Mark Latham Commodity Equity Intelligence Service

Friday 16th December 2016
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    Brazil prosecutors hit ex-president Lula with more corruption charges

    Prosecutors on Thursday charged former Brazilian President Luiz Inacio Lula da Silva, his wife and a former finance minister with more corruption charges in the investigation of graft at state-run oil company Petrobras.

    It is up to federal judge Sergio Moro to decide if the new charges will result in another trial for Lula, who is already accused in Moro's court in southern Brazil with separate corruption charges. A ruling on those charges is not expected before late January or early February.

    Lula, an extremely popular two-term president who left office in January 2011, faces another trial on graft charges in a Brasilia court, but a start date has not been set.

    Lula's lawyers have repeatedly said that he is innocent of all accusations. In an emailed statement Thursday night, lawyer Cristiano Martins called the latest charges "a work of fiction."

    In bringing the new charges, prosecutors said in a statement that Lula oversaw a scheme in which Latin America's biggest construction firm, Odebrecht, paid 75 million reais ($22.18 million) in bribes to win eight Petrobras contracts.

    Prosecutors said Lula orchestrated the political appointment of Petrobras executives who would carry out the kickback scheme, with the money being funneled back into the campaign coffers of Lula's Workers Party and its allies, including Brazil's current ruling party, the Democratic Movement Party.

    Lula's wife, Marisa, was also charged in the case with money laundering, while Lula's former finance minister, Antonio Palocci, was charged with corruption and money laundering. Both already face separate charges and trials in the Petrobras case.

    Prosecutors said part of the illicit money made its way to Lula and his wife and that they benefited by surreptitiously using Odebrecht money to purchase and renovate real estate.

    The so-called Car Wash investigation is the biggest graft probe yet carried out in Brazil.

    So far, 200 people have been charged and 81 have been convicted . The charges involve at least 6.4 billion reais in bribes.

    Marcelo Odebrecht, the former chief executive of his family's construction firm, who is serving over 19 years in prison after being found guilty on other Car Wash charges, was also hit with more corruption charges on Thursday.

    But he has turned state's witness, along with nearly 80 other executives from the firm, and their statements are expected to implicate more than 200 politicians. Odebrecht is expected to remain imprisoned until the end of 2017 and remain on probation for several years in exchange for his testimony.

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    Oro Blanco indirect stake sale in Chile's SQM fails, shares plummet

    Dec 15 Chilean holding company Oro Blanco said on Thursday it had decided not to go ahead with the sale of an indirect stake in lithium and fertilizer firm SQM after no suitable offers were received.

    The terms and conditions of the offers received "did not contribute to the interests of the company or its shareholders, while one of the conditions would have been impossible to comply with, so the board unanimously decided today to not continue with the process," Oro Blanco said in a statement.

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    China Devalues Yuan To Weakest Fix Since May 2008

    Following last night's bond bloodbath, The Fed fallout continues in China as The PBOC has devalued the official Yuan fix the most since Brexit to its weakest level since May 2008, breaking above 6.95/USD. Since the "one-off" devaluation in Aug 2015, the Chinese currency has now weakened almost 14% against the dollar.

    While the broad Renminbi basket has been "stable" against China's global trading partners for 3 months...

    It appears the devaluation pressure has been focused back against the US Dollar...

    And bear in mind that the "stability" we described above came at the grand cost of a stunning quarter of a trillion in reserves 'defending' the outflow pressure in 2016...

    For now the China bond market has stabilized a little (by which we mean it is not collapsing).

    At some point this butterfly's wings of turmoil will ripple across the world's liquidity markets and punch all those with a plan in US banking stocks in the face... the question is, when?
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    'Crazy bad' air pollution warning for Beijing

    Officials issue a red alert, halting construction, closing schools, restricting traffic and advising people to stay indoors.

    The hazardous conditions will last for five days from late Friday until 21 December, Beijing's environmental protection bureau warned on its social media account.

    The red alert announcement, which cited an accumulation of air pollution in Beijing and the surrounding areas, means schools will be closed and construction halted across the city.

    There will also be traffic restrictions, while citizens will be advised to stay inside.

    The colour-graded warning was introduced last year as part of a government initiative to be seen to be taking action on the country's environmental degradation.

    Beijing declared its first-ever red alert last December, bringing parts of the capital to a virtual standstill and forcing soldiers on duty in Tiananmen Square to wear smog masks.

    The threshold for declaring the highest level of alert has since been raised, and is only issued when the Air Quality Index (AQI) is forecast to exceed 500 for a day, 300 for two consecutive days, or 200 for four days.

    According to the World Health Organisation, the maximum safe level for exposure over a 24-hour period is 25.

    AQI levels topped 400 for two days earlier this month and an orange alert, the second highest level, was declared in November.  

    The AQI measures the concentration of tiny particles, known as PM 2.5, per cubic metre.

    The particles are particularly dangerous as they are small enough to get into the lungs and in some cases, directly into the bloodstream.

    A study published in 2015 found China's air pollution was linked to 1.6 million deaths a year, or 4,000 people a day.

    Beijing's air quality ranks among the worst in the world, with much of the blame attributed to industrial pollution and the burning of coal.  

    Air pollution tends to be more severe in the winter months, when coal-fired central heating systems are in use.

    China's government has promised to tackle its environmental problems, and has declared a "war on pollution".

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    China environment watchdogs to sever local government ties by year-end

    China's environment impact assessment (EIA) agencies will sever all connections with local governments by year-end to avoid conflicts of interest and help bolster the environment ministry's battle against rampant air, water and soil pollution.

    Citing the Ministry of Environmental Protection, the official Xinhua news agency said late on Thursday that 337 EIA agencies had already been de-coupled from local government or been disbanded. The remaining 13 will be detached this month.

    Earlier this week, China punished nearly 700 officials for inadequately protecting the environment in the latest round of rolling inspections. The previous round led to more than 3,000 officials being disciplined and 198 million yuan ($29 million) in fines being handed out for environmental violations.

    China's environment ministry was given authority earlier this year to investigate regions and enterprises without prior warning, and was empowered to summon any local government or company official to account for their actions.

    China has been trying to strengthen its environmental powers as part of a "war on pollution" launched in 2014 to reverse the damage done by decades of untrammelled growth.

    Xinhua said formerly government-affiliated EIA agencies had been ordered to terminate all connections with local government in 2015 to avoid corruption and conflict of interest. It added China has a total of 984 EIA agencies and 19,700 EIA engineers.
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    Brazil's Braskem to pay 3.1 bln reais in leniency deal for corruption case

    Brazil's Braskem SA , the largest petrochemical producer in Latin America, signed a leniency deal on Wednesday with Brazilian prosecutors leading a sweeping corruption probe into political kickbacks at state-run oil company Petrobras, the company said in a securities filing.

    The company agreed to pay 3.1 billion reais ($920 million) in fines to Brazilian authorities. Around half will be paid in cash immediately, while the rest will be paid in six years beginning in 2018. Braskem did not elaborate on previously disclosed negotiations with U.S. authorities.
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    Global task force sets recommendations on climate risk disclosure

    Global financial regulators on Wednesday issued a series of recommendations for corporate disclosure of climate-related risk as part of a consultation on standards for financial reporting.

    The Task Force on Climate Related Financial Disclosure recommended that companies consider the impact of climate change as part of their governance, risk management and strategy.

    The TCFD's draft paper sets out metrics and scenarios that firms should consider disclosing.

    The paper, which launches a 60-day consultation, seeks input from publicly listed companies, investors, lenders and insurance underwriters about the financial risks companies face from climate change.

    The standards are intended to be voluntary in the first instance, allowing companies to work within a standardized set of reporting guidelines, helping investors assess and compare corporate exposure to climate risk.

    The TCFD's work aims to allow investors to make better informed decisions on capital allocation by avoiding projects, companies and sectors most exposed to climate risk and related regulation.

    The task force was set up in December 2015 by global financial watchdog the Financial Stability Board, at the request of the G20 group of most industrialized countries.

    Its purpose is to provide investors with the information they need to assess corporate exposure to climate change, within a wider FSB remit to mitigate threats to the global financial system.

    The FSB's focus is to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies in the interest of global financial stability.

    "The disclosure recommendations will give financial markets the information they need to manage risks, and seize opportunities, stemming from climate change," FSB chairman and Bank of England Governor Mark Carney said in a statement Wednesday.

    "As a private sector solution to a market issue, the Task Force has focused on the practical, material disclosures investors want and which all capital-raising companies can compile," Carney said.


    In a speech in London in 2015, Carney set out the key types of risk that companies face from climate change:

    - Direct physical risks: damage through floods and other climate related events on property and business activity

    - Liability risks: legal actions in future by parties affected against those they hold responsible

    - Transition risks: financial risks that could result from the process of adjustment to a low carbon economy

    UK-based financial analysis group Carbon Tracker Initiative said the climate risk disclosure standards would address an information gap in the market.

    "Even before last year's watershed Paris Agreement, climate risk was high on the agenda of the world's largest institutional investors and asset managers," it said in a statement Monday ahead of the task force's report.

    "Record-high shareholder support (against board recommendations) for resolutions asking oil and gas companies to stress test their business models against a two-degree consistent climate outcome demonstrates that this is squarely a financial concern," said Carbon Tracker.

    "The recommendations mark a significant step forward towards meeting that market demand while also highlighting some of the most pertinent elements of existing voluntary disclosure frameworks," it said.

    "The focus on making a market for these risks -- underpinned by the international reach of the FSB -- should signal to capital markets regulators around the globe the prospect of consistent, comparable disclosure standards on climate risk both within sectors and across stock exchanges," it said.
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    China Jan-Nov power consumption climbs 4.96pct on year, NDRC

    China's power consumption climbed 4.96% from the year prior in the first eleven months, said Zhao Chenxin, spokesman of the National Development and Reform Commission (NDRC), in a press conference held on December 14.

    The growth expanded from a year-on-year growth of 0.72% during the same period last year, thanks to the rapid increase of power consumption by tertiary industries and residential segment, which indicates further optimization of the country's power consumption structure.

    Zhao didn't give figures of actual power consumption, which is expected to be announced late in this week.

    The electricity use by residential segment gained 11.43% over January-November from a 4.73% increase in the corresponding period last year.

    For the non-residential segment, the primary industries – mainly the agricultural sector – reported a 5.16% growth of power consumption in the first eleven months, compared with a growth of 2.97% a year ago.

    The secondary industries – mainly the industrial sector saw power use climb 2.62% on year, up from a year-on-year drop of 1.12% in the same period last year.

    Power consumption by tertiary industries – mainly the service sector – increased 11.66% on year, compared with a 7.33% rise from the previous year.

    Over January-November, China's output of hydropower, nuclear and wind power increased 6.94%, 23.87% and 30.30% from a year ago, respectively, according to preliminary statistics.

    China's power consumption may grow at a slower pace in the fourth quarter than in the third, due to weaker temperature effect, said China Electricity Council (CEC).

    The power use of the whole year is expected to register a higher-than-expected growth of 4.5% or so, the CEC said.

    The CEC predicted the country's installed power capacity to hover at 1.64 TW in 2016, of which 36.5% will be from fossil fuels. For newly-installed capacity, the council said it may reach 120 GW, with newly-installed capacity of non-fossil fuels at 70 GW.
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    Head Of US Pacific Fleet Ready To Confront Beijing As China Warns Of US Carmaker Penalty For

    In what some have seen as the first warning shot of retaliation against Trump's threats of protectionism and part of China's escalating trade war involving the auto industry, overnight China Daily reported quoting a senior state planning official that Beijing will soon slap a penalty on an "unnamed U.S. automaker for monopolistic behavior."

    Investigators found the U.S. company had instructed distributors to fix prices starting in 2014, Zhang Handong, director of the National Development and Reform Commission's price supervision bureau, was quoted as saying. However, in the exclusive interview with the newspaper, Zhang said no one should "read anything improper" into the timing or target of the penalty, which likely suggests that there was nothing coincidental about the timing or the target of the penatly which comes at a sensitive time for China-U.S. relations after U.S. president-elect Donald Trump called into question a long-standing U.S. policy of acknowledging that Taiwan is part of "one China".

    China, the world's largest auto market, has become crucial to the strategies of car companies around the world, including major U.S. players General Motors and Ford Motor.

    For now, the two US auto giants stated on the record they were unaware of the Chinese decision: "We are unaware of the issue," said Mark Truby, Ford's chief spokesman for its Asia-Pacific operations. In a statement, GM said: "GM fully respects local laws and regulations wherever we operate. We do not comment on media speculation."

    As Reuters adds, the penalty follows a government crackdown on what it has called monopolistic behavior by foreign automakers and dealers.

    This would be the second penalty by the NDRC this month and the seventh fine issued to automakers since the commission began anti-monopoly investigations in 2011, China Daily reported. Previous targeted firms have included Germany's Audi, Daimler Mercedes-Benz and Japan's Toyota and one of Nissan's joint ventures.

    The United States is ready to confront China should it continue its overreaching maritime claims in the South China Sea, the head of the US Pacific fleet said on Wednesday, comments that threaten to escalate tensions between the two global rivals.

    China claims most of the resource-rich South China Sea through which about $5 trillion in ship-borne trade passes every year. Neighbours Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims.

    The United States has called on China to respect the findings of arbitration court in The Hague earlier this year which invalidated its vast territorial claims in the strategic waterway.

    But Beijing continues to act in an "aggressive" manner, to which the United States stands ready to respond, Admiral Harry Harris, head of the US Pacific Command, said in a speech in Sydney.

    "We will not allow a shared domain to be closed down unilaterally no matter how many bases are built on artificial features in the South China Sea," he said. "We will cooperate when we can but we will be ready to confront when we must."

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    Explanation of US tax plans.

    How is the GOP’s business tax different than the current corporate income tax?

    The easiest way to understand how the new tax in their plan works is to compare it to the current corporate income tax.

    Under current law, corporations are taxed on their profits, which are roughly defined as revenues minus costs, at a marginal rate of 35 percent. Costs are things like state and local taxes, the cost of goods sold, interest payments, and other business inputs. Businesses that purchase capital investments need to depreciate, or write off, the cost of those goods over many years or decades. In addition, U.S. corporations are taxed on profits they earn overseas and bring back to the U.S. minus a credit equal to the taxes they paid overseas on that income.

    The GOP’s plan would alter the corporate income tax in five major ways:

    1. The tax rate would be lowered to 20 percent.
    2. Businesses would no longer need to depreciate capital investments. Instead, they will be able to fully write off, or expense them, in the way in which they purchased them.
    3. Businesses would no longer need to pay tax to the IRS on profits they earn overseas.
    4. Businesses would no longer be able to deduct interest as a business expense.
    5. The corporate tax would be “border adjusted.”

    These changes turn the tax into what is called a “destination-based cash flow tax.”

    All of those changes are straightforward, but I am not sure what you mean by “border adjusted.”

    The border adjustment is one of the more interesting features in the GOP’s tax reform plan.

    Typically, we hear about a border-adjusted tax in the context of a value-added tax. A border-adjusted tax is a tax that is applied to all domestic consumption and excludes any goods or services that are produced here, but consumed elsewhere.

    A border adjustment conforms to what is called “destination-based” principle (thus the “destination-based” in the “destination-based cash flow tax”). This principle states that the tax is levied based on where the good ends up (destination), rather than where it was produced (origin).

    Most value-added taxes throughout the world follow the destination principle. However, this principle can also apply to retail sales taxes, business taxes, and carbon taxes. The GOP plan applies this principle to business taxes.

    So how does a border-adjusted business tax generally work?

    In the context of a value-added tax, a border adjustment works by applying the tax to imports, but exempting exports from the tax. The GOP’s business tax is not a VAT, but the mechanism that makes it border adjustable is similar.

    In order to make the corporate tax border adjustable, the revenue from sales to nonresidents would not be taxable, and the cost of goods purchased from nonresidents would not be deductible. So if a business purchases $100 million in goods from a supplier overseas, the cost of those goods would not be deductible against the corporate income tax. Likewise, if a business sells a good to a foreign person, the revenues attributed to that sale would not be added to taxable income.

    Another way to think about the border adjustment is that the corporate tax would ignore revenues and costs associated with cross-border transactions. The tax would be solely focused on raising revenue from business transactions from sales of goods in the United States.

    VATs are usually border adjusted. Does this mean the corporate tax in the GOP's plan is a VAT?

    No. There are provisions in the GOP plan’s business tax that make it similar to a VAT, such as full expensing of capital investment, the non-deductibility of interest payments, and the border adjustment. However, it does not have the same tax base as a VAT. Specifically, the tax in the GOP tax plan allows businesses to deduct payroll. A VAT would not.

    A tax on imports, but not on exports. This sounds like a tariff.

    A border adjustment is not a tariff, nor would it give the U.S. a trade advantage.

    At first glance, a border adjustment sounds like a tariff because it applies to imports, but does not apply to exports. The adoption of a border-adjustable tax is sometimes praised as a cure for the U.S. trade deficit, or promoted as giving the U.S. a competitive edge, or offsetting a competitive edge now enjoyed by foreign producers whose countries use border-adjusted taxes. Such claims are unfounded, and based on a misunderstanding. For instance, Senator Ted Cruz wrongly argued that his plan would benefit exports.

    A border-adjusted tax falls equally on domestic and imported goods, in order to tax the amount of income people spend on consumption. A domestically produced good and an imported good will face the same tax. Goods produced in the U.S. and exported abroad are exempt from taxation, but exports are not consumed at home. However, the foreign buyer may be subject to a consumption tax levied in his home country, but that is not the concern of the U.S. taxing authority.

    Of course, U.S. producers may think of this as a subsidy for exports because they would not be taxed on sales overseas. But if businesses were able to reduce the prices of their goods they sell overseas due to the border adjustment, this would trigger a higher demand for dollars in order to purchase those goods. This higher demand for dollars would increase the value of the dollar relative to foreign currencies and offset any perceived trade advantage granted by the border adjustment.

    How would a border adjustment impact federal revenues?

    In the case of the United States, a border-adjusted tax would raise revenue by broadening the tax base. The United States has a large current account deficit; its imports greatly exceed its exports. Because of that difference, taxing spending on imports instead of taxing sales of exports would raise revenue, roughly $1 trillion or more over a decade.

    Of course, the plan also lowers the corporate tax rate and enacts full expensing, so on net the tax changes will likely reduce overall business tax revenue.

    Would a border adjustment be complicated?

    A system in which cross-border transactions are essentially ignored would actually be simpler than current law.

    Businesses have profits and investments all over the world. Properly allocating revenues and costs across borders is quite a complex task and requires businesses to navigate very complex parts of the U.S. tax code.

    Moving to a destination-based cash flow tax would eliminate the need for a lot of these complex provisions because the tax would only concern itself with domestic transactions. As Alan Auerbach has pointed out, the need to allocate research and development costs would go away under this proposal.

    In addition, because the GOP plan’s corporate tax is a territorial tax—dividends paid by U.S. foreign subsidiaries are not taxable in the U.S.—there would be no need to calculate foreign tax credits.

    How would the proposed tax impact profit shifting?

    One of the impacts of the GOP’s proposed cash-flow tax is that profit shifting that occurs under the current corporate income tax would be pretty much eliminated.

    Under current law, businesses have the incentive to overstate costs in the United States and overstate profits elsewhere in order to avoid the higher marginal tax rate in the United States. This is because the current tax is based on where profits are located, not sales.

    With a destination-based tax, this incentive disappears because the very transactions that make profit shifting possible are ignored. For example, if a business understates profits in the U.S. by understating the cost of widgets it sells to a subsidiary in France, it wouldn’t matter because that transaction would be ignored because it is an export. Likewise, if a foreign subsidiary overstates the cost of lumber it imports to the United States, it, again, doesn’t matter because that cost is not deductible against the corporate tax base.

    Also, because interest in the GOP’s plan is not deductible, profit shifting through cross-border loans would no longer be possible. IP income would also not be an avenue through which businesses profit shift because royalties paid overseas for goods sold in the United States would not be deductible.

    In fact, this system would create an incentive for businesses to shift profits into the United States and companies that hold IP overseas and sell goods throughout the world would have an incentive to relocate that IP to the United States.

    What about the World Trade Organization? Would they object to this tax?

    The World Trade Organization generally allows and expects consumption-based taxes (called “indirect taxes”) to be border adjusted. However, it objects to income-style taxes (called “direct taxes”) being border adjusted. So the corporate income tax is considered not eligible for border-adjusted treatment. This is the conventional treatment going back to the 1950s.

    However, there is a case for treating this tax as an indirect, consumption-based tax. Once a business tax allows full and immediate expensing of capital investment spending, it takes on the nature and tax base of a consumption-based tax.

    Where should I go to read more about this subject?

    The Center of American Progress, back in 2011, published a paper highlighting the benefits of a destination-based cash flow tax.

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    Rick Perry is Donald Trump's choice for energy secretary

    President-elect Donald Trump has selected former Texas Gov. Rick Perry to be his nominee for energy secretary, multiple transition sources told CNN Tuesday, which would make him head of an agency he once sought to eliminate.

    Perry, twice an aspirant for the White House and for decades a swaggering figure in the Texas Republican Party, returns to the national limelight after his career in politics withered amid scandal and embarrassment.

    If confirmed by the Senate, Perry will inherit a department that has focused on promoting clean energy and reducing dependence on fossil fuels, but has also seen domestic production of oil explode. And his selection is a nod to the traditional GOP emphasis on energy sources like coal and oil.

    A hallmark of Obama's Energy Department has been the grants and loans it issues for research. The loan program was expanded to include renewable energy projects as part of Obama's economic stimulus package in 2009, and more than $30 billion in loans have been issued since then.

    These loans have also been a source of controversy. In 2011, Obama administration had to defend its loan to Silicon Valley energy startup Solyndra when it filed for bankruptcy and taxpayers had to foot a $535 million bill. For all its support of green energy, the department has also presided over a massive oil boom.

    Obama's current energy secretary Ernest Moniz is a longtime supporter of fracking, which he sees as a "bridge" to a low-carbon future. He has lauded increased domestic production of oil and natural gas via the technique. Hydraulic fracturing technology, more commonly known as fracking, now accounts for more than half of all US oil production -- a massive jump considering fracking made up less than 2% of the country's oil output in 2000. The production of American crude has nearly doubled in the past decade, putting U.S. behind only Saudi Arabia and Russia in world rankings.
    Trump has made it clear he wants the US to play an even bigger role in the global oil ecosystem.

    "I've never understood why, with all of our own reserves, we've allowed this country to be held hostage by OPEC, the cartel of oil-producing countries, some of which are hostile to America," Trump wrote in his book "Crippled America."

    Experts say pumping more oil could decrease the country's dependence on foreign crude, but there's also a risk it would send prices crashing again. Oversupply caused oil prices to plummet as much as 75% between 2014 and earlier this year.

    Perry's selection culminates a four-year effort to rebuild his political image in the aftermath of his disastrous 2012 run. A late entrant into the presidential primary, Perry was recruited as the sought-after alternative to eventual nominee Mitt Romney, but his policy stumbles failed to install confidence and his career sputtered.

    The crystallizing moment -- when Perry on a primary debate stage blanked and painfully could not recall the name of the third federal agency he vowed to eliminate as President -- none other than the Energy Department that he will now lead -- a gaffe that became known primarily for the word with which he ended his live misery: "Oops."

    Four years later -- under the threat of prosecution for allegedly promising to strip funding for a county agency if a local official would not leave her post -- Perry's campaign was more modest. He became one of the first candidates to attack Trump, labeling him at one point a "cancer on conservatism," but dropped out in September 2015 amid fundraising troubles. He eventually became an occasional surrogate for Trump during the general election.
    In his first 100 days, Trump says he'll roll back Obama-era regulations on the fossil fuel industry, bringing jobs back to coal country. Many of these regulations fall under the Environmental Protection Agency , but leadership from the Energy Department could play a key role.

    Trump has also pledged to expand drilling on federal land, which would require approval from the Interior Department. The Army Corps of Engineers, which reports to the Department of Defense, oversees the permit process for the contentious Dakota Access Pipeline.
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    Trump picks Exxon chief Tillerson as secretary of state

    President-elect Donald Trump announced Exxon Mobil Corp's Rex Tillerson as his choice for secretary of state on Tuesday, praising the business leader as a successful international dealmaker who has led a global operation.

    Tillerson's experience in diplomacy stems from making deals with foreign countries for the world's largest energy company, although questions have been raised about the oil executive's relations with Russia.

    "He will be a forceful and clear-eyed advocate for America’s vital national interests, and help reverse years of misguided foreign policies and actions that have weakened America’s security and standing in the world," Trump said in a statement.

    Tillerson said he shared Trump's "vision for restoring the credibility of the United States’ foreign relations and advancing our country’s national security."

    Trump picked Tillerson, 64, after the Texan was backed by several Republican establishment figures including former Secretary of State James Baker, former Secretary of State Condoleezza Rice and former Defense Secretary Robert Gates, the transition official said.

    Their support is seen as key to helping Tillerson get past a possibly contentious Senate confirmation battle likely to focus on his relationship with Russian President Vladimir Putin.

    In 2013, Putin bestowed a Russian state honor, the Order of Friendship, on Tillerson, citing his work "strengthening cooperation in the energy sector".

    Trump judged in making the pick that Tillerson could adequately address questions about his relations with Russia, an official said.

    Lawmakers from both major parties have raised questions about Tillerson and former U.N. Ambassador John Bolton, who has been mentioned as a possible No. 2 State Department official and who has voiced hawkish views on Iraq and Iran.

    Separately, a source close to the transition said Trump had chosen former Texas Governor Rick Perry as his nominee for energy secretary, with an announcement expected soon. Perry met Trump on Monday at Trump Tower in New York.

    Republicans and Democrats said Tillerson, who is president of Exxon Mobil Corp, would be asked about his contacts with Russia, having met Putin several times. He won fresh praise from Moscow on Monday.

    Senator John McCain, a leading foreign policy voice and the 2008 Republican candidate for president, told Reuters in an interview: "I have concerns. It's very well known that he has a very close relationship with Vladimir Putin."

    There has been controversy over the role alleged Russian cyber hacking may have had on the outcome of the Nov. 8 presidential election, in which Trump defeated Democrat Hillary Clinton.


    While busily filling out his Cabinet, Trump is seeking to answer questions about how he will separate himself from his far-flung business empire before taking over the presidency on Jan. 20.

    He had planned a news conference on Thursday to lay out the details but delayed it until Tuesday due to what aides said was the crush of picking people to serve in his administration.

    In a series of late-night tweets on Monday, Trump said he would be leaving his business before Jan. 20 so he can focus full-time on the presidency and that he would leave his two sons, Donald Trump Jr and Eric Trump, to manage it.

    He did not mention his daughter, Ivanka, who has been a central player in Trump's business affairs and who is said to be considering a move to Washington to help her father.

    "No new deals will be done during my term(s) in office," Trump said.

    He said he would hold a press conference "in the near future to discuss the business, Cabinet picks and all other topics of interest. Busy times!"

    Trump chose Tillerson over 2012 Republican presidential nominee Mitt Romney, who had famously criticized Trump during the party's fight for a nominee this year. Trump called Romney to tell him he had decided to choose someone else for the job.

    "It was an honor to have been considered for secretary of state of our great country," Romney said in a Facebook posting on Monday night.

    "My discussions with President-elect Trump have been both enjoyable and enlightening. I have very high hopes that the new administration will lead the nation to greater strength, prosperity and peace."
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    Bitcoin Reaches Multiyear High as Chinese Get Nervous


    1. China, where the stock market stumbled again as the Chinese authorities continue their arbitrary acts of rulemaking. This time they hit the insurance industry, criticizing some of the larger firms for buying stocks.
    China Vanke, a developer who was apparently being acquired last month, slumped another 6% as a result of the officials’ criticizing leveraged buyouts (ending the acquisition).

    2. The nation’s government bond yields rose further, with corporate yields following. The selloff in the corporate sector has been especially acute at the short-end of the curve. Are we seeing some redemptions from wealth management products (WMPs) who tend to hold a great deal of corporate debt?

    3. The renminbi is expensive to borrow in Hong Kong again. Rates have been rising quickly for term loans (as opposed to overnight). Here is the 3-month yuan HIBOR rate.

    Part of the reason for the tighter offshore yuan market is Hong Kong’s decline in yuan time deposits. Hong Kong residents used to open renminbi accounts to get a much higher rate relative to the Hong Kong dollar. But after the August 2015 devaluation, deposit volumes have been declining. Beijing’s tightening of capital controlsis also reducing the yuan availability in Hong Kong.

    4. The renminbi implied volatility jumped in recent days as investors brace for more currency declines.

    5. Bitcoin hit a multiyear high as market participants continue to point fingers at China’s residents.

    6. Many ask where the rest of Asia will stand in a US-China trade dispute. Here are the China- vs. US-bound exports from the largest Asian economies (ex-Japan).

    7. China’s latest batch of economic releases looks quite stable. In fact, some argue that these figures are too stable to be real (with only minimal fluctuations on a year-over-year basis).

    8. China’s Western acquisitions spiked in 2016. With Bejing concerned about capital outflows, will all this shopping spree slow down next year?
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    China thermal, hydro power output both rises in Nov

    Total electricity output in China reached 503.4 TWh in November, gaining 7% from a year ago and up 3.24% from October, showed data from the National Bureau of Statistics (NBS) on December 13.

    That equated to a daily output of 16.78 TWh on average in the month, up 7% year on year, data showed.

    Electricity output from China's thermal power plants – mainly coal-fired – rose 5.3% year on year to 379.7 TWh in the month, up 6.81% from October, the NBS data showed.

    By contrast, China's hydropower output climbed 3.3% year on year but dropped 13.1% month on month to 80.4 TWh in November.

    The output of nuclear power and wind power both increased 34.8% from the year-ago level to 19.5 TWh and 20.8 TWh in the month, while that of solar power surged 42.6% year on year to 3 TWh.

    Over January-November, China's total power output increased 4.2% on year to 5,370.1 TWh.

    Of this, thermal power stood at 3,967.9 TWh, up 2.2% year on year; while hydropower reached 984 TWh, up 6.4% from the year prior.

    The output of nuclear power and wind power stood at 191.4 TWh and 190.8 TWh, rising 23.5% and 17.9% year on year; solar power output was 35.9 TWh, increasing 32.7% from a year ago.

    Over the period, thermal power generation accounted for 73.89% of the total power generation, while hydropower output accounted for 18.32%.
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    Small business optimism remained flat leading up to Election Day and then rocketed higher as business owners expected much better conditions under new leadership in Washington, according to a special edition of the monthly NFIB Index of Small Business Optimism, released today.

    “What a difference a day makes,” said Juanita Duggan, President and CEO of the National Federation of Independent Business (NFIB). “Before Election Day small business owners’ optimism was flat, and after Election Day it soared.”

    The NFIB Index of Small Business Optimism is one of the oldest and most widely respected economic research reports in the country. It is a survey asking small business owners a battery of questions related to their expectations for the future and their plans to hire, build inventory, borrow, and expand.

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    China Nov factory output, retail sales stronger than expected

    China's factory output and retail sales grew faster than expected in November, while fixed-asset investment was in-line with forecasts, adding to growing signs of stabilisation in the world's second-biggest economy.

    Factory output grew 6.2 percent from a year earlier, slightly better than analysts' forecasts and October's reading.

    Retail sales climbed 10.8 percent, the fastest pace since December 2015 and beating expectations for a 10.1 percent rise.

    After a rocky start to the year, China's economy has performed better than expected and looks set to hit Beijing's 6.5 to 7 percent growth target as increased government spending and a sizzling housing market spur a construction boom.

    Private investment remains weak, however, leaving economic growth more reliant on a steady stream of government spending, while the property market is showing signs of fatigue, raising fears that this year's momentum will not be sustainable.

    Growth of fixed asset investment was unchanged at 8.3 percent in January-November from the same period a year earlier, the National Bureau of Statistics said on Tuesday.

    That was in-line with analysts' estimates and the same pace as in the first 10 months of the year.

    Fixed-asset investment by state firms rose 20.2 percent in January-November, easing from 20.5 percent in the first 10 months.

    Growth of private investment picked up to 3.1 percent from 2.9 percent in January-October, suggesting an improved appetite from private firms to invest though still at low levels compared with previous years.

    Private investment accounted for 61.5 percent of fixed asset investment in the Jan-Nov period, the stats bureau said.

    Chinese policymakers have been trying to lure private investors into big infrastructure projects through public-private partnerships, but many lucrative sectors are still dominated by state firms.

    Retail sales were buoyed by gains in auto sales, home appliances and cosmetics.

    Auto sales in China surged for a sixth consecutive month in November, an industry association said on Monday, as consumers rushed to buy cars amid uncertainty over whether a tax incentive will be extended beyond the end of the year.

    Alibaba Group Holding Ltd (BABA.N) Singles' Day festival on Nov. 11 posted a record 120.7 billion yuan ($17.73 billion) worth of sales, though the gala shopping day saw growth slow as Chinese shoppers searched for deeper discounts and lower price tags.

    Last week, trade data showed China's imports grew at the fastest pace in more than two years in November, while exports also rose unexpectedly, reflecting a pick-up in both domestic and global demand.

    The statistics bureau said in comments with the data that China's economy showed positive changes in November but still faces uncertainties at home and abroad.

    China's property sales growth slowed sharply to 7.9 percent in November from a year earlier, its lowest November 2015, and well short of a 26.4 percent increase in October.
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    Bond's still falling.

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    China launches WTO dispute resolution case against U.S., EU

    China said on Monday it had launched a dispute resolution case at the World Trade Organization over the surrogate country approach used by the United States and European Union to calculate anti-dumping measures against Chinese exports.

    When China joined the WTO in 2001, it agreed to let WTO members treat it as a non-market economy when assessing dumping duties for 15 years.

    That gave trade partners the advantage of using a third country's prices to gauge whether China was selling its goods below market value.

    But that clause expired on Dec. 11, and China has demanded that countries abide by the agreement.

    U.S. Commerce Secretary Penny Pritzker said in November the time was "not ripe" for the United States to change the way it evaluates whether China has achieved market economy status, and there was no international trade rules requiring changes in the way U.S. anti-dumping duties are calculated.

    China's Commerce Ministry said in a statement on its website that 15 years on, all WTO members had an obligation to stop using the surrogate country approach.

    "Regretfully, the United States and European Union have yet to fulfil this obligation," the ministry said.

    Separately, a ministry official said in another statement a U.S. investigation into what it regards as Chinese dumping of plywood products launched last week amounted to abuse of emergency trade relief measures.

    The United States and European Union are some of the biggest levelers of anti-dumping measures under this process against China. The measures have seriously affected exports and employment for Chinese firms, the ministry added.

    The case China has lodged is a normal way of resolving trade disputes, and it has every right to do so, it said.

    "China reserves the right under WTO rules to resolutely defend its legal rights," it added, without elaborating.

    The United States has repeatedly argued that China's market reforms have fallen short of expectations, especially in aluminum and steel, where state intervention has led to oversupply and overcapacity, threatening industries around the world.

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    China Minmetals unit raises $2.3 billion for restructuring

    Kingray New Materials Science & Technology (600390.SS), an electric components firm controlled by the world's largest metals trader, said it had raised 15 billion yuan ($2.17 billion) to use for restructuring.

    The company controlled by China's Minmetals Corp also said in a statement late on Sunday that it plans to issue shares to acquire Minmetals unit Minmetals Capital Holdings, which owns its financial assets, in a deal worth 17.8 billion yuan.

    It will use the 15 billion yuan that it raised from 10 institutions including CITIC Securities (600030.SS) and China Merchants Wealth to replenish capital at the unit, which has subsidiaries spanning financial leasing, banking, futures, securities and asset management.

    Reuters reported that Kingray and Minmetals were planning the fundraising in May.

    The financial asset restructuring of Minmetals Corp, one of China's biggest state-owned enterprises, was launched in December after the announcement of its takeover of equipment maker China Metallurgical Group Corp in one of the largest mergers in China's metals sector.
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    Headed home: workers abandon Indian building sites after cash crackdown

    Hundreds of thousands of Indian construction workers have returned home since Prime Minister Narendra Modi abolished high-denomination banknotes, leaving some building sites across the country facing costly delays.

    A month after Modi's shock move to take away 86 percent of cash in circulation to crush the shadow economy, the growing labor shortage threatens to slow a recovery in India's construction industry, which accounts for 8 percent of gross domestic product and employs 40 million people.

    Work at SARE Homes' residential projects, spanning six cities, has slowed dramatically as migrant workers, who are out of cash and have no bank accounts to draw from, have little choice but to return to their villages.

    "Construction work at all projects has slowed down in a big way," managing director Vineet Relia told Reuters.

    Property enquiries, meanwhile, have slumped by 80 percent around the Indian capital since the cash crackdown, according to property portal 99acres.

    Getamber Anand, president of Indian builders' association CREDAI, said projects nationwide had been hit, and estimated that roughly half of the migrant workforce, numbering in the low millions, had left for home.

    Road developers have also reported a slowdown as they struggle to find sufficient labor.

    The exodus shows little sign of reversing, risking damage to construction activity and the wider economy into 2017, despite Modi's assurances that hardships from his radical "demonetization" should be over by the end of the year.

    The disruption to building raises doubts about the Reserve Bank of India's view that the impact on the economy would be transitory. The central bank held interest rates on Wednesday despite calls for action.


    Modi's gamble is that the majority of workers will be compelled to open a bank account as sub-contractors refuse to pay in cash, bringing them into the formal economy and expanding the country's low tax base.

    That may happen eventually, but for now, millions of workers who depend on daily wages for food and shelter are struggling. Many have never held a bank account, and even if they wanted one, some do not have the necessary documents to do so.

    At a construction site in Gurugram, a satellite city near Delhi, worker numbers have halved to 100. The site manager received a government circular on Nov. 25 saying every worker's wage should be paid into a bank, a message relayed to each contractor.

    Biseshwar Yadav, a 36-year-old migrant laborer from the northeastern state of Bihar, worries about arranging documents to open an account and the cost of making regular trips to the bank.

    Standing in the largely deserted worker housing colony opposite the unfinished 20-storey blocks of flats he had been building, Yadav said that with no salary, he was surviving on $89 borrowed from a local shopkeeper to pay for food.

    Some laborers back in their villages are reluctant to return. Duryodhan Majhi, 38, traveled to his eastern state of Odisha after his employer in Secunderabad ran out of cash to pay his $4.4 daily wage.

    "We keep moving from city to city in search of work. This new order would mean opening a new bank account every time we change cities. How and when will we work then?" he said, adding he would seek farm work.

    CREDAI's Anand predicts activity on construction sites will not return to normal until April, and only once laborers are able to open accounts at banks still struggling to serve long queues of people desperate for cash.

    "Right now the banks say they don't have time to open accounts. It's the biggest challenge," Anand said.


    Data suggest that demand in India's economy has slowed sharply since Modi's decision on Nov. 8.

    Indian services activity plunged into contraction in November for the first time since June 2015, a survey showed, while factory activity also slowed.

    The real estate industry was already carrying an overhang of unsold inventory, and was hit by an earlier clampdown on "black" money, much of which is invested into property.

    Indian cement and steel makers are feeling the pinch.

    "Developers have cut down purchases," said Mukesh Kasana, a dealer for UltraTech Cement Ltd (ULTC.NS), part of the Aditya Birla conglomerate, estimating his sales had slumped 80 percent.

    India's decade-long construction boom created one in three new jobs as tens of millions of people made the journey from the rural hinterlands to seek employment in towns and cities.

    For Modi, a healthy construction sector is vital if he is to fulfill his promise of boosting job creation for the one million Indians joining the workforce every month.

    There is no reliable data on the number of migrants who have abandoned construction sites since demonetization, because most are undocumented. But stories abound of cash-strapped workers thronging railway and bus stations to make their journey home.

    Jainuddin, a labor contractor near Delhi, said he had lost about 40 of his 50 men since Nov. 8.

    "The ground reality is vastly different from what it appears to those designing these policies."

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    Driving License Applicants Plummet.

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    So at what point in the bond market rout does consensus move?

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    Bond rout continues as experts blast Trump's economic plan – as it ... › Business › Stock markets14 Nov 2016 - Global bond markets suffer fresh losses as investors anticipate higher interest rates and inflation under president Trump.

    Trump policy effect energises dollar as government bonds sink 14 Nov 2016 - Monday 22:00 GMT. A conviction that a Donald Trump presidency will deliver higher inflation has dominated market sentiment, energising the ...

    Why the Bond Market's Rout May Get Only Bigger | Investopedia 2 Dec 2016 - Global Bond RoutBond prices are now in a bear market, with U.S. 10-year Treasuries seeing their yields jump by the most since 2009 in November. ... Bond prices and yields (interest rates) vary inversely, so as interest rates rise bond prices fall.

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    Oil and Gas

    Anadarko Closes Deepwater Gulf of Mexico Acquisition and Raises Oil-Growth Expectations

    Anadarko Petroleum Corporation announced today it has closed the acquisition of Freeport-McMoRan Oil & Gas’s deepwater Gulf of Mexico assets. The transaction is effective Aug. 1, 2016. Anadarko also increased its oil-growth expectations and discussed plans to further accelerate its rig activity in the Delaware and DJ basins. In addition, the company provided an update on its deepwater drilling activities in the Gulf of Mexico, highlighted by successes at Warrior and Phobos, which add to its inventory of future tieback opportunities, as well as a successful development well in the Heidelberg field.


    Doubles ownership in the Lucius development to approximately 49 percent
    Doubles Gulf of Mexico production to more than 160,000 net barrels of oil equivalent (BOE) per day
    Adds three operated deepwater facilities, bringing Anadarko’s total operated facilities to 10
    Enhances cash flow to accelerate activity in the Delaware and DJ basins

    “As a result of closing this transaction, Anadarko now operates the largest number of floating production facilities in the deepwater Gulf of Mexico, which provides a competitive advantage to leverage this infrastructure into attractive new investment opportunities,” said Anadarko Chairman, President and CEO Al Walker. “This region continues to play a key role in our portfolio by contributing to our higher-margin oil growth profile, while generating substantial future free cash flow to accelerate the growth of our world-class U.S. onshore assets in the Delaware and DJ basins. The expanded portfolio of deepwater facilities provides numerous hub-and-spoke opportunities that can generate rates of return of better than 50 percent at today’s prices. Given our industry-leading capabilities in deepwater project management, production solutions and exploration success, adding these high-quality assets greatly improves our ability to deliver strong performance in a volatile commodity environment.”


    At the time the acquisition was announced, Anadarko indicated the acquired assets would generate substantial free cash flow over time, which would facilitate increased investment in the U.S. onshore and position the company to deliver a five-year compounded oil growth rate of 10 to 12 percent in a $50 to $60 oil-price environment. As previously announced, in anticipation of closing the acquisition, Anadarko added two rigs in each of its Delaware and DJ basin positions early in the fourth quarter. Going forward, the company plans to further increase activity in each area, with expectations of ending the first quarter of 2017 with 14 operated rigs in the Delaware Basin and six operated rigs in the DJ Basin. This compares to seven operated rigs and one operated rig in each of these basins, respectively, at the end of the third-quarter 2016. The company’s new investments in these basins generate rates of return of 35 percent to more than 60 percent at today’s prices.

    “As a result of our large and well-located acreage positions, improving cost structure, midstream infrastructure advantages, and commodity-price outlook, we now believe we have the ability to deliver a five-year compounded annual oil growth rate of 12 to 14 percent, while investing within expected cash inflows,” said Walker.


    Further highlighting the value of Anadarko’s deepwater Gulf of Mexico tieback and exploration program, the company today announced its Warrior exploration well encountered more than 210 net feet of oil pay in multiple high-quality Miocene-aged reservoirs. The Warrior discovery is located approximately 3 miles from the Anadarko-operated K2 field and is expected to be tied back to its Marco Polo production facility. Anadarko is the operator at Warrior with a 65-percent working interest. Other partners include Ecopetrol (20 percent) and Mitsubishi Corporation Exploration Co., Ltd. (15 percent).

    At the Phobos appraisal well, which is located approximately 12 miles south of the Anadarko-operated Lucius facility, the company has already encountered more than 90 net feet of high-quality oil pay in a Pliocene-aged reservoir similar to the nearby Lucius field. This secondary accumulation was present in the Phobos discovery well and will be evaluated for tieback to the Lucius facility. Meanwhile, drilling is ongoing toward the primary objective in the Wilcox formation. Anadarko has a 100-percent working interest at Phobos.

    At the Heidelberg field, the fifth production well currently being drilled has encountered the reservoir sand with more than 150 net feet of oil pay to date. The well will be completed immediately following drilling operations and is expected to be brought on production early next year.

    “The successes to date at Warrior and Phobos further demonstrate the value of our assets in the deepwater Gulf of Mexico and our tieback strategy. It also illustrates why we have tremendous confidence in the potential of our ‘3 Ds’ – the Deepwater, Delaware and DJ – to drive growth and value for many years to come,” added Walker. “We look forward to providing further details on these successful developments and other results during the first quarter of next year.”

    Anadarko Petroleum Corporation’s mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world’s health and welfare. As of year-end 2015, the company had approximately 2.06 billion barrels-equivalent of proved reserves, making it one of the world’s largest independent exploration and production companies. For more information about Anadarko and Flash Feed updates, please visit

    U.S.-based oil and gas company Anadarko Petroleum has made a hydrocarbon discovery in the Warrior exploration well and in the Phobos appraisal well, both located in the U.S. Gulf of Mexico.

    The oil company said on Thursday that the Warrior well, located in the Green Canyon area. encountered more than 210 net feet of oil pay in multiple high-quality Miocene-aged reservoirs. Drilling reached a total depth of 26,957 feet (8.216 m) in water depths of 4,144 feet (1.263 m).

    The Warrior discovery is located approximately 3 miles from the Anadarko-operated K2 field and is expected to be tied back to its Marco Polo production platform.
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    Pipeline from two Libyan oil fields 'reopens' but output hampered

    A group of oil guards in Libya said on Thursday they had reopened a long blockaded pipeline leading from the major oil fields of Sharara and El Feel, but an oil worker said a separate group had prevented a production restart at El Feel.

    The apparent agreement by a faction of the Petroleum Facilities Guard (PFG) in Rayana to open the pipeline after shutting it for more than two years has raised hopes of a major output boost from Sharara and El Feel, which together can produce more than 400,000 barrels per day (bpd).

    But the strength and scope of deals to resume production from the fields is not clear, and officials and analysts say any increase to output is likely to be gradual and fragile because of technical problems and Libya's ongoing political turmoil.

    The National Oil Corporation (NOC) has not confirmed any resumption of production at the fields.

    Libya is one of two members of the Organization of the Petroleum Exporting Countries (OPEC) that is not bound by the bloc's pledge to cut oil production by about 1.2 billion bpd during the first half of 2017.

    Its oil production has doubled to about 600,000 bpd since September, when the eastern-based Libyan National Army (LNA) took control of several blockaded ports and allowed the NOC to reopen them. But it remains far below the 1.6 million bpd Libya produced before its 2011 uprising.

    While a jump in Libyan output is seen as one of the risks to the OPEC deal, continued political rivalries and conflict are likely to complicate efforts to bring output back towards past levels.

    The NOC has said it hopes to raise production to 900,000 bpd in the near future, and to 1.1 million bpd next year.

    It has been involved in negotiations with tribal leaders and armed factions for months to reopen a valve at Rayana, a town on the pipeline's route to the northern coast.

    Mohamed Al-Gurj, a spokesman for the PFG faction in Rayana, said a valve had been reopened on Wednesday, after coordination between a PFG unit headed by Mohamed Basheer, an LNA commander in the nearby town of Zintan, and the NOC. The PFG and military officials had announced a deal on Wednesday.

    But an oil worker from Mellitah Oil and Gas, which exports oil from El Feel, said a separate PFG group from the local Tebu ethnic group had prevented a restart there.

    "El Feel oil field is not operating yet because the petroleum facilities guards from the Tebu who guard the field rejected the reopening," said the employee, speaking on condition of anonymity. "Although we carried out a start-up process last night, we were surprised by the PFG," he said.

    An official from Sharara field, who also did not want to be named, said there had been no instruction to resume pumping oil there.

    Mazen Ramadan, an adviser to Libya's U.N.-backed government in Tripoli, said the reopening of the valve at Rayana had been agreed with representatives from the nearby town of Zintan, following demands for local development and exemption from prosecution for blockaders.

    But he said he was taken aback by the PFG announcement. "We contacted Zintan but they have denied that they have a unit of PFG with this name," he said.

    There has been no production at Sharara since the Rayana valve was closed in November 2014, while El Feel continued some production until April 2015. The NOC said in September the pipeline closure had cost Libya $27 billion.

    Output has also been interrupted in the past by rival armed factions present at Sharara and El Feel, including from the Tebu and Tuareg ethnic groups.

    El Sharara is a joint venture between the NOC and Spain's Repsol, with a production capacity of about 370,000 bpd. El Feel is run by the NOC and Italy's ENI with a capacity of about 58,000 bpd.

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    Chesapeake Energy Drills Deeper for Profit - wsj

    Doug Lawler watched a drilling rig’s high-pressure pumps rumble as workers bored in to a massive natural-gas well, part of a new drilling campaign the Chesapeake Energy Corp. chief executive calls “Prop-a-geddon.”

    Named for the sand that drillers use to prop open hydraulically fractured rocks, Prop-a-geddon is an experiment to create supersize oil and gas wells that the company estimates can extract fossil fuels for roughly 75% less than typical wells, thanks to potentially greater economies of scale.

    This well, in the Haynesville Shale formation around Shreveport, La., went 2 miles deep and another 2 miles horizontally, and used 51 million pounds of sand, which the company believes is a world record. Typical wells in this area extend about 5,000 feet, or less than a mile.

    “It’s the biggest job in the history of the Haynesville,” Mr. Lawler said of the massive size of the fracking job under way. “It’s absolutely critical to the company.”

    In a world where oil prices look poised to stay lower for longer, even after the Organization of the Petroleum Exporting Countries agreed to a production cut last week, the challenge for U.S. shale drillers is no longer unlocking new supplies—it is showing they can make money doing it.

    For Chesapeake, a deeply indebted pioneer of the U.S. shale boom co-founded by the late wildcatter Aubrey McClendon, its very survival may depend on figuring it out.

    Under Mr. McClendon, Chesapeake became the second-largest U.S. natural-gas producer after Exxon Mobil Corp., leading a rush to lease land for drilling from Pennsylvania to Texas. But in doing so, it piled up a mountain of debt and a litany of lawsuits that left it reeling—and led to the ouster of Mr. McClendon—even before energy prices collapsed in 2014.

    Mr. Lawler, brought in by activist investors, is selling assets to pare debt, and trying to transition the money-losing company into a prudent spender that can produce oil and gas more economically, and eventually turn a profit.

    He estimates the Oklahoma City-based company’s true debt was roughly $21 billion when he took over in 2013. Between 2010 and 2012, the company had spent nearly $30 billion more on drilling and leasing than it had brought in from operations.

    This year, Chesapeake expects to spend no more than $1.75 billion to produce between 617,000 and 637,000 barrels of oil equivalent a day. That is nearly 90% less than the $14.7 billion Chesapeake spent in 2012 to produce 648,000 barrels of oil equivalent a day. Debt, meanwhile, has been cut to $10.9 billion.

    Chesapeake has reduced its workforce by roughly 70% to about 3,500 employees and shrunk its drillable land portfolio to about 7 million acres, compared with 15 million at the end of 2012.

    Last week, Chesapeake disclosed the sale of 78,000 acres in the Haynesville to an unnamed private company for $450 million. It plans to sell an additional 50,000 acres in the field in the coming months, though it would still retain roughly 250,000 acres.

    While the company’s turnaround remains far from assured, it has so far avoided bankruptcy restructuring. That fate, which has befallen 88 U.S. oil and gas producers since the start of 2015 according to law firm Haynes and Boone LLP, looked possible for Chesapeake earlier this year, when its stock fell under $2 a share amid a drop in prices.

    Some investors have bought into a comeback: Chesapeake shares are up fourfold from their 52-week low as asset sales and debt reductions have diminished concerns. The stock is now trading at $7.27.

    “For what a company has to do now to survive and thrive, they are doing all the right things,” said Robert Clarke, an analyst at researcher Wood Mackenzie Ltd.

    Southeastern Asset Management Inc., headed by Mason Hawkins, remains Chesapeake’s largest shareholder with 10.5% of its stock. It declined to comment. Billionaire Carl Icahn, who worked with Mr. Hawkins to recruit Mr. Lawler, sold more than half his stake in the company in September.

    ‘For what a company has to do now to survive and thrive, they are doing all the right things. ’

    —Robert Clarke, Wood Mackenzie

    Mr. Lawler would like to cut Chesapeake’s debt to $6 billion. Although the company is still outspending cash from operations, he expects it to be cash-flow neutral in 2018, assuming an average oil price of about $60 a barrel.

    A big part of hitting those goals depends on what Chesapeake accomplishes with the vast portfolio of oil and gas fields originally leased by Mr. McClendon, including some in Wyoming and Oklahoma in addition to Louisiana.

    Frank Patterson, Chesapeake’s executive vice president of exploration and production, told analysts in October that the company was learning how to get more out of the ground by drilling and fracking longer wells.

    “What we’re learning in the Haynesville, we’re testing in the Eagle Ford, we’re going to apply to the Utica,” he said. “It’s a game changer.”

    Donning a hard hat and chatting with a work crew, Mr. Lawler was surveying those lessons firsthand last month in the Haynesville—and feeling confident a turnaround was under way.

    “It’s just a matter of time,” he said.

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    Brigham reverses into Diamondback!

    Diamondback Energy Inc., Midland, Tex., has agreed to acquire Austin-based Brigham Resources Operating LLC and Brigham Resources Midstream LLC for $2.43 billion. It’s Diamondback’s second deal for southern Delaware basin acreage since it entered the area earlier this year.

    The deal covers 76,319 net leasehold acres in Pecos and Reeves counties, Tex., with November net production averaging 9,482 boe/d, of which 77% was oil, from 48 gross producing horizontal wells and 16 gross producing vertical wells. The acreage is 83% operated with average working interest of 81%.

    Diamondback says recent horizontal wells on and surrounding the properties have confirmed geochemical data that indicate Wolfcamp A, Wolfcamp B, 3rd Bone Spring, and 2nd Bone Spring as primary targets.

    The firm estimates development potential within the footprint of the deal includes 1,213 net horizontal locations, and says additional development and downspacing potential may exist throughout the Wolfcamp and Bone Spring intervals.

    The contiguous position supports average lateral lengths of 8,000 ft based on current leasehold, with multiple opportunities to increase lateral lengths, the firm says.

    The acquisition, effective Jan. 1, 2017, and expected to close in February, comprises $1.62 billion in cash and 7.69 million shares of Diamondback common stock. Diamondback also will receive $50 million in existing infrastructure, including gas pipeline, fresh water access, frac ponds, and salt water gathering and disposal infrastructure.

    Major Permian player

    Once complete, Diamondback’s leasehold interests in the Permian basin will total 182,000 net surface acres.

    “We feel that the single well economics of over 100% internal rates of return at today’s commodity prices on this [newly acquired] acreage compete for capital in the top quartile of our existing inventory and are comparable to the acreage we acquired in July 2016 in the southern Delaware basin,” said Travis Stice, Diamondback chief executive officer. In that deal, Diamondback gained 19,180 net surface acres primarily in Reeves and Ward counties, Tex., from an unnamed seller for $560 million.

    Stice said the firm believes it can now support 15-20 operated rigs overall. “In addition to our soon to be added sixth rig that will begin developing our previously acquired acreage in the Delaware basin, we plan to add two additional rigs to develop this pending acquisition in 2017,” he said.

    Diamondback also believes production from the new acreage along with increased production from its other assets will enable the firm’s overall production growth to surpass 60% in 2017 at the midpoint of its current guidance range.

    Brigham Resources was founded in 2012 by current Chairman Bud Brigham, current Chief Executive Officer Gene Shepherd, and former members of management from Brigham Exploration Co. following its sale to Statoil ASA. It’s backed by private equity firms Warburg Pincus LLC, Yorktown Partners LLC, and Pine Brook Road Partners LLC.

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    PNG gas hopes buoyed as ExxonMobil raises offer for InterOil

    An increased takeover offer from ExxonMobil for Papua New Guinea player InterOil augurs well for progress on Oil Search's LNG expansion ambitions but has revealed a downgrade in the size of the Elk-Antelope gas resource.

    After a successful court appeal against the $US2.2 billion-plus takeover in November, Exxon has raised the maximum price payable for InterOil by about 10 per cent to $US78.94 per share.

    The new terms have been endorsed by InterOil's board and a revised timetable set to complete the transaction, aiming for closure on March 31.

    The delay in Exxon's acquisition of InterOil has slowed progress on a collaboration plan between the Exxon-led PNG LNG project and the Total-led Papua LNG venture that owns Elk-Antelope. The two projects, each partly owned by Oil Search, are set to support the next phase of expansion of LNG in PNG.

    The revised terms of the takeover paves the way for a new vote by InterOil shareholders on the deal, now expected in February. While shareholders had previously approved the original takeover terms, former InterOil chief executive Phil Mulacek opposed them and successfully argued in the Canadian Court of Appeal that the deal was unfair.

    Mr Mulacek argued that Exxon's offer significantly undervalued InterOil given the Elk-Antelope fields "could hold up to 2 billion boe [barrels of oil equivalent], or about 10 per cent of total current ExxonMobil reserves."

    He has the support of many small shareholders in InterOil who are convinced their company is worth much more than the US oil giant is offering.

    Adding to their frustration, InterOil chief executive Michael Hession is set to reap a payment of almost $US40 million if the takeover proceeds under the terms of his employment contract, an amount described as "excessive" by respected proxy adviser ISS.

    Exxon, which outbid Oil Search for InterOil, has now increased the upper range of its offer, by raising the cap of the resource estimate it would pay for to 11 trillion cubic feet from 10 tcf. The offer is structured as a $US45 per share flat cash payment, plus an extra $US7.07 per share for each tcf of gas certified as being held in Elk-Antelope above 6.2 tcf.

    But in less positive news for all players involved, InterOil released an update of the amount of gas likely to be in Elk-Antelope which reduces the best estimate to 7.8 tcf from 10.2 tcf. The latest estimate doesn't include results from the Antelope-7 well currently being drilled.

    InterOil chairman Chris Finlayson said the company was "pleased to have reached an agreement" with Exxon on the deal and reiterated the board saw it as in the best interests of shareholders.

    The break fee payable by InterOil has been increased to $US100 million from $US67 million.

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    Pioneer Sees Oil Reaching $70 in 2018 as Global Glut Burns Off

    Pioneer Sees Oil Reaching $70 in 2018 as Global Glut Burns Off

    Texas driller Pioneer Natural Resources Co. sees crude prices surging to $70 a barrel in a year’s time as the world finally burns through its surplus of oil and drilling in the Permian shale basin heats up.

    Pioneer has locked in future sales through hedging contracts for about 85 percent of its oil and natural gas output next year, Chief Operating Officer Tim Dove said in an interview Tuesday in Pioneer’s Midland, Texas office. The company hasn’t hedged much for 2018, as it bets that prices have room to run beyond their jump in the past two weeks, he said.

    We haven’t done much hedging for just that reason," Dove said. “We think there’s a chance that ’18 can be better."

    Crude prices have climbed to more than $50 a barrel since Nov. 30, after OPEC agreed to its first output cut in eight years and other major producers followed suit. While that’s raised fears that U.S. explorers will raise their own pumping and flood the market, Dove said Pioneer is sticking with its current plans to operate 17 drilling rigs in the Permian. The company expects to increase output by 15 percent a year through 2020.

    Shale companies have survived more than two years of slumping prices in part by negotiating steep discounts with the contractors who drill their wells and provide other services in the field. Dove said he doesn’t expect that to change next year, even as activity picks up.

    “The service companies right now have a tremendous amount of idled equipment; all you have to do is drive down Interstate 20 here and you can see stacked rigs as far as the eye can see," he said. “The fact is, it’ll be a while before they have pricing power again."

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    Job Ads for Oil & Gas Workers Up 50% Since August

    Ever use the job site called Indeed? The site aggregates job ads from everywhere it can find them from around the web–into one very useful search engine.

    Think of it as Google for job listings.

    Indeed has its own blog and employs its own economists to analyze trends. Today the site released data that shows oil and gas industry job postings have spiked up 50% since a low in August, which is a good sign that the industry is, indeed (pun intended) turning around.

    Attached Files
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    India's oil imports jump 12.7 pct y/y in Nov

    India's oil imports in November jumped about 12.7 percent from a year ago to 18.76 million tonnes or 4.58 million barrels per day, with imports of oil products rising 34.7 percent, government data showed.

    Exports fell 0.8 percent during November from a year earlier, the data showed. The data for imports and exports is preliminary because
    private refiners share numbers at their discretion.

    Attached Files
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    Canadian Natural Resources Limited Announces 2017 Budget

    Commenting on the Company’s 2017 budget, Steve Laut, President of Canadian Natural, stated, “With Horizon Phase 2B online, Canadian Natural is now a more robust and sustainable company. In 2017 we will complete the last major component of the Horizon expansion and make a significant step towards our transition to a long-life, low decline asset base with Horizon Phase 3 targeted to be on stream in Q4 2017. The robustness of the Company is reflected in our ability to grow production 6% in 2017 with a capital program of $3.9 billion well below targeted cash flow, generating free cash flow of approximately $1.7 billion after the Company’s current dividend of $1.1 billion. Canadian Natural will take a balanced approach on how we allocate free cash flow between enhancing balance sheet strength, increasing returns to shareholders, investing in economic resource development and opportunistic acquisitions.

    With a large diverse portfolio of assets, the Company retains significant capital flexibility. In 2017, the Company will continue to allocate capital using a disciplined approach. This disciplined approach provides the Company with opportunities to increase the Company’s E&P drilling capital program by up to approximately $525 million, the potential for a Horizon debottleneck requiring approximately $70 million of project capital or the flexibility to rollback our capital program by up to approximately $900 million if commodity price volatility or economic conditions dictate. The 2017 capital program will deliver near-term production growth from the Horizon Phase 3 expansion while we work to advance the Company’s mid-term project at Kirby North. Going forward, with a greater base of sustainable free cash flow that our long-life, low decline assets provide, the Company will have increased flexibility to allocate cash flow to maximize shareholder value.”

    Canadian Natural’s Chief Financial Officer, Corey Bieber, continued, “Canadian Natural has effectively managed our balance sheet in 2016 through proactive capital allocation and a continued focus on lowering our overall operating and capital cost structures. In 2017, we target to continue this focus, while bringing the major component of our transition to long-life, low decline asset base to completion. As a result, Canadian Natural is confident we can deliver on the Company’s cash flow allocation pillars. We target to quickly strengthen key balance sheet metrics to the low-end of our long-term targeted ranges and increase returns to shareholders as we have over the past 16 years.”

    Attached Files
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    What OPEC Cut? Iraq Is Boosting Its January Oil Exports By 7%

    In an "unexpected" twist, the WSJ reports that instead of cutting its crude production by 4% as it "promised" it would do in the Vienna November 30 meeting, Iraq instead plans to increase crude-oil exports in January, according to government records, immediately raising questions about its commitment to the OPEC’s landmark production agreement. The WSJ reportsthat Iraq’s national oil company, the State Organization for Marketing of Oil, or SOMO, had plans as of December 8, nine days after agreeing to cut production, to instead increase deliveries of its Basra oil grades by about 7% to 3.53 million barrels a day compared with October levels, according to a detailed oil-shipment program viewed by The Wall Street Journal. Those oil shipments represent about 85% of Iraq’s exports.

    The list of planned tanker loadings has been circulated among potential buyers so they can gauge its availability.

    When asked by the WSJ to explain this curious discrepancy, SOMO chief Falah al-Amri declined to comment about the company’s January export levels. Iraq’s oil minister, Jabbar Ali al-Luaibi, has said he would instruct SOMO to act on the OPEC output-cut agreement.
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    Petrofac says services business sees higher bidding activity

    British oilfield services company Petrofac Ltd said deferral and cancellation of projects hurt order intake at its biggest unit this year, but the recovery in oil prices has helped improve bidding activity for services contracts in the final quarter.

    The company's stock was down about 4.4 percent at 870 pence at 0900 GMT on Thursday on the London Stock Exchange.

    Petrofac's engineering and production services unit was performing in-line with expectations and is on track to make up in part for project deferral and cancellations at the biggest unit, engineering and construction, the company said in a statement on Thursday.

    Oil producers have cut billions of dollars in exploration and production spending to weather a prolonged slump in oil prices that has hurt demand for oilfield services companies.

    However, crude prices have modestly recovered from 13-year lows to more than $50 a barrel.

    Petrofac's peer John Wood Group Plc's chief financial officer, David Kemp, said on Wednesday that the company showed modest recovery in some of its oil and gas markets, including U.S. shale and offshore oil exploration and drilling businesses.

    Petrofac has high exposure to the Middle East oil markets that resulted in good backlog coverage for 2017 as record production in the region drove up contract awards.

    "Bidding activity has increased during the last quarter of the year... we are well placed for recovery in our core markets," Group CFO Alastair Cochran said in a call with reporters.

    Petrofac said its order book backlog stood at $14.5 billion as of Nov. 30. It had recorded an order book value of $20.7 billion in 2015 due to higher orders from its core Middle Eastern markets.

    The company said its full-year net profit is expected to come in above forecast as record revenues and cost-cutting measures have paid off.
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    Japan's Mitsui to invest in Russia's Ros Agro, R-Pharm

     Japanese trading house Mitsui & Co is set to acquire equity stakes in Russian agriculture firm Ros Agro and Moscow drugmaker R-Pharm as Russian President Vladimir Putin visits Japan this week, Nikkei business daily said on Thursday.

    The report comes after Russian officials on Tuesday cautioned against expecting a breakthrough in Moscow's territorial dispute with Tokyo when Putin visits, and proposed focusing instead on commercial deals.

    Mitsui and Ros Agro will sign a memorandum of understanding (MOU) on a capital and business tie-up under which the Japanese firm is expected to invest several billion yen in London-listed Ros Agro, which deals in grains, cooking oil to meat, Nikkei said without citing sources.

    Mitsui is also expected to spend 15 billion yen to 20 billion yen ($128 million-$171 million) for a roughly 10 percent stake in R-Pharm, which produces drugs under licences from pharmaceutical firms such as in India, the report said.

    A Mitsui spokeswoman declined to comment.

    Japan's JGC Corp plans to sign an MOU with Russia's Pacific island of Sakhalin on a feasibility study for building a miniature natural gas liquefaction facility, the Nikkei said.

    Under the study, the facility to be built on the eastern part of the island would produce up to 12,000 tonnes of liquefied natural gas (LNG) per annum to provide fuel for domestic households and businesses on the island, it added.

    A JGC spokesman declined to comment.

    A Japanese venture led by state-run Japan Oil, Gas and Metals National Corp (JOGMEC) announced on Wednesday it and Russia's Irkutsk Oil Co would enter the production phase at the onshore Ichyodinskoye oilfield in the Zapadno-Yaraktinsky Block (ZY block), north of Irkutsk.

    The Japanese venture in which Japan's Inpex Corp and Itochu Corp also have stakes has a 49 percent stake in the operating firm, while the rest is held by Irkutsk Oil.

    Attached Files
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    Is Rosneft looking to build a pipeline to export gas from Zohr to Europe?

    There is speculation in the Russian media this week about whether Rosneft is planning a pipeline to export gas from the Zohr field to Europe. Russia’s Economy Today (Russian) quotes energy analyst Igor Yushkov from that country’s National Energy Security Fund as saying that Rosneft’s acquisition of a 30% participating interest in Eni’s Shorouk offshore concession for USD 1.125 bn signals an ambition to export to the EU through a pipeline.

    Rosneft, he says, is positioning itself as Egypt’s main export partner on the Zohr field. Meanwhile, state-owned Sputnik’s Arabic site is running with a report that a pipeline is definitely in the cards in what we’re reading as a pickup of the Economy Today piece. We’ll be keeping a close eye on this one, folks.
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    Hedging activity maintains high pace set in Q3

    Oil and gas hedging activity skyrocketed in Q3 to the highest level in a year. Will activity climb higher in Q4 as prices break through the US$50/bbl threshold? Our corporate research experts look at the Q3 numbers and analyse hedging volumes, trends as Q4 wraps up, and what's to come in a post-OPEC-cuts 2017.

    Oil and gas hedge volume soared in Q3 2016 — more than in any of the prior three quarters. What drove this surge in activity? And what conclusions might we draw as Q4 comes to a close and we enter 2017 with historic production cuts by OPEC?

    Covering a peer group of 32 of the largest upstream companies with active hedging programmes, our analysis shows the volume of oil hedges in Q3 were up 72% compared to Q2, and gas was up 45%. This surge may simply be due to higher oil and gas prices relative to H1 2016, with a majority of derivatives within US$5/bbl of a US$50/bbl (Brent) oil price and a minimum of US$3 per thousand cubic feet of gas (Henry Hub).

    Notably, only three operators were responsible for 42% of the volumes added in oil hedging, and just two of their peers accounted for 58% of gas hedging volumes. The rush to lock in US$50/bbl oil and US$3.20/mcf gas suggests that producers may not have sensed much price upside beyond those levels for the near term. But recent OPEC announcements have altered the outlook.

    A recent flattening in the curve for oil-price futures suggests that the pace of oil-hedging activity has remained strong during Q4. Producers appear to be rushing to lock in $55/bbl oil for 2017. The extent of the activity cannot be quantified until producers disclose updates to derivative positions in Q4 results documents. We will be watching for a few key signals:

    1) Will Q4 activity exceed the year-to-date highs we saw during Q3?;
    2) With several sub-$50/bbl hedges already in place, how much will producers' weighted-average hedge price increase?; and
    3) Will the new activity raise 2017 hedge protection to similar levels as 2016 and 2015?
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    Statoil getting out of oil sands, takes $500 million loss

    Statoil ASA, the Norwegian-owned oil and gas major, does not believe it has a future in the Canadian oil sands.

    Citing concerns over profitability, the company said Wednesday it will sell its Kai Kos Dehseh (KKD) assets in the Alberta oil patch to Athabasca Oil (TSX:ATH) and take a loss of at least $500 million.

    The deal with Athabasca Oil involves two oil sands leases, a 24,000 barrel a day test project and a greenfield facility which was expected to produce 40,000 barrels a day, which Statoil shelved in 2014.

    “This transaction corresponds with Statoil’s strategy of portfolio optimization to enhance financial flexibility and focus capital on core activities globally,” Statoil said in a statement. Through the sale, a cash and share transaction totalling CAD$832 million, Statoil will earn a 20% stake in Athabasca Oil. But the divestment will also trigger an impairment of between USD$500 million to $550 million.

    The deal with Athabasca Oil involves two oil sands leases, a 24,000 barrel a day test project and a greenfield facility which was expected to produce 40,000 barrels a day – the latter of which Statoil shelved in 2014.

    The Norwegian oil company entered KKD through the acquisition of North American Oil Sands Corporation in 2007. In 2011 PTTEP acquired a 40% interest, and in 2014 Statoil and PTTEP agreed to divide their respective interests in KKD. Since then, Statoil has continued as owner-operator of the Leismer and Corner projects.

    Statoil, of course, is not the first European company to scale back investments in the Canadian oil sands, which have been hit hard by the crude oil price collapse. France's Total SA (NYSE:TOT) shelved its Josyln project in 2014, and also divested some of its interest in the $13.5 billion Fort Hills facility to Suncor (TSX:SU).

    Last year Royal Dutch Shell (LON:RDSA) pulled the plug on the development of its Carmon Creek thermal oil sands project and took a $2 billion charge as a result.

    American companies are also taking a hard look at the oil sands. In October, Exxon Mobil (NYSE:XOM) said it would have to cut its oil reserves by 19%, including removing 3.6 billion barrels from its books, from the Kearl oil sands project in northern Alberta.

    Even with prices climbing above $50 a barrel, oil sands producers are challenged by high upfront capital costs – making new projects difficult -, new carbon emissions regulations and limited access to pipelines, which forces companies operating in Canada to accept lower prices for their products.

    “Since we entered the oil sands in 2007, our portfolio has changed and also the energy markets have shifted quite fundamentally since then,” Paul Fulton, Statoil’s country president, told The Globe and Mail. “We’ve seen a decline in the oil price, and Statoil has a broader portfolio of assets that it needs to allocate its capital to.”
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    Exxon Names Darren Woods as New CEO to Replace Rex Tillerson

    Darren Woods, the man replacing Rex Tillerson as the leader of America’s most influential energy giant, helped transform Exxon Mobil Corp.’s refining business from a poor cousin of oil production to the primary profit generator.

    Woods, the company’s refining boss since 2012, was named the next chairman and chief executive officer effective Jan. 1 after President-elect Donald Trump picked Tillerson to become U.S. Secretary of State, the Irving, Texas-based oil company said in a statement Wednesday. Even if Tillerson doesn’t become America’s top diplomat -- three Republican senators have expressed misgivings about his nomination -- he was due to leave no later than March when he reaches Exxon’s mandatory retirement age.

    Woods, 51, inherits a drilling and refining behemoth hamstrung by a 2 1/2-year slump in energy markets, ill-timed investments in North American shale and Russia, and allegations of deceiving investors with a climate-change cover-up. Still, Trump’s election, OPEC’s plan to cut production and Woods’s ability to boost the value of the company’s refineries have all combined to change the face of the industry for Exxon heading into the future.

    “Validating the integrated model will be the challenge for the next leader of Exxon,” said Vincent Piazza, a senior analyst at Bloomberg Intelligence in New York. “Downstream and chemicals have been the few bright spots counterbalancing the negative impact of prices on the upstream segment.”

    Darren Woods

    Woods’s elevation to chairman and CEO was telegraphed with his promotion to president in January, the same time he became a member of the board of directors. He’s been on the six-person management committee that oversees day-to-day operations since June 2014. He steps into the new roles effective Jan. 1.

    Refining Reversal

    For the past five quarters at Exxon, refining has outperformed so-called upstream oil and natural gas wells, a reversal of the traditional relationship. Since June 2015, Exxon’s refineries and related business lines raked in $6.34 billion, compared with $3.05 billion for the oil and gas business. During that same period, refining burned through $3.1 billion in capital spending, compared with $23.2 billion in the upstream segment.

    A Kansas-born electrical engineer by training, Woods joined Exxon as an analyst in 1992 and rose through the ranks on the refining and chemicals side of the business. His main rival in the competition to succeed Tillerson was Jack Williams, a drilling engineer who oversaw oil and gas projects from Louisiana to Malaysia before taking control of XTO Energy, the shale explorer Exxon bought in 2010 for $35 billion.

    One of Woods’s most-pressing tasks will be figuring out how to rescue a stillborn Russian joint venture that locked up $1 billion in investments and a billion-barrel Arctic oil discovery behind a wall of international sanctions.

    Russia Quandary

    When Exxon signed a 2011 agreement to join with Rosneft PJSC in drilling Arctic, deepwater and shale fields, it was seen as a crowning achievement of Tillerson’s career. But the work slammed to a halt when the U.S. and European Union imposed economic sanctions against Russia in 2014 as punishment for its annexing Crimea and supporting Ukrainian separatists. The venture has been mostly idle ever since.

    On the home front, Woods will face allegations by attorneys general from New York, Massachusetts and other states that Exxon misled investors about the threat posed to the company’s portfolio by climate change. Under Tillerson, the company has aggressively defended its record and said the probes are politically motivated.

    Exxon shares have risen 16 percent this year, lagging the 19 percent advance by the Bloomberg World Oil & Gas Index. Chevron Corp. and Royal Dutch Shell Plc have also outperformed their bigger rival, with gains of 29 percent and 40 percent, respectively.

    Woods made $28,848 in political contributions during the past four years. The biggest recipient was Exxon’s political action committee, which took in $13,700. Woods also gave the Republican National Congressional Committee $10,000.

    Exxon’s leadership change comes after the Organization of Petroleum Exporting Countries and several non-OPEC nations including Russia committed to cutting almost 1.8 million barrels a day of crude starting next year. Oil in New York has risen about 15 percent to over $50 a barrel since the Nov. 30 accord.

    Legendary oil tycoon T. Boone Pickens sees crude reaching $60 a barrel within a month, and $75 some time next year. “I’m long oil,” Pickens said during a Bloomberg Television interview on Monday. OPEC members “will carry out what they say they will do. They will cut supply.”
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    Protesters agree to end blockade of western Libya oil pipelines: officials

    Protesters blockading pipelines to Libya's Sharara and El Feel oil fields have promised to reopen them and production could restart in the coming days, security officials and an oil industry source said on Wednesday.

    Reopening the fields could add 365,000 barrels per day (bpd) to Libya's production, which has been drastically reduced by conflict and political disputes.

    National output has doubled since September to about 600,000 bpd after blockades at major ports were lifted, but it remains far below the 1.6 million bpd the OPEC member was producing before its 2011 uprising.

    A faction of Libya's Petroleum Facilities Guard (PFG) that has blockaded one pipeline since November 2014 and another since April 2015 said in a statement that they had agreed to reopen both.

    "The National Oil Corporation should start its work as soon as possible and we, as the Petroleum Facilities Guard, pledge to protect and defend the wealth of the Libyan state," the statement said.

    The PFG faction is aligned with the self-styled Libyan National Army (LNA), a force based in eastern Libya. Its statement was confirmed by the office of Idris Madi, head of the LNA's command center in its western outpost of Zintan. Madi's office said the blockade would end by Thursday.

    A National Oil Corporation (NOC) source confirmed the deal, but said the resumption of production was not guaranteed, as similar previous pledges had fallen through.

    He said that NOC subsidiaries at the Zawiya refinery and Mellitah complex, which are fed from Sharara and El Feel, had been readying for a restart.

    "Both companies are preparing their facilities to resume production. Also in the fields there have been preparations," he said, adding that any restart would be gradual.

    The NOC has said that it hopes to raise production to 900,000 bpd in the near future and to 1.1 million bpd next year, though it says those increases are dependent on blockades ending and the NOC receiving new funds for its operating budget.

    Libya's continuing political turmoil remains a threat to any production recovery, with rival governments in the east and west of the country and armed factions competing for power and oil wealth.
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    Gulfport Energy Corporation Announces Entry into the SCOOP Play with Complimentary Acquisition of Approximately 85,000 Net Effective Acres

    Gulfport Energy Corporation today announced that the Company has entered into a definitive agreement with Vitruvian II Woodford, LLC (“Vitruvian”), a portfolio company of Quantum Energy Partners, to acquire approximately 46,400 net surface acres in the core of the SCOOP, including approximately 183 MMcfe per day of net production for October 2016 for a total purchase price of $1.85 billion.

    Acquisition Highlights

    Substantially contiguous acreage position totaling approximately 85,000 net effective acres, which includes rights to 46,400 Woodford acres and 38,600 Springer acres, in Grady, Stephens and Garvin Counties, Oklahoma, with approximately 80% held by production.
    Stacked-pay potential with approximately 1,750 gross drilling locations, including over 775 gross locations with internal rates of return of approximately 75%, targeting the Woodford and Springer intervals with significant upside potential through infill drilling and additional prospective zones.
    Existing production of approximately 183 MMcfe per day in the month of October 2016.
    Total estimated proved reserves at September 30, 2016 were 1.1 Tcfe.

    As of December 13, 2016, Gulfport entered into a definitive agreement with Vitruvian to acquire approximately 46,400 net surface acres with multiple producing zones, including the Woodford and Springer formations, in Grady, Stephens and Garvin Counties, Oklahoma. Given the potential for numerous producing intervals across this high-quality position, Gulfport has identified approximately 1,750 gross drilling locations, composed of only Woodford and Springer zones with significant upside potential through infill drilling and additional prospective zones present on the acreage. The acquired properties are located primarily in the over-pressured liquids-rich to dry gas windows of the play and include approximately 183 Mmcfepd of net production for October 2016. The transaction also includes 48 producing horizontal wells and an additional interest in over 150 non-operated horizontal wells. Four rigs are currently operating on the acreage and Gulfport currently intends to maintain a four rig cadence in the play during 2017 and add an additional two rigs at the beginning of 2018. Based on the estimated internal reserve report prepared by Vitruvian as of September 30, 2016 and audited by Netherland, Sewell & Associates, Inc., the estimated proved reserves attributable to the acreage are approximately 1.1 Tcfe.  The acquisition is expected to close in February 2017, subject to the satisfaction of certain closing conditions.

    Consideration in the transaction includes a total purchase price of approximately $1.85 billion, consisting of $1.35 billion in cash and approximately 18.8 million in shares of Gulfport common stock privately placed to the sellers, subject to adjustment.  The Company intends to fund the cash portion of the acquisition through potential debt and equity financings prior to closing.

    Chief Executive Officer and President, Michael G. Moore commented, “Today is a defining day for Gulfport Energy. Combining Vitruvian’s high-quality SCOOP position with our prolific Utica assets will transform our company and solidify Gulfport with core positions in two of North America’s high-return natural gas basins. In Vitruvian, we believe we have found a prolific stacked pay resource with strong production history, a multi-year, high-return drilling inventory – an opportunity with significant upside from both a resource and operational perspective.  The asset consists of a low-risk, substantially contiguous acreage position in the core of the SCOOP. This acquisition is not only additive to our Company but in our opinion truly one-of-a-kind. The transaction is expected to be accretive to cash flow and net asset value per share and provides us with a blocky, sizeable and scalable footprint in a new operating area.”

    Vitruvian CEO and President, Richard F. Lane commented, “We are pleased to be part of this significant transaction, both for the complimentary asset it represents for Gulfport and for the achievement it represents for Vitruvian’s employees and stakeholders. We plan to work closely with the Gulfport team to ensure a seamless transition of the asset to Gulfport.”

    President of Quantum Energy Partners, Dheeraj Verma commented, “We are excited about this transaction and believe that the combination of these assets will provide Mike and his team with more opportunities for margin expansion and cash flow growth immediately. We are quite optimistic about the value creation potential here and look forward to participating in this upside as a shareholder of the combined company.”

    BofA Merrill Lynch acted as exclusive financial advisor to Gulfport in connection with the transaction and Akin Gump Strauss Hauer & Feld LLP served as Gulfport’s legal counsel. Jefferies acted as financial advisor to Vitruvian in connection with the transaction and Vinson & Elkins served as Vitruvian’s legal counsel.

    About Gulfport

    Gulfport Energy Corporation is an Oklahoma City-based independent oil and natural gas exploration and production company with its principal producing properties located in the Utica Shale of Eastern Ohio and along the Louisiana Gulf Coast. In addition, Gulfport holds a sizeable acreage position in the Alberta Oil Sands in Canada through its 24.9% interest in Grizzly Oil Sands ULC.
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    STONE ENERGY CORPORATION Announces Filing for Court Approval of Prepackaged Restructuring Plan

    Stone Energy Corporation, and its domestic subsidiaries (together with the Company, the “Debtors”), today announced that they had filed voluntary petitions under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) to pursue a pre-packaged plan of reorganization (as amended, the “Plan”) in accordance with its previously announced comprehensive balance sheet restructuring efforts.

    As previously disclosed, on November 17, 2016, the Debtors commenced a solicitation to seek acceptance by a majority of those voting in each voting class of claims of the Company’s creditors under the Plan, including (a) the lenders (the “Banks”) under the Fourth Amended and Restated Credit Agreement, dated as of June 24, 2014, as amended, modified, or otherwise supplemented from time to time (the “Credit Agreement”) among Stone as borrower, Bank of America, N.A. as administrative agent and issuing bank, and the financial institutions named therein, and (b) the holders of the Company’s 1 3⁄4% Senior Convertible Notes due 2017 (the “Convertible Notes”) and the Company’s 7 1⁄2% Senior Notes due 2022 (the “2022 Notes” and, together with the Convertible Notes, the “Notes” and the holders thereof, the “Noteholders”).  Stone expects the solicitation period to end on December 16, 2016.  Copies of the Plan, then in effect, and the disclosure statement related to the solicitation were furnished as Exhibit 99.1 to Stone’s Current Report on Form 8-K filed on November 18, 2016.

    As previously announced, on October 20, 2016, the Debtors and Noteholders holding approximately 85.4% of the aggregate principal amount of Notes executed a restructuring support agreement (the “Original RSA”).  On December 14, 2016, the Debtors, the Noteholders holding approximately 79.7% of the aggregate principal amount of Notes and the Banks holding 100% of the aggregate principal amount owing under the Credit Agreement entered into an Amended and Restated Restructuring Support Agreement (the “A&R RSA”) that amends, supersedes and restates in its entirety the Original RSA.  In connection with entry into the A&R RSA and the commencement of the bankruptcy cases, the Debtors amended the Plan.

    Pursuant to the terms of the Plan as revised to be consistent with the terms of the A&R RSA and the term sheet annexed to the A&R RSA (the “Term Sheet”), Noteholders, Banks and other interest holders will receive treatment under the Plan, summarized as follows:

    Noteholders will receive their pro rata share of (a) $100 million of cash, (b) 96% of the common stock in reorganized Stone and (c) $225 million of new 7.5% second lien notes due 2022.

    Existing common stockholders of Stone will receive their pro rata share of 4% of the common stock in reorganized Stone and warrants for up to 10% of the post-petition equity exercisable upon the Company reaching certain benchmarks pursuant to the terms of the proposed new warrants.

    Banks signatory to the A&R RSA will receive their respective pro rata share of commitments and obligations under an amended Credit Agreement on the terms set forth in Exhibit 1 to the Term Sheet, as well as their respective share of the Company’s unrestricted cash, as of the effective date of the Plan, in excess of $25 million, net of certain fees, payments, escrows or distributions pursuant to the Plan and the PSA, defined below.

    Banks not signatory to the A&R RSA will have the option to receive either (a) the same treatment as the Banks signatory to the A&R RSA, or (b) their respective pro rata share of new senior secured term loans plus collateral for their respective pro rata share of issued but undrawn letters of credit.
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    Conoco sells $1.3 billion in oil land, assets

    ConocoPhillips, the world’s largest independent oil company, sold $1.3 billion in oil land and other assets this year, generating cash for debt reduction, share repurchases and operations.

    Conoco, based in Houston, said on Wednesday it will record $800 million in sales this quarter: interests in Senegal, Indonesia, Alaska’s North Cook Inlet and Minnesota iron ore. The sales will reduce company oil and gas production by 27,000 barrels per day. Still, Conoco doesn’t expect the loss to effect its 2016 production totals; It says 2017 production, excluding work in Libya, won’t dip and could grow as much as 2 percent.

    The company paid down $1.25 billion of debt in October and another $150 million in December, totaling about $2.2 billion of debt this year.

    Conoco plans to repurchase $3 billion in shares, and began in mid-November.

    In the third quarter, Conoco lost $1 billion, $100,000 less than it lost in the second quarter of 2016 and the third quarter of 2015. It cut about $300 million in capital expenses as it shifted money from offshore projects to hydraulic fracturing operations in U.S. shale fields. It also slashed operating expenses by 17 percent, or $300 million.

    But it still reported $27 billion in long-term debt.

    The company said on Wednesday that it plans on selling $5 billion to $8 billion in assets over the next two years.
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    Jump in lower 48 oil production

                                               Last Week  Week Before  Last Year

    Domestic Production '000.......... 8,796          8,697         9,176
    Alaska ....................................... 520            522            524
    Lower 48 ................................. 8,276          8,175         8,652
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    Summary of Weekly Petroleum Data for the Week Ending December 9, 2016

    U.S. crude oil refinery inputs averaged 16.5 million barrels per day during the week ending December 9, 2016, 57,000 barrels per day more than the previous week’s average. Refineries operated at 90.5% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.8 million barrels per day. Distillate fuel production decreased last week, averaging 5.0 million barrels per day.

    U.S. crude oil imports averaged about 7.4 million barrels per day last week, down by 943,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.7 million barrels per day, 2.0% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 624,000 barrels per day. Distillate fuel imports averaged 233,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.6 million barrels from the previous week. At 483.2 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 0.5 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 0.8 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 3.6 million barrels last week but are near the upper limit of the average range. Total commercial petroleum inventories decreased by 2.0 million barrels last week.

     Total products supplied over the last four-week period averaged over 19.4 million barrels per day, down by 2.5% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 8.9 million barrels per day, down by 3.0% from the same period last year. Distillate fuel product supplied averaged over 3.9 million barrels per day over the last four weeks, up by 11.0% from the same period last year. Jet fuel product supplied is up 3.4% compared to the same four-week period last year.

    Cushing up 1.2 mln bbl

    EIA reports shows refiners exporting huge amount of product, 5.7 MMbbl/day total, 1.1 are mogas, 1.3 distillate. 30% of product is exported!
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    Analysis: Iran emerges as high sulfur gasoil supplier for ARA refining hub

    Northwest Europe has opened its doors to the first shipments of Iranian gasoil after a 10-year hiatus, and these nascent flows are adding to the desulfurization opportunities within the Amsterdam-Rotterdam-Antwerp refining hub.

    The specifications of the recent fixtures put Iranian gasoil as a prime candidate for desulfurization and blending within the ARA hub, market sources said.

    So far this year, the HSGO shipments have been straight run 0.7-0.9% gasoil from Bandar Mahshahr, middle distillates traders and sources close to the parties involved said.

    In aggregate, high sulfur gasoil exports from Iran have amounted to approximately 100,000 mt each month, booked for the West of Suez, the Mediterranean, Northwest Europe and West Africa, a source with knowledge of the matter said.

    The latest fixture to Northwest Europe was on board the Glorious, a 60,000 mt cargo, which discharged into Amsterdam on November 26, having left Bandar Mahshahr, Iran, on November 12, S&P Global trade flow software CFlow showed. The Mahshahr Oil Terminal is used to store products from the Abadan Refinery to the west.

    This vessel was laden with 0.7% sulfur gasoil, sources said.

    The identity of the charterer remains unclear.

    Among the other Iranian ports, Bandar Abbas exports 6-7 cargoes of 5,000 ppm (0.5%) gasoil each month, National Iranian Oil Company said, while port Lavan Island supplies one cargo on average of maximum 500 ppm gasoil.

    No high sulfur gasoil volumes are presently being offered from these ports.

    Before desulfurization facilities were launched this year, both Bandar Abbas and Lavan Island supplied high sulfur specifications around 10,000 ppm (1.0%) gasoil.

    Desulfurization facilities by Bandar Abbas port were made operational in November, while those at Lavan Island became active six months before, a NIOC source said.

    NIOC doesn't publish tenders for high sulfur gasoil, opting for private negotiations instead.

    So far this year, Iranian exports from Bandar Mahshahr have ranged between 7,000-9,000 ppm, sources said.

    The first gasoil shipment from Iran since its trade sanctions were removed was chartered by trading company Vitol, according to shipping sources and broker reports.

    Vitol wasn't immediately available for comment on the matter.

    The UN Security Council lifted petroleum sanctions on Iran in January.

    The trade sanctions were originally imposed by the UN Security Council in 2006, but were tightened up in 2008 and again in 2010 in opposition to Iran's nuclear program.

    Since the sanctions were lifted, Iran has exercised the opportunity to sell oil to Europe, with a large proportion of this crude and condensate rather than refined or finished products.


    Firstly, being straight run gasoil, the Iranian streams can be fed through a wide range of desulfurization units across the ARA region. Unlike cracked material, straight run gasoil contains fewer impurities and unwanted metals and is therefore a more malleable product.

    Certain desulfurization units apply restrictions on metal contaminants within cracked material, to optimize the longevity of the unit. Desulfurizers need to burn at higher temperatures in the presence of contaminants, which in turn reduces the desulfurization unit's life span, a refinery source said.

    Handling cracked material becomes more complex.

    "If there are additives beyond the technical specifications, you need to do a cost-benefit analysis. If the catalyst is burning at a higher temperature, this affects the life [of the unit]. So you must know the burn rate, and then you do the analysis," the refiner said.

    Conversely, the straight run nature of the Iranian gasoil offers better optionality in the way of desulfurization across units in Europe, where there is a vast desulfurization capacity.

    While the Iranian material could journey east toward Singapore's oil products hub, Northwest Europe offers superior desulfurization capabilities, with facilities built to manage Europe's cleaner energy evolution towards the current 10 ppm ultra low sulfur diesel specification.

    As sulfur content requirements became more stringent across Europe, the infrastructure was developed simultaneously within the region to satisfy the lower sulfur demands.

    "Singapore does not have desulfurization capacity, so it is easier to take into ARA. Freight is not too expensive on a bigger vessel [to ARA]," a trader said.


    Globally, the trend is for lower sulfur levels in gasoil and diesel. However, one of the few outlets left for high sulfur material is West Africa.

    Indeed, the Torm Sara loaded in Bandar Mahshahr and, after visiting the oil terminal at Fujairah, the vessel is now heading towards Lome, Togo, the main point in the West African offshore market.

    However, in West Africa the predominant grade traded is 0.3% gasoil -- high sulfur, high density, high flash gasoil. However, Iranian gasoil initially falls short on the latter two aspects.

    The flash point for the latest Iranian gasoil offered ranged between a minimum of 54-60 degrees Celsius, while the grade traded in the offshore Lome market typically requires a very high flash point of 70 C, according to sources.

    The density of Iran's gasoil also fails to meet WAF's requirements, as the typical traded density in the offshore market is a minimum of 0.865, according to traders.

    As a result, the material is likely to have been blended in Fujairah in order to meet the market's requirements.

    "It is too low density for WAF, even after desulfurization. ARA makes sense," according to the first trader, who also specializes in West African trade.

    Other high-sulfur consumer markets in the region are also a tricky prospect without blending. But even here the move is towards lower sulfur specifications.

    For example, Pakistan is set to move from 0.5% sulfur to 500 ppm at the beginning of 2017, and as part of the general trend to lower sulfur material, the ability of Iranian material to go into short positions without blending or being desulfurized is extremely limited.

    For now, Iran's gasoil shipments to ARA are expected to continue, market sources said, together with the existing flows of condensate and crude products.

    However, there remains uncertainty over the regularity of these shipments.
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    Wood Group shows recovery in U.S. shale on rising oil prices

    Oilfield services company John Wood Group Plc's CFO David Kemp said on Wednesday that the company showed modest recovery in some of its oil and gas markets, including U.S. shale and offshore oil exploration and drilling businesses.

    * U.S. shale is the largest contributor to company's operations and maintenance contracts in its west region, which includes the Americas. John Wood Group said a steady rise in rig count would help its assets in the Permian, Eagle Ford, Marcellus, Utica and Bakken basins as the market recovers in 2017.

    * The number of oil rigs operating in the United States rose for a fifth straight week to 477, reaching the highest level since January as a surge in crude prices continued to bring equipment back into operation, weekly data from oil and gas services company Baker Hughes showed.

    * U.S. shale production is set to recover from a five-month decline in January, the U.S. government said on Monday. Oil rose to an 18-month high on Monday after OPEC and some of its rivals reached their first deal since 2001 to jointly reduce output to tackle global oversupply, though prices slipped late in the day.

    * Wood Group, which counts BP Plc as one of its customers, said in August that it expected a 20 percent drop in full-year EBITA.

    * Full-year revenue was expected to be $5.18 billion, according to company-provided consensus on its website. Pretax profit was expected to be $247 million.

    * The company reiterated on Wednesday it would raise its 2016 dividend by double-digit percentage points.

    * Oil companies have cut back on spending for exploration drilling and maintenance, reducing demand for engineering firms such as Wood Group that provide services such as overhaul of compressors, pumps, generators and rotating equipment.

    * The company, founded in 1912 as a ship repair and marine engineering firm, said it expected earnings before interest, tax and amortisation (EBITA) to be in line with the company-provided consensus of $370 million for the full-year ended Dec. 31.
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    Gazprom, OMV reach outline deal on swap of Norway, Siberia assets

    Russian energy company Gazprom and Austrian oil and gas group OMV reached an outline deal on Wednesday to swap a 38.5 percent stake in OMV's Norwegian unit for a 25 percent stake in a section of Gazprom's Urengoy gas field.

    OMV Chief Executive Rainer Seele, who took the top job at Austria's biggest company last year, is reversing the policy of his predecessor who achieved output growth by buying assets in the North Sea, where production is expensive but reliable.

    Seele aims to generate cash by selling off non-core assets such as Turkey's Petrol Ofisi and to replenish the company's weakening reserves with access to oil and gas fields in low-cost countries such as Russia and the United Arab Emirates.

    Gazprom is set to benefit from diversifying its geographic footprint, as well as synergies in logistics and marketing and access to technology it could use in future for Russian offshore projects, Chief Executive Alexei Miller told reporters in Vienna.

    Both Miller and Seele sounded optimistic when asked about outstanding approval from Norwegian authorities for the deal, which will be an asset swap with no cash involved. Gazprom had previously said Norway might bloc it from acquiring a stake larger than 25 percent in OMV's Norwegian holding.

    "In Russia they always say problems should be solved when they occur and if they occur, presently we do not have this problem," Miller said.

    Without going into detail, Seele said dates for meetings with Norwegian authorities would be fixed soon, adding that he had received no indication that the swap might not go ahead.

    The effective date of the deal will be Jan. 1, 2017, pending regulatory approval, with the final deal expected to be sealed in the middle of next year, OMV said in a statement.

    OMV, which expects to invest around 0.9 billion euros ($955 million) in the field until 2039, anticipates its Urengoy output will start in 2019 with production reaching more than 80,000 barrels of oil equivalent per day (boe/d) in 2025.

    In the third quarter, OMV's output was 301,000 boe/d and Seele has said it might stagnate at that level until 2020 without the Russian deal, for which Seele once said there was "no plan B".

    OMV, which relies on mature fields in Austria and Romania for much of its output, would see its reserves swell by half with an expected contribution of 560 million boe until 2039 from the 24.98 percent stake in the Achimov IV and V sections of Urengoy.
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    OPEC Says Supply Cuts Won’t Re-Balance Market Until Second Half

    OPEC said its agreement to cut production, while speeding up the re-balancing of the global oil market, won’t result in demand exceeding supply until the second half of next year.

    The Dec. 10 agreement between the Organization of Petroleum Exporting Countries and non-members such as Russia and Kazakhstan “will accelerate the reduction of global inventories and bring forward the re-balancing of the oil market to the second half of 2017,” OPEC said in its monthly report Wednesday. It’s a more pessimistic outlook than that published Tuesday by the International Energy Agency, which indicated a supply deficit in the first half.

    Oil prices have climbed about 16 percent since OPEC announced its first production cuts in eight years on Nov. 30 as it seeks to end a three-year glut that the group admits lasted longer than it expected. The accord was widened on Dec. 10 when 11 non-members signed up as well.

    Despite a commitment from those countries to lower their output in the first half by 600,000 barrels a day, the organization slightly increased forecasts for supplies from outside OPEC in 2017. It estimates that production in Russia, which pledged half of the non-OPEC cut, and in Kazakhstan, which also agreed to cut, will remain steady for the six months covered by the deal. The report doesn’t state whether the estimates take into account the most recent agreement.

    The non-OPEC growth forecast was increased by about 100,000 barrels a day, to 300,000 a day, “due to higher price expectations for 2017,” according to the report, produced by the bloc’s Vienna-based secretariat. The organization kept forecasts for U.S. supply in 2017 unchanged.

    The group said its own output climbed 150,800 barrels a day to 33.87 million a day in November, as Nigeria and Libya -- which are both exempt from any obligation to cut -- restored some of their disrupted supplies. This implies that, in order to meet the group’s target of 32.5 million barrels a day, the other nations would need to make deeper cuts than originally agreed.

    Another complication for the deal may come from the group’s revision of October output levels, which were used as the reference points for the accord. Production in Saudi Arabia, the biggest and most influential member, was assessed by the organization at 10.56 million barrels a day in October, higher than its reference level of 10.54 million.

    The organization has created a monitoring committee, composed of three members and two non-members, to ensure compliance with the agreement.

    Production data submitted directly by members, which is also included in the report, continued to show a discrepancy with the group’s own estimates. While data from Iraq, Iran and Venezuela have regularly differed, this month’s report showed a wider disparity for Saudi Arabia. The kingdom told OPEC it produced 10.72 million barrels a day in November, about 200,000 a day more than OPEC’s own assessment.
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    Merger talks stall between Maersk, Dong, report says

    Talks aimed at merging the oil businesses of Maersk and Dong Energy have stalled, a news report said, citing industry and banking sources.

    Dong confirmed last month that negotiations were under way, but sources have since told Reuters that the two Danish firms have failed to agree a valuation of their assets.

    A merger between the two firms’ oil and gas businesses was viewed by many industry observers as a good fit.

    In recent months, Maersk said it was splitting the group into separate energy and transport, while Dong has revealed plans to ditch its oil and gas business to focus on renewables.

    The two firms hold a large number of North Sea licences. Maersk is currently drilling the Culzean field, one of the biggest finds in the UK sector.

    Maersk and Dong both declined to comment on the report.
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    No Russian oil export cuts?


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    Callon Petroleum (CPE) to Acquire Delaware Basin Acreage for $615M

    Callon Petroleum Company (NYSE: CPE) today announced that its wholly owned subsidiary, Callon Petroleum Operating Company, has entered into a definitive agreement to acquirecertain undeveloped acreage and producing oil and gas properties for total consideration of $615 million in cash from American Resource Development LLC, American Resource Development Upstream LLC, and American Resource Development Midstream LLC (collectively, "Ameredev"). The Company intends to fund the cash purchase price with the net proceeds of an equity offering announced concurrently with the announcement of this acquisition, and with current cash balances or availability under its revolving credit facility.

    Key attributes of the Ameredev acquisition include:

    Approximately 27,552 gross (16,098 net) surface acres, centered around a contiguous position in Ward County, Texas, with additional acreage in Pecos and Reeves Counties, Texas;

    Current net production of approximately 1,945 barrels of oil equivalent per day (71% oil) for the month of October 2016 based on information provided by the seller, including production from 20 gross operated horizontal wells currently producing from the Wolfcamp and Bone Spring formations;

    Estimated delineated base inventory of 481 gross (206 net) identified horizontal drilling locations targeting the Wolfcamp A and B zones with an average lateral length of approximately 7,500 feet, including 36% of the inventory comprised of 10,000 foot laterals;

    Additional potential horizontal drilling locations from both delineated and emerging prospective zones in the Wolfcamp and Bone Spring formations;

    Established infrastructure ownership, including five salt water disposal wells and over 13 miles of gathering lines and gas lift return lines; and

    An agreement to acquire up to an additional 1,006 net acres in Ward County, mutually identified by Callon and Ameredev, if such leasehold acquisitions are consummated prior to closing of the Ameredev acquisition.

    Ameredev currently operates approximately 80% of net surface acreage and has an average working interest in operated properties of approximately 82%. On a pro forma basis, assuming the closing of the acquisition, Callon's aggregate Permian Basin position will include approximately 55,500 net surface acres concentrated in four core operating areas within both the Midland and Delaware sub-Basins.
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    Continental Resources Reports Record STACK Meramec Well

    Continental Resources, Inc. today announced a new Company record well in the over-pressured oil window of the Oklahoma STACK play. The Angus Trust 1-4-33XH produced 4,642 barrels of oil equivalent (Boe) per day in a 24-hour test, comprised of 2,088 barrels of oil (Bo) and 15.3 million cubic feet (MMcf) of natural gas. During this initial production test, the Angus Trust flowed at 5,200 psi (pounds per square inch). Continental has a 78% working interest in the well.

    The Angus Trust well is located immediately north of Continental’s Boden 1-15-10XH in south central Blaine County. The Boden produced an initial 24-hour test rate of 3,508 Boe, 28% oil, at a flowing casing pressure of more than 5,000 psi. The Boden was Continental’s first completion in the condensate window of the over-pressured STACK. In just over a year, the Boden has produced 591,000 Boe, 26% oil. The Boden is currently producing 1,815 Boe per day, 22% oil, at a flowing casing pressure of 2,900 psi.

    “The Angus Trust is another tremendous STACK Meramec well,” said Harold Hamm, Chairman and Chief Executive Officer. “Aside from being a Company record well, it further validates our perspective of the extent of the over-pressured oil window.”

    The Company estimates its total completed well cost for the Angus Trust is $8.9 million, approximately 30% less than the Boden. The Angus Trust’s 9,500-foot lateral was completed in 36 stages, with 20 million pounds of white sand, similar to the Boden.

    December Production Exit Rate Revised Higher

    As a result of strong production in both North Dakota and Oklahoma, the Company has increased its expected production exit rate for December 2016. The Company now expects to exit 2016 with production in a range of 213,000 to 218,000 Boe per day, compared with the previous guidance range of 205,000 to 210,000 Boe per day. The Company expects to maintain approximately this production level through the first quarter of 2017.

    Attached Files
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    One Europe Oil Refiner Said to Get 20% Less Saudi Arabia Crude

    Saudi Arabia, spearheading OPEC’s quest to eliminate a crude glut, will cut the amount of oil it allocates to one European refining company by about 20 percent, a person with direct knowledge of the matter said.

    The restriction, imposed by state oil company Saudi Aramco, will be applied to next month’s supplies, the person said, asking not to be identified because the information is private. It offers a clue about how the kingdom’s planned supply curbs will play out geographically. Separately, Iraq’s state oil marketing company will tell customers to expect reduced volumes next month, a second person said.

    The Organization of Petroleum Exporting Countries surprised oil markets at the end of November by clinching a deal to limit its collective output by about 1.2 million barrels a day and then enlisting non-member nations to join the effort. The focus of Saudi Arabia’s own cuts was outside of Asia as other regions had bigger surpluses, a Gulf official said Dec. 9.

    Saudi Arabia agreed to cut its production to 10.06 million barrels a day at the end of November and the nation’s oil minister, Khalid al-Falih, said Dec. 10 that even deeper cuts were possible. The planned restrictions by Saudi Arabia and Iraq follow similar announcements by the state oil companies of the U.A.E. and Kuwait to their Asian customers. Until now, most European refiners said they hadn’t been informed of Saudi Arabia’s intentions for supply next month.

    A second European refiner will receive the amount of oil from the Saudis in January that they had asked for, a person familiar with the matter said Tuesday without stating whether that would be an increase or decrease on prior months. A third refiner, yet to be notified of their January allocations, expects normal contractual supplies next month, according to a person with knowledge of the matter.
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    Sinopec Said to Revive Up to $10 Billion IPO of Retail Unit

    China Petroleum & Chemical Corp., the world’s biggest oil refiner, is reviving a long-mooted initial public offering of its retail business that could raise as much as $10 billion, people familiar with the matter said.

    The state-owned oil company, known as Sinopec, has asked banks to submit proposals by this month for roles to manage a potential Hong Kong listing next year, according to the people, who asked not to be identified as the information is private. Sinopec shares jumped 4.3 percent to HK$5.86 at 10:55 a.m. Wednesday in Hong Kong, headed for the biggest gain since April.

    Sinopec’s retail operations include more than 30,500 fuel stations under its own brand as well as a network of convenience stores. It proposed a listing of the retail business in 2014, when it sold a 29.99 percent stake for 107 billion yuan ($15.5 billion) to a group of investors including China Life Insurance Co. and billionaire Guo Guangchang’s Fosun International Ltd.

    “Low crude prices and a shaky stock market in Hong Kong this year were the reasons Sinopec hasn’t tried aggressively to list,” Anna Yu, a Hong Kong-based analyst at China Merchants Securities (HK) Co., said by phone Wednesday. “It looks more reasonable now for them to try next year if oil prices rise and the appetite for IPOs recovers as many expect.”

    ‘High Expectations’

    The oil refiner’s chairman, Fu Chengyu, retired from Sinopec in May last year and was replaced by Wang Yupu, who had been deputy head of the Chinese Academy of Engineering. No final decisions have been made, and Sinopec may also decide against floating the business if market conditions are unfavorable, the people said.

    A Beijing-based spokesman for Sinopec declined to comment.

    The company’s retail gasoline sales gained 9.8 percent last year to 58 million metric tons, according to its annual report. Its non-fuel transactions jumped 45 percent to 24.8 billion yuan as it increased cooperation with Internet companies.

    “Sinopec has high expectations for the unit, as fuel stations, by any standard, are the crown jewels of all Sinopec assets,” China Merchants’s Yu said. “It generates steady cash flow and is little affected by oil-price fluctuation.”

    Growth Targets

    The retail business isn’t being properly valued within Sinopec, and some of the unit’s outside shareholders may be pushing for a listing to monetize their investments, according to Neil Beveridge, a senior analyst at Sanford C. Bernstein & Co. in Hong Kong.

    “The real profit driver in those networks is non-fuel retail,” Beveridge said by phone Wednesday. “Spinning off these businesses is a better way of enhancing the value of these assets.”

    Chinese energy giants have sold parts of their extensive pipeline assets to cut costs and meet government-set growth targets as lower oil prices hurt earnings. Sinopec said Monday it agreed to sell a 50 percent stake in a pipeline unit to investors, including China Life, for 22.8 billion yuan as it seeks funds to expand its natural gas business.
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    Iran crude oil exports to hit 5-mth low in Dec -source

    Iran's crude oil exports in December are set to fall 8 percent from November to a five-month low, a source with knowledge of its preliminary tanker schedule said, as lower shipments to China and others in Asia offset bumper exports to Europe.

    Iran was exempted from last month's OPEC deal to reduce output by 1.2 million barrels per day (bpd) starting from January, and had been expected to boost its output slightly.

    But Iran's December crude exports excluding condensate are set to fall to 1.88 million bpd, from 2.04 million bpd in November, the source familiar with its export situation said. That may be a sign it is having trouble maintaining output after the lifting of sanctions this year led to a surge in production.

    Exemption from the deal agreed by the Organization of the Petroleum Exporting Countries (OPEC) was a victory for Tehran, which has argued it needs to regain the market share it lost under Western sanctions targetting its nuclear programme.

    Compared with a year ago, Iran's December crude exports are still set to jump 81 percent as shipments to Europe resumed only in February this year, according to the source.


    Iran exports to Asia this month are set to fall 17 percent from November to 1.11 million bpd, the lowest since February, as major importers all cut their purchases except for India.

    Exports to Europe look set to rise 10 percent from November to this year's high of 767,000 bpd, topping levels seen prior to the imposition of toughened sanctions in 2012.

    Before the sanctions were enforced, Iran was exporting about 2.2 million bpd of crude each month, with Europe taking about 600,000 bpd, according to the International Energy Agency.

    Loadings headed for China in December will tumble 28 percent from November to 400,000 bpd, the lowest since October 2015.

    Japan is lifting 134,000 bpd of crude, down 1.6 percent from November, while South Korea is loading 60,000 bpd, half its November volumes.

    India - the only major Asian buyer to show growth - will load 517,000 bpd in December, up 12 percent from November and making it Iran's top buyer for the month.

    In Europe, Italy and Turkey are both lifting around 190,000 bpd, while Greece and Spain are taking around 97,000 bpd.

    Austria is loading about 1 million barrels this month, following its first purchase in years in August.

    In addition, another 161,000 bpd is heading to unspecified destinations in Europe.
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    Slack data management exposed BP to high safety risk: leaked report

    Slack data management exposed BP to high safety risk: leaked report

    BP's refining operations are exposed to high safety risks that can lead to deadly accidents and pollution as a result of slack data management and a lack of investment, according to a leaked internal report from 2015.

    The report, co-authored by BP, IBM (IBM.N) and industry consultancy WorleyParsons (WOR.AX), states that the British company's refining and petrochemical business, known as downstream, is trailing rivals such as Royal Dutch Shell by up to seven years in managing information to reduce safety risks and financial losses.

    "Inadequate management and use of engineering information has been a root cause or contributing factor" in 15 percent of 500 high-risk incidents reviewed in the report, which was provided by Greenpeace.

    BP has improved its safety record since the 2010 Deepwater Horizon rig explosion in the Gulf of Mexico where 11 people were killed and which led to the largest environmental disaster in U.S. history.

    BP had no fatalities among its employees in 2014 and 2015 compared with four in 2013 and one in each of the previous two years, according to company data. Among BP contractors, there were three fatalities in 2014 and one in 2015.

    In comments on the leaked report, BP said it was "committed to safe, reliable and compliant operations. With that in mind, BP regularly conducts internal assessments in an effort to make improvements to its operations".

    "This particular report focused on potential enhancements to how BP manages engineering data. It is not an analysis of any operational incidents, and any suggestion that this report indicates BP is wavering from its safety commitment is wrong," a company spokesman said.

    The most significant incident recorded by the authors occurred in January 2014 at the 413,500 barrels per day (bpd) Whiting, Indiana refinery which cost BP $258 million in lost production. The incident at the gasoil hydrotreater unit, which removes sulphur from oil, was due to "multiple deficiencies in engineering information management".

    At the Hull petrochemical plant in northern England equipment that was not operated correctly led to losses of $35 million to $45 million.

    BP's safety record came in to focus in 2005 when a blast at its Texas City refinery killed 15 workers and injured 180 others. BP was fined $84.6 million by the U.S. Occupational Safety and Health Administration between 2005 and 2012 for safety rules violations found at the refinery in investigations following the blast.

    The report said highly material safety risk and financial performance issues remained due to "the lack of refining and petrochemicals-wide direction, governance, coordination and investment".

    The upstream segment, which produces oil and gas, has further work to do but is significantly ahead of downstream, the report said, reflecting the big focus BP has placed on safety after the Deepwater Horizon explosion.

    Greenpeace UK's senior climate adviser Charlie Kronick said in a statement that "BP's sloppy approach to a crucial aspect of safety hasn't changed".

    "The same happy-go-lucky attitude that played a role in major accidents in the past is seemingly still reflected in the management of safety information across the oil giant’s operations from rig to refinery."
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    Bakken oil production jumps in October

    North Dakota oil production up 71K bpd in October vs September to 1.043 million bpd - state regulator

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    EIA Dec Drilling Rpt: Marcellus Production Continues Rocket Ride

    EIA Dec Drilling Rpt: Marcellus Production Continues Rocket Ride

    Yesterday MDN’s favorite government agency, the U.S. Energy Information Administration (EIA), issued our favorite monthly report–the Drilling Productivity Report (DPR).

    The DPR is the EIA’s best guess, based on expert data crunchers, as to how much each of the U.S.’s seven major shale plays will produce for both oil and natural gas in the coming month.

    For the past two reports, estimating production for November and December, Marcellus natgas has increased. The trend continues in this latest report, which forecasts production for the coming month of January.

    The October report predicted Marcellus production would increase in November by 73 million cubic feet per day (MMcf/d).

    The November report predicted Marcellus production would increase in December by 130 MMcf/d.

    The current December report predicts Marcellus production will go up by another 160 MMcf/d in January.

    Yikes! Another trend observed: four of the seven shale plays will increase production in January, one (the Utica) will produce about the same in January, and only two will produce less gas in January than they did in December. Translation: shale gas production is once again on the rise–which breaks a five month record of month over month declines across all seven plays.

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    InterOil Provides Update on ExxonMobil Transaction

    InterOil Corporation today provided an update on the transaction with Exxon Mobil Corporation.

    Following the previously announced decision by the Court of Appeal of Yukon to allow an appeal lodged by Phil Mulacek, InterOil’s Independent Transaction Committee (“the Committee”), consisting of four independent and experienced directors of InterOil, are undertaking a detailed and thorough review process relating to the proposed transaction, with the support of independent legal counsel and BMO Capital Markets, an independent financial advisor.

    To accommodate the new review process, ExxonMobil and InterOil have agreed to extend the outside date of the current Arrangement Agreement to the close of business on Wednesday, December 21, 2016 (New York time).

    Dr. William Ellis Armstrong, Chairman of the Committee said, “We are pleased to have reached an agreement with ExxonMobil to extend the outside date and expect to be in a position to update shareholders on the progress of our deliberations shortly.”
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    Gazprom Signs Oil Deal With Iran as Russians Return in Force

    Russian companies including Gazprom PJSC signed a raft of initial agreements with Iran that could lead to contracts worth billions of dollars, as Energy Minister Alexander Novak outlined Russia’s ambition to become a major investor in the Persian Gulf nation.

    A Russian delegation to Tehran signed nine agreements on Tuesday in industries ranging from energy to railways. Gazprom reached an unspecified accord with Iran’s state natural gas company, and its subsidiary Gazprom Neft PJSC signed a deal to study the Cheshmeh-Khosh and Changuleh oil fields. State-run Gazprom is the third Russian energy company to sign a memorandum of understanding with Iran, joining Lukoil PJSC and Zarubezhneft OAO.

    “Our priority is to develop Iran’s big projects,” Novak said at one of several signing ceremonies during the day. “These agreements will have a significant influence on the relationship between our two countries.”

    The number of foreign business delegations visiting Tehran has swelled since the easing of sanctions in January opened Iran’s $400 billion economy to global investors. Even so, many international companies have refrained from signing final deals to invest in the country as they assess risks amid sanctions that are still in place and as they wait to see what U.S. President-Elect Donald Trump and Iranian elections in May might mean for business.

    To read about Iran’s stalled investment boom, click here

    Russian investors may be able to move into Iran more quickly than Western European competitors because Russian banks are less constrained by remaining U.S. sanctions on Iran, Richard Dalton, a former U.K. ambassador to Tehran, said by phone. “Russia is better placed certainly than the U.K., France or Germany,” he said.

    OPEC member Iran has sharply boosted sales of crude oil sales since the loosening of sanctions over its nuclear program. The Organization of Petroleum Exporting Countries, which decided last month to cut its collective output to shore up prices, gave Iran an exemption and will allow the nation to boost output by 90,000 barrels a day to 3.8 million barrels a day starting Jan. 1.

    The Oil Ministry has courted international oil companies to help it meet its production targets. Royal Dutch Shell Plc signed a deal last week to assess three of Iran’s largest oil and gas fields, while Total SA reached a non-binding agreement in November for a $4.8 billion gas-development project.

    “We have significant need for capacity,” Hamid-Reza Araghi, managing director of National Iranian Gas Co., said after signing the agreement with Gazprom. “God willing, in the next one or two months, we will be able to convert these into projects and contracts.”

    Russia also signed agreements to develop the Bandar Abbas power station on the southern Iranian coast and to electrify a railway in the country’s northeast, Iran’s Information and Communications Technology Minister Mahmoud Vaezi said. Together with other agreements in trade, finance, industry, mining and agriculture, the preliminary deals could lead to final contracts with a total value of $10 billion, he said.

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    Swan Energy gets nod for start of construction of LNG terminal

    SLPL executed epc contract for marine,dredging works worth INR 21.15 billion with National Marine & Infrastructure India Private Limited

    Co gets approval from gujarat maritime board for commencement of construction of lng terminal with ancillary structures for FSRU project, GUJARAT
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    Oil labour shortages?

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    China's Sinopec weighs takeover of Gulf Keystone

    China's Sinopec Corp  is weighing a takeover of Gulf Keystone Petroleum, an oil company operating in the Kurdistan region of Iraq, Bloomberg reported on Tuesday.

    Gulf Keystone shares were up 13.5 percent at 144.43 pence at 1041 GMT.

    Sinopec, Asia's largest refiner, is working with advisers and has made an approach to Gulf Keystone, Bloomberg reported, citing sources familiar with the matter.

    The company may also attract other bidders, according to Bloomberg.

    A spokesman for Gulf Keystone declined to comment, while Sinopec could not be immediately reached for comment.

    Gulf Keystone has been fighting to avoid insolvency after low oil prices and overdue oil export payments from the Kurdistan regional government crippled its balance sheet.

    The Kurdish oil producer's market value has tumbled to about 290 million pounds ($368 million) as of Monday's close from its peak valuation of 3.5 billion pounds in February 2012, according to Reuters calculations.

    Earlier this year, Gulf Keystone agreed to swap $500 million of debt for equity, wiping out some of the world's top funds as shareholders.

    In July, Norwegian energy firm DNO ASA (DNO.OL) offered to buy Gulf Keystone for $300 million, following the latter's junk bond deal.

    However, DNO's proposal lapsed as Gulf Keystone failed to meet certain conditions related to its financial restructuring.
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    Jera to sell LNG to UK’s Centrica

    Japan’s Jera, the joint company of Tepco and Chubu Electric and the largest importer of liquefied natural gas, signed an agreement with Centrica for the sale of up to six cargoes per year.

    The six cargoes per year will be delivered to the Isle of Grain LNG terminal in the U.K. for a period of five years starting in April 2019, Jera informed in its statement on Tuesday.

    The price of LNG sold will be linked to European gas market price, with a volume flexibility at JERA’s discretion, the statement reads.

    The Japanese company adds that it will optimize the SPA volume in cooperation with Centrica, securing flexibility to respond to LNG demand fluctuations.

    The LNG sale and purchase agreement comes following discussions based on the memorandum of understanding with Centrica on collaboration in the LNG business, in such areas as utilization of LNG terminal capacity in the U.K., joint procurement of LNG and optimization of LNG vessels.

    Earlier in September, Centrica signed a five-year deal to purchase up to 2 million tonnes of liquefied natural gas per annum from Qatargas.

    Last week, Jera informed it has made its first purchase from the U.S. mainland, loading a cargo at Cheniere’s Sabine Pass LNG terminal in Louisiana.
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    Novak warns oil companies, outlines cuts


    Russian Energy Minister Novak: Russian output cut to reach 300K BPD by May, to stay there until end-June --Die Presse

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    Expected Jan month-on-month gain in US shale oil output first since Apr 2015: EIA

    US shale oil production should rise overall by 2,000 b/d to 4.542 million b/d in January -- the first month-on-month projected overall increase since April 2015, the US Energy Information Administration said Monday.

    Even so, crude production in two of the bigger domestic oil plays, the Bakken in North Dakota and Montana and the Eagle Ford Shale in south Texas -- should continue to drop overall as rig counts in those plays remain low relative to two years or even one year ago, EIA said in its monthly Drilling Productivity Report.

    Even so, the decreases in those plays, particularly the Eagle Ford, are slowing. There, for example, January production is pegged to fall 23,000 b/d to 980,000 b/d. That is less than the 33,000 b/d drop predicted for December, 35,000 b/d in November, 46,000 b/d for October and 53,000 b/d for September.

    Likewise, the Bakken is forecasted to decrease just 13,000 b/d for next month to 905,000 b/d, below the 14,000 b/d output drop predicted for December, 21,000 b/d for November and 28,000 b/d in October.

    Positive oil output forecasts for the Permian Basin continued for January, the fifth month of predicted increases for that region which is the most active in the US. There, EIA forecasts production to jump by 37,000 b/d next month to 2.126 million b/d.

    US shale production has been decreasing for about 20 months during a two-year industry downturn that has seen severe drilling cutbacks and has affected energy companies along the value chain.

    The number of drilling rigs globally has dropped worldwide, although the impact was most severe in the US where shale output was frenzied in mid-2014. That was when oil prices that were over $100/b began to drop and reached half that figure by year-end.

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    Patterson-UTI to buy Seventy Seven Energy for $1.76 bln including debt

    U.S. driller Patterson-UTI Energy Inc said on Monday it would buy its smaller counterpart Seventy Seven Energy Inc in an all-stock deal worth $1.76 billion including debt.

    Seventy Seven shareholders will receive 1.7725 shares of Patterson-UTI for each share held, Patterson-UTI said.

    The deal includes $336 million of Seventy Seven Energy's debt net of cash and warrant proceeds.

    Patterson-UTI said it will issue about 49.6 million common shares for the deal and will pay off Seventy Seven's debt through a combination of cash on hand and its own credit.

    Patterson-UTI will have more than 1.5 million hydraulic fracturing horsepower following the closing of the transaction, it said.

    The company also expects to achieve $50 million in synergies from the deal, which is expected to add to its cash flow.

    Seventy Seven Energy, which provides drilling and hydraulic fracturing, or fracking, services, had cut its debt by $1.1 billion and exited bankruptcy in early August under the control of its creditors.
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    China November refinery runs hit record high, crude output falls

    China's refinery throughput hit a daily record in November as plant maintenancewound down and independents ramped up productions, while crude oil production fell as producers held to output cuts at inefficient wells.

    Data from the National Bureau of Statistics (NBS) showed on Tuesday that refinery throughput rose 3.4 percent year-on-year to 45.77 million tonnes, or 11.14 million barrels per day (bpd), an all-time high on a daily basis.

    "Plant overhauls wound down sharply in October and November versus a peak in August," said Harry Liu, a Beijing-based consultant with research and analysis agency IHS. "A rebound in diesel fuel demand also helped."

    Diesel consumption strengthened between October and November driven in part by a price surge in local commodity futures for coal and steel, said Liu.

    The re-opening of some mines, in response to the government's call to boost output to tame a year-long price rally in the world's top coal consuming nation, also drove up diesel use for heavy-duty trucks.

    A few independent refineries winning fresh quotas to import crude oil since late September also added to run increases, analysts and traders have said.

    Daily crude oil output in November, however, fell 9 percent from a year ago to 3.915 million barrels, the data also showed. It recovered from October's 3.78 million bpd, though, the lowest in more than seven years.

    For the first 11 months, crude production in the world's second-largest oil consumer was down 6.9 percent on the year at 182.91 million tonnes, just under 4 million bpd.

    Major upstream producer PetroChina reported in October that its crude output for the first nine months of 2016 fell 3.7 percent from a year earlier to 696.6 million barrels.

    Sinopec Corp recorded a 12.6 percent year-on-year fall in crude oil productions in the first nine months of the year.

    But with global oil prices rebounding to an 18-month high after OPEC and some of its rivals reached their first deal since 2001 to reduce output, production declines may slow in the coming months, said IHS's Liu.

    Natural gas output gained 5.5 percent from a year ago to 12.4 billion cubic meters, with year-to-date productions up 2.2 percent on-year at 123.5 bcm, the NBS data showed.

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    UAE's ADNOC to cut January oil supplies to Asia; Kuwait, Oman to follow

    Abu Dhabi National Oil Company on Tuesday said it would cut crude supplies by 3-5 percent across its three export grades to meet commitments under an OPEC deal to curb output.

    The move is one of the first visible indicators that oil markets could be physically tighter in 2017 as the Organization of the Petroleum Exporting Countries (OPEC) and other producers cut production to ease a supply glut and prop up prices.

    Still, ADNOC's cut is unlikely to have a large impact on the market as it is within operational tolerance limits, while some buyers have extra oil from Saudi Arabia and Iraq to replace lost Abu Dhabi supplies, traders said.

    "I think it's manageable. Many (refiners) received incremental Arab Extra Light in January to cover," said a North Asian refinery official, speaking on condition of anonymity.

    In a notice to term lifters, ADNOC said it would reduce Murban and Upper Zakum crude supplies by 5 percent and cut Das crude exports by 3 percent.

    "In line with OPEC's latest decision to cut production, we regret to advise you that crude oil allocation for the month of January 2017 will be reduced," ADNOC said.

    Kuwait Petroleum Corp (KPC) has also notified at least two customers in Asia it "will implement its share of the reduction, which shall take effect January 2017", refining officials said.

    Non-OPEC Oman will tell customers on Tuesday that it plans to cut output by 45,000 bpd and will provide details on the reduction to each customer later, a source said.

    ADNOC's supply cuts will mostly hit Asia although they remain within tolerance limits of 5 percent, as allowed by a contract clause that lets seller or buyer adjust loading volumes based on logistics.

    ADNOC's production hit a record 3.1 million bpd in November, according to a Reuters survey. The producer's flagship crude is light sour Murban, with production of about 1.6 million bpd and an API gravity of about 40 degrees.

    Besides state-controlled ADNOC, France's Total, South Korea's GS Energy and Korea National Oil Corporation (KNOC), and the Japan Oil Development Company (Jodco) are partners in producing onshore crude. Key Murban crude buyers are in Japan, South Korea, New Zealand and Thailand.

    The UAE's main offshore crudes are Upper Zakum and Das. Upper Zakum, owned 28 percent by U.S. oil major ExxonMobil, and 12 percent by Jodco, is a medium grade crude. Das, a blend from the Umm Shaif and Lower Zakum oilfields, is a relatively light crude grade. Beyond ADNOC's 60 percent share, Britain's BP, Total and Jodco are partners in producing Das crude.
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    Mexico rebrands decline into non-Opec pledge

    Mexico surprised the oil market over the weekend by signing on to an accord to cut non-Opec production, but its short-term pledge appears to be more of a symbolic gesture that rebrands an existing decline in output.

    At its 10 December meeting in Vienna, non-Opec countries led by Russia committed to reducing combined production by 558,000 b/d for six months starting on 1 January, complementing an Opec pledge of cutting up to 1.2mn b/d, led by Saudi Arabia.

    Mexico's deputy oil minister Aldo Flores attended the meeting, maintaining a low profile in the wake of the government's first-ever awards of deepwater acreage to foreign oil companies in a historic auction last week.

    The official statement from the meeting said the reductions pledged could encompass "managed decline" as well as active cuts.

    Mexican state-run oil company Pemex tweeted yesterday that it "will reduce its production by 100,000 b/d in 2017, in line with what was approved in the 2017 Income Law and the Pemex business plan 2017-2021. This reduction is the result of the natural decline of the fields."

    But Algeria's state news agency specifically asserted that the Latin American country would actively reduce output by 100,000 b/d beyond expected natural decline of 200,000 b/d. Algeria was a key player in broking both the Opec cut agreement and the deal with non-Opec producers.

    Speaking this morning at Washington-based think tank Wilson Center, Flores did not directly respond to the Algerian statement. But he said Mexico's participation in the Vienna meeting was in the context of Pemex's expected production declines.

    "We have been very clear that [Mexico's] managed decline that was mentioned at the meeting will take place in the context of Pemex's own plan," Flores said. "A managed decline will also help in bringing the market into the balance." Mexico's participation in the agreement between Opec and other producers will not overturn the historic opening of Mexico's energy sector, he said. "We will continue to implement our reform as planned."

    Mexico's oil production has been falling steadily from a 2004 peak of 3.4mn b/d, and further declines have already been factored into the nation's 2017 budget. Next year's output is forecast to drop below 2mn b/d, from around 2.1mn b/d in 2016.
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    Genscape Cushing inventory

    Genscape Cushing inventory: 68,428,795, +1,129,415 from week ended Dec. 02

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    Canadian Natural Resources Limited Announces the Sale of its Ownership Interest in the Cold Lake Pipeline

    Canadian Natural ResourcesLimited  is pleased to announce that it has reached an agreement to monetize the Company’s non-core ownership interest in the Cold Lake Pipeline, to Inter Pipeline Ltd (“Inter Pipeline”). The transaction consists of the monetization of the Company’s entire 15% ownership interest of Cold Lake Pipeline Ltd. and its 14.7% ownership interest in the Cold Lake Limited Partnership. Upon closing of the transaction the Company will receive gross proceeds of $350 million in cash and 6,417,740 common shares of Inter Pipeline at an ascribed value of $177.5 million for total value of approximately $527.5 million. The transaction is targeted to close in 2016.

    Canadian Natural expects to record an after-tax gain on disposition of approximately $200 million, based upon preliminary value allocations.

    As previously announced, Canadian Natural has reinitiated Phase 1 of the Kirby North Project (“Kirby North”). To transport Kirby North volumes, Canadian Natural has, concurrently with this disposition, secured firm pipeline transportation capacity with Inter Pipeline for the Kirby North production and diluent volumes, with first production targeted for the first quarter of 2020. This will effectively integrate with the existing transportation arrangements for Canadian Natural’s producing Kirby South volumes.

    The Cold Lake Pipeline equity ownership was a non-core asset for Canadian Natural and monetization of the asset brings forward significant value for the Company’s shareholders, not previously recognized, and does not alter the Company’s rights, pricing and access to the Cold Lake Pipeline itself. After completion of the sale, Canadian Natural will retain access to the Cold Lake Pipeline system for portions of the Company’s crude oil volumes.

    Canadian Natural retained BMO Capital Markets to act as financial advisor for the transaction.

    Canadian Natural is a senior oil and natural gas production company, with continuing operations in its core areas located in Western Canada, the U.K. portion of the North Sea and Offshore Africa.
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    EQT Announces 2017 Operational Forecast

    EQT Corporation today announced the Company’s 2017 capital expenditure (CAPEX) forecast of $1.5 billion, excluding business development and land acquisitions, and including $1.3 billion for well development. Funding will be provided by cash generated from operations, and cash-on-hand.

    EQT forecasts 2017 production sales volume of 810 – 830 Bcfe, which includes volume growth of 70 Bcfe, the majority of which stems from the previous year’s drilling program. The majority of the volume expected from the 2017 drilling program will be realized in 2018, at which time EQT forecasts production volume growth of 15 – 20% per year for several years.

    EQT’s 2017 CAPEX forecast excludes CAPEX for EQT Midstream Partners, LP (NYSE: EQM), a master limited partnership controlled by EQT Corporation and consolidated in EQT’s financial statements. EQM announced its 2017 financial and CAPEX forecast today in a separate news release, which can be found at


    In 2017, the Company plans to drill 119 Marcellus wells with an average lateral length of 7,000 feet – all of which will be on multi-well pads to maximize operational efficiency and well economics. The Marcellus drilling program will focus on the Company’s core Marcellus acreage, with 76 wells in Pennsylvania and 43 wells in West Virginia.


    The Company plans to drill 81 Upper Devonian wells with an average lateral length of 7,300 feet. These wells will be limited to co-development on Marcellus pads in Pennsylvania.


    The Company plans to drill seven deep Utica exploratory wells with an average lateral length of 6,800 feet. EQT owns approximately 490,000 net acres that the Company believes to be prospective for the deep Utica.

    Also announced today by EQT, is a modification to the Company’s midstream agreement with Williams Ohio Valley Midstream, LLC (Williams) related to the dedicated portion of the approximately 62,500 Marcellus acres EQT acquired from Statoil USA Onshore Properties, Inc. earlier this year. Under the new agreement, EQT has committed firm volumes of 50 MMcfe per day initially and growing to 200 MMcfe per day by the fourth year. In addition to the existing right to provide wellhead gathering services, EQM can now provide high pressure pipeline services on the volume in excess of the commitment. EQM is currently coordinating with EQT Production to design a midstream system to support the Marcellus well development plans on this acreage. The investment opportunity for EQM is estimated to be $600 million for full buildout of wellhead gathering and high pressure pipeline services.

    2017 GUIDANCE

    Based on current NYMEX natural gas prices, adjusted operating cash flow attributable to EQT is projected to be approximately $1,200 million for 2017, which includes approximately $200 million from EQT’s interest in EQT GP Holdings, LP (NYSE: EQGP). See the Non-GAAP Disclosures section for important information regarding the non-GAAP financial measures included in this news release, including reasons why EQT is unable to provide projections of its 2017 net cash provided by operating activities and 2017 net income, the most comparable financial measures to adjusted operating cash flow attributable to EQT and EBITDA, respectively, calculated in accordance with GAAP.
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    Enerplus Announces Sale of Non-Operated North Dakota Assets and Increased Drilling Inventory at Fort Berthold

    Enerplus Corporation announces that its wholly-owned subsidiary, Enerplus Resources (USA) Corporation, has entered into a definitive agreement to sell non-operated assets in North Dakota (the “Assets”) for total cash consideration of US$292 million (approximately C$385 million), subject to estimated cash tax of US$12 million and customary closing adjustments. The divestment includes approximately 5,800 net acres primarily located on the Fort Berthold Indian Reservation with an average working interest per drilling spacing unit of 8%. Production from the Assets averaged approximately 5,000 BOE per day (approximately 4,000 BOE per day net of royalties) during the third quarter of 2016.

    The Assets comprise approximately 8% of the Company’s existing net acreage in North Dakota. Upon closing of the divestment, Enerplus will hold an operated position in North Dakota of approximately 65,500 net acres. Production from Enerplus’ operated North Dakota assets averaged 23,700 BOE per day (90% liquids) in the third quarter of 2016.

    “We have established a position as one of the leading operators in the Williston Basin. This divestment of our non-operated, low-working interest acreage is highly accretive and will further improve our focus on our operated core acreage position allowing us to more efficiently allocate capital to the play,” commented Ian C. Dundas, President & CEO. “This transaction also highlights our significant running room in the core of the Williston Basin where our operated acreage has, on average, approximately half the drilled well density of the divested acreage.”

    Mr. Dundas added, “The proceeds from this sale will provide additional financial flexibility and a source of funding for the acceleration of activity at our operated Fort Berthold acreage over the coming years.”

    Evercore and RBC Richardson Barr are acting as financial advisors to Enerplus on this transaction.

    Enerplus expects to provide updated 2017 capital plans and guidance in early 2017.

    Increased Drilling Inventory at Fort Berthold

    As part of Enerplus’ ongoing development optimization at Fort Berthold, the Company continues to progress its evaluation of well density. Based on analysis of Enerplus’ higher density units and data from other operators in the basin, Enerplus believes there is strong technical and economic justification to support a higher recovery factor assumption and higher well density than the Company’s previous development plan.

    Enerplus is now planning for higher density in the Middle Bakken zone, increasing to six wells per drilling spacing unit, compared to four wells previously. At this time, Enerplus has not changed its planning assumptions for well density in the Three Forks’ zones. Overall, this results in an average density of approximately ten wells per drilling spacing unit leading to an estimated 550 gross remaining drilling locations (465 net). This increase in gross operated inventory represents growth of nearly 40% from previous estimates. Enerplus’ 550 gross remaining drilling locations were comprised of 92 proved plus probable undeveloped reserves locations, 155 development pending best estimate contingent resources locations, and 303 unbooked future locations at year-end 2015. Enerplus expects to have drilled 20 gross locations in 2016. The remaining 530 gross locations represent approximately 16 years of drilling inventory under a two rig program.

    In connection with the ongoing down-spacing analysis, Enerplus is continuing to modify its completion design in order to optimise capital efficiencies and individual well recoveries while maximising economic returns and recoverable resources per drilling spacing unit.
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    Japan's average price for LNG spot cargoes contracted in Nov jumps 15% on month

    The average price Japanese buyers paid for spot cargoes contracted in November jumped 15% month on month to $7.0/MMBtu, the highest since January this year, the Ministry of Economy, Trade and Industry showed Friday.

    METI gathers data from utilities and other LNG buyers in Japan to publish a simple average of contract prices, but the delivery months of the cargoes are not disclosed.

    Platts JKM averaged $7.181/MMBtu in November, reflecting spot deals concluded for December and January deliveries to Japan and South Korea.

    The ministry also said the average price of cargoes delivered into Japan in November was $5.9/MMBtu, up 3.5% from the previous month.

    Meanwhile, the Platts JKM for November delivery averaged $5.977/MMBtu. The November JKM was assessed from September 16 to October 14, during which prices rose, thanks to firm demand from end-users.
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    Sinopec sells 50 pct gas pipeline stake to China Life and SDIC unit

    China's Sinopec has sold a 50 percent stake in its Sichuan-East China gas pipeline to China Life Insurance and SDIC's transportation business in a deal that values the asset at 45.6 billion yuan ($6.6 billion).

    A Sinopec statement on Monday said that China Life Insurance paid 20 billion yuan for a 43.8 percent stake while SDIC's transportation unit paid 2.8 billion yuan for 6 percent.

    "The asset is fairly valued and the deal is a win-win for both parties" Nomura analyst Gordon Kwan said. "China Life is looking at a good long-term stable investment."

    Sinopec said the pipeline generated a first-half net profit of 1.17 billlion yuan on revenue of 2.6 billion yuan.

    The sale comes four months after the country's second-largest oil and gas group announced plans to divest half of its share of the pipeline in a move spurred by Beijing's reform push to boost efficiency and increase infrastructure investment in cleaner fuels.

    Sinopec has said that the proceeds will be used to expand the 2,200 km (1,370 miles) pipeline and build gas storage facilities.
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    Why oil will crash again in 2016

    In 1950 the American mathematician and economist John Forbes Nash, Jr. earned his PhD with a dissertation that explained why markets can gravitate towards a sub-optimal equilibrium. What is now known as a Nash Equilibrium results when all economic actors know that a different strategy would be better for them, but they also know that this different strategy will only be better for them if all other economic actors also change their strategy, as a consequence of which no-one will do anything.

    This situation is effectively what caused the oil price crash of 2014. As I documented in “The trends that will keep the oil price below $60/B”, the historically high oil price of the period 2000 – 2013 caused a massive influx of money into the oil & gas industry. This money was used by the oil & gas industry to increase production capacity, under the assumption that economic growth would increase global crude oil demand to such an extent that the market would be able to absorb the additional barrels. Since 2008, however, economic growth has largely disappointed. (Pretty much every quarter since the IMF has had to revise its global growth forecast downward.) Consequently, a crude oil supply glut built up. To maintain the (then still) comfortable price level the oil & gas industry should have gradually lowered production, but it didn’t. The producers were enjoying the high price too much and everyone knew that a reduction in his or her production would only support the price if everyone else did the same. So no-one did anything, hoping someone else would. This Nash Equilibrium lead to a steady increase in the imbalance between supply and demand, until it reached close to 2 million barrels per day in the 4th quarter of 2014, causing the price to collapse.

    Unfortunately, this crash has not broken the market free from the Nash Equilibrium. Rather, it has locked it into another one.

    It is well known that despite impressive improvements in efficiency over the last year, a substantial part of the current tarsand and shale operations in North-America is unprofitable in the current price environment of $40 to $50 per barrel. Producers in these (and other) high-cost areas would actually make more money if they shut in production, but only very few actually have. In fact, global liquids production has increased, from 92.5 million barrels per day during the 2nd quarter of 2014 to 96.3 million barrels per day in the 3rd quarter of 2015.

    The reason for this surprising fact is that the oil & gas producers know that the first one to take the rational step of reducing production will lose if all others don’t follow suit. Hence OPEC’s decision not to reduce its production – why would it reduce in the knowledge that those who do not reduce would then reap the benefit of a higher prices?

    The consequence of this new Nash Equilibrium in the global crude oil market is a massive increase in inventories. According to the International Energy Agency the global stockpile of crude oil now stands at almost 3 billion barrels. Around the world, land storage sites are essentially full and producers and traders have turned to storing excess crude in tankers, driving up the day rate of supertankers to around $100.000 per day, its highest level since 2008.

    This new Nash Equilibrium can end in only one way: another crude oil price crash.

    So far, the high-cost producers in North-America have been enabled to continue uneconomical production by banks providing credit on terms equal to, or even better than those during the boom years. (Clearly, the banks are part of the current Nash Equilibrium. Every one of the original lenders to the shale industry knows that it would only be sensible to cut back lending, but he or she also know that whoever cuts back credit first will lose because his borrowers will go bankrupt, unless all other banks do the same at the same time.) In addition, private equity investors have stepped in, hoping to snap up crude oil assets on the cheap and willing to finance unprofitable operations until the oil price recovers.

    Therefore, unless the price goes down further, shale production will not collapse any time soon and the supply glut will remain. This effectively means that in the absence of a sudden uptick in crude oil demand (which is highly unlikely, as the Chinese economy is slowing and the country can not continue to build up strategic petroleum reserves), the price will go down.

    With land storage already full and floating storage increasingly uneconomical due to the high day rates for supertankers, it is just a matter of time before the market realizes it doesn’t have to buy crude at oil $40 per barrel. Because producers are getting ever closer to the situation where they simply have to sell their production, at any price, due to a lack of other options. This will change market sentiment and drive the crude oil price further down, even making $20 per barrel a distinct option.

    In other words, the current Nash Equilibrium will be broken up by another price crash, one that will really reset the industry back to normal and rebalance crude oil supply and demand. Only from that point onward will the rule that the crude oil price is determined by the cost of the marginal barrel apply again, which, as I explained in “The trends that will keep the oil price below $60/B”, I foresee to be around $60 per barrel.

    But we’ll need to go down first, before we can start going up again.
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    Russia's Yamal LNG gets 750 mln euros in credit line from Intesa

    Dec 12 Russia's Yamal LNG project, which aims to start producing liquefied natural gas next year, said on Monday it had obtained a 14.5-year credit line worth 750 million euros ($796 million)from Intesa Sanpaolo bank.

    The loan pays an annual interest rate of 6-month EURIBOR plus 2.5 percent, while the Italian export credit agency SACE and the French export credit agency COFACE provide an insurance coverage.

    The $27 billion Yamal LNG project got $12 billion in loans from Chinese banks in April.

    Yamal LNG, the world's most northerly project of its kind, is located beyond the Arctic circle. The gas, frozen at a temperature of around minus 160 Celsius (minus 320 Fahrenheit), will be shipped to global markets including China.

    Russia's Novatek holds 50.1 percent of Yamal LNG. France's Total and China National Petroleum Corp control 20 percent each while China's Silk Road Fund owns 9.9 percent.
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    FERC denies rehearing on Veresen’s Jordan Cove LNG export project

     The U.S. Federal Energy Regulatory Commission rejected a rehearing for Veresen Inc.’s multibillion-dollar proposal to build a liquefied natural gas (LNG) export terminal in Oregon.

    The FERC has earlier this year denied a permit to two Veresen units to construct, own and operate the 6 mtpa Jordan Cove LNG plant and an associated 232-mile pipeline.

    Jordan Cove Energy Project and Pacific Connector Gas Pipeline, both units of Veresen, have filed a request for rehearing on the permit in April.

    In its decision to deny the rehearing, the FERC said that the March 11 order “properly denied the application and that it would not reopen the record and consider evidence filed subsequent to the initial decision, as the request for rehearing did not demonstrate the existence of extraordinary circumstances.”

    The FERC reiterated that its denial is without prejudice to the applicants submitting a new application should the companies show a market need for these services in the future.

    “Veresen remains committed to this important energy infrastructure project,” Don Althoff, CEO of Veresen said in a statement.

    “We are very disappointed by FERC’s decision, especially in light of the significant progress that has been made in demonstrating market support for the project and the strong showing of public support for the project. We continue to firmly believe this project will provide significant economic benefit to Oregon, while ensuring responsible environmental stewardship and stakeholder engagement.”

    Veresen said in the statement that the Calgary-based company will review all of its options in light of the FERC denial, including appeal or the submission of a new application with FERC.

    To remind, Veresen recently announced it will continue to advance the LNG export project and associated pipeline with plans to spend about US$30 million next year on the development.
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    Israel and Turkey are working to eliminate a major obstacle to natural gas deals: their own fractious history.

    The two governments are working on a framework for the export of Israeli natural gas to Turkey that would protect contracts between companies if diplomatic ties break down, Israeli Energy Ministry Director-General Shaul Meridor said in an interview in Jerusalem. With such a shield in place, gas could begin flowing from Israeli waters to Turkey as soon as 2019, he said.

    “For banks to eventually finance such a project they will have to know that no matter what happens between the countries politically, the business side will be protected,” he said.

    The prospect of energy ties helped the countries patch up a six-year rift over a deadly Israeli raid on a Turkish ship that sought to breach Israel’s blockade of the Hamas-ruled Gaza Strip. Israel was looking for export markets, while Turkey sought to bolster its status as an energy hub and diversify away from Russian gas. But while companies are in talks to sign gas deals, concerns linger that diplomatic relations could deteriorate.

    Pipeline Dream

    Partners in the Leviathan field, Israel’s biggest natural gas reservoir, are negotiating to export about 10 billion cubic meters of gas per year to Turkey, Bloomberg reported in March. Through its units, billionaire Yitzchak Teshuva’s Delek Group Ltd. owns a 45.3 percent stake in Leviathan, while Houston, Texas-based Noble Energy Inc. holds 39.7 percent. Ratio Oil Exploration 1992 LP owns the rest.

    A pipeline from Israel to Turkey would have to traverse the territorial waters of Cyprus, but Meridor signaled that its construction wouldn’t hinge on the fate of talks to reunify the island, whose north Turkey occupied in 1974. He declined to go into details.

    “We have a plan for every scenario,” he said. “We’re talking with the Cypriots and of course with the Turks about it. I’m pretty sure we’ll find a way for the pipeline to go through Cypriot economic waters to Turkey.”

    Israel is seeking to attract global energy companies to bid for new licenses after gas development was delayed by years of domestic debates on everything from resource taxes to export quotas. Meridor, who recently met with executives of large energy companies in Houston, said there’s growing interest now that the disputes have been overcome, but declined to give names.

    “We’re back in business,” he said. “We lost five to six years years in discussions inside the government with the current companies. But we’re there now. The Israeli regime isn’t going to change now, we’re very clear about that.”

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    Rosneft buys into Eni’s giant gas discovery (Egypt)

    Italian oil and gas company Eni is trimming its stake in the giant Zohr discovery, offshore Egypt. Namely, the company will sell a 30 percent stake in the Shourouk Concession, containing the Zohr, to Rosneft.

    The sale, announced on Monday, follows a recent divestment of a ten percent stake in the license to BP, the completion of which is ongoing.

    Rosneft will pay $1.12 billion, plus a reimbursement of Eni’s past expenditures, which so far amount to $450 million.

    In addition, Rosneft has an option to buy a further 5% stake under the same terms, Eni said on Monday.

    The Zohr field was discovered by Eni in August 2015 and is the largest natural gas field ever found in the Mediterranean, with a total potential of 850 billion cubic meters of gas in place. On February 2015, the authorization process for the development of the field was completed, while the first gas is expected by the end of 2017.
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    Texas leads biggest rig count jump since April 2014

    Texas leads biggest rig count jump since April 2014

    The oil rebound in West Texas this week led the biggest surge in the drilling rig count since April 2014 — when oil was priced well above $100 a barrel.

    The amount of drilling activity jumped in Texas as 17 active rigs were added to the Lone Star State, mostly in the busy Permian Basin. The total rig count increase of 27 rigs this week easily surpasses the mid-November increase of 20 rigs in one week, according to data collected by Baker Hughes oilfield services firm.

    The hike in drilling activity is the first big change since the Organization of the Oil Exporting Nations agreed at the end of November to scale back oil production. OPEC leaders are meeting Saturday with Russia and other non-OPEC nations to discuss further reductions. The U.S. benchmark for oil was trading above $51 a barrel early Friday afternoon.

    Of the 27 rigs added in the U.S., 21 of them are primarily seeking oil and the remaining six are drilling for natural gas.

    The Permian Basin added 11 rigs, with three more in South Texas’ Eagle Ford Shale and two more in the Texas Panhandle’s Granite Wash. Colorado also saw a big jump with six rigs activated in the DJ-Niobrara Basin.

    The total count is 624 rigs, up from a low of 404 in May, according to Baker Hughes. Of the total, 498 are primarily drilling for oil.

    The Permian now accounts for 246 rigs, almost half of the nation’s oil rigs. The next most active area is Texas’ Eagle Ford shale with 40 rigs, according to the Baker Hughes data.

    Despite this week’s increase, the oil rig count is down 69 percent from its peak of 1,609 in October 2014, before oil prices began plummeting.

    Attached Files
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    China's gas supplies to exceed 360 bln cubic meters

    China's natural gas supplies will exceed 360 billion cubic meters by 2020, predicted a report released by authorities on December 10.

    Stable supplies and relatively well-developed infrastructure have buoyed the fast growth of the gas market, according to the report jointly issued by the National Energy Administration, the Development Research Center of the State Council and the Ministry of Land Resources.

    China is rich in natural gas with 90 trillion cubic meters of conventional resources, and consumers in all its 31 provincial-level regions have access to natural gas currently.

    China's natural gas output rose from 50 billion cubic meters in 2005 to 135 billion cubic meters last year. It accounts for around 7% of China's energy production, with a national target to exceed 10% by 2020.

    The country's demand for the fuel has been boosted by price cuts aimed at switching users from coal to cleaner fuels.
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    Quebec Paves Way for Oil, Gas Exploration With New Energy Plan

    Quebec’s legislature passed a bill that will pave the way for more oil and gas exploration, providing a boost to drillers such as Junex Inc. while drawing criticism from environmental, aboriginal and citizen groups.

    Bill 106 passed Quebec’s National Assembly in a 62-38 vote early Saturday after an overnight debate ahead of the holiday break. The legislation is meant to implement Quebec’s clean energy plan but also contains provisions allowing for energy exploration, potentially including fracking.

    “Quebec’s government just voted down an amendment to ban fracking in a triumph of science over ‘leave it in the ground’ lunacy,” Calgary-based Questerre Energy Corp. tweeted early Saturday morning.

    Shares of companies that hold exploration rights, including Questerre and Junex, based in Quebec City, surged last week as passage of the legislation looked likely. Questerre holds about 1 million acres and has drilled test wells in the Utica shale formation along the St. Lawrence River, according to its website. Questerre’s shares rose the most in more than eight years on Thursday and inched up again on Friday. Junex’s stock increased 30 percent, the most in almost two years.

    Framework for Drilling

    Bill 106 creates a new agency to promote Quebec’s transition to cleaner energy yet also lays out a framework for oil and gas development in the Canadian province. Environmental, aboriginal and citizen groups argued that the bill’s mandate is contradictory, that debate was rushed and that it should have included a moratorium on fracking as well as greater protection for landowners.

    While Canada’s National Energy Board doesn’t record Quebec as producing any marketable hydrocarbons of its own, the province holds enough gas to meet its own needs for about 100 years. Most is locked up in the Utica shale formation or in deposits beneath Anticosti Island, according to the Canadian Association of Petroleum Producers.

    “This is obviously a way for the government to please the industry,” Patrick Bonin, a spokesman for Greenpeace Canada’s climate and energy campaign, said by phone. “There is no reason why this bill was passed under the false claim from the government that there is urgency.”

    Fracking is safe and the industry position is that it should be monitored like any other technology to make sure that’s the case, so a moratorium is unnecessary, David Lefebvre, director general of the Quebec Oil & Gas Association, said by phone Saturday. “Wells are fracked every day, all around the world,” he said.

    Bill 106 strips power from landowners who will be powerless to stop exploration by companies with drilling claims, Carole Dupuis, a spokeswoman for Regroupement vigilance hydrocarbures Quebec, said by phone from Quebec City.  That, in turn, will hurt property values, especially if exploration leads to fracking.

    “If there was not the fracking issue, the landowner issue would not be a problem. It’s an access issue,” she said. “What’s the value of your land if someone has been drilling one kilometer from you and you don’t know if your drinking water is safe?”

    Fracking Ban

    The citizens group she represents is also concerned that companies with deposits worth developing will be able to expropriate land from owners who are unwilling to sell.

    Expropriation was possible before Bill 106 and a moratorium on fracking would have actually hurt landowners by giving environmentalists the power to decide what they could do with their property,  said Michael Binnion, chief executive officer of Questerre Energy.

    “In our entire time in Quebec we’ve never gone on anyone’s land that didn’t want us there,” he said by phone from Calgary. “This act lets farmers who would like to partner with oil and gas companies have that chance.”

    Bill 106 goes against aboriginal rights to self-determination and to establish the best use of their lands, Mi’gmaq Chief Darcy Gray said in an e-mail Saturday.

    “The bill also opens up our lands to exploration that we feel could have long-lasting, detrimental and irreparable damage,” he wrote “especially with regards to hydraulic fracturing and or other types of well stimulation.”

    “Why this would even be considered, or how it could be construed as a favorable initiative, is beyond me,” he said.

    Stronger Opposition

    The fact that the debate was rushed through the National Assembly has set the stage for stronger opposition from citizens, Greenpeace’s Bonin said.

    “Having the Quebec government sign onto the Paris agreement, claiming they are leaders in climate change, but not wanting to have proper debate on fossil-fuel development in the province is a clear demonstration that it’s not a climate change leader,” he said.

    The Quebec energy bill was approved just hours after Canada reached agreement on a national climate deal to establish a minimum carbon price, with Manitoba and Saskatchewan the lone hold-out provinces.

    Environmentalists have criticized Prime Minister Justin Trudeau for falling short on his green pledges by allowing continued energy sector development, most notably with his approval of the Kinder Morgan Inc. Trans Mountain pipeline last month. Trudeau has said his government aims to balance economic growth with tougher environmental standards.

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    Qatar to merge LNG producers Qatargas and RasGas

    Qatar will merge state-owned liquefied natural gas producers Qatargas and RasGas Co Ltd, the chief executive of Qatar Petroleum (QP) said on Sunday, in the Gulf state's latest reaction to lower energy prices.

    The more-than-two-year slump in oil prices has forced Gulf countries to reduce state spending and consider consolidations as a way to cut costs: among the biggest being Abu Dhabi's merging of Mubadala and International Petroleum Development Co.

    While Qatar is more focused on gas than oil, it too has been forced into reorganisations, with QP already going through a process that reduced staffing and earmarked a number of assets for divestment.

    The tie-up of Qatargas and RasGas, Qatar's number one and two LNG producers respectively, has been talked about for a number of years stretching back before the oil price reduction.

    At a news conference, QP CEO Saad al-Kaabi said that behind the announcement was an element of wanting to cut costs.

    "Of course as an outcome of this cost reduction will be realised, it will make us more competitive in the market," he said, adding that the move would save "hundreds of millions of dollars", without giving a timeframe for the savings.

    "It's one business that will do the same thing. Putting it all (in) one place gives you a much bigger advantage in marketing."

    The transition, which will result in a single company called Qatargas, will take around 12 months to complete and will begin before the end of this year.

    Once the new structure is in place, some areas of the business could see job cuts, although the operational side of the plants will not be affected, Kaabi said.

    A Doha-based energy analyst said the move was in line with QP's recent cost cutting but also had other benefits.

    "Arguably the reasons for having two firms - to deal with western and eastern markets and also to encourage some competition during the rollout phase of LNG facilities - are no longer relevant," he said.

    Qatargas is the largest LNG-producing company in the world, with an annual output capacity of 42 million tonnes a year, according to its website. While QP owns a majority stake, global energy firms including Total, Mitsui & Co and ConocoPhillips also possess small stakeholdings.

    RasGas has a production capacity of about 37 million tonnes a year, according to its website. It is a 70/30 percent joint venture between QP and Exxon Mobil.
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    Canadian Oil Sands Resurrected Amid OPEC Cut

    Cenovus said Thursday that the company will proceed with its 50,000 barrel a day phase G expansion at its Christina Lake oil sands site. The announcement comes more than a month after Canadian Natural said it was resuming work on its 40,000 barrel a day Kirby North project.

    The expansions are the first to resume since an oil market crash saw prices plunge from more than $100 a barrel in 2014 to a 12-year-low of about $26 a barrel earlier this year. The Organization of Petroleum Exporting Countries’ agreement last week to cut production for the first time in eight years propelled crude prices above $50 just as the Canadian government approved the expansion of two export pipelines.

    “You are seeing some cautious optimism come back,” said Mark Oberstoetter, lead analyst for upstream research at Wood Mackenzie in Calgary. “2017 looks to be a healthier year in terms of where the price will be. It won’t be all-out growth, but they can start to think of brownfield, debottlenecks, projects that do make sense in the new world.”


    The oil sands region of northern Alberta is one of the most expensive regions in the world for crude production because of its isolation and the technical challenge of extracting the tar-like bitumen from the ground. Heavy Canadian crude currently sells at a discount to West Texas Intermediate futures of just over $15 a barrel.

    The downturn forced oil sands companies to become more cost-efficient as they renegotiated contracts with service companies and cut their workforce to survive falling prices.

    During the downturn, Cenovus managed to cut operating costs as much as 40 percent, Brian Ferguson, Cenovus’s president and chief executive officer, said in a conference call Thursday. The company will raise its capital budget next year by 24 percent from 2016 to C$1.3 billion, with 30 percent dedicated to “planned growth projects,” he said. Christina Lake Phase G will be built at C$500 million less than originally budgeted.

    “We expect Christina Lake Phase G to be an industry-leading oil-sands expansion,” Ferguson said. “Our teams have done a tremendous amount of work to reduce cost and improve the efficiency of every dollar that we planned to spend.”

    Total oil production is expected to rise 14 percent from 2016 after recently completed expansions at Christina Lake and Foster Creek, the CEO said. Expansion for the Foster Creek Phase H and Narrows Lake Phase A expansions will be announced in mid 2017.

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    Boost for Western Australia as Gorgon starts supplying first customers

    The $54-billion Gorgon liquefied natural gas (LNG) project, on Barrow Island off the coast of Western Australia, has started domestic gas supplies to the Western Australian market.

    US energy major Chevron on Friday reported that an initial 150 TJ/d of gas was being supplied to foundation customer Synergy and an industry customer under long-term contracts.

    “This is a significant development for domestic gas in Western Australia and we are committed to being a safe and reliable supplier of domestic gas to our customers,” said Chevron Australia MD Nigel Hearne.

    Domestic gas from the Gorgon project will be transported to the mainland via a 90 km pipeline, connecting into the existing Dampier to Bunbury natural gas pipeline.

    The project is the most significant entry into the Western Australian domestic gas market for almost 30 years. At full capacity and subject to market demand, Gorgon could supply up to 300 TJ/d of gas to the Western Australian market, equivalent to generating enough electricity for 2.5-million households.

    The Australian Petroleum Production and Exploration Association (Appea) has welcomed the new domestic supply, saying Western Australia’s energy security has been further enhanced with the start of the project.

    Appea COO for Western Australia Stedman Ellis said Gorgon was a major reason why Australia was set to become the world’s leading LNG exporter by 2020.

    “Its impact on the Western Australian and Australian economies has already been enormous and is set to grow even bigger through the long-term jobs, local contracts, export income and taxation revenues it will generate over many decades.

    “Gorgon’s entry into the domestic gas market marks another significant milestone in the project’s development and will ensure Western Australians continue to enjoy access to abundant supplies of cleaner-burning natural gas well into the future.”

    Ellis said Western Australia’s domestic gas supply would be further boosted once Chevron began supplying gas from its Wheatstone project near Onslow
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    Oil prices soar on global producer deal to cut crude output

    Oil prices shot to their highest levels since mid-2015 on Monday after OPEC and other producers reached their first deal since 2001 to jointly reduce output in order to rein in oversupply and prop up markets.

    Brent crude, the international benchmark for oil prices, soared to $57.89 per barrel in overnight trading between Sunday and Monday, the highest level since July 2015.

    U.S. West Texas Intermediate (WTI) crude also hit a July 2015 high of $54.51 a barrel.

    Brent and WTI eased to $56.58 and $53.92 respectively by 0453 GMT, but were both still up over 4 percent from their last settlements.

    With the deal signed after almost a year of arguing within the Organization of the Petroleum Exporting Countries and mistrust in the willingness of non-OPEC Russia to participate, focus is switching to compliance of the agreement.

    "We believe that the observation of the OPEC-11 and non-OPEC 11 production cuts is required to sustainably support... oil prices to our 1H17 WTI price forecast of $55 a barrel," Goldman Sachs said.

    "This forecast reflects an effective 1.0 million barrels per day (bpd) cut vs. the 1.6 million bpd announced cut and greater compliance to the announced cuts is therefore an upside risk to our forecasts."

    AB Bernstein said the agreed deal "amounts to an aggregate supply cut of 1.76 million barrels per day (bpd) from 24 countries which currently produce 52.6 million bpd, or 54 percent of world oil supply."

    Bernstein said that "some of the non-OPEC supply cuts will come from natural decline, but most will come from self-imposed cuts."

    Saudi Aramco has told U.S. and European customers it will reduce oil deliveries from January.

    OPEC plans to slash output by 1.2 million bpd from Jan. 1, with top exporter Saudi Arabia cutting around 486,000 bpd in a bid to end overproduction that has dogged markets for two years.

    On Saturday, producers from outside OPEC agreed to reduce output by 558,000 bpd, short of the target of 600,000 bpd but still the largest contribution by non-OPEC ever.

    "Non-OPEC participation should add to bullish sentiment," Morgan Stanley said.

    From outside OPEC, Russia said it would gradually cut 300,000 bpd.

    "Once cuts are implemented at the start of 2017, oil markets will shift from surplus into deficit. Given the cuts in production announced by OPEC, we expect that markets will move into a 0.8 million bpd deficit in 1H17," AB Bernstein said.

    Still, some analysts expect producers, drawn by higher oil prices, to increase output again.

    "While better compliance than we expect would initially lead to higher prices – with full compliance worth an additional $6 per barrel to our price forecast – we expect that a greater producer response, especially in the U.S., would eventually bring prices back to $55," Goldman Sachs said.
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    New Ways to Clean Up Oil Fields Without Dumping Wastewater

    Earthquakes tied to oilfield wastewater dumping are a major problem in Oklahoma. This year the state has suffered more than 500 earthquakes of magnitude 3.0 or higher; from 2004 to 2008, the five years before the fracking boom, there were nine. So a handful of water management companies are experimenting with ways to reduce the pouring of drilling wastewater back into the ground. Cost is a principal concern, because existing techniques are expensive. The market for handling the water in Oklahoma is about $3 billion, according to consulting firm CAP Resources.
    Mobile Evaporator
    Innovator: Anurag Bajpayee
    Title: Chief executive officer of Gradiant, a three-year-old, 50-employee company in Woburn, Mass.
    MIT grad Bajpayee is building an automated evaporator that fits in a large, rectangular gray box on the back of an 18-wheeler. It’s designed to release as much as two-thirds of the wastewater back into the air as clean water vapor, depending on the salt content. What’s left will still be pumped back underground, Bajpayee says, or perhaps reused in some drilling operations. He says he’s in talks with three drilling companies to deploy his first machine in Oklahoma early next year.
    Inductive Evaporator
    Innovator: Mike Keller
    Title: President of Produced Water Technologies, a Tulsa startup with six employees
    The Oklahoma entrepreneur, who’s spent 40 years working on waste management technology for refineries and chemical plants, proposes to capture waste heat from pipeline compressors (he won’t say how) to evaporate the clean water from drilling waste, meaning companies won’t have to spend money generating that heat independently. Keller says he’s aiming to cut the amount of wastewater sent back underground by about half.
    Innovator: Brian Kalt
    Title: President of Fairmont Brine Processing, a four-year-old, 65-employee company in Fairmont, W.Va.
    Kalt wants to build a plant to extract salt particles from wastewater and release the cleaned-up water into rivers. He says he can process a barrel of wastewater for $1.50, about what disposing of it underground costs. He plans to sell the extracted salt for use on icy roads, as a water softener in large industrial boilers, and to help keep coal piles from freezing in winter. Kalt, a former Marine officer who served in Iraq, already uses the process to clean water from natural gas wells.
    Clean Enough for Fracking
    Innovator: Clane LaCrosse
    Title: CEO of Bosque Systems, a nine-year-old, 300-employee company in Fort Worth
    Oklahoma native LaCrosse is the only one in the state already working to clean drilling wastewater. His company treats about 10 million barrels a month, using techniques like filtration to make it clean enough for his eight clients to reuse in their next wells. Fracking is such a water-hungry enterprise that Bosque never has any cleaned wastewater left unused, LaCrosse says. The company often has to add some freshwater to the recycled stuff.

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    Encana cuts debt by largest amount for E&P TSX companies in past year

    Debt reduction has been a hot topic in past year in Canada, as companies adapted to a lower-for-longer price environment. Out of 70 domestic and international producers listed on the TSX, Q3 2016 data available in CanOils reveals that Encana Corp.has cut debt by the largest monetary value over the past year. The company has removed just under Cdn$2.6 billion of debt from its balance sheet between Q3 2015 and Q3 2016 (see note 1), a reduction of around 30%.

    The TSX-listed company that has shaved the most debt off its previous year’s balance sheet proportionately is Touchstone Exploration Inc.. By cutting its debt by Cdn$6.6 million, Touchstone’s debt levels are 93% lower in Q3 2016 than in Q3 2015.

    In terms of domestic producers, Paramount Resources Ltd. (TSX:POU) cut its debt by the largest percentage (84%) over the same timeframe, using funds generated in an asset sale that was the largest E&P deal of the year in Canada.

    Subsequent to Q3 2016 – and therefore not in these figures – RMP Energy Inc.closed a deal with Enerplus Corp. to sell its assets at Ante Creek for Cdn$114.3 million. The sale proceeds allowed RMP to eliminate its bank debt.

    Not all companies reduced debt. Suncor Energy Inc.,the TSX’s largest current producer, saw the largest debt increase in terms of actual value between Q3 2015 and Q3 2016. Suncor’s debt rose by Cdn$2.9 billion after a busy year of acquisitions. Painted Pony Petroleum Ltd. saw debt increase by the largest proportion over the 12 month period, more than ten-fold, to Cdn$537 million. This was mainly due to a new finance lease being accounted for upon the start-up of operations at a gas processing facility and pipeline.

    Overall, despite some companies’ increases in debt, these 70 oil and gas companies of the TSX have around 6% less debt impacting their balance sheets in Q3 2016 compared with Q3 2015 (Cdn$92.4 billion vs. Cdn$98.5 billion).

    For those domestic operators that have reduced debt by significant margins, focus can switch to other pressing problems relating to the downturn, such as Licensee Liability Ratings (LLR).
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    Xcite Energy put into liquidation as creditors seek cash

    Xcite Energy, a North Sea focused oil company, has been put into liquidation after having been deemed insolvent, as it failed to raise funds for debt payment.

    The company, working to develop the Bentley field in the UK North Sea, failed to pay $152 million in debt when bonds issued in 2014 matured on Ocober 31, 2016.

    On November 1, 2016 the Bond Trustee made demand on Xcite to repay the debt in full. Xcite then confirmed that it could not repay the debt claimed in the demand.

    The creditors then applied to court to place Xcite into liquidation, and the court on December 5 appointed joint liquidators of the company.

    Xcite’s material assets are the licenses its subsidiary XER holds in four blocks in the UK North Sea, the most significant of which is the Bentley field license.

    The assets have been put up for sale prior to the court action, but the process is now monitored by liquidators who will review bids received and determine further course of action.

    In a letter to shareholders, the liquidator has said that based upon current forecasts, the funding available to Xcite will be exhausted during January 2017.

    “If this occurs, XER will cease to operate and the Licences will likely be revoked resulting in little or no value being available to XEL’s stakeholders. In view of this, and in anticipation of the liquidation, the Directors determined that it was appropriate to commence a marketing process for the sale of the shares XEL holds in XER.”

    As for the company shareholders, in order for them to receive a distribution from the disposal of XEL’s assets, that sale must realize in excess of all secured and unsecured creditor claims. At this stage, those claims are estimated to be $152 million, according to FTI Consulting, the liquidator.

    In light of these developments, the Final Investment Decision for Bentley field, which Xcite hoped to file in 2016, will most likely, almost certainly, not happen.

    The Bentley is the crown jewel of Xcite’s portfolio, which the company has been working to develop since  in 2003. It is located on the East Shetland Platform in the UK Northern North Sea.

    Xcite in 2012 completed pre-production phase, producing 147,000 barrels of Bentley crude oil in the process. Xcite has described the oilfield as one of the largest undeveloped resources in the UK North Sea.
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    Alternative Energy

    New Australian big solar fund adds SunPower plants to portfolio

    Recently launched Australian sustainable investment fund, New Energy Solar, has made two new investments in the US big solar market, taking a majority interest in two California solar farms, developed by US PV giant, SunPower.

    The two new US investments – which take the fund’s solar assets to a total of four since it was established in November 2015 – were announced by New Energy Solar and SunPower on Thursday.

    New Energy Solar, headed up by property and investment executive Tom Kline, is just the latest in a number of new funds set up in Australia – and abroad – to capitalise on the booming global large-scale renewable energy industry.

    The fund hasn’t made made any investments in Australia, as yet, but according to its September Quarterly Update, had 300MW of potential local solar projects under review and expected opportunities to “ramp up” in 2017-2018, off the back of ARENA’s latest large-scale funding round.

    “Australia’s excellent natural solar resources, coupled with a domestic solar industry that is still in a state of relative infancy compared with other markets, supports the Fund’s optimistic outlook for future domestic investment opportunities,” the September update said.

    The new US SunPower projects, both located in Kern County, California, will each have a capacity of 67.4MW once completed – construction began in mid-2015, with full commercial operation expected to be achieved later this month.

    SunPower will retain an ownership interest in the two projects and provide ongoing operation and maintenance services. And both have secured long-term power purchase agreements – one with Stanford University and one with Turlock Irrigation District.

    New Energy Solar, which has also acquired shares in two North Carolina solar farms, one 43MW and one 47.6MW, said the SunPower projects were “excellent additions” to the fund’s portfolio.

    “We are proud to partner with SunPower, one of the most experienced and leading developers and operators of utility-scale solar power,” said Kline in a statement.

    Indeed, as the two companies note in their joint announcement, both the Kern County projects will serve electricity demand nearly 500km away.

    “Projects like these demonstrate the flexibility with which organisations can now take advantage of cost-effective solar power by using larger capacity off-site solar resources to reliably serve a greater percentage of demand,” the media statement said.

    Nam Nguyen, SunPower’s senior vice president noted that off-site solar allows for land-constrained organisations to benefit from the economies of scale achieved with larger solar installations.

    “We congratulate New Energy Solar on their leadership in recognizing the value of this model and thank them for their partnership,” Nguyen said.

    For New Energy Solar, the two projects are expected to generate a five-year average yield of approximately 6.5 per cent per annum.
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    Subsidies for home renewable energy creation to increase

    Subsidies for renewable technologies to heat homes, such as heat pumps and biomass boilers, are being increased, the Government announced.

    And plans to drop solar thermal panels – which use the sun to heat water – from the heating subsidies scheme have been abandoned, with payments for the technology maintained at current levels.

    The moves come as part of reforms to the “renewable heat incentive” which aims to encourage the take-up of clean technologies for heating and hot water in homes and other buildings.

    Heating accounts for 45% of UK energy consumption and more than 30% of carbon emissions, energy minister Baroness Neville-Rolfe said.

    But the Government has faced criticism from its own climate advisers as progress on cutting carbon from heating – most of which is provided by gas in the UK – has stalled.

    Ministers have announced that subsidies for air source and ground source heat pumps, which run on electricity and work like reverse fridges to heat homes, will be increased.

    There will also be a slight increase in payments for boilers that burn biomass such as wood pellets to heat homes, returning support to a previous level, which was a response to a consultation on reforming the incentive scheme.

    And solar thermal will stay in the scheme and continue to receive the same level of payments.

    Baroness Neville-Rolfe said the improvements to the renewable heat incentive would “do more to encourage households and businesses to install electric heat pumps and indeed biomass boilers, instead of conventional fossil fuel systems”.

    “The reforms will also make sure we are improving the value for money of spend through the scheme and that consumers are protected,” she said in a speech at an event on making heating greener at think tank Policy Exchange.

    Paul Barwell, Solar Trade Association chief executive, said: “Solar thermal is back, which is great news for consumers who want to bring down their energy bills and do their bit to mitigate climate change.”

    Isabella O’Dowd, policy analyst for the STA solar thermal group, added: “The UK lags behind on solar thermal internationally but its potential in this country is huge.

    “It is a low hassle choice for households with even limited roof space; once installed solar thermal typically provides around half of your hot water and it can take around 10% off the average energy bill, with very little on-going maintenance.”

    With the payments under the incentive scheme, costs can be recovered within 10 years, she said.
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    S.Korea pairs state utility, private tech giants in $37 bln bid to seize global green energy lead

    South Korea aims to vault from laggard to leader in the renewable energy industry, as Seoul prepares to hook the country's tech giants up to nearly $40 billion in public funds in a bold plan to become a new global leader in green power.

    Amid questions over the future of clean energy in the United States under President-elect Donald Trump, as well as China's appetite for cutting fossil fuel reliance, Seoul is accelerating into battery and 'smart' grid technology - vital to store and transmit power whose generation changes with the weather.

    Fresh from unveiling a 42 trillion won ($37 billion) support package, Seoul said last month it now aims to double the amount of green energy it produces by 2025 - 10 years ahead of previous plans. As well as cutting overwhelming reliance on coal and nuclear power, the plan aims to tap into the prowess of Korean tech leaders like Samsung - previously focused on consumer electronics - to build a major new export industry.

    "South Korea definitely has the potential when it comes to clean tech because of government incentives but also the already established companies there," said Vishal Sapru, Program Manager, Power Quality/Power Supplies at consultancy Frost & Sullivan. "They are strong contenders when it comes to utility-scale storage...They have the bandwidth to meet aggressive demand."

    The push by Asia's 4th-largest economy comes as global climate change treaty commitments dovetail with a race among the world's tech firms for new revenue streams while growth in goods like smartphones slows. The International Energy Agency now sees 28 percent of the world's power being generated from renewable sources by 2021, up from 23 percent in 2015.


    Firms from General Electric to Europe's ABB are eyeing growth in smart grids and batteries - and have a head start. But by combining the power transmission know-how of its state utilities with private sector expertise in batteries and power controls, South Korea is well placed to gain ground, industry executives say.

    "One of Korea's strengths is IT technology, particularly semiconductors and battery," said Lee Jeong-min, a senior manager of energy storage systems sales team at Hyosung Corp . "If we link them together with new energy business, we can catch up."

    Hyosung is among several private firms partnering with state utility Korea Electric Power Corp (KEPCO) to develop smart grid and energy storage systems at home and in international markets.

    KEPCO is now working on some 40 overseas energy and power distribution projects. It agreed in November with the U.S. state of Virginia to develop 10 energy projects, echoing similar deals it has agreed with Canada's Ontario state as well as Dubai.

    "We play our role in operating the power grid and leading new businesses, while private sector partners do their part by making products and supplying them," Hwang Woohyun, vice president of KEPCO, told Reuters in an interview.


    To help extend Korean companies' global reach, KEPCO plans to invest 8.3 trillion won in collaborative programmes by 2020. Meanwhile partner Samsung SDI is eying 3 trillion won in investments on battery development by 2020.

    LG Chem is also bullish on energy storage as solar panel costs drop and government support rises.

    "This year energy storage system revenue is expected to grow over 60 percent to 270 billion won and to increase further next year, about 80 percent to more than 500 billion won," Kang Chang-Beom, LG Chem vice president said in a recent conference call.

    For SDI, part of the Samsung empire and the world's top maker of handset batteries, the government push offers a way to help it further expand into energy storage systems.
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    US solar generation installations set record in third quarter: GTM Research

    A record 4,143 MW of solar photovoltaics was installed in the US in the third quarter, with 3,200 MW being utility-scale PV installations, GTM Research said Tuesday in a report commissioned by the Solar Energy Industries Association.

    The previous quarterly high was in the fourth quarter of 2015, with 3,284 MW of solar installed, according to GTM.

    US solar installations drove 60% of new electric generating capacity additions in Q3 2016, a record quarterly market share, GTM said.

    "Between Q1 and Q3 2016, solar accounted for 39% of all new electric generating capacity brought on-line in the US, ranking second only to natural gas as the largest source of new capacity additions," it said.

    Total installed solar generation capacity in the US at the end of the third quarter reached 35,743 MW, up from roughly 10,000 MW three years ago, GTM said.

    The utility-scale PV market continues to be the primary driver of solar installation growth in the US, while residential rooftop installations have slowed, it said. The utility-scale segment represented 77 % of solar PV installed in the third quarter of 2016.

    "Driven by a large pipeline of utility PV projects initially procured under the assumption of a 2016 federal Investment Tax Credit expiration, the third quarter of 2016 represents the first phase of this massive wave of project completion, a trend that will continue well into the first half of 2017," said Cory Honeyman, associate director of US solar at GTM Research, in an accompanying statement.

    California, which now has 15,251 MW of solar generation, added more than 1,000 MW of utility scale in Q3, GTM said.

    GTM expects the US to install 14,100 MW of solar PV in full-year 2016, which, if reached, it said, would be 8 % above the 2015 total of 7,300 MW.

    In the fourth quarter, GTM said it believes 7,800 MW of solar will come online, with "a massive" 4,800 MW of utility PV projects making up the bulk of that quarterly total. The consultants said that 19 utility-scale projects greater than 100 MW are expected to come online in Q4.

    "More solar capacity is expected to come online in the second half of this year than has ever come online in a single year," GTM said.

    More than 50% of the original utility PV pipeline intended for 2016 has "successfully pushed out interconnection into 2017, or later," it said. This roughly 6,000 MW "spillover" of utility PV installations was enabled by the extension of the federal Investment Tax Credit, which Congress approved in December 2015.

    California's investor-owned utilities have "already procured enough renewables to meet their renewable portfolio standard obligations through the end of this decade," GTM said. "Despite dirt-cheap PPA pricing, the utility PV segment is struggling to reboot procurement given the degree of demand pull-in in 2016."

    Even with PPA pricing consistently ranging between $35/MWh and $60/MWh, utility offtakers have only partly countered the demand rollback from utilities that over-procured in the past couple of years, GTM said.

    As a result, over 70% of the 2017 utility-scale project pipeline procurement will come from entities other than utilities seeking to meet renewable portfolio standards, it said.

    Corporate customers have already procured more than 1,500 MW of so-called off-site wholesale solar for post-2016 installation dates, GTM said.
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    E.ON invests in UK start up that uses sails to harness wind power

    German energy group E.ON has invested in a British start-up business that uses sails instead of rotors to harness wind energy.

    Kite Power Solutions (KPS) secured 6 million euros ($6.36 million) in a fresh funding round that, apart from E.ON, included oil industry services company Schlumberger and Royal Dutch Shell, E.ON said on Tuesday.

    A spokesman declined to say how the funding was divided up.

    KPS's technology generates energy from wind by flying sails comparable to the ones used in kite surfing in altitudes of up to 450 meters (1,476 ft), which is much higher and far less expensive than current wind turbines.

    "We catch the opportunity to be a first mover in producing renewable energy at locations where it is for economic and technical reasons not possible today," Frank Meyer, senior vice president at E.ON's B2C & Innovation unit said.

    The move is part of a broader trend in the energy industry, where pressures to shift away from fossil fuel-fired power plants has triggered a race to develop new technologies that companies hope can help transform the industry.

    E.ON, Germany's second largest energy group after Innogy, has so far invested in more than a dozen startups in the United States, Europe and Australia.
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    China pins hopes on taxation for environmental protection

    China's top legislature is working to upgrade the current pollutant discharge fee system to a coercive and legally binding law, which will tax air and water pollutants, solid waste and industrial noise at different rates, to fight chronic and intractable pollution in the coming years.

    China established the "pollutant discharge fee" system in 1979. In 2015, it collected 17.3 billion yuan ($2.5 billion) from some 280,000 businesses.

    The State Council rendered a draft environment tax law to China's top legislature for the first reading in August, and it vowed earlier this week to introduce environment tax by 2020 in a five-year plan for ecological and environmental protection.

    "The upcoming law is expected to raise polluters' operational costs and thus force them to upgrade technology and shift to cleaner production," said Tan Yunming, professor at the Central University of Finance and Economics.

    Many polluters are overcapacity-hit enterprises and environment tax will help weed out firms that fail to change, said Luo Jianhua, an expert with the All-China Federation of Industry and Commerce.

    Luo dismissed worries that the new tax could encourage enterprises to hike prices and shift the burden to consumers, saying that major emitters like steel and cement factories are unlikely to raise prices in an oversupplied market.

    Pollutant discharge fees are now collected by environmental protection authorities, who have the expertise to gauge pollution, and environment tax will be collected largely by regular taxation authorities.

    "The enforcement of the law will require close cooperation between the two departments," said Chang Jiwen, a resources and environment policy researcher at the Development Research Center of the State Council.

    In addition to the environment tax law, the central government dispatched inspection teams to review local-government environmental protection measures this year.

    The second round of inspections are now underway, and the first round held more than 3,000 governmental officials accountable for lazy environmental protection efforts. Punishments include removal from posts.

    Attached Files
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    SA-made silicon energy storage system “ready to close grid gap”

    A South Australian company behind a silicon based thermal energy storage system has created and successfully tested a full prototype of its technology, which it says is ready for commercialisation after a decade is the making.

    Adelaide-based Latent Heat Storage – whose progress with its homegrown, patented silicon storage technology we have monitored here and here – said on Friday a prototype of its thermal energy storage system (TESS) had its first successful run on September 30.

    The company, which is in the process of changing its name to 1414°, says it is now ready to apply its TESS to industry and generation sites at scales of 10MWh and 200MWh.

    Suitable sites for these demonstrations, the company says, would be a wind farm, or an existing gas-fired generator. The technology will increase efficiency and revenues of a wind farm through load shifting to times of maximum demand.

    As we wrote here in October last year, the TESS was developed in conjunction with the University of Adelaide, and Adelaide-based engineering consultancy ammjohn.

    It works to store energy by heating and melting containers full of silicon, whose properties of high latent heat capacity and melting temperature make it ideal for the storage of large amounts of energy.

    A key benefit of the TESS device is also considered to be its scalability. The trial confirmed that the technology is capable of storing and supplying hundreds of MW of electricity, at just $70,000 per MWh to provide for a reliable electricity supply with up to 90 per cent renewable sources – making it a good fit with the South Australian energy market.

    And, as well as storing and dispatching electricity, the system’s excess heat can be used to heat water for space heating and other industrial processes.

    So far, the company has invested more than $3 million in getting the technology to this point, with the help of a $400,000 federal government grant awarded last October.

    1414 Degrees said on Friday that sceptics had doubted such a high temperature storage system was feasible, but that the prototype TESS had proven them wrong.

    Kevin Moriarty, a former chairman and managing director of zinc and gold miner Terramin Australia, has recently joined the company to help get commercial operations off the ground. He says 1414° needs $10 million to $20 million to progress its plans, and is involved in “investment discussions” with several large energy companies interested in the technology.

    1414° chairman Dr Kevin Moriarty with pure silicon. Source: Adelaide Advertiser

    “The next phase is to develop the first large, commercial systems over the next two years,” Dr Moriarty said in an interview with the Adeliade Advertiser in October this year.

    “We are facing a pivotal moment in the local and global energy market, with soaring prices, instability, and harmful emissions.

    “Our energy storage technology presents an opportunity to disrupt the energy market and the use of readily available silicon rocks ensures its sustainability and its affordability.

    “We’re using cutting edge technology developed right here in South Australia to provide a viable low cost solution, not just for the power problems we’re experiencing here in SA but which can be implemented worldwide.”

    Moriarty said that while battery chemistries like lithium-ion had a limited life, only lasting a certain number of charging cycles, the TESS was based on a “phase change” – melting and cooling of silicon – and so did not suffer the same limitations.

    He said while the TESS was built with off-the-shelf components, the intellectual property was key to its success.

    “The know-how is crucial. Anyone can go and buy some silicon, it’s cheap, it’s $2000 a tonne,” he said. “A single tonne of that (a 50sq cm block), just to melt that, to hold it at melting temperature, what they call the latent heat, in other words the energy of melting, is the equivalent of taking a tonne of water and raising it 200m in the air.

    “One block like that will store enough energy to keep 28 houses operating for a day.

    “This was recognised in CSIRO some years ago although they worked mostly with molten salt because that operates at around 500 degrees. This melts only at 1414 degrees. It will stay at that temperature while it’s melting and provide energy until fully solidified at a constant potential like hydro. No other heat storage system does that.

    “You can store it, then you can regenerate it.’’

    Attached Files
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    Monsanto shareholders back Bayer deal, CEO hopeful of U.S. approval

    Shareholders of U.S. seeds and agrochemicals company Monsanto Co approved the company's $66 billion acquisition by Bayer AG on Tuesday, a deal that still requires regulatory approval to close as expected in late 2017.

    Increased research and development spending by the combined companies and plans to develop a global seeds and biotechnology hub in St. Louis fuel hopes regulators will not block the deal, which was agreed upon in September, Monsanto CEO Hugh Grant said.

    "I think those augur well for the deal," he told Reuters in an interview.

    If the deal closes, it will create a company commanding more than a quarter of the combined world market for seeds and pesticides in the fast-consolidating farm supplies industry.

    Uncertainty about whether President-elect Donald Trump would stand in the way of large mergers after taking office in January has clouded the outlook of some deals. Trump vowed during his campaign to block AT&T Inc's (T.N) purchase of Time Warner Inc (TWX.N) and look to break up Comcast Corp's (CMCSA.O) deal to buy NBC Universal, citing too much concentration of power.

    The president does not directly decide if a merger is illegal under antitrust law. That is done by the U.S. Justice Department or Federal Trade Commission, which divide up the work of assessing mergers. If one of the agencies decides to stop a deal, it must convince a judge to agree.

    Grant said he has not met with Trump or any of his transition team and did not elaborate on how the company was working to secure the deal.

    The acquisition came after a string of large mergers that have roiled the agribusiness sector in the last year or so, including ChemChina's purchase of Swiss chemicals company Syngenta AG (SYNN.S) and a merger of Dow Chemical and DuPont.

    DuPont's chief executive, Ed Breen, said last week the incoming Trump administration is not likely to have an impact on his company's merger with Dow Chemical.
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    Stine Seed gives U.S. soy farmers a rare chance to replant GMO seeds

    Major producers of genetically modified seeds, including Monsanto Co and Bayer AG, have long barred U.S. farmers from saving seeds after harvest to replant - a condition that allows the companies to charge every year for the technology.

    Now, a smaller challenger, Stine Seed, wants to disrupt that practice.

    Next year, family-owned Stine says it will give about 200 farmers in a pilot program the chance to replant genetically modified soybean seeds. The program is expanding after launching this year with about 50 farmers.

    Major genetically modified seed companies have largely stamped out the once-common practice of saving seed in the United States over the past two decades. They have required farmers to sign contacts that bar them from replanting the patented, genetically modified seeds now used to produce most of the nation's soybeans.

    If Stine's program succeeds and expands further, it would represent the renewal of a technique that major seed developers view as a threat to the commercial value of their intellectual property.

    Seeds in Stine's program will include those containing a genetic trait called LibertyLink, which was developed by Bayer and licensed by Stine, and that's created tension between the companies.

    Bayer "does not support saved seed," spokesman Jeff Donald said. He declined to comment specifically on Stine's program.

    Two top Stine executives - Harry and Myron Stine, who are father and son - gave Reuters conflicting accounts of the company's talks with Bayer about the pilot program and its plans to profit from it.

    "Bayer despises that we're doing it," Myron Stine, company president, said in a telephone interview in September. "We are constantly changing things to fit what Bayer wants," he added in an October interview.

    In a later interview at a Stine Seed's office in Iowa, however, founder and Chief Executive Harry Stine said that Bayer merely wanted Stine to ensure that farmers did not replant Libertylink seeds without paying for the technology. Stine crafted a system to ensure it can accurately track when farmers save and replant seeds and ensure they pay Bayer the appropriate fees.

    "They just wanted to make sure you weren't having some farmer just go to a bin (of genetically modified seeds) and plant whatever he wanted," Harry Stine said about Bayer in October. "Other than that, they were fine with the program."

    Genetically modified seeds are sold by independent companies, such as Stine, and by major players, including Monsanto, Bayer and Syngenta AG. Stine and other independent seed sellers often pay to license genetic traits from the larger companies to put into seed.

    Monsanto, the world's largest seed maker, has successfully sued U.S. farmers who saved genetically modified seed after pledging in contracts with the company to use it for only one crop. Other trait developers make U.S. farmers sign similar agreements.

    In Argentina - where farmers are legally allowed to save seed - Monsanto has stopped launching new soybean technologies, following a dispute with exporters and the government over royalties paid for saved seed.

    Monsanto and Syngenta declined to comment on Stine's program.


    Stine plans to limit its seed-saving program to farmers willing to allow the company the option to buy the new genetically modified seed grown by farmers during each harvest.

    To secure seed supplies, Stine has traditionally hired farmers to grow the seeds and agreed to buy all the seeds those farmers produce. In the pilot program, however, Stine will reserve the right to reject seeds because of low customer demand or other reasons, eliminating waste and saving Stine money.

    As an incentive for farmers in the pilot program, Stine is offering discounts on the original seed they use - charging them as little as $26 per acre instead of the going rate of about $40 per acre for seeds containing Bayer's LibertyLink trait.

    Myron Stine said Bayer had received calls from Stine competitors, who also pay to license the Bayer trait, complaining that Stine was offering farmers a "super lucrative price" on seeds containing LibertyLink, which protects soybean crops against a weed killer.

    "It just ticks them off," Myron Stine said of Stine's competitors.

    Asked about Myron's comments, Donald, the Bayer spokesman, said the company "wouldn't want to discuss our internal conversations with licensees."

    Myron Stine said Stine Seed would initially lose money on the pilot program, partly because it must pay licensing fees to Bayer for LibertyLink.

    But Stine could turn a profit later, he said, if it starts licensing new traits from a closely affiliated company, MS Technologies, possibly for lower prices than Bayer charges. Seeds containing the new MS Technologies traits are not yet on the market.

    Harry Stine serves on the board of directors for MS Technologies and has a financial interest in the company, said Joseph Saluri, an MS Technologies director and general counsel for Stine Seed. He said pricing for the MS Technologies traits had not been determined.


    After Myron Stine spoke to Reuters several times, company attorney Brenda Stine-Reiher wrote to a reporter in October saying Myron had provided "misinformation." She singled out his comments on potentially lower pricing - what she called "priority pricing" - for Stine Seed on traits from MS Technologies.

    "There is no such pricing in place yet," wrote Stine-Reiher, who is Myron's sister.

    The company then set up an interview with Harry Stine. In contrast to his son, Harry Stine said he intended to profit immediately from the pilot program. He said MS Technologies' fees were not set but would likely be similar to Bayer's.

    If Stine eventually turns to MS Technologies for traits, Bayer will still be linked, at least to some degree, to its seed-saving program, Harry and Myron Stine said. One new trait Stine is considering for the program is a joint project of Bayer and MS Technologies.

    Bayer declined to comment on that trait.

    MS Technologies co-developed a second soybean trait with Dow AgroSciences. Stine also wants to offer that trait in program, Harry and Myron Stine said.

    The traits will allow soybeans to resist more herbicides than LibertyLink.

    Dow did not respond to questions about Stine's program but said in a statement it "will not support 'saved seed.'"
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    Cows and rice paddies boost methane emissions: study

    Global methane emissions from agriculture and other sources have surged in recent years, threatening efforts to slow climate change, an international study has found.

    Researchers led by French Laboratoire des Sciences du Climat et de l'Environnement (LSCE) reported that methane concentrations in the air began to surge around 2007 and grew precipitously in 2014 and 2015.

    In that two-year period methane concentrations shot up by 10 or more parts per billion (ppb) annually, compared with an average annual increase of only 0.5 ppb during the early 2000s, according to the study released by the Global Carbon Project, which groups climate researchers.

    Marielle Saunois, lead author of the study and assistant professor at Université de Versailles Saint Quentin, said that the increase in methane emissions could threaten efforts to limit global warming.

    "We should do more about methane emissions. If we want to stay below a 2 degrees (Celsius) temperature increase, we should not follow this track and need to make a rapid turnaround," she said in a statement.

    Methane is much less prevalent in the atmosphere than carbon dioxide (CO2) -- the main man-made greenhouse gas -- but is more potent because it traps 28 times more heat. The report did not say to what extent methane contributes to global warming.

    CO2 emissions are expected to remain flat for the third year in a row in 2016, thanks to falls in China, the Global Carbon Project said last month.

    Saunois said that while the reasons behind the methane surge are not well understood, the most likely sources are cattle ranching and rice farming. Cows expel large quantities of methane and the flooded soils of rice paddies are homes for microbes that produce the gas.

    She cited data from the United Nations' Food and Agriculture Organization indicating that livestock operations worldwide expanded from producing 1.3 billion head of cattle in 1994 to nearly 1.5 billion in 2014, with a similar increase in rice cultivation in many Asian countries.

    Robert Jackson, a co-author of the paper and Professor in Earth System Science at Stanford University, said that methane can come from many different sources, including natural sources such as marshes and other wetlands, but about 60 percent comes from human activities, notably agriculture.

    A smaller portion of the human contribution, about a third, comes from fossil fuel exploration, where methane can leak from oil and gas wells during drilling.

    "When it comes to methane, there has been a lot of focus on the fossil fuel industry, but we need to look just as hard, if not harder, at agriculture," Jackson said.
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    Washington state sues Monsanto over PCB damages, cleanup costs

    Washington state filed an environmental lawsuit on Thursday against agricultural company Monsanto Co seeking damages and cleanup costs associated with the company's production of PCBs, the state's attorney general said.

    Monsanto produced the polychlorinated biphenyls, or PCBs, "for decades while hiding what they knew about the toxic chemicals' harm to human health and the environment," Attorney General Bob Ferguson said in a statement.

    St. Louis-based Monsanto, whose products include genetically modified crop seeds and pesticides, said the lawsuit, which was filed in King County Superior Court, lacked merit.

    "This case is highly experimental because it seeks to target a product manufacturer for selling a lawful and useful chemical four to eight decades ago that was applied by the U.S. government, Washington State, local cities, and industries into many products to make them safer," Monsanto Vice President Scott Partridge said in a statement.

    PCBs, once used widely to insulate electrical equipment and in products like paint and caulk, have been linked to cancer, immune system difficulties and other health problems.

    The manufacture of PCBs was banned in the United States in 1979. Monsanto was the only U.S. producer of PCBs between 1935 and 1979, Ferguson said.

    The lawsuit - against Monsanto and two of its splinter companies, Solutia Inc and Pharmacia LLC - seeks compensation for damages to Washington state's natural resources, including the economic impact to the state and its residents, Ferguson said.

    "PCBs have been found in bays, rivers, streams, sediment, soil and air throughout Washington state, with more than 600 suspected or confirmed contamination sites from Puget Sound to the Wenatchee River, Lake Spokane to Commencement Bay," he said.

    The company faces lawsuits by at least eight West Coast cities raising similar claims.

    In September, German chemicals and healthcare group Bayer AG made an offer to buy Monsanto for $66 billion. The deal has to be cleared by regulatory authorities in the United States, Europe and elsewhere.

    Attached Files
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    Precious Metals

    Silver miner Hochschild says production halted at mine in Peru

    Silver miner Hochschild Mining Plc said production at its Pallancata silver mine in Peru had been temporarily suspended, as members of a local community blocked a road and demanded renegotiation of agreements for land easements.

    An easement gives a party the right to use or enter onto another's property without owning it.

    Hochschild's shares were down 5.2 percent at 230.4 pence at 0819 GMT on the London Stock Exchange.

    The miner, which operates in Peru, Chile and Argentina, said its forecast for 2016 production and costs would not be affected by the production halt.

    Talks facilitated by the government are ongoing with relevant parties, the company said.

    Hochschild forecast in October full-year production of 35 million silver equivalent ounces and all-in sustaining costs, or the total cost of sustaining production and capital expenditure, in the range of $11-$11.5 per silver equivalent ounce.
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    Finance titans face off over $5tn London gold market

    Some of the biggest names in finance are fighting for control of the London goldmarket – a $5 trillion, three-century-old trading hub that is being forced to adapt to a digital e.

    As the London Bullion Market Association revamps over-the-counter trades that are the market’s major pricing benchmark, new ways of buying and selling precious metals are set to start next year from CME Group , Intercontinental Exchange and the London Metal Exchange. Some big bankshave stakes in the outcome, including Goldman Sachs Group, HSBC Holdings and JPMorgan Chase and Co.

    “There are four weddings, and we have to dance at all of them, because we don’t know which marrie will last,” said Adrien Biondi, the global head of precious metals at Commerzbank in Luxembourg. “Only one will win.”

    Almost half the world’s known gold trading occurs in London. OTC transactions are sealed by virtual handshakes, leaving default risk with buyers and sellers rather than relying on clearinghouses, which use collateral to mane and offset risk. But since the financial crisis, all markets have been reevaluating how they do business and mane risk as regulators step up scrutiny. That’s particularly true for major price-setting exchanges, after it was discovered in 2012 that banks were manipulating a key benchmark for global interest rates.

    A push for fewer risks and more disclosure has forced the LBMA to seek changes that would make it more transparent and secure for customers. The association, which counts HSBC and JPMorgan among its members, will introduce trade reporting for its members and a new trading platform in the first half of next year. That’s also when competitors plan to unveil new precious-metals derivatives built around the clearinghouse models.

    Gold remains one of the world’s most-popular commodities and a core reserve for central banks around the world. While prices slumped for three straight years through 2015, demand has since rebounded. Holdings by exchange-traded funds are up 30% this year, and investors have poured a net $25.5-billion into precious metals funds, data compiled by Bloomberg show.

    That’s helped boost the business of buying and selling gold. In October, LBMA reported gold trading rose to a daily avere of 18.6-million ounces. That’s about $23.5-billion, based on the avere value of bullion for the month. Prices are up 9.4% this year at $1 160.30 an ounce as of Wednesday.

    The LME, the world’s largest base-metals exchange, found so much promise in precious metals that it announced in August plans to start offering cleared gold and silver contracts in the first half of 2017. Eventually, it will add platinum and palladium. The exchange had the backing of a group of five banks including Goldman Sachs, ICBC Standard Bank and Societe Generale SA, as well as the World Gold Council, a group backed by the mining industry that seeks to develop markets for the metal.

    ICE, which owns commodity and financial exchanges, already runs the daily London gold auction on behalf of the LBMA among 13 authorized participants who set the daily price. In October, the Atlanta-based company said it would start its own gold contract in February that would involve bullion held in London and traded on its New York exchange.

    Chico-based CME Group, owner of the Chico Board of Trade and the world’s largest futures exchange operator, sought an even earlier entree into the London marketplace. In November, during LME Week, CME said it would start London gold and silver contracts Jan. 9 that offer a spread between spot prices and benchmark U.S. futures.

    “We’re going to see five years of turmoil in this market before things settle down,” Tony Dobra, an executive director at the UK’s biggest gold refiner, Baird & Co., said by phone from London on Dec. 6. “The good old London OTC market will keep soldiering on until we see some sort of consensus.”
    Opinion Split

    Senior traders, including Biondi and Simon Grenfell, global co-head of commodities at Natixis SA, an LBMA member bank which offers trading and risk manement services, said the change is both necessary and inevitable.

    The development “reduces credit risk in the system and makes it easier to trade,” Grenfell said by e-mail from London. “While the overhaul to gold markets may reduce credit margins on client business, improving transparency is a welcome change.”

    Opinion remains split on who will come out on top. Dobra, Biondi and founding member Raj Kumar, head of precious metals business development at ICBC Standard Bank, all said the LME offers the best solution for the market. Brad Yates, trading head for Dallas-based refiner Elemetal, said the CME would best fit his business needs. And participation on ICE’s benchmark, which underlies its contract, keeps growing, with trading house INTL FCStone the latest to join the process.

    “There will always be an OTC market in London, but much of what currently takes place here will shift to the exchanges,” said Kumar, who works at a unit of  Industrial & Commercial Bank of China (Asia), the world’s biggest bank. “Participating in any new contract incurs set-up costs, and so firms will need to prioritise which venues they are likely to trade.”
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    Newmont facing up to $1.2B impairment charge due to upcoming Yanacocha closure

    As every mining company knows, closing a mine can be costly, especially one the size of Newmont's  Yanacocha in Peru.

    On Tuesday, the largest U.S. gold company said in a filing with the US Securities and Exchange Commission that it will likely record a non-cash impairment charge of between $1 billion and $1.2 billion in the fourth quarter due to runaway costs associated with closing the mine, which is nearing the end of its life.

    Started in 1993, Yanacocha is the largest gold mine in South America, and number 6 on Frank Holmes' list of top 10 producing gold mines.

    In a statement, Newmont said it expects increasing costs to retire the mine in the order of $400 million to $500 million in Q4, based on more costly water treatment, demolition and earthworks expenses. Denver-based Newmont has to submit a closure plan to Peruvian government authorities  every five years. The mine is currently 51.3%-owned by Newmont, with the rest owned by Minas Buenaventura of Peru (43.6%) and International Finance Corporation (5%).

    Newmont planned to replace Yanacocha production from the nearby Conga copper and gold mine, but years of local opposition including violent protests in 2011, led the company to abandon the $5 billion project earlier this year.

    While Newmont acknowledged that local opposition was an important factor in their decision, a company spokesman noted there were many other factors involved.

    “At the end of the day, our decision to reclassify Conga’s reserves as resources was a business decision triggered by certain operating and construction permits expiring at the end of 2015, uncertain prospects for future development and permitting and market conditions,” he told back in April.
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    De Beers diamond sales tempered by India's cash crackdown

    Anglo American's latest De Beers diamond sale showed that demand had slowed after India's withdrawal of high-value banknotes, though it was higher than during the commodities slump of a year ago, the company said on Tuesday.

    Prime Minister Narendra Modi's decision to scrap old 500 rupee ($7.40) and 1,000 rupee banknotes as part of a crackdown on tax evasion and counterfeiters has dented consumer spending in a country where most people are paid in cash and buy what they need with cash.

    Anglo American said that rough diamond sales for De Beers' final sale of the year amounted to $418 million, compared with $476 million for the previous sales cycle this year.

    The last sale of 2015 brought in $248 million.

    "While the trade in lower-value rough diamonds is experiencing a temporary slowdown as a result of the demonetisation programme in India, demand across the rest of the product mix continued to be healthy," De Beers' CEO Bruce Cleaver said.

    He had previously said that the second half of the year would be tougher after a recovery in the first six months as jewellers restocked following Christmas sales.

    Anglo American has put its De Beers diamond business at the centre of its strategy of focusing more sharply on high-value commodities, rather than bulk assets.

    India is the third-biggest diamond jewellery market behind the United States and China, accounting for about 8 percent of global demand.

    Typically, Indians purchase jewellery in cash and many do not have credit cards. In addition to withdrawing high-value notes from circulation, the government has also capped daily withdawals from cash machines at 2,000 rupees.

    London-listed Gemfields said at the start of December that it was postponing the auction of predominantly higher-quality emeralds from its Kagem mine in Zambia to February because of the banknote crackdown and accompanying hit to consumer spending.
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    India's top gold import bank suspends bullion dealers accounts

    Axis Bank Ltd, India's top importer of gold, has suspended the bank accounts of some bullion dealers and jewellers after two of its executives at a branch were arrested over alleged money laundering.

    The move is likely to curtail imports by the world's second-biggest gold consumer this month and could weigh on global prices already near their lowest level in ten months.

    "We have temporarily suspended transactions in a few current accounts as a part of a larger enhanced due diligence exercise being conducted on transactions post-demonetisation," the bank said in an e-mailed reply to questions from Reuters.

    Prime Minister Narendra Modi scrapped 500-rupee and 1,000-rupee banknotes on Nov. 8 in a bid to flush out cash earned through illegal activities, or earned legally but never disclosed to tax authorities.

    There have also been reports of people rushing to buy gold by paying as much as a 50 percent premium above official prices using their unaccounted money to skirt the note ban.

    Axis did not directly comment on the arrests. Last week the Enforcement Directorate, a government agency that fights financial crime, said it had arrested two Axis bank employees for allegedly helping launderers to buy gold with the help of scrapped notes.

    The bank said the suspended gold dealers' accounts will be restored over the next few days after an "enhanced due diligence process".

    A Chennai-based bullion dealer, who declined to be named, said the bank had frozen his account without giving a reason. Half a dozen other dealers in Kolkata, Mumbai, Ahmadabad and New Delhi also confirmed the freezing of their Axis accounts.

    The move has brought bullion trading to a standstill, with jewellers fearing attention from government agencies if they make large purchases, said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata.

    It is estimated that one-third of India's annual demand of around 800 tonnes is paid for in "black money" - the local term for untaxed funds held in cash by citizens that do not appear in any official accounts.

    Jewellers and bullion dealers are deferring purchases and gold imports in December could fall to 30 tonnes, down from 107 tones in the same month a year ago, said a Mumbai-based dealer.

    In November the country's gold imports jumped to around 100 tonnes, the highest in 11 months.

    Axis, India's third-biggest private sector bank, said last week it had suspended 19 employees over alleged breaches at one of its branches in implementing a government-ordered exchange of high-value bank notes.
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    Asia Gold-China premiums near 3-yr high, Indian demand remains subdued

    Gold premiums in China held near three-year highs this week amid fears of limited supply of the precious metal, while demand in India remained subdued despite lower prices due to a severe cash crunch.

    The import curbs may be part of China's efforts to limit outflows of the yuan after the currency's slide to its weakest in more than eight years, traders said. China allows only 13 banks to import gold, including three foreign lenders, according to the Shanghai Gold Exchange.

    "The news on import restrictions is keeping the premiums high and there has been no real demand," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

    Gold was sold in China at about $28-$30 an ounce above the international spot benchmark this week, traders said.

    Premiums went above $30 in November, the most since January 2014, according to Thomson Reuters data.

    Spot gold is on track for its fifth consecutive week of declines on rising expectations of a rate hike by the U.S. Federal Reserve.

    Gold demand in India remained subdued despite a drop in prices as retail demand was squeezed by cash crunch, while jewellers were delaying purchases expecting a fall in prices next week.

    Dealers in the world's No.2 consumer of the metal were offering a discount of up to $5 an ounce this week over official domestic prices that include a 10 percent import tax, compared with a discount of up to $4 last week.

    Indian gold prices fell to 27,700 rupees per 10 grams on Friday, the lowest level since Feb. 8.

    "Everyone is running business with limited inventory. Jewellers are waiting for correction in prices and want to see how demonetization pans out," said Daman Prakash Rathod, a director at MNC Bullion, a wholesaler in south Indian city of Chennai.

    Last month, Prime Minister Narendra Modi scrapped 500 and 1,000 rupee banknotes, or 86 percent of the value of cash in circulation, in part of a crackdown on corruption, tax evasion and militant financing.

    Indian jewellers rely on the wedding season for an uptick in demand during winter months after the end of key festivals such as Diwali, but this year wedding demand has fallen sharply due to cash crunch, jewellers said.

    India's overseas purchases of gold could halve to 50 tonnes in December after jumping to the highest level in 11 months in November.

    In Hong Kong and Singapore sellers offered premiums of between $1-$1.50 an ounce. Discounts in Tokyo remained at 50 cents this week.

    Attached Files
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    Base Metals

    Philippines cancels environmental permits of three mines – Minister

    The Philippine government has cancelled the environmental compliance certificates (ECC) of three mines, including two nickel producers, Environment and Natural Resources Secretary Regina Lopez said on Thursday.

    The agency is reviewing hundreds of ECCs granted by previous governments including those granted to mines in a crackdown on environmental degradation. The Philippines is the world's top nickel ore supplier.

    That is a separate review from an environmental audit of the country's 41 mines completed in August and the full results of which, Lopez said, would be released in January. Ten mines have been halted so far and another 20 face suspension.

    "We will announce the decision in January, probably around the second week," Lopez told a media briefing.
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    Equally weighted Base Metals Break Out.

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    Oyu Tolgoi resumes copper shipments to China

    Canada’s Turquoise Hill Resources, which is 51% owned by Rio Tinto and holds two-thirds of the massive Oyu Tolgoi copper-gold mine in Mongolia, said Wednesday it had resumed concentrate shipments from the operation to China.

    The Vancouver-based miner said that after two weeks of talks with Mongolian and Chinese authorities, Oyu Tolgoi has been allowed to restart shipping ore across the border, but it will follow a new joint coal and concentrate crossing route at the border between the two nations.

    Oyu Tolgoi — located in Mongolia’s remote southern Gobi desert, close to the country’s border with China — is expected to produce 560,000 tonnes of copper per year, along with gold and silver by-products.

    Production at the mine, expected to reach 560,000 tonnes of copper per year once at full tilt, was unaffected during suspension, Turquoise Hill said.

    Rio Tinto approved in May a $5.3 billion expansion of Oyu Tolgoi, one of the world's largest copper mines and a key component of the company’s master plan to become less dependent on iron ore for profits and become one of the world’s biggest copper producers.

    The planned expansion, with its nearly 200 km (125 miles) of underground tunnels that will track three times as deep as the Empire State Building is tall, will more than double the copper output from Oyu Tolgoi, which is mostly sent south to China, the world’s main metals consumer.

    It is also expected to help Rio and Turquoise Hill get to the most valuable part of the deposit, which also contains gold and silver, and where there has been a open pit mine running since 2013.

    First production from the extended underground area is expected by 2020, when a shortage of copper is tipped to emerge. Full ramp up is slated for 2027.
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    World refined zinc market in 277,000 mt deficit in Jan-Oct

    The global market for refined zinc metal was in deficit by 277,000 mt from January to October 2016, with total reported inventories falling by 53,000 mt over the same period, according to preliminary data released Wednesday by the International Lead and Zinc Study Group.

    For the first 10 months of last year, the market was in surplus by 201,000 mt, according to ILZSG data.

    A rise in global usage of refined zinc metal of 3.7% year on year to 11.599 million mt was primarily influenced by an increase in Chinese apparent demand of 9.3%, which more than offset a 14% reduction in the US, the ILZSG noted. Usage in Europe rose by 0.9% year on year.

    Chinese imports of zinc contained in zinc concentrates fell by 44.5% to 631,000 mt in January-October, but the country's net imports of refined zinc metal increased by 26% to 359,000 mt.

    Despite rises in output in China and the Republic of Korea, world refined zinc metal output declined by 0.6% over the period to 11.322 million mt, mainly as a consequence of reductions in Australia, India, Mexico and the US.

    Global zinc mine production of 10.887 million mt was down by 1.8% compared to the corresponding 10 months of 2015.

    "This was mainly due to reductions in Australia, India, Ireland and Peru that more than offset increases in Bolivia, China and the Russian Federation," the ILZSG said.
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    Aurubis confident of better year ahead after 2015/16 profit tumbles

    Europe's biggest copper smelter, Aurubis AG, said it expected profit to rebound in the current financial year after reporting a near 40 percent drop in 2015/16 earnings on Wednesday, partly due to smelter repairs in Bulgaria.

    The German company, which processes copper concentrate into metal, said it was now benefiting from high supplies of copper ore in the market and that it expected "significantly higher" operating earnings from the sector this financial year.

    "We assess the expected treatment and level of refining charges as relatively high in light of the current market situation," it said.

    It reported operating earnings (EBT) for the year ended September of 213 million euros ($227 million), down from 343 million euros in the previous year and below a Reuters poll forecast for 217 million euros. Aurubis had previously warned that it would not repeat last year's record results.

    "Overall, we expect significantly higher operating EBT and slightly higher operating ROCE (operating return on capital employed) for the group in the fiscal year 2016/17 compared to the (2015/16) reporting year," new CEO Juergen Schachler said.

    Schachler, who took over as CEO in July, said Aurubis is likely to seek deals to process more complex copper concentrate in coming months after a surprisingly low deal on fees to process standard ores.

    Benchmark annual copper ore treatment and refining charges (TC/RCs) for 2017 reportedly agreed in November by smelter FreeportMcMoRan are too low and some negotiations are still being carried out above the benchmark level, Schachler told a news conference to present the results.

    Freeport will reportedly pay $92.50 per tonne and 9.25 cents per pound for 2017 treatment and refining charges (TC/RCs), the second annual benchmark cut in a row and down from $97.5 per tonne for term contracts this year.

    "Negotiations are still going on above this level," Schachler said. "I still regard the level as too low in view of rising costs, an uncertain sulphuric acid market and strong mine production."

    Sulphuric acid is an important by-product of copper. When mine production is high, mines and other concentrate owners have to compete to gain smelter capacity and so TC/RCs are likely to be firm.

    "The upshot of this level could be that we will seek agreements to process more complex concentrate grades instead of the standard grades in the benchmark agreement," Schachler said.

    Some spot TC/RC deals for standard grades were currently being made below the expected benchmark level, he said.

    A scheduled shutdown at Aurubis's Pirdop smelter in Bulgaria hurt its 2015/16 earnings. The company said its first-quarter earnings for the current financial year will be affected by a three-week maintenance shutdown in October-November at its Hamburg smelter, which is legally mandated every three years.

    Schachler said the company was considering acquisitions although it had no firm targets in view.

    "We could go towards acquisitions when they strengthen Aurubis' core business," he said.

    Aurubis' last takeover was its purchase of Luvata group's rolled copper operations in 2011.

    "We currently have no concrete projects although we are naturally always in discussions," Schachler said. "We are financially in a rather strong position and have the potential."

    More details about the company's strategy could be announced at the annual shareholders' meeting in March, he said.

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    Ivanhoe PEA outlines dual alternatives for DRC-based Kamoa/Kakula deposits

    A new preliminary economic assessment (PEA) has outlined two potential initial development scenarios for Ivanhoe Mines’ “disruptive” Kamoa-Kakula copper project, in the Democratic Republic of Congo (DRC).

    The PEA examined two initial scenarios for development of the high-grade copper deposits at the Kamoa-Kakula project, located on the Central African copper belt, west of the DRC’s established Katanga mining region.

    "Kamoa-Kakula is an incredibly disruptive, district-scale, Tier 1 copper project that is still in its early days of discovery and development. Kakula's high copper grades and thicknesses establish Kamoa-Kakula as the most remarkable and rapidly-growing mineral discovery with which I've been associated during my 30-plus years in the explorationbusiness," stated founder and executive chairperson Robert Friedland.

    "We've already discovered as much copper in measured and indicated resources as we found with the original Ivanhoe Mines at Oyu Tolgoi, in Mongolia's South Gobi – but this time at much higher grades. Significantly, both the Kamoa and Kakula discoveries are open for future expansions. We remain focused on expediting development of Kamoa and Kakula.

    The first option entails the initial Kakula Phase 1 mine, calling for a high-grade initial phase of production at a head grade of 8.1% copper in year two and an average grade of 7.52% copper over the initial five years of operations, resulting in estimated average copper output of 209 000 t/y.

    The operation will hit peak production at 262 000 t in year three.

    The PEA calculated an initial capital cost, including contingency, of $1-billion, which is about $200-million lower than previously estimated in the March Kamoa prefeasibility study (PFS).

    The initial phase has an after-tax net present value (NPV), at an 8% discount rate, of $3.7-billion, an increase of 272% compared with the after-tax NPV of $986-million estimated in the March Kamoa (PFS).

    The after-tax internal rate of return (IRR) has been calculated at 38%, which is more than double the IRR of the 2016 Kamoa PFS. The IRR also includes a payback period of 2.3 years.

    Average mine-site cash cost is expected to average $0.37/lb of copper during the first decade of operations.

    Ivanhoe pointed out that Kakula is expected to produce a very-high-grade copper concentrate of more than 50% copper, with extremely low arsenic levels.


    The PEA also outlined an alternative eight-million-tonnes-a-year development scenario for the Kakula and Kamoa deposits, proposing to develop the two deposits as an integrated mining and processing complex.

    This scenario envisages the construction and operation of two separate facilities: the Kakula Phase 1 mine on the Kakula deposit and the Kansoko mine on the Kansoko Sud and Kansoko Centrale areas of the Kamoa deposit.

    Ivanhoe expects each operation to be a separate undergroundmine with an associated processing facility and surfaceinfrastructure.

    Under this scenario, Ivanhoe will process a higher head grade of 8.1% copper in year two and an average grade of 7.1% copper over the initial five years of operations, for an average output of 224 000 t.

    Combined, the Kakula and Kansoko mines are planned to produce on average 292 000 t/y of copper at an average grade of 5.81% copper during the first ten years of operations. The operations will reach peak output of 370 000 t/y by year seven.

    The alternative scenario is also expected to cost $1-billion, including contingency.

    The PEA calculated an after-tax NPV, at an 8% discount rate, of $4.7-billion, which is an increase of 382% compared with the after-tax NPV of $986-million estimated in the 2016 Kamoa PFS. The after-tax IRR of 34.6% is more than double the IRR of the 2016 Kamoa PFS, and will have a payback period of 3.5 years.

    Average mine-site cash cost is estimated at $0.42/lb of copper during the first ten years.

    Australian consultancy OreWin, Amec Foster Wheeler E&C Services and SRK Consulting prepared the PEA.

    The Kamoa-Kakula deposits boast combined indicated mineral resources of 944-million tonnes, grading 2.83% copper and contain 58.9-billion pounds of 1% copper cutoff grade ore, as well as a minimum thickness of 3 m.

    Kamoa-Kakula also has inferred mineral resources of 286-million tonnes, grading 2.31% copper and containing 14.6-billion pounds of copper.


    Ivanhoe stated that it had tasked Ivanhoe’s senior miningadviser, former president and co-founder of McIntosh Engineering Michael Gray to undertake a subsequent PEA to examine a doubling of the proposed mining rate at Kakula Phase 1 to eight-million tonnes a year, plus expanded output options of up to 16-million tonnes a year from two mines.

    Ivanhoe expects the follow-on PEA, now under way, to have “substantial advantages” over the development of two mines to achieve the same production rate. Planned studies also will assess higher mining rates of up to 16-million tonnes a year, which would use high-grade copper ore from the Kakula, Kansoko Sud and Kansoko Centrale deposits of the adjacent Kamoa deposit.

    The company expects to publish the results of the follow-on PEA by February next year.

    Meanwhile, Ivanhoe confirmed that strategic discussions regarding the company and its projects are intensifying, revealing that several significant mining companies and investors across Asia, Europe, Africa and elsewhere have expressed interest while setting no limit on providing capital.

    Attached Files
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    Copper supply from top world mine threatened as export ban looms

    Exports from the world’s second-largest copper mine in Indonesia are under threat as a government ban on overseas concentrate shipments is scheduled to come into force from the middle of January.

    While Ministers are rushing to revise the regulations so miners that have committed to build smelters can continue to export ore concentrates, an intermediate product used to make copper, there’s no guarantee that the deadline will be met. The rules as they stand now only permit shipments of refined metal after January 11.

    Richard Adkerson, CEO of Freeport-McMoRan, the world’s biggest publicly traded copper miner and owner of the massive Grasberg mine in Papua province, says he’s confident the issue will be resolved. He told a conference in the US last week that without a resolution the company would have to cut back operations and potentially curb development of the underground mine where it’s spending $1-billion a year.

    CRU Group, a consultancy, says the regulations will be changed.“CRU’s view is that the rules will be revised and Freeport McMoRan will be able to continue to exportGrasberg concentrates,” Christine Meilton, principal consultant, copper supply and raw materials, said by e-mail from London. “This may not happen before January 11, when the current export licence is also due to expire, in which case we may see a disruption to exports. Our base case forecast assumes that any disruption does not continue long enough to result in a cutback in production.”

    Grasberg is the world’s largest mine in terms of coppercapacity after Escondida in Chile, according to the International Copper Study Group, while Freeport says the deposit has the single biggest reserves of gold. Any disruption could support prices of copper, which is the best performer among its peers this quarter, as banks from Goldman Sachs Group Inc. to Citigroup take a bullish view on the metal next year.

    Indonesia, Southeast Asia’s largest economy, prohibited exports of raw, unprocessed ores in January 2014 as it sought to build a processing industry and prevent its mineral wealth from disappearing overseas. While the rules allowed time for producers to build smelters, the government said that after three years shipments of semi-processed ores would no longer be permitted.

    Progress building plants has been slow because of problems with investment, power supplies and falling prices for metals, which in January hit the lowest since 2009. Luhut Panjaitan, the co-ordinating Minister of Maritime Affairs, said last month the government is expediting a revision to the law to allow semi-processed exports as long as miners are constructing smelters.

    The outlook has been muddied by uncertainty over the role to be played by parliament. The head of a commission which overseas energy and mineral resources policy said in October parliament would only have time to consider a revision to the law next year. The government has said the changes could be made by revisions to regulations rather than to the law itself.

    “It’s all still in discussion,” said Bambang Gatot Ariyono, director general of minerals and coal at the Energy & Mineral Resources Ministry. “We are still looking at things from all sides,” he told reporters in Jakarta on Friday.

    Whatever the process, this is an important moment for Freeport in Indonesia. The regulation as it stands prohibits the export of concentrates, Adkerson told the conference last week. “If that’s not resolved, that will have a significant impact on us in terms of our employment there, our investments that we’re making,” he said, according to a Bloomberg transcript.

    It’s not just a question of concentrate exports. Freeport is also seeking clarity on the conditions that will permit it to operate in the country beyond 2021 when the 30-year term on its contract expires. Then, there is also a requirement for the company to build a new smelter so it can continue to exportconcentrate under government rules.

    “Building a copper smelter in Indonesia is hugely uneconomic because of the excess of smelters globally,” Adkerson said last week. “We’ll arrange project financing. We’ll bring in partners. The world will have a new smelter and we’ll do that. But we can’t start spending money on it until we get a contract extension. It’s a four-year or probably five-year construction project.”

    All this is at a time when Freeport is aggressively selling assets to reduce debt, which stood at $19-billion at end-September, and after its credit ratings were cut to junk earlier this year. It’s involved in a tussle over the sale of a coppermine in the Democratic Republic of Congo and is battling bondholder objections to the sale of its Gulf of Mexico assets. Cowen Group, an investment firm, rates the producer as its top metals and mining pick for 2017.

    Freeport has forecast sales from Grasberg next year will be 1.45-billion pounds of copper and 2.75-million ounces of gold.
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    Regulator approves expansion of Antofagasta's Centinela mine in Chile

    Antofagasta Minerals said on Monday that environmental regulators approved a proposed expansion of its Centinela mine in northern Chile, opening the door for a $4.35 billion investment by the Chilean copper mining company.

    The expansion project, which is set to be rolled out in two stages, would double Centinela's copper output to over 400,000 tonnes a year.

    "With environmental approval, we will be completing the engineering studies in the coming months," Antofagasta Chief Executive Ivan Arriagada said in a statement.

    "We hope to submit this project to the board of Antofagasta in 2018 once these studies are done. The final authorization to bring this project about will depend on the required investment ... and the possibility of securing financing for its construction, aspects which we are currently working on."

    The expansion would extend the life of the mine to 2056.
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    Japanese auto aluminium suppliers wary of boom in electric motor-driven car sales

    Japanese diecasters and secondary aluminium alloy smelters are closely following the progress of Nissan Motor's electric passenger vehicle Note ePOWER, which has become a best seller in November -- the month of its launch, sources said Tuesday.

    The Note ePOWER was launched on November 2, and 15,784 units of the model were sold in that month making it the highest selling car model in the country, according to Japan Automobile Dealers Association.

    "The boom of Note suggests that motor-run electric vehicles will become popular faster than we initially thought, and that engines will become obsolete. We, diecasters, need to start thinking about survival," said one diecaster source.

    Note comes with a gasoline engine made of secondary aluminium alloys, and a motor. The car does not have any transmission components.

    The engine generates electricity that drives the car by running the motor, sources said.

    A typical Japanese car consumes at least 80 kg of ADC alloys, mainly for the engine and transmission components, according to industry data.

    "Requirement of auto diecasting alloys will decrease as the alloy is used predominantly for engine and transmission parts. More cars will have a motor rather than an engine, and ADC will be used for small motor components," said one Japanese trader.

    The other top selling car models in Japan during November were hybrid passenger vehicles which have a gasoline engine and a motor.

    Toyota Motor's hybrid passenger vehicle, Prius, with a gasoline engine and a motor, came in second, selling 13,333 units, and Aqua, a hybrid Toyota car, came in third selling 12,409 cars, and the fourth was Sienta, also a Toyota hybrid car.

    "The Note model selling better than hybrid vehicles will likely to trigger other Japanese automakers to speed up releases of electric vehicles with no engines," the diecaster added.

    But automakers are under greater pressure to make lighter cars. There are car components made of steel and other material that could be replaced by aluminium, sources said.

    Attached Files
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    Crunch time coming for Philippines nickel ore exports

    Crunch time is coming for the flow of nickel ore from the Philippines to China.

    The market is awaiting news of how many more nickel mines might fall foul of a sweeping clamp down on what the Philippine administration terms irresponsible mining.

    Eight nickel mines have already been suspended. Another 14 have been put on notice.

    Between them they account for around half of the country's production, putting at risk China's nickel pig iron (NPI) producers who have become increasingly reliant on Philippine supply for their raw material input.

    But the truth of the matter is that Philippine ore exports are going to slow dramatically over the coming months whatever the outcome of the current mine audit.

    They always do at this time of year because of the rainy season.

    This time around, however, normal seasonality could generate an abnormal supply-chain shock because of low inventory in China.

    That's what nickel bulls will tell you anyway. Bears are unconvinced, arguing that China's NPI sector has proven itself resilient in the past to shifts in raw material flows, so why should this time be any different?

    Uncertain as to which way to call the impact on nickel's complex supply landscape, the market is expressing itself less on outright price than on call options.


    The results of the latest audit on the mining sector are coming imminently, according to Regina Lopez, former environmental campaigner and now Philippine Environment and Natural Resources Secretary.

    And "there will definitely be suspensions", she told Reuters at the start of this month.

    How many and for how long she wouldn't say. Nor whether any of those mines already suspended might be allowed to restart.

    In the short term it doesn't matter much. The rainy season is a more reliable predictor of the country's nickel ore exports than government policy.

    And exports to China are already showing signs of slowing as they always do around this time of year.

    It's just they are falling from a lower base, since they were already running 12 percent below year-earlier levels in the first 10 months of 2016.

    And they will fall harder this year due to the near depletion of Altawitawi Nickel Corp's Tumbagaan mine, one of the few that could operate during the rainy season, according to analysts at Macquarie Bank.


    The question facing the nickel market is not whether the flow of nickel ore to China's NPI sector is going to slow.

    It's rather how resilient will be the supply chain to the slowdown.

    China's stocks of nickel ore are currently estimated by Mysteel at 13.4 million tonnes MYSTL-INKO-TTPR. It's uncertain just how much that represents in terms of contained nickel.

    But the key takeaway is that they have been falling sharply over the last couple of months and are close to the 12.7-million trough recorded in April at the end of the last Philippine rainy season.

    Macquarie, which is firmly in the bull camp, argues that the normal seasonal drawdown would mean contained nickel in ore inventory falling below 30,000 tonnes by March, "the lowest in recent history and equating to less than one month consumption". (Commodities Comment, Nov. 28, 2016).

    That would imply a major supply and price hit to China's nickel-stainless steel supply chain.

    Unless, of course, China can find alternative sources of nickel feed. Which it might be able to do, according to the bear argument articulated by Citi analysts. (Metals Weekly, Dec. 6, 2016).

    Ironically, the gap could be filled by Indonesia. "Ironically" because it was that country's own 2014 suspension of nickel ore exports to China that created the new dependency on Philippine ore in the first place.

    Indonesia shut off all exports of unprocessed minerals to force its mining sector down the value-add beneficiation road.

    That policy is now starting to bear fruit with Chinese players, led by Tsingshan Group, off-shoring both NPI and stainless steel capacity in Indonesia.

    There is now a large and rapidly growing flow of NPI from Indonesia to China, almost 600,000 tonnes of it in the first 10 months of this year, already three times last year's total.

    Will it be enough to offset the drop in Philippines ore shipments over the coming rainy season? Particularly if seasonality is overlaid with more mine closures?

    There are too many moving parts to this nickel supply conundrum to say with any certainty.


    Which is probably the reason why interest in the London nickel options market has cranked up several gears over recent weeks.

    Faced with a difficult call as to what exactly will happen to the nickel supply chain, bulls have been expressing themselves via call options.

    Activity in London Metal Exchange (LME) nickel options totalled almost 195,000 lots in October and November, up from 110,000 lots in the previous two months.

    Outstanding open interest in call options, which confer the right to buy, totals 14,406 lots across the first quarter of 2017. That dwarfs the 6,545 lots of open interest on put options, which confer the right to sell.

    There are noteworthy clusters of open interest on the $12,000 strike price (3,948 lots), the $12,500 strike (1,043 lots), the $13,000 (2,575 lots) and, on March alone, on the $13,200 strike (1,000 lots).

    As of Thursday's close January was valued at $11,075, February at $11,091.50 and March at $11,108 per tonne.

    The first-quarter 2017 time frame, of course, coincides with the seasonal drop-off in Philippine ore exports and the period of maximum stress in China's long nickel supply chain which ends up feeding its giant stainless steel sector.

    That call option open interest is a heat map of bullish bets that the supply chain is not going to withstand the coming test without a price reaction.

    Whether those expectations are right we're about to find out, but it's the Philippine rain as much as the new Philippine administration that's going to exert the biggest influence on actual exports over the next few months.
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    Steel, Iron Ore and Coal

    Fortescue repays more debt

    Iron-oremajor Fortescue Metals has issued a $1-billion repayment notice for its 2019 senior secured credit facility, resulting in annual interest savings of around $38-million.

    “This $1-billion payment is a continuation of our focused debt repayment strategy and further lowers our total cash position. Fortescue’s nearest debt maturity is in June 2019, and is now less than $2-billion with gross gearing falling below our targeted 40% level once this payment is made,” said Fortescue CEO Nev Power.

    “Our productivity and efficiency initiatives have achieved sustained cost reductions and combined with buoyant market conditions, are generating significant free cash flow which will further strengthen Fortescue’s balance sheet.”
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    China to clear import tax on Australian thermal coal

    China to clear import tax on Australian thermal coal

    Australian thermal coal cargoes arriving at China's ports on January 1, 2017, and thereafter will be clear of the Asian country's 2% import tax, currently equivalent to $1.50/t, and levied on the delivered CFR South China price of shipments, Platts reported, citing the Australian government.

    Beijing introduced a 6% tax on all thermal coal imports in October 2014, and went on to lower its rate on Australian-origin thermal coal to 4% in December 2015, and then to 2% effective January 1, 2016.

    "Under China-Australia Free Trade Agreement (ChAFTA) commitments, this tariff is scheduled to be fully eliminated (cut to 0%) for Australian-origin thermal coal on January 1, 2017," said a spokeswoman for the Australian government's department of foreign affairs and trade in an emailed response to S&P Global Platts' questions.

    Market participants will be watching to see how prices in the Chinese seaborne market react to the lifting of the import tax, and whether CFR South China prices rise by an equivalent amount, about $1.50/t.

    January-loading Capesize cargoes of Australian 5,500 kcal/kg NAR thermal coal were heard bid by Chinese buyers at $66/t FOB Newcastle to offer prices at $67.50-$68/t.

    Total imports of Australian coal by China fell 1.2% on year to 58.18 million tonnes over January-October this year, showed data from China's General Administration of Customs.

    Although China will be lifting its import tax on Australian thermal coal shipments early in the new year, Beijing is maintaining its 6% tax on imports of thermal coal from Colombia, Russia and South Africa.

    Indonesian thermal coal shipments to China are exempt from any import tax under a bilateral free trade agreement.
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    Nippon Steel, Glencore settle Q1 semi-soft coking coal price

    Australian producer Glencore and Japanese steelmaker Nippon Steel have settled the January-March 2017 semi-soft coking coal contract price at $171/t, up 32% from $130/t in the last quarter of this year, Platts reported on December 14, quoting three sources close to the matter.

    This comes after Nippon Steel inked premium hard coking coal price in the first quarter of 2017 for Glencore's premium mid-vol coal at $285/t FOB Australia on December 12.

    Market participants said that while the $171/t FOB Australia price was higher than expected for January-March 2017, the semi-soft-to-premium coal price ratio represents a multi-year low.

    The semi-soft settlement for the first quarter next year is equivalent to 60% of the premium hard coking coal settlement price, below the 65% price ratio achieved in the fourth quarter 2016.

    The average price relativity over the last eight quarters has been 78%.

    The huge price increase from the fourth quarter is acceptable, as the relativity is still low, a north Asian steel maker was cited by Platts as said.

    Other Asian buyers were less satisfied, with one saying that weak thermal coal prices did not justify such a high semi-soft settlement price.

    Sources from two other Australian mining companies were pleased with the settlement price for January-March 2017, but admitted it would encourage coal producers to switch more tonnes from the thermal coal market into that of metallurgical coal, the report said.

    The largest Australian suppliers of semi-soft coking coal are Rio Tinto, Glencore, Yancoal, Peabody, BHP Billiton and Whitehaven.

    Attached Files
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    China to cut coal consumption share below 58pct, NEA

    China plans to reduce the share of coal below 58% in its primary energy use in the 13th Five-Year period ended in 2020, said Li Yangzhe, vice director of the National Energy Administration, in a national energy forum on December 10.

    The share of non-fossil energy is planned to grow to 15% and that of natural gas is to rise to 10%, said Li.

    Data showed the share of coal in China's energy mix has been on the downward trajectory in recent years, with a proportion of 65.7%, 66.6%, and 68.8% in 2012-2014.

    According to the government's plan, China will boost use of non-fossil energy such as wind and solar energy on the one hand, and promote efficient and clean use of fossil fuel by expanding natural gas use, upgrading oil product quality and cutting surplus coal capacity on the other hand.

    Besides, the government will ensure supply of natural gas and encourage more private enterprises to develop oil resources.

    According to Li, China's new installed nuclear capacity may reach 30 GW by 2020, raising the total capacity to 58 GW. Total hydropower capacity will reach 340 GW by then.
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    Inner Mongolia Ordos Nov coal sales surge on month

    Coal-rich Ordos in northern China's Inner Mongolia autonomous region sold 59.94 million tonnes of coal in November, surging 24.7% from October and up 14.6% from the year-ago level, showed the official data on December 15.

    Of this, sales of local mines – mines owned by the prefecture and lower-level governments and private mines – stood at 49.27 million tonnes, increasing 18.1% on the year and 26% on the month.

    Coal sales of Shenhua Group Ordos branch nudged up 0.8% from a year ago to 10.67 million tonnes, a rise of 20% from the previous month.

    In November, Ordos' coal price averaged 290 yuan/t, soaring 77.9% from a year prior and up 6.6% from October. Raw coal price averaged 280 yuan/t, rising 64.7% year on year and up 5.7% month on month.

    Ordos sold 478.68 million tonnes of coal over January-November, edging up 0.2% compared to the corresponding period last year, data showed.

    Coal sales from local mines increased 3.5% on the year to 366.78 million tonnes in the first eleven months, while those from Shenhua Group slid 9.4% on the year to 111.90 million tonnes.

    Over the same period, average coal price was 201 yuan/t in Ordos, rising 14.2% year on year.

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    China's key steel mills daily output edges down 0.24pct in late Nov

    Daily crude steel output of China's key steel mills edged down 0.24% from ten days ago to 1.72 million tonnes over November 21-30, according to data released by the China Iron and Steel Association (CISA).

    The country's total crude steel output was estimated at 2.26 million tonnes each day on average during the same period, dipping 0.44% from ten days ago but gaining 2.26% from the month-ago level, the CISA said.

    By November 30, stocks of steel products at key steel mills stood at 12.4 million tonnes, dropping 5.85% from ten days ago, the CISA data showed.

    By the end of November, total stocks of major steel products in China slid 8.1% month on month to 7.87 million tonnes.

    In late November, the average price of crude steel increased 27 yuan/t from ten days ago to 2,547 yuan/t, while that of steel products surged 110 yuan/t from ten days ago to 3,399 yuan/t.

    In early December, rebar price increased 6.4% from ten days ago to 3,251.6 yuan/t; wire price climbed 5.7% from ten days ago to 3,252.31 yuan/t, showed data from the National Bureau of Statistics.
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    JSPL ramps up coal production on higher prices

    Jindal Steel and Power (JSPL) reported a positive result at its mining operations in southern Africa and Australia in the first two quarters in the fiscal year of 2017, on the back of higher coal prices, said the company in its latest results announcement.

    JSPL's overseas mine in Australia, Mozambique and South Africa are set to witness a major turnaround during the third and fourth quarters. "All mines are already in operation and their productions are being ramped up. If the present prices of coking and thermal coal sustain at around the present level, the mining assets will contribute a significant value to the company's EBITDA performance," said the company.

    In South Africa, anthracite production increased, with a 50% hike in capacity,
    and the mines report higher earnings on the back of higher coal prices, the company said.

    In Mozambique, Jindal's mines resumed coal production on the back of the higher prices in global metallurgical coal markets. The company targeted production of 0.25 million tonnes by the end of the current financial year.

    "The mines in Mozambique are expected to achieve a major turnaround during the coming quarters," the company said.

    The first two quarters also marked a turnaround for JSPL's Australian mining operations, which generated positive earnings. The Wongawilli mine in New South Wales produced 0.04 million tonnes of coal in the quarter and is now ramping up production to 0.1 million tonnes.

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    Ferrochrome price settled for first quarter – Merafe

    JSE-listed Merafe Resources on Thursday said the European benchmark ferrochrome price for the first quarter of 2017 has been settled at $1.65/lb.

    This, the company noted in a statement to shareholders, would be an increase of 50% from the $1.10/lb price in the fourth quarter of this year.

    In August, the company said it expected to benefit from renewed positive ferrochrome demand trends, as well as from the fact that only four of seven South African ferrochrome producers were in production.

    Merafe – headed by CEO Zanele Matlala – generates income primarily from the Glencore–Merafe Chrome Venture.

    Attached Files
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    China iron ore falls for second day as rally loses steam

    Chinese iron ore futures dropped for a second session on Thursday as investors pared bullish bets after lifting it, along with steel, to multi-year highs.

    Improved steel supply in parts of China prompted some traders to cut price offers, dragging down rates on raw material iron ore that had piggybacked on the strength in the steel market.

    The most-active rebar on the Shanghai Futures Exchange closed flat at 3,413 yuan ($492) a tonne. Earlier in the session, it fell as low as 3,304 yuan. The construction steel product touched 3,557 yuan on Monday, its highest since April 2014.

    Iron ore on the Dalian Commodity Exchange slipped 1.1 percent to end at 608.50 yuan per tonne. It climbed to a near three-year high of 657 yuan on Monday.

    Both commodities fell on Wednesday despite data suggesting that Chinese banks looked set to lend a record amount this year as Beijing boosts the economy to meet economic growth targets.

    The decline indicates that "investors felt the price had surged too high, too fast," ANZ analysts said in a note.

    China's efforts to curb overcapacity in its steel sector and stimulate economic growth with increased infrastructure spending had fueled an 88-percent rally in Shanghai rebar futures this year.

    But data released on Tuesday showed China's crude steel output rose for a ninth straight month in November, suggesting that Beijing's closure of excess capacity has not stopped mills from producing more to chase rising prices.

    The retreat in futures again pulled back spot iron ore below $80 a tonne after staying above that level for five days.

    Iron ore for delivery to China's Qingdao port .IO62-CNO=MB slid 5.1 percent to $79.18 a tonne on Wednesday, according to Metal Bulletin. The spot benchmark peaked at $83.58 on Monday, its strongest since October 2014.

    An increase in the supply of billet in Tangshan led to prices for the semi-finished steel product dropping late on Tuesday, said Metal Bulletin which tracks Chinese trades.

    Rebar futures followed on Wednesday, which resulted in buyers delaying their procurement plans, it said.
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    Coal India Q2 net profit plunges to the lowest level

    Coal India (CIL) registered its lowest quarterly profit for the second quarter of fiscal year 2016-17 (April-March) since its listing, revealed company presentation submitted to Bombay Stock Exchange.

    CIL, the world's largest coal producer, saw its net profit plunged 77.4% to Rs 600.4 crore ($89.01 million) for the period against Rs 2,654.34 crore in the previous corresponding period.

    The company's net income from operations has gone down by 7.8% to 16,212.5 crore in 2016 from 17,489.8 crore in 2015.

    The presentation also revealed that the company's production during the same period fell 3.5% to 104.41 million tonnes and the offtake fell 5% to 115.93 million tonnes.

    Coal India, which produces around 84% of India's total coal, posted a 6.8% drop in net sale to 3,3441.1 crore during July to September from 35,913.34 crore in the same quarter of 2015-16.

    On December 14, CIL's stock slumped to a six-month low, closing at Rs 292.25 ($4.33) per share, down 4.42%.
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    Coal demand growth to stall as appetite wanes, according to IEA

    Growth in global coal demand will stall over the next five years as the appetite for the fuel wanes and other energy sources gain ground, according to the latest coal forecast from the International Energy Agency.

    The share of coal in the power generation mix will drop to 36% by 2021, down from 41% in 2014, the IEA said in the latest Medium-Term Coal Market Report,driven by lower demand from China and the United States, along with fast growth of renewables and strong focus on energy efficiency.

    But in a sign of coal’s paradoxical position, the world is still highly dependent on coal. While coal demand dropped in 2015 for the first time this century, the IEA forecasts that demand will not reach 2014 levels again until 2021. However such a path would depend greatly on the trajectory of China’s demand, which accounts for 50% of global coal demand – and almost half of coal production – and more than any other country influences global coal prices.

    The new report highlights the continuation of a major geographic shift in the global coal market towards Asia. In 2000, about half of coal demand was in Europe and North America, while Asia accounted for less than half. By 2015, Asia accounted for almost three-quarters of coal demand, while coal consumption in Europe and North America had declined sharply below one quarter. This shift will accelerate in the next years, according to the IEA.

    Because it is relatively affordable and widely available, coal remains the world’s number one fuel for generating electricity, producing steel and making cement. It provides almost 30% of the world’s primary energy, declining to 27% by 2021. However it is also responsible for 45% of all energy-related carbon emissions and is a significant contributor to other types of pollution.

    “Because of the implications for air quality and carbon emissions, coal has come under fire in recent years, but it is too early to say that this is the end for coal,” said Keisuke Sadamori, the director of the IEA’s energy markets and security directorate, who launched the report in Beijing, China.

    “Coal demand is moving to Asia, where emerging economies with growing populations are seeking affordable and secure energy sources to power their economies. This is the contradiction of coal — while it can provide essential new power generation, it can also lock-in large amounts of carbon emissions for decades to come.”

    The IEA’s report acknowledges China’s continued dominance in global coal markets. Coal-fired power generation in China dropped in 2015 due to sluggish power demand and a diversification policy that led to the development of new renewable and nuclear power generation capacity. The IEA forecast for Chinese coal demand shows a very slow decline, with chemicals being the only sector in which coal demand will grow, reaching 2,816 Mtce by 2021, around 100 Mtce less than the 2013 peak.

    In the United States, coal consumption dropped by 15% in 2015, precipitated by competition from cheap natural gas, cheaper renewable power – notably wind – and regulations to reduce air pollutants that led to coal plant retirements. This was the largest annual decline ever, reaching levels not seen in more than three decades. Another substantial decline is expected in 2016. Looking ahead, the IEA forecasts a 1.6% per year decline, much slower than 6.2% decline over the past five years, as higher gas prices result in less coal-to-gas switching.

    The brightest sign for coal was a recent unexpected boost in prices that provided relief to the industry. After a sustained four-year long decline, coal prices rebounded in 2016, mostly because of policy changes in China to cut capacity and curb oversupply. This was another example of the strong influence of macroeconomic developments and policies in China in shaping the global coal market.

    The report also points out that despite the Paris Agreement there is no major impetus to promote the development of carbon capture and storage technology.
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    US Southeast rebar prices move up further on mill hikes

    Recent price hikes issued by US rebar producers continued to show strength in the market this week as higher offers were heard in the US Southeast, according to market sources.

    "We are seeing the increases that were announced having an impact on the market," a fabricator in the region said.

    At the start of the month, Nucor, Gerdau Long Steel North America, Steel Dynamics Inc. and Commercial Metals Co. independently announced $25/st increases on rebar transaction prices, effective with new orders December 2. The increases mark the third round of price hikes in as many months. US producers previously raised rebar prices $30/st in November and $20/st in October.

    Offers from domestic mills for rebar were heard as high as $540/st ex-works in the Southeast Tuesday, however others said this would only represent the high end of the current price range. Others put pricing closer to $520-$530/st ex-works.

    S&P Global Platts on Tuesday raised its daily US Southeast rebar assessment to $520-$540/st ex-works, up from $510-$520/st.

    The mills do not seem to have an abundance of stock on the ground, which is helping higher prices to stick, said a distributor in the region. However, the fabricator said while mills may have closed rollings for the remainder of the year, they still seem to have enough inventory on hand to satisfy demand.

    Higher import pricing is also continuing to have a positive impact on the domestic rebar market, sources said. After offers soared in recent months, Turkish pricing has peaked at $460/mt CFR Houston ($423/st CIF), the distributor said, however nothing really firm is currently being offered for March arrivals.

    Platts on Tuesday raised its daily US imported rebar assessment to $413-$423/st CIF Houston, up from $404-$413/st CIF.

    Domestic rebar pricing will likely stay relatively stable approaching year-end due the typical seasonal slowdown associated with the holidays, sources said, but there could be another increase in January if the current increase holds and scrap prices rise again as expected.

    "With scrap gearing up to go even higher there is a possibility rebar could go up again, but I don't think the current increase is stable enough to see another increase before then," the fabricator said.
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    CNX Coal expects increased sales in 2017-18 as market recovers

    CNX Coal expects increased sales in 2017-18 as market recovers

    CNX Coal Resources expects sales volumes to increase in 2017 due to strengthening coal markets both in the US and abroad, it said Tuesday.

    The Canonsburg, Pennsylvania-based company said in an investor presentation that it expects coal sales of 6.25 million to 6.75 million st in 2017, up from 5.9 to 6.1 million st in 2016. For 2018, the company also expects sales volumes of 6.25 million to 6.75 million st.

    The company said it expects to gain from the recent pricing recovery due to a combination of unsold coal, unpriced/collared coal, and the fact that roughly 15%-20% of the company's sales are linked to power prices.

    In addition, the company said for the coming year it expects a 5%-10% improvement in average revenue per ton and flat to low-single-digit increases in cost of coal sold compared with 2016.

    In the third quarter, the company reported an average sales price per ton sold of $44.30/st, and operating cash cost per ton sold of $29.29/st.

    CNX Coal owns 25% of the Bailey, Harvey and Enlow Fork mines in western Pennsylvania, with the remainder held by Consol Energy, which spun off CNX Coal in July 2015.
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    Hebei slashes 33.85 Mtpa surplus steel capacity

    Hebei province, a giant steel producer in northern China, slashed 33.85 million tonnes per annum (Mtpa) of surplus steel capacity by the end of November, said the provincial Development and Reform Commission on December 8.

    Steel makers from eight cities – including Tangshan, Handan, Qinhuangdao among others – contributed to the province's de-capacity campaign.

    A total of 15 steel enterprises in Tangshan cut 15.69 Mtpa of steel capacity during the same period, with Hebei Iron and Steel Group cutting 2.45 Mtpa.

    Handan followed with nine firms cutting 8.15 Mtpa of excess steel capacity. Qinhuangdao and Xingtai shed 3.52 Mtpa and 2.72 Mtpa of steel capacity, respectively.

    China has finished the 2016 de-capacity target of 45 Mtpa in steel industry ahead of schedule, according to Xu Kunlin, vice secretary general of the National Development and Reform Commission.
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    China Jan-Nov coal industry FAI continues to improve

    China's fixed-asset investment (FAI) in coal mining and washing industry amounted to 276.4 billion yuan ($40.06 billion) over January-November, with the year-on-year fall further narrowing 0.4 percentage points from a month ago to 23.2%, showed data from the National Bureau of Statistics (NBS) on December 13.

    Private investment in the sector stood at 168.8 billion yuan, falling 16.5% year on year, compared to a drop of 17.8% a month ago.

    During the same period, fixed-asset investment in all mining industry in the country posted a yearly decline of 20.2% to 919.9 billion yuan; of this, private investment in mining industry stood at 567.6 billion yuan, dropping 12.1% from the previous year.

    Meanwhile, the total fixed-asset investment in ferrous mining industry in the first eleven months witnessed a yearly drop of 29.1% to 90.5 billion yuan; while that in oil and natural gas industry dropped 33.9% on year to 186.9 billion yuan, according to the NBS data.

    The fixed-asset investment in non-ferrous mining industry stood at 134.6 billion yuan during the same period, down 9.0% from the year-ago level, data showed.
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    Coal vessel queue at PWCS terminals rises to 4-wk high

    The vessel queue at the Port Waratah Coal Services terminals at Australia's Newcastle Port rose for the third consecutive week to a four-week high of 26 ships on December 11, Platts reported on December 12, citing the logistics coordinator for the Hunter Valley coal chain.

    The queue grew by four ships from 22 a week earlier, and is 11 ships more than the year-to-date average of 15 vessels, data collected from the Hunter Valley Coal Chain Coordinator's weekly reports showed.

    HVCCC does, however, expect the queue to fall to just six ships by the end of the month -- based on terminal demand, it said.

    Inbound receivals to PWCS were 3.50 million tonnes for the week ended December 11, down slightly from 3.60 million tonnes in the previous week. Port Waratah coal stocks finished the week at 2.13 million tonnes, up by 426,000 tonnes week on week, it said.

    The Port Kembla Coal Terminal had zero ships either queuing or assembled on the same day, which is down from two queuing and two assembled a week earlier, the port operator said.

    Exports from PKCT have picked up with 323,218 tonnes sent in the past seven days, compared with approximately 115,793 tonnes per week in November.

    The Dalrymple Bay Coal Terminal didn't have any ships loading on December 12, down from two a week earlier, and the number of coal vessels at anchor rose by four ships to 20 week on week, which is more than double the average queue of nine throughout November, figures from DBCT Management showed.

    The RG Tanna Coal Terminal at Gladstone Port also saw a rise in queue numbers. It had three ships at berth and 15 at anchor, up from four at berth and seven at anchor a week earlier, and an average of eight at anchor throughout November, the Gladstone Ports Corporation said.
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    Beijing mulls ban on coal trucks, storage in Tianjin in smog fight

    Beijing's environmental watchdog is considering a ban on the use of trucks to transport coal and closing coal storage facilities in Tianjin, one of China's busiest ports, a researcher with the agency said, in what would be a drastic move to tackle smog.

    The city's Environmental Protection Bureau has not made a formal proposal to the municipal government of Tianjin, Zhou Yangsheng, researcher with the agency told a coal industry briefing on late Monday.

    He did not give an estimate on when a decision might be made on the move.

    If implemented, it would be the latest in a series of extreme steps taken by the capital city government to cut air pollution in and around the smog-plagued capital Beijing.

    The area surrounding the capital and its neighbor Tianjin in Hebei province is the most polluted in the world's second-largest economy despite mounting efforts to control traffic and shut down coal-fired power plants and steel mills.

    Tianjin port, China's second largest by cargo volume, is the key hub for trading 100-million-tonnes a year of sea-borne coal and domestic coal that flows south from Inner Mongolia.

    The proposal could reduce coal volumes at Tianjin by as much as 43 million tonnes, incurring a loss of 400 million yuan ($58 million) for the city, Yangsheng said, although ports in other parts of China would take the lost business.

    Closing storage facilities and prohibiting trucks would also likely force shippers and traders to find alternative routes and modes of transport, like rail.

    The municipal government of Tianjian did not respond to a request for comment on the proposal.

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    Asia iron ore hits new 2016 high at $83.95/dmt CFR Qungdao; bullish steel spurs buying

    The seaborne iron ore market hit a new 2016 high Monday as a spike in billet price buoyed buying interest and propelled a spate of spot deals at higher levels.

    S&P Global Platts assessed the 62%-Fe Iron Ore Index at a year-to-date high of $83.95/dry mt CFR North China Monday, up $2.80/dmt from Friday.

    IODEX saw its previous high for the year on December 7 at $82.30/dmt CFR Qingdao.

    The front-month January IODEX swap was up $2.2/dmt on the day at $79.40/dmt.

    Continued strength in the steel market has caused iron ore prices to rise as mills pursued productivity to maximize margins, sources said.

    "Steel prices are up, and at the moment margins are still there, so production is still ongoing," an eastern China trader said.

    However, the spot price of square billet in Tangshan, a closely watched barometer, spiked Yuan 190/mt from Friday to Yuan 3,110/mt ($450.16/mt) ex-stock Tangshan Monday.

    "The Chinese mills are now chasing after cargoes," said a Beijing trader, adding that stronger steel prices are sparking buying interest from Chinese buyers.

    A strong steel performance also pushed up derivatives.

    The most liquid January rebar contract on the Shanghai Futures Exchange surged Monday, last trading at Yuan 3,444/mt ($498.51/mt), up Yuan 99/mt from Friday, and settling at Yuan 3,436/mt, up Yuan 111/mt.

    On the Dalian Commodity Exchange, the most liquid May iron ore contract last traded at Yuan 635.5/dmt ($91.99/dmt), up Yuan 17.50/dmt from Friday, and settled at Yuan 634.50/dmt, up Yuan 20/dmt over the same period.

    Mills were also actively considering steel and metallurgical coal and coke prices to determine the most cost effective blast furnace mix, sources said.

    "Mills margins up, medium and high grade fines will remain popular," an eastern China mill source said.
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    Teck Resources sets Q1 coking coal price at $285/t, highest since 2011

    Teck Resources said on December 12 it has agreed with major customers on a benchmark price of $285/t for the first quarter of 2017 for its top quality steelmaking coal, the highest quarterly price in more than five years, Reuters reported.

    The price is 43% up on the fourth-quarter industry benchmark of $200/t, and helped to boost the Canada-based company's share price by nearly 3% to close at C$22.96 ($17.51) on the Toronto Stock Exchange.

    Earlier on the same day, Japanese steel mill Nippon Steel & Sumitomo Metal Corp and mining company Glencore Plc settled the January-March premium hard coking coal price at $285/t, Platts reported quoting unnamed parties familiar with the negotiations.

    If other international steelmakers follow this price, it would be the highest industry quarterly benchmark since the fourth quarter of 2011.

    Prices for steelmaking or metallurgical coal have quadrupled this year on the back of Chinese government curbs on domestic production and supply disruptions, reviving the fortunes of producers like Teck, which just a year ago was struggling to reduce debt and lost its investment-grade rating amid weak commodity prices.

    Teck also said it has ratified new five-year collective agreements with unionized employees at its Fording River and Elkview coal mines in British Columbia.

    Teck's first-quarter realized prices will reflect a combination of sales at the quarterly contract price and spot sales, the company said in a statement.

    As a result of the higher prices, Teck should be able to reduce its net debt to C$6.2 billion by the end of the first quarter of 2017 from C$7.6 billion at the end of September, said RBC Capital Markets analyst Fraser Phillips.

    The de-leveraging of Teck's balance sheet "will continue to drive outperformance of Teck's share price over the next three to six months," Phillips said in a note to clients.

    Teck's shares have surged nearly 500% this year, on the back of the coal price rally and helped by stronger zinc and copper prices as well.

    The Fording River agreement would expire on April 30, 2021 and the Elkview contract on October 31, 2020, Teck said. As a result of the new collective agreements, Teck expects to incur a one-time, after-tax charge to profit in the fourth quarter of approximately C$35 million.

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    China's November steel output grows at fastest in over two years: stats bureau

    China's steel mills boosted their monthly output at the fastest pace in more than two years in November, data showed, as robust infrastructure demand spurred producers to expand production for a ninth straight month even as coking coal prices bite.

    Output rose 5 percent to 66.29 million tonnes year-on-year, the fastest growth since June 2014, according to data from the National Bureau of Statistics on Tuesday.

    Although soaring costs of key raw materials, like coking coal and iron ore, have eroded margins, steel mills were still making a profit of between 200-600 yuan ($28.98-86.95) per ton, said Wang Yilin, senior steel analyst at Sinosteel Futures.

    "Steel mills want to increase production because of the big profit margins," she said. "The steel market has also been driven by strong infrastructure demand, as Beijing has approved more projects this year."

    The spike last month showed mills in the world's top producer were chasing rising prices, said Richard Lu, analyst at CRU consultancy in Beijing. Shanghai rebar futures have surged 95 percent this year.

    Strong demand and rising prices of raw materials have enabled steel mills to increase their prices and pass on the cost to end-users, said Lu.

    "Because of the strong market sentiment, physical traders are buying steel in hopes of making money with the price continuing to increase," he added.

    Compared with October, output dropped 3.24 percent to its lowest level since February ahead of a seasonally slowest period for steel sales from the infrastructure and construction sectors during the colder winter months.

    Analysts expect output to decline in December as mills undertake annual scheduled maintenance.

    Total output for the first 11 months of 2016 edged up 1.1 percent to 738.94 million tonnes.

    In 2015, China's output dropped for the first time since 1981 as weak metal prices and a government clampdown on excess capacity forced plants to shut or suspend operations.

    This year, most of the capacity that has been closed for good was already shuttered.

    "Some of them have been idle for years, so it won't largely impact steel output," said Lu.

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    Hunan 2016 cuts 20.73 Mtpa of coal capacity

    Hunan province in central China would eliminate coal production capacity of 20.73 million tonnes per annum (Mtpa) by closing 318 mines this year, according to statements announced by the provincial Coal Administration on its website.

    Since August, the administration has published three batches of coal mines that would be shut, with the last batch dated December 7.

    The administration, however, didn't say if these mines have all been closed or not. Phone calls made by China Coal Resource ( to the administration were not answered.

    Usually, coal mines earmarked for closure would be ordered to stop production and enter the closure process.

    The third batch listed 29 coal mines with combined capacity of 1.9 Mtpa, while the first and second batch had 257 and 32 mines with capacity at 16.10 Mtpa and 2.73 Mtpa, respectively.

    The Hunan provincial government said earlier this year it planned to phase out 15 Mtpa of outdated coal capacity during the 13th Five-Year Plan period (2016-20), and cap the number of coal mines at 200 or so and annual output around 25 million tonnes.

    Hunan plans to produce 25 million, 30 million and 20 million tonnes of coal in 2020, 2025 and 2030, respectively.

    The province will also strive to increase recovery rate of thick, medium-thick and thin coal seams to 80%, 85% and 90%, separately.
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    Daqin Nov coal transport increases for the 5th straight mth

    Daqin line, China's leading coal-dedicated rail line connecting Datong City of coal-rich Shanxi province with northern Qinhuangdao port, transported 37.59 million tonnes of coal in November, said a statement released by Daqin Railway Co., Ltd on December 9.

    That was 28.56% higher than the year-ago level and 3.19% more than the month before – the second year-on-year and fifth month-on-month gain – thanks to increased hauling efforts by railway authorities to meet strong demand from utilities in the heating season.

    In November, Daqin's daily coal transport averaged 1.25 million tonnes, up 15.74% from the previous month.

    Daqin rail line realized coal transport of 312.84 million tonnes in the first eleven months, falling 14.07% year on year.

    To boost coal stocks and curb the rapidly rising coal price, the Taiyuan Railway Administration was asked to increase coal transport from Shanxi to Qinhuangdao port during November and December.

    As of November 30, coal stockpiles at Qinhuangdao port stood at 6.52 million tonnes, rising 11.37% from the year-ago level and up 51.69% from a month prior.
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    New WA iron mine to start production in H1 2017

    A new iron ore facility in Western Australia expects to start mining in early 2017.

    Final approval for the Iron Hill mine, being developed by Mount Gibson Iron Limited, came from the Western Australia environment minister.

    The state’s environmental protection agency (EPA) gave the project the green light in July. The new mine, located just 3 km from the company’s existing Extension Hill operation, is expected to offset an imminent output drop as mining at Extension Hill will cease by the end of this year. It will use the existing mine's facilities and logistics arrangements.

    Iron Hill has 8.8 million tonnes of indicated and inferred mineral resources graded at 58.3% iron content.

    “We welcome this important environmental approval of the Iron Hill mine, which takes us one step closer to commencing mine development in early 2017,” Mount Gibson Iron CEO Jim Beyer said in a statement published on Friday.

    The announcement bumped Mount Gibson Iron's stock price by 4.6% on Friday, to 34 cents a share.

    The company expects to sell 2.8 to 3.1 million tonnes of product in the 2016-17 financial year, with all-in cash costs in line with those of Extension Hill.
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    Brazil grants operating license to Vale’s massive S11D iron ore mine

    Iron ore giant Vale scored Friday a key win after the Brazilian government granted the company a 10-year operating license for its flagship project in the Amazonian state of Para, known as S11D.

    S11D is set to start operations before year-end, with first shipment expected in January 2017.

    According to a document published on the country’ federal environment body Ibama's website (in Portuguese), the massive operation will produce 90 million tonnes a year. That compares to the company’s overall target of 340–350 million tonnes in 2016.

    Vale, which already is the world’s largest iron ore producer, said the license was an important milestone in consolidating the company’s position “as the producer with the lowest C1 cash cost in the industry." The miner was referring to a standardized cost of production that excludes freight and royalties.

    Last year Vale told investors S11D would push the company's cash costs per tonne to below $10 from the current $12.30.

    S11D is Vale's largest-ever investment, valued in some $17 billion. It is expected to start operations before year-end, with first shipments slated for in early 2017.
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    China puts temporary ban on North Korean coal imports

    China's Commerce Ministry said it will put a temporary ban on imports of North Korean coal as part of a U.N. Security Council resolution meant to deter Pyongyang from pursuing its nuclear weapons program, Reuters reported on December 11.

    The 15-member Security Council late last month put new sanctions on North Korea aimed at cutting its annual export revenue by a quarter, after it carried out its fifth and largest nuclear test so far in September.

    China would slash its imports by some $700 million compared with 2015 sales under the new sanctions, according to diplomats.

    The ban will be in effect until the end of the year, though coal shipped before Dec. 11 that was yet arrive at Chinese customs would be exempt, said the ministry in a short statement on its website on December 10.

    Over the first ten months of this year, China imported 18.6 million tonnes of coal from North Korea, up almost 13% from a year ago.

    Coal is one of North Korea's only sources of hard currency and its largest single export item.

    North Korea has said any sanctions against its missile or nuclear programmes are a violation of its sovereignty and right to self-defense.
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    Shanxi Coking Coal, CCB sign debt-to-equity swap agreement

    Shanxi Coking Coal Group, a leading coal producer in northern China's Shanxi province, has signed a framework debt-to-equity swap agreement with China Construction Bank, said the company on its website on December 9.

    It is the first debt-to-equity deals in Shanxi province involving a state-run firm after the State Council rolled out relevant guidance in October.

    Shanxi Coking Coal Group will set up two funds totalling 25 billion yuan ($3.62 billion) with China Construction Bank as part of the agreement, according to the company.

    One of the funds will be mainly used for reducing debt-equity ratio and fiscal expenditures of the group, which may contribute to an enhancement of its capital strength.

    The other fund is expected to bolster the integration of its businesses and strengthen comprehensive competition.

    The cooperation will vigorously promote the supply-side structural reform of the group, and speed up its transformation and upgrading.
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    Jinneng Group signs 16 Mt term coal contracts with utilities

    Jinneng Group in northern China's Shanxi province singed 2017 term supply contracts with four utilities, with total volume at 16 million tonnes, the company announced on its website on December 5.

    The four utilities included China Resources Group and three of China Huaneng Group's subsidiaries -- Huaneng Power International, Huaneng Shandong Power Generation and Huaneng Fuel Company. The company didn't specify the volume to be supplied to each utility.

    Jinneng Group will release more advanced coal capacity during the 13th Five Year Plan period paving the way for deepening corporation with utilities, said Wang Qirui, president of Jinneng.

    This followed signing of 2017 term contracts between two Chinese coal giants -- Shenhua Group and China National Coal Group – and the nation's top five utilities.

    On December 1, twelve key coal producers, including Yankuang Group, Shaanxi Coal & Chemical Industry Group and Longmei Group among others, inked term coal contracts. The contracts earmarked annual supply of 102 million tonnes of thermal coal to utilities and steel producers, at a discounted price to current spot market rates, said China National Coal Association (CNCA).
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    Shaanxi Nov coal output gains 23pct on year

    Shaanxi province, one of China's major coal production bases, produced 49.79 million tonnes of raw coal in November, gaining 22.84% from the year-ago level and up 11.87% from October, showed the latest data from the Shaanxi Administration of Coal Mine Safety.

    Coal output over January-November fell 8.20% from the previous year to 415.48 million tonnes, data showed.

    Of this, coal mines owned by the central and provincial governments produced 77.38 million and 106.82 million tonnes of raw coal, down 17.16% and falling 14.48% from the year prior, respectively; and coal output of the mines owned by municipal and prefecture governments stood at 231.28 million tonnes, down 1.28% on year.

    Total coal sales during the same period reached 411.49 million tonnes or 99.04% of the total coal output of the province, down 3.89% year on year, with sales in November standing at 48.81 million tonnes.
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    Shandong Nov coal output climbs 9.7pct mth on mth

    Eastern China's Shandong province produced 10.98 million tonnes of raw coal in November, climbing 9.69% from October but down 23.74% year on year, showed the latest data from the Shandong Administration of Coal Mine Safety.

    Over January-November, raw coal output of the province totaled 117.99 million tonnes, falling 12.8% from the corresponding period last year.

    Of this, 90.49 million tonnes were produced by provincial-owned mines, up 10.2% year on year, while that from mines owned by municipal and lower-level government stood at 27.5 million tonnes, rising 20.4% from a year ago.
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    Hubei calls for immediate halt at all coal mines

    Central China's Hubei province ordered all the coal mines in the province to suspend production immediately and conduct safety inspections, said the provincial Administration of Work Safety on December 8.

    Coal mines cannot resume production until get approvals signed by officials of the municipal or prefecture government, while mines with gas outburst issues should be approved by the provincial Coal Mine Safety Administration, said the authority.

    The province launches a province-wide safety inspection on all of its coal mines from December 8 to next year's January 25.

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    EU launches new investigation into Chinese steel imports

    The European Union has launched a new investigation into whether Chinese manufacturers are selling steel into Europe at unfairly low prices, a case Beijing said it viewed with deep concern.

    The European Commission has determined that a complaint brought by EU steel makers' association Eurofer regarding certain corrosion resistant steel merits an investigation, the EU's official journal said on Friday.

    The EU has imposed duties on a wide range of steel grades after investigations over the past few years to counter what EU steel producers say is a flood of steel sold at a loss due to Chinese overcapacity.

    An official at China's Commerce Ministry said Beijing attached a "high degree of attention and concern" to the case and that Europe's steel problems were due to weak economic growth. Blaming China's excess capacity was baseless.

    Wang Hejun, the head of the trade remedies investigation department at China’s Commerce Ministry, said in a statement on the ministry's website that Europe should rationally analyze the problems facing its steel industry.

    "It should not adopt mistaken trade protectionist measures that limit fair market competition," he said.

    Beijing is also irked because the investigation has been launched just days before the 15th anniversary of China's accession to the World Trade Organization, when it says new trade defense rules should apply.

    Under existing rules, the EU can compare Chinese prices with those of another country - in the current case it has chosen Canadian prices. However, Beijing insists this should no longer be possible from Dec. 11.

    The European Commission proposed last month a new way of treating China, but its proposals still await approval from the EU's 28 members and the European Parliament.

    Some 5,000 jobs have been axed in the British steel industry in the last year, as it struggles to compete with cheap Chinese imports and high energy costs.

    G20 governments recognized in September that steel overcapacity was a serious problem. China, the source of 50 percent of the world's steel and the largest steel consumer, has said the problem is a global one.

    In October, the European Commission set provisional import tariffs of up to 73.7 percent for heavy plate steel and up to 22.6 percent for hot-rolled steel coming from China. Those investigations are set to conclude in April.

    In anti-dumping cases, the Commission typically has up to nine months to determine whether there are grounds for imposing provisional duties on a product and then a further six months to determine whether duties should apply as long as five years.
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    India's steel minister says not in favour of protectionist moves

    India's debt-laden steel industry should not take the government's protectionist measures for granted and need to raise their efficiency to compete with foreign companies, the country's steel minister told Reuters in an interview on Friday.

    The government has imposed various duties and quality controls on imports over the past two years to stop the inflow of cheap steel from countries such as China, the world's biggest producer burdened with a massive oversupply.

    "In my view (protectionist measures) should not be there even for a month, but I have to see the overall position of the industry," minister Chaudhary Birender Singh said in his office.

    "I've made it very clear to the industry that on one hand, we are giving this much of protection but on the other hand, I want a roadmap where you can improve upon your efficiency ... (to) narrow down the cost of production and sale price."

    Goutam Chakraborty, analyst at Emkay Global Financial Services in Mumbai, said Indian companies typically produce commodity-grade steel with lower returns and are less efficient than foreign companies producing high-end steel.


    India's steel sector still accounts for 28 percent of banks' stressed loans, Singh said, but the government measures have helped local companies including JSW Steel, Jindal Steel and Power, Tata Steel and state-run SAIL to raise prices and improve margins.

    Lenders now want the government to help the steel sector with more steps to expedite the recovery of their loans, including by asking state companies such as SAIL to buy some sick private steel assets or manage their operations.

    Singh said loss-making SAIL or fellow state steel maker RINL were not in a position to buy any assets of private companies struggling to repay loans, but they could help with "expertise" or people.

    "It's very strange. When banks advanced loans to these companies, they never consulted me. (But the) responsibility (of sorting the bad loans) now rests with the steel ministry."

    The government expects India's steel-making capacity to rise over a third to around 160 million tonnes by mid-2018, for which SAIL will need to speed up its capacity increase that Singh said had not been satisfactory.

    The company recently signed a technical agreement with South Korean steel maker POSCO, which Singh hopes will help raise output.

    The minister also said Japan and South Korea were keen to invest in India's steel sector and their officials have already met with him.
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    China's Nov steel exports edge up on improved global demand

    China exported 8.12 million tonnes of steel products in November, falling 15.5% year on year but edging up 5.5% month on month, showed the latest data from the General Administration of Customs (GAC).

    The demand from abroad has improved, as the Eurozone countries and the U.S. has seen a recovering economy. The PMI for global manufacturing stood at 52.1 in November, up from 52 a month ago.

    Meanwhile, the global steel prices were pushed higher by downsizing steel exports from China in recent months, which in turn tempt the country to export more. The devaluation of RMB also made Chinese steel products more competitive in global market.

    Total exports of steel products dipped 1% year on year to 100.68 million tonnes in the first eleven months, data showed.

    China imported 1.11 million tonnes of steel products in November, climbing 20.65% year on year and up 2.78% from October; imports over January-November stood at 12.02 million tonnes, gaining 3.6% from the year prior.

    China imported 91.98 million tonnes of iron ore in November, 11.99% higher than last year and up 13.84% from October. Over January-November, iron ore imports reached 935.24 million tonnes, rising 9.2% year on year.

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