Energy giant BP would consider partnering with blockchain startups that are doing initial coin offerings, and it's even tested tokens internally, an executive said Wednesday.
Speaking at the Blockchain Expo in London, Julian Gray, the technology director for BP's digital innovation organization, voiced a common theme: non-financial enterprises are perhaps more open to open-blockchain innovation than their financial-services counterparts.
Gray said:
"We haven't done anything with public chains yet. But that doesn't mean we won't. We have done proof of concepts using tokens internally, transferring value."
Inside BP, he said, there's a lot of education that needs to be done. But there is a handful of people at the company, formerly known as British Petroleum, now who realize that blockchains, even the open kind, are not merely "hacker territory."
Gray said that while his own innovation department is robustly funded, he is open to working with others that have gone the ICO route.
"Would we partner with people who are doing this stuff? Yes, I think so," he said. "Not right now, but I wouldn't be surprised if we did."
The session moderator, Lewis Cohen, a partner at the law firm Hogan Lovells, said it was interesting to hear someone from a company like BP say this.
While the financial services industry has shown a lot of resistance to anything having to do with ICOs or public chains, that's not the case in the wider enterprise world, Cohen said, where he's found players are more amenable to the token route to funding innovation.
Gray added,
"This technology is out the gate and it's clearly going somewhere and at some point we will interact with it."
Speaking to CoinDesk after the panel, Gray said: "I have been looking at this for a long time and I don't believe in taking the view that ICOs are terrible, like we have heard from many people.
"However, I would stress that is my view - and not necessarily the view of BP," he said.
U.S. crude oil refinery inputs averaged over 16.9 million barrels per day during the week ending April 13, 2018, 70,000 barrels per day less than the previous week’s average. Refineries operated at 92.4% of their operable capacity last week. Gasoline production increased last week, averaging 10.2 million barrels per day. Distillate fuel production decreased last week, averaging 5.1 million barrels per day.
U.S. crude oil imports averaged over 7.9 million barrels per day last week, down by 720,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.2 million barrels per day, 2.7% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 705,000 barrels per day. Distillate fuel imports averaged 103,000 barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.1 million barrels from the previous week. At 427.6 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories decreased by 3.0 million barrels last week, but are in the upper half of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 3.1 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories remained unchanged last week, and are in the lower half of the average range. Total commercial petroleum inventories decreased by 10.6 million barrels last week.
Total products supplied over the last four-week period averaged over 20.8 million barrels per day, up by 5.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.4 million barrels per day, up by 0.7% from the same period last year. Distillate fuel product supplied averaged 4.2 million barrels per day over the last four weeks, down by 2.0% from the same period last year. Jet fuel product supplied is up 5.3% compared to the same four-week period last year.
More seniors than juniors for the first time this year:
Here's Korea, it is a spectacular example:
China will further overhaul its bloated state enterprises and push for mergers in sectors such as power and coal, which are plagued by zombie firms, bankruptcy and debt defaults, according to the head of the agency that oversees state assets valued at $26 trillion.
"Some of the central state-owned enterprises in certain industries are too fragmented and have low efficiency," said Xiao Yaqing, chairman of the State-Owned Assets Supervision and Administration Commission, referring to SOEs directly regulated by the central government.
"We support companies that are willing to come together on their own," he said in an interview on April 11 on the sidelines of the Boao Forum in Hainan province.
As of last year, China's SOEs had a combined 160.5 trillion yuan ($25.6 trillion) in total assets, and their total revenue could rival the size of Japan's economy. Improving their profitability is critical to China's economic policy of re-balancing the economy away from an over-reliance on debt-fueled infrastructure investment and exports to one powered more by services and consumer spending.
SASAC encourages consolidation in power, coal, and machinery manufacturing to avoid "duplication," Xiao said.
Since 2014, SASAC and other ministries have orchestrated more than a dozen mergers in various sectors that involved more than $1 trillion in assets, heeding government's call to make SOEs "bigger, better and stronger". The makeover has created behemoths such as China Railway Rolling Stock Corporation, the world's largest train-maker, and China Energy Investment Group, the world's largest thermal power generator.
China's goods trade surplus shrank 21.8 percent in the first quarter of this year as the country saw a better balance of trade, customs data showed Friday.
China's goods exports rose 7.4 percent year on year in the first three months while imports grew 11.7 percent, resulting in a trade surplus of 326.18 billion yuan (about 51.85 billion U.S. dollars), according to the General Administration of Customs (GAC).
Total foreign trade volume expanded 9.4 percent to 6.75 trillion yuan in the first quarter from the same period last year.
Huang Songping, a spokesperson with the GAC, told a press briefing that the relatively fast trade growth was a result of a mild global economic recovery that has given rise to robust trading activities, as well as the sound development of the domestic economy, which has strengthened demand for imports.
Steady progress in the Belt and Road Initiative and stronger trading with emerging markets also supported the first-quarter growth, Huang said, as trade volume with Belt and Road countries jumped 12.9 percent in the three-month period, 3.5 percentage points faster than the overall increase.
Trade with countries along the Belt and Road reached 1.86 trillion yuan, accounting for 27.5 percent of China's total foreign trade in the first quarter, according to Huang.
The European Union, the United States and ASEAN were the top three trading partners of China, which together accounted for 41.2 percent of foreign trade.
From January to March, trade between China and the United States rose 13 percent in dollar-denominated terms, with Chinese exports to the United States increased 14.8 percent and the China-U.S. trade surplus standing at 58.25 billion dollars.
Chinese private enterprises played a bigger role in trade by contributing 38.3 percent to total trade, up 1.7 percentage points compared with the first quarter of 2017.
The country's less developed regions, including central and western China, all outpaced the national average trade growth in the January-March period.
Huang said he sees rising pressure and challenges for the global economy and international trade in the second quarter stemming from global uncertainties and intensifying protectionism.
Fiercer competition in the global manufacturing sector will also pose challenges for China's foreign trade, he said.
But Huang said he expects China's foreign trade will maintain an upward trend as the country has pledged to take measures to further open up its market and expand imports.
China’s imports of major commodities may be losing some of their strong growth momentum, with gains in the first quarter of this year failing to keep pace with those from the same period in 2017.
At first glance, China’s imports of crude oil, iron ore, coal and copper looked to have bounced back in March after a poor showing in February.
However, the first two months of the year generally result in some distortions in the data, depending on the timing of the Lunar New Year. This year’s holiday fell entirely within February, resulting in weaker import numbers.
It’s always more illuminating to look at first quarter numbers when assessing China’s commodity imports, and here the story is far more mixed.
Crude oil imports rose 7 percent in the first quarter of 2018 compared to the same period a year earlier to the equivalent of about 9.1 million barrels per day (bpd).
However, the growth rate in the first quarter of 2017 was 15 percent, meaning that although China’s imports of crude oil are still increasing, they aren’t doing so at the same pace as they did in the early part of last year.
In volume terms, the gain still looks impressive, with imports in the first quarter some 600,000 bpd more than they were in the same period in 2017.
However, it’s also worth noting that exports of refined fuels were about 1.27 million bpd, which is about 210,000 bpd more than they were in the first quarter of last year.
This implies that of the additional 600,000 bpd of crude imported in the first quarter of 2018, just over a third was exported as refined products, a further factor pointing to the loss of some growth momentum in China’s crude demand.
IRON ORE LOSES SPEED
Coal imports also looked to have rebounded strongly in March, with a 27.8 percent jump over the previous month, but the gain for the first quarter as a whole was a more modest 16.6 percent.
This growth rate is still robust, but it is about half the pace of what was achieved in the first quarter of 2017.
The story is even weaker for iron ore, with first quarter imports of 270.5 million tonnes actually being 0.1 percent down from the same quarter last year.
In the January-March period last year, iron ore imports were up 12.2 percent from the same period in 2016.
It would appear that China’s vast steel sector may be taking a breather after several months of strong gains, and the build-up of iron ore inventories at ports to record levels in recent weeks probably has helped lower the appetite for imports.
However, copper is an area of strength in China’s first quarter, with imports of unwrought copper increasing 7.3 percent in the first quarter, a reversal of the decline of 20 percent experienced in the first three months of 2017.
However, it’s likely that some of this gain is due to a change in regulations, making it more difficult to import copper scrap and thereby boosting demand for the refined metal.
Overall, the picture that emerges from China’s first quarter trade data is somewhat similar to an Australian government public information campaign on terrorism, which urged citizens to “be alert, not alarmed”.
There is little to suggest that China’s economy is slowing faster than expected, and the data show that commodity imports are still relatively robust, even if the pace of growth is slowing.
It’s likely that a healthy moderation is the best outcome for China, just so long as it doesn’t turn into something more pronounced in the current quarter.
Denver’s Coda Coffee Co. this week is offering what it calls “the world’s first blockchain-traced coffee,” giving customers access to a cloud-based ledger that tracks every stop along their coffee’s supply chain. By scanning a QR code associated with the batch of coffee they bought, customers can see the date and location of every transaction—from collection at the farm to washing and drying, milling, export, roasting and retail.
“A lot of people put information on their bags that they haven’t personally verified,” said Tommy Thwaites, co-founder of Coda Coffee. “This allows the customer, right there, on demand, to trace their coffee back to the farmer.”
The new tool comes as tech-savvy consumers are seeking more information about the products they consume and businesses are looking for more efficient ways to track their relationships with suppliers.
An initiative to modernize energy trading processes through blockchain was receiving overwhelming interest from market participants, Chief – Operations and IT, Gunvor Group, Eren Zekioglu said in an exclusive interview. The new platform, to be developed by a newly created, London-based company called VAKT, aims to modernize the post-transaction management of physical energy commodities trading.
Gunvor kicked off the collaborative project in November 2017 together with a consortium of companies including energy majors BP, Shell and Statoil; trading houses Koch Supply & Trading and Mercuria; and banks ABN Amro, ING and Societe Generale.
“The amount of interest we’ve seen since the launch has been overwhelming. The biggest names in our respective industries have all contacted us, expressing an interest in being part of this movement,” Zekioglu said.
“From being a participant, a user, or even an investing partner, the market has expressed its support, and we’ll reciprocate that support with collaboration. The commodities trading industry, which is known for being one of the most competitive in the world, has clearly sent us a message that it wishes to unite to move it forward,” he added.
Few details on the functionality of the platform have been disclosed since the consortium was launched. What is known is that it intends to set up secure, smart contracts and authenticated transfers of electronic documents, to help its members move away from traditional and cumbersome paper contracts and operations documentation. This will reduce risks of error and cut costs, while improving the reliability and efficiency of back-end trading operations.
A truly market-transformative function would be for the platform to also match counterparties in the way that brokerages do. This does not appear to be on the cards in the short-term, but Zekioglu did not discount it altogether.
“If you can send a Tesla into outer space, then you can do anything. It just depends on the needs of the users and the imperative to preserve a competitive environment for everyone,” he said.
The main challenge in setting up VAKT has been the technology itself, “which continues to mature very quickly,” he pointed out.
“We’ve had to keep pace and jump in while everything evolves. This means establishing a true subject-matter collaboration in terms of trading and technology,” he said.
“When setting up a company with the involvement of such major firms (oil majors, banks, traders, etc.), you’d assume every step would be a challenge.
But to the full credit of everyone involved, we haven’t experienced any standard bureaucratic issues,” he added.
VAKT, which is the Swedish word for guard, has a growing number of employees and is being led by industry veteran Jon Jimenez, who holds the role of interim CEO, after a 20-year career at BP.
More details could surface later this week, when VAKT is expected to issue its second statement.
http://blogs.platts.com/2018/04/16/blockchain-oil-trading-vakt-gunvor/
A major smog indicator in China's heavy industrial Beijing-Tianjin-Hebei region rose by more than a quarter in March, the Ministry of Ecology and Environment said on April 13, raising concerns that pollution is increasing with the end of winter output restrictions.
Concentrations of particulate matter of less than 2.5 microns, known as PM2.5, climbed to 80 micrograms per cubic meter in the region last month, an increase of 27% from a year ago, the ministry said.
The region includes China's capital and Tangshan, the world's largest steel producing city.
A six-month anti-pollution campaign that ended on March 15 required 28 Chinese cities to reduce PM2.5 levels by as much as 25% by slashing industrial output, restricting traffic and cutting coal use.
During the first quarter, the levels of PM2.5 in the Beijing-Tianjin-Hebei region, which has been under heavy political pressure to tackle pollution, dropped 22.1% to 74 micrograms per cubic meter, down from near record highs in the same period of last year.
That indicates the output cuts were working as intended but their expiration has increased concerns that pollution levels are rebounding as factories, freed from restrictions, ramp up output.
Nationwide, during the first quarter, PM2.5 concentrations fell 9.7% from a year ago to 56 micrograms per cubic meter in the 338 cities monitored by the ministry. However, in March, average concentrations climbed 2.1% from the year before to 48 micrograms per cubic meter.
Seven of China's 10 most polluted cities in March were in Hebei province, China's biggest steel producing region. Tangshan and the city of Handan have already decided to extend the winter curbs until November.
However, Xuzhou, an industrial city in eastern China's Jiangsu province, was also on the list of the 10 smoggiest cities in March and during the first quarter, a sign that China's smog is shifting from its northern heartlands as a result of the crackdown.
The Yangtze river delta region, which comprises Jiangsu, Zhejiang and Anhui provinces and the city of Shanghai, saw PM2.5 levels fall 4% in March, but average levels rose 1.8% in the first quarter as a whole.
China is currently working on a new 2018-2020 action plan to tackle pollution, and experts have urged the government to introduce more targeted measures to tackle rising ground-level ozone, which has become a growing urban health threat.
Chinese authorities are working to reduce PM2.5 concentrations because the small size of the particles allows them to be inhaled deep into the lungs and their accumulation eventually can cause lung and heart disorders.
In an emergency response to the heavily-polluted weather in the Beijing, Tianjin and Hebei area this week, Tangshan city has initiated measures to cut emissions from 20:00 on Sunday April 16, SMM learned.
On top of current non-heating season cutbacks, a further cut of 50%in output was imposed on sintering machines. Coke ovens were required to prolong coking process to 36 hours on the premise of safety.
While output in the casting industry was suspended across the board, uses of gas furnace and coal-fired hot blast stoves are banned.
Other restrictions include transportation limits in the downtown area, ports, and steel and coking plants area.
It is unclear when the restrictions would be lifted.
https://news.metal.com/newscontent/100792157/tangshan-imposes-more-output-cuts-on-pollution-concerns
The shipping industry made a historic step toward cleaner air on Friday with a deal to cut greenhouse gas emissions by half by 2050, after a politically charged debate at the industry’s global regulator in London.
Shipping and aviation were excluded from the Paris climate agreement adopted under a United Nations framework in 2015, with governments entrusting the International Maritime Organization to come up with a consensus on carbon reduction measures from ocean going vessels.
The aviation sector reached a deal on carbon emissions two years ago, but it took shipping much longer as ocean carriers and regulators considered measures such as the adoption of clean-burning fuels or electric propulsion, slower sailing speeds and hull design improvements at a cost of hundreds of billions of dollars.
French oil major Total said it will buy a majority stake in electricity retailer Direct Energie in a 1.4 billion euro ($1.73 billion) deal that will make it a major competitor for top French power utility EDF.
Total said it had entered into an agreement with the controlling shareholders of Direct Energie to acquire 74.33 percent of the firm’s capital at a price of 42 euros per share, ex-dividend of 0.35 euros per share, representing overall an acquisition price of approximately 1.4 billion euros.
Rio Tinto first-quarter shipments rise 4.7 pct
Global miner Rio Tinto said on Wednesday its first-quarter iron ore shipments rose 4.7 percent, helped by fewer weather disruptions during the period and productivity improvements.
The world’s second-biggest supplier of the steel-making ingredient shipped 80.3 million tonnes in the quarter ended March 31, up from 76.7 million tonnes a year ago.
The Anglo-Australian miner maintained its guidance for this year of 330 million to 340 million tonnes.
Rio Tinto production performance a mixed bag in Bowen Basin
LONGWALL changeover and maintenance work at Rio Tinto's Kestrel mine has caused a massive drop in production of hard coking coal for the group, but thermal coal production is up.
According to the latest production figures, released Wednesday, the mining giant extracted 1 .1 million tonnes of coking coal for the first quarter of 2018.
That was 50 per cent less than the previous quarter and 20 per cent down on the corresponding period last year.
The production update also noted the mining giant has sold its coal assets in the Bowen Basin for about $4.15 billion and is expected to complete the transaction in the latter part of 2018.
Rio Tinto chief executive Jean-Sebastien Jacques said the company had deinvested from coal to raise returns on other assets.
"We announced $5 billion of deinvestments in the quarter, highlighting our ongoing drive to strengthen the portfolio and raise rate of return on assets,” Mr Jacques said.
"By continuing to advance our mine-to-market productivity program, whilst maintaining our focus on the displined allocation of cash, we will continue to deliver superior returns to our shareholders.”
While hard coking coal production dropped, thermal coal increased by 16 per cent from the last quarter and was up 12 per cent on the corresponding quarter last year
The increase in thermal coal output was because of production changes at the Hail Creek mine site.
Rio Tinto had falls across most other resources from the last quarter.
https://www.dailymercury.com.au/news/rio-tinto-production-performance-a-mixed-bag-in-bo/3390446/
Meanwhile, bauxite production during the March quarter was up 12% on the previous corresponding period, to 12.6-million tonnes, driven by operational improvements.
The Gove operation, in the Northern Territory, delivered a 31% increase in production owing to the debottlenecking of the materials handling system, while stronger production was also achieved at Weipa and Sangaredi.
Aluminium production during the three months under review was down 5%, to 846 000 t, largely owing to an ongoing lock-out at the Becancour smelter, which started in January, as well as a power incident at the Dunkerque smelter, which occurred in February.
Rio on Wednesday alerted shareholders to the fact that aluminium production in the 2018 financial year could be affected by a number of issues, including the $500-million sale of the Dunkerque aluminium smelter, which was announced in January, and the $345-million sale of the ISAL smelter, in Iceland, which was announced in February.
US sanctions on various Russian individuals and companies, including the world’s second largest producer, Rusal, could also affect its aluminium output.
Rio previously said that it was reviewing its arrangements with the impacted entities, including Rusal’s 20% interest in Queensland Alumina, and its associated supply and offtake agreements, as well as bauxite sales to Rusal’s refinery in Ireland and offtake contracts for alumina that are used in Rio smelters.
Meanwhile, copper production during the March quarter was up 65% on the previous corresponding period, to 139 300 t, as output from the Escondida mine, in Chile, recovered following a labour union strike in the first half of last year.
Production from the Oyu Tolgoi mine, in Mongolia, was also up 2% during the same period, to 13 000 t.
http://www.miningweekly.com/article/rio-tinto-lifts-iron-bauxite-and-copper-output-warns-sanctions-could-impact-aluminium-2018-04-18
* TEAMSTERS CANADA RAIL CONFERENCE FORMALLY SERVED 72 HOURS’ NOTICE OF INTENT TO STRIKE TO CANADIAN PACIFIC RAILWAY
* UNION HOPES TO REACH NEGOTIATED SETTLEMENT THAT MEMBERS CAN RATIFY, AND TO MOVE FORWARD WITHOUT A SERVICE DISRUPTION
* TALKS WITH COMPANY WILL RESUME IN MORNING OF WEDNESDAY, APRIL 18
China will ban the imports of 16 more scrap metal and chemical waste products from the end of this year, the environment ministry said on Thursday.
The 16 banned products include steel smelting slag containing more than 25 percent of the metal manganese, and ethylene polymer waste, the Ministry of Ecology and Environment (MEE) said in a document published on its website.
MEE also listed another 16 items that will be banned by the end of 2019, including timber waste and scrap metals such as stainless steel, tungsten and magnesium.
China told the World Trade Organisation last year it would stop accepting imports of 24 types of foreign waste by the end of the year, and that it would phase out shipments of other waste products, including those readily available from domestic sources, by the end of 2019.
China’s crackdown on imported waste, which was as much as 47 million tonnes in 2015, is part of its “war on pollution”, and was meant to help upgrade the country’s economy and move it up the global supply chain.
The ban has already caused massive pile-ups of trash overseas, but MEE spokesman Liu Youbin said at a press briefing on Thursday it was a “key move to ensure environmental safety and protect public health.”
“For the next step, the ecology and environment ministry together with other departments will conscientiously enforce and strictly forbid foreign garbage from crossing the border,” he said.
Even before the ban came into effect, the government cancelled the waste import permits of 960 companies in 2017, and shut down another 8,800 firms accused of violating restrictions on imported scrap paper and plastic. The environment ministry said last year’s total waste imports fell 12 percent as a result, but it didn’t give an absolute number.
The newly formed Ministry of Ecology and Environment said at its inaugural meeting last month that it would step up the fight against foreign waste, saying it was “a symbolic measure for the creation of an ecological civilisation in China.”
Uncovering violations has been a major challenge, however, with smuggling still rife. Customs authorities are also having to step up their detection capabilities in order to identify which shipments violate China’s scrap quality standards.
China’s customs department seized 110,000 tonnes of smuggled waste in the first quarter of this year, it said this month.
Australia’s South32 Ltd, the world No. 1 manganese producer, on Thursday raised its output guidance for the steelmaking ingredient amid strong demand and high prices related to U.S. sanctions against Russia, sending its shares to an all-time high.
The company, spun off from mining giant BHP Billiton Ltd in 2015, said Australian manganese output rose nearly a sixth in the three months to end-March, while South African output dipped 5 percent in the same period.
The Perth-based miner plans to raise its Australian manganese production by 6 percent to 3.3 million wet metric tonnes and its South African output by 5 percent to 2.15 million wet metric tonnes to meet demand, it said in a quarterly update.
Shares of South32 rose as much as 6 percent, hitting an all-time intraday peak of A$3.99 ($3.10), as bullish sentiment toward the price of metals potentially caught up in U.S. sanctions helped investors overlook what analysts said was an otherwise patchy result for the company.
“Whilst we view S32 as fully valued at current levels, we are mindful that the current commodity price environment ... would provide a boost to cash flow and likely entice investors to the stock on a near term trade,” Royal Bank of Canada analyst Paul Hissey said in a client note.
Investors are especially upbeat about the prices of aluminum and alumina, added Hissey. South32 missed analyst estimates with a 5 percent decline in alumina production due to maintenance at refineries in Australia and Brazil but stuck to its full-year output guidance.
The company also stuck to its full-year guidance for aluminum production despite flat or softer quarterly results at its two refineries.
“We delivered production records at Mozal Aluminium and Australia Manganese and have increased full year guidance for both of our manganese operations in light of strong market demand,” South32 Chief Executive Officer Graham Kerr said in a statement.
The company meanwhile posted a 44.5 percent slump in third-quarter coking coal production and cut full-year output guidance at its Illawarra mine, south of Sydney, the result of an extended outage as it undertakes ground rehabilitation work.
Coking coal production fell to 794,000 tonnes, from 1.4 million tonnes a year earlier.
The company cut its output guidance for Illawarra coal to 4.1 million tonnes from 4.5 million.
South32 was forced to suspend operations there in mid-2017 because of concerns about high gas levels in the mine. Government regulators let the company partially restart the mine in August last year.
China’s war on pollution is at risk of reaching a “stalemate”, with poor weather conditions undermining the country’s efforts to reduce smog, an environment ministry spokesman said on Thursday.
Air pollution rose by more than a quarter in parts of northern China in March, and the region has been hit by another bout of smog in the second half of April, which the Ministry of Ecology and Environment (MEE) has blamed on weak air circulation.
“Weather conditions last month in Beijing were the worst over the past six years with slow wind, little rain and high temperatures, but average pollution readings were able to stay at same level as the past five years,” Liu Youbin, spokesman for the Ministry of Ecology and Environment (MEE), said at a regular press briefing.
“The air pollution campaign has entered a stage of stalemate, as Chairman Mao described in his famous book ‘On Protracted War’... The efforts we made have sometimes been offset by unfavorable weather, and it will take time for us to slip the leash of weather conditions to win the war,” he added.
China met its 2013-2017 air quality targets after forcing major polluters like steel mills and coal-fired power generators to raise standards and upgrade their technology, and it also shut down thousands of smaller law-breaking enterprises.
Liu said China shut down as many as 62,000 small-scale and “dispersed” pollution sources in 2017, noting that they were responsible for around 30 percent of total emissions of PM2.5, small particles that lodge in the lungs.
But experts have warned that China’s anti-smog campaign is getting even harder, with improvements in air quality starting to level off now that relatively straightforward programs like the desulphurisation of power plant emissions have been completed.
While the focus has primarily been on reducing concentrations of PM2.5, experts have also urged the authorities to take action against other hazardous forms of air pollution like ozone, which has been on the rise in northern China.
“The easy actions have been done very well but now there is more that needs to be done,” said Chen Songxi, an expert in environmental statistics at the Guanghua School of Management at Peking University.
“Motor vehicles in cities have to be curbed - so far, there has been little action in that regard, because it will be very unpopular with drivers,” he added.
Environment protection authorities in north China's Shanxi Province have sent investigators to probe the illegal dumping of chemical waste exposed by a state television program.
CCTV ran a report on April 17 based on their own investigation into alleged dumping in Hongtong County by the Shanxi Sanwei Group Co., a chemical manufacturer listed on the Shenzhen Stock Exchange.
Shanxi provincial department of environmental protection, along with the government of Linfen City, which administers Hongtong, sent a team of investigators to probe possible malpractice, the department said.
According to the CCTV report, the company dumped coal ash and slag into a 30-meter-deep pit the size of two football fields. The pit had no barriers underneath, which is mandated by environment authorities.
The company is also suspected of illegally discharging waste water into the environment.
Farmers in Zhaocheng township alleged that village officials have allowed the illegal dumping and pollution.
Two village officials are under detention for obstructing reporting. Investigators are questioning company employees.
Argentina’s Deputy Secretary of Mining Policy, Mario Capello, said today that both the federal and the provincial governments have to work together towards relaxing the Glacier Law so that it becomes easier to develop Patagonia’s massive copper deposits.
According to the state-owned news agency Télam, Capello said that such deposits have the potential for producing 1 million tonnes of the red metal this year, which would translate into $8.5 billion in exports. Current exports from the mining industry generate $3.5 billion.
“Let’s do what we’ve got to do,” the official told reporters. “We have to make decisions that allow for the exploitation of Argentina’s mineral riches and supports the development of the country’s interior,” he added.
Capello explained that his proposal is based on the fact that most porphyries are located in areas 3,500 or 4,000 meters high where the ground is frozen and, therefore, cannot be exploited under current regulations.
The secretary made these statements at an exhibition in the western province of San Juan, where he also said that he is convinced that the world needs Argentina's copper, lithium, gold and silver.
http://www.mining.com/argentinian-government-wants-change-glacier-law-boost-mining-development/
The US has told the EU and India that it will not discuss Section 232 tariffs under the Safeguards Agreement, as they are not protectionist measures.
"The US informs the EU and India that their requests for consultations on the steel and aluminum tariffs under Article 12.3 of the Safeguards Agreement has no basis in the agreement since the tariffs are not safeguard measures," the US said in a filing to the World Trade Organization, according to a senior trade source.
The US said it would discuss the issue on the condition the talks would not be under the Safeguard Agreement; under this agreement India, the EU, and any other complainant, could negotiate for the imposition of counter-measures at parity to the Section 232 tariffs.
Meanwhile, Russia has also requested consultations with the US under Article 12.3 of the Safeguard Agreement, like China, India and the EU, suggesting the measures are a safeguard rather than in the interest of national security.
Russia wanted to discuss "how to achieve the objective under Article 8.1 requiring a member imposing a safeguard to maintain a 'substantially equivalent level of concessions,'" the trade source said of the WTO filing.
It's possible that the balance between oil supply and demand for the major industrialized economies could slip below the five-year average, the International Energy Agency said Friday.
The Organization of Petroleum Exporting Countries is in its second year of an effort to drain a surplus from global crude oil inventories with coordinated production cuts. A market surplus driven by past OPEC policies of defending markets shares with higher production and steady gains in U.S. output helped push the price of oil below $30 per barrel in early 2016.
A market report from the IEA said the impact of U.S. oil production is limited by pipeline constraints, while "more than a second Saudi Arabia" has been added to the OPEC-led effort since it began, making the markets tighter in the Organization for Economic Cooperation and Development.
"With markets expected to tighten, it is possible that when we publish OECD stocks data in the next month or two they will have reached or even fallen below the five-year average target," the IEA's report read.
For the United States alone, analysis from commodity pricing group S&P Global Platts found crude oil inventories are at their lower point for this time of year since 2014. Some of the production gains have been offset by rising exports of U.S. crude oil.
Crude oil prices are now sitting comfortably above the $70 per barrel mark. Oil prices spiked at the start of the year and have since been supporting by mounting concerns over trade tensions between the United States and China, the potential for direct multilateral military engagement in Syria and a simmering proxy war between Iran and Saudi Arabia in Yemen.
"As we write, uncertainty about the next steps in Syria and Yemen has helped propel the price of Brent crude oil back above $70 per barrel," the IEA stated. "It remains to be seen if recently elevated prices are sustained and, if so, what are the implications for the market demand and supply dynamics."
When Brent crude oil prices moved from $70 per barrel in January to the upper $60 range in February, Total Chairman and CEO Patrick Pouyanné told French newspaper Le Monde the balance between supply and demand was delicate.
"It is not written that the barrel will stay at its $70 level, and we are working on downturn scenarios at $50 per barrel," he told Le Monde. "There are still many unknowns on the oil markets."
It’s a cornerstone of the global economy, producing and selling 10 MMbopd. Yet for four decades the financial performance of Saudi Aramco has been one of the biggest secrets in global business, limited to a tiny circle of executives, government officials and princes.
Now, a first glimpse of the state oil giant’s finances shows Aramco churned out $33.8 billion in net income the first six months of 2017, easily outstripping U.S. titans like Apple Inc., JPMorgan Chase & Co. and Exxon Mobil.
The numbers seen by Bloomberg News give investors the most extensive set of data yet to assess the possible value of a once-in-a-generation deal for financial markets: Aramco’s proposed initial public offering. And with Aramco generating the bulk of Saudi Arabia’s revenue, the accounts also provide sovereign bond investors with a unique insight into the kingdom’s financial health.
Asked to comment on the figures, Saudi Aramco said in a statement: "This is inaccurate, Saudi Aramco does not comment on speculation regarding its financial performance and fiscal regime.”
Among the most eye-catching facts: The company is almost totally free of debt and enjoys production costs running at a fraction of the industry standard, the figures show.
But Saudi Arabia’s dependence on the company to finance social and military spending, as well as the lavish lifestyles of hundreds of princes, places a heavy burden on its cash flow. Aramco’s tax bill rises steeply as oil prices increase. Together with elevated capital spending, that’s likely to limit the scope for dividend payments after a share sale.
The accounts, prepared to an IFRS standard, also show Aramco’s sensitivity to oil prices. In the first of half of 2016, when crude averaged $41/bbl, the company made $7.2 billion in net income. This year, profits are likely to be significantly higher than 2017 after the recent rally in oil to more than $70/bbl.
Saudi Crown Prince Mohammed bin Salman, who’s made the Aramco IPO a key part of his ambitions to ready the kingdom for the post-oil age, wants to raise a record $100 billion by selling a 5% stake. That would value the company at $2 trillion and dwarf the record $25 billion raised by Chinese internet retailer Alibaba Group Holding Ltd. in 2014.
Some oil industry executives, consultants and analysts, including Sanford C. Bernstein & Co. and Rystad Energy, have questioned the $2 trillion target, suggesting that a figure between $1 trillion and $1.5 trillion is more realistic.
Investors still don’t know exactly when, or even whether, the share sale will take place, and until today they had no information on the company’s financial position. The sale, including an international listing in New York, London or Hong Kong, was initially scheduled for 2018, but is now likely delayed until 2019.
Two key metrics investors will use to size up the valuation of the company are cash flow generation and dividend payments.
According to Bloomberg calculations based on the data, Aramco generated adjusted cash flow from operations of $52.1 billion in the first half of last year, when Brent crude averaged nearly $53/bbl. In the same period, Shell generated cash from operations of nearly $21 billion despite pumping a quarter the oil and gas that Aramco produces.
The dividend, while large, isn’t huge set against other industry leaders. Aramco paid a cash distribution to the government of $13 billion in the first half of 2017. That compares with shareholder payouts of $6.4 billion by Exxon and $7.8 billion by Royal Dutch Shell, even though those two combined produce less oil than Aramco.
The reason for the limited cash generation is tax: Aramco pays a 50% income tax and an additional variable royalty on revenue.
The financial data reviewed by Bloomberg shows that Saudi Arabia imposed a new sliding royalty scale in January 2017, broadening the scope of the levy and increasing the marginal rate as oil prices rise.
Before the changes, Aramco paid a royalty of around 20% on crude oil and refined products exported, about 7 MMbpd. Now, it levies the royalty for the whole of the company’s oil liquids production, more than 10 MMbbl.
The royalty is set at marginal rate of 20% for oil prices up to $70/bbl, 40% between $70 and $100, and a 50% in excess of $100.
It’s unclear whether Saudi Arabia plans any further changes to the tax regime prior to the IPO.
Aramco is also investing heavily. According to the data, the company’s reported capital expenditures were $14.7 billion in the first half of 2007, well ahead of the $8 billion to $9 billion reported in the same period by Exxon and Shell.
There’s plenty to cover investors, however. Aramco produces from some of the largest, lowest-cost fields in the world and spent just $7.9 billion in production and manufacturing costs in the first half of last year, according to the data.
Using a rough measure of total oil, condensate and gas production, Aramco spent less than $4/bbl to pump hydrocarbons, compared to similarly rough calculations of around $20/bbl for Exxon and Shell.
Aramco is also nearly debt free, reporting total borrowings of $20.2 billion at the end of the first half of 2017, offset by cash and cash equivalents of $19 billion.
No matter what final valuation Aramco achieves, the first look at the company’s books illustrates the tremendous deal the kingdom cut in 1976 to fully nationalize the company. It paid the forerunners of Chevron and Exxon about $1.5 billion for their shares.
And even after an IPO, Aramco will remain far more than a big oil company, both within the kingdom and beyond. Its giant fields, strung through the Saudi desert, are key for global economic growth and geopolitical security.
At home, the torrent of cash will continue to underpin the kingdom’s decades-old social contract for many years to come: generous state handouts in return for the political loyalty that maintains stability in the birthplace of Islam.
http://www.worldoil.com/news/2018/4/13/the-aramco-accounts-inside-the-worlds-most-profitable-company
Fourteen companies have expressed interest in oil and natural gas exploration and development contracts to be auctioned by Iraq on April 25, the oil ministry in Baghdad said on Saturday.
The 14 have bought a package containing the bidding documents and terms of the contracts for the 11 exploration blocks to be auctioned, it said in a statement.
The blocks, located in border areas with Iran and Kuwait, and in offshore Gulf waters, were to be auctioned in June.
That date was brought forward to April 15 and then postponed to April 25 to give bidders more time.
The oil ministry last month announced measures to reduce the fees paid to oil companies in the contracts to be auctioned.
The new contracts will exclude oil by-products from thecompanies’ revenue, establish a link between prevailing oil prices and their remuneration, and introduce a royalty element. Oil companies operating in Iraq currently receive a fee from the government linked to production increases, which include crude and oil by-products such as liquefied petroleum gas.
OPEC’s second-largest producer after Saudi Arabia, Iraqdecided to change the contracts after a glut caused oil pricesto crash in 2014, reducing Baghdad’s ability to pay such fees. Companies including BP, Exxon Mobil, Eni, Total, Royal Dutch Shell and Lukoil have helped Iraq expand production in the past decade by over 2.5 million barrels per day (bpd) to about 4.7 million bpd. The semi-autonomous Kurdistan Regional Government produces oil and gas from fields it controls in northern Iraq under a production-sharing model that is more profitable to companies.
The new contracts offered by Baghdad will also set a time limit for companies to end gas flaring from oilfields they develop.Iraq continues to flare some of the gas extracted along side crude oil at its fields because it lacks the facilities to process it into fuel.Iraq hopes to end gas flaring by 2021. Flaring costs the government nearly$2.5 billion in lost revenue each year and could meet most of its unmet needs for gas‐fired power, according to the World Bank.
Prime Minister Justin Trudeau says he has instructed his finance minister to enter negotiations with Kinder Morgan to "remove the uncertainty" hanging over the Trans Mountain pipeline expansion project.
Trudeau also says federal legislation is coming that will "reassert and reinforce" the fact that the federal government is well within its jurisdiction to approve the project and ensure it goes ahead.
He's offering few details, however, saying the negotiations will not take place in public.
"Ideally, we wouldn't be in this situation right now," Trudeau told a news conference Sunday after a closely watched, last-minute meeting with B.C. Premier John Horgan, who is blocking Trans Mountain, and Alberta Premier Rachel Notley, who desperately wants to see it go ahead.
"Ideally, the rhetoric and actions by the B.C. government would not have led to the concerns of the company, that got approval to move forward on a project that is in the national interest," he said.
"We are responding to this situation. We are demonstrating not just that we are exerting and understanding the responsibilities that come with the federal government, but demonstrating as well what we have long held -- and what Canadians understand: that the environment and the economy must go together."
Trudeau, whose political ambitions have a lot riding on the project, spent more than 30 minutes at the podium following Sunday's meeting, much of it spent in an effort to depict Canada as a unified country with complex needs and interests, all in an effort to ease the persistent tensions in Western Canada and elsewhere over the dispute.
"B.C.ers and Albertans are not opponents; they are neighbours," the prime minister said. "They are fellow countrymen and women who want the best for themselves and each other."
Horgan was the first to emerge following the meeting, saying that nothing was discussed that would end his ongoing opposition to the project. Notley, meanwhile, said she's confident the federal commitments will see the expansion go ahead.
Notley said her province and Ottawa had agreed on a plan to "eliminate" investor risk surrounding the Trans Mountain pipeline expansion project -- a commitment she said ensures the pipeline "will be built," although she refused to provide details.
"The federal government, along with the government of Alberta, has commenced discussions with Kinder Morgan to establish a financial relationship that will eliminate investor risk," Notley said.
"I'm quite confident that should these discussions end successfully, that the pipeline will be built -- and that is good, because the pipeline is in the national interest."
Horgan also would not elaborate on the "legislative and financial measures" promised by Trudeau to push the project forward.
"Despite all of the commonality between the three of us, we continue to disagree on the question of moving diluted bitumen from Alberta to the port of Vancouver," he said.
"We had a discussion about options; the federal government laid out their plans over the next number of days ... and we had a discussion about what role British Columbia could continue to play to protecting and defending our coast."
Horgan made clear that Trudeau made no threats and made it clear he had no intention of punishing B.C. residents.
Horgan's opposition to Trans Mountain -- rooted in part in the fact his tenuous NDP government depends on the support of the Green party, which staunchly opposes the project -- is the main reason Kinder Morgan put the brakes on non-essential spending on the project a week ago.
Trudeau, meanwhile, has long insisted the Kinder Morgan pipeline is within federal jurisdiction and that Horgan's government has no authority to block it -- a claim Horgan wants the courts to evaluate, and one with which he says he plans to press ahead.
Horgan's news conference was barely over before Conservative Leader Andrew Scheer was at the podium, laying the blame for the impasse squarely at the prime minister's feet.
"His damaging policies ... have only led to more uncertainty and instability in Canada's resource sector," Scheer said.
The energy sector, Scheer said, is now convinced that "Justin Trudeau does not want their business in Canada."
Trudeau's cabinet approved the pipeline in 2016, following an interim environmental review process that included assessing things such as the emissions that will be created from producing additional fossil fuels that will flow through it. The cabinet decided the project, which will build a new pipeline that runs parallel to an existing one but can carry twice as much, was in the national interest.
Trudeau has argued repeatedly his government has put in place the environmental protections and policies needed to reduce the risks of an oil spill, and that building the pipeline to get Canadian resources to market is necessary for the Canadian economy.
Notley has said Alberta could buy an equity stake in the pipeline, or even buy the whole thing if necessary.
Kinder Morgan, meanwhile, has given Trudeau until the end of May to find a solution that would provide their investors a measure of confidence that the project would be allowed to proceed.
The meeting, convened at the last minute Thursday as Trudeau was departing for the Summit of the Americas in Peru, marked the first time the three leaders have all been in the same room together to hash out the dispute.
https://www.bnn.ca/trudeau-pledges-money-new-law-to-make-trans-mountain-happen-1.1057540
Oil, after looking rangebound for a while, albeit at the highest levels since 2014, looks like it has broken out. When WTI futures challenged February’s high of $66.66 a few weeks ago, we reached $66.55 before retreating rapidly, a pattern that reinforced the resistance level and suggested that we would head lower again. A couple of days ago, however, we broke through and have been trading above that point for three days now. That confirms that WTI has broken out of its range, but the lack of follow through since suggests that this may not be all that significant. An analysis of the reasons for the breakout and the price action since, however, suggest that it will be.
The first question that heeds to be answered is how significant any technical signal is in the longer term. The answer is not very. Even big-picture, clearly visible technical analysis such as this can only take you so far. The break of a level often triggers stop loss orders clustered around it, so can cause a quick jump that traders can exploit intraday, but over time more powerful fundamental forces hold sway. It is those fundamentals that forced oil higher this week.
The demand factors that have been in play for nearly a year now are well known. Improving global and U.S. growth suggest higher oil demand and the market has reacted accordingly. What changed this week, however, was the supply side of the equation. Conventional wisdom has held that that was a restricting factor for oil prices. The seeming ability of North American shale producers to turn production on and off in response to price moves suggested that the run up would prompt big increases in supply. That is still a possibility, but what changed this week was the supply picture elsewhere.
Middle East tensions and conflicts are nothing new for oil traders, nor for anyone else for that matter. They have existed for millennia and the occasional flare-ups are sometimes taken in stride by the market. The reaction to Syria’s President Assad using chemical weapons against his own people, however, has the potential to be very impactful.
There are calls for a reaction greater than the targeted strikes employed by President Trump last time and that has traders worried. There has been talk from OPEC this week about extending their production cuts into next year, but if the proxy war in Syria heats up the prospect of a unified front by the signatories to that agreement are seriously reduced. If the Vienna agreement were to break down just as U.S. shale producers are ramping up production, it doesn’t take a genius to conclude that oil will be hit hard.
All of that, however, is speculation, and if we return to the recent price action there are suggestions that the market is not worried. Even as Trump has been tweeting out contradictory signals this week and the IEA has issued a report that they expect the signatories to the Vienna agreement to declare “mission accomplished”, WTI has held above the previous highs. That indicates one of two things. Either traders are not worried about the effects should that be the case, or simply don’t believe it will happen.
Overall, then, while technical levels and breakouts are not usually too significant in the long term, the lack of volatility following the initial push upwards suggests that this one may be. We are still close enough that a drop back below $66 could come and return us to the previous range but forming a new range of around $66-$75 looks more likely.
https://oilprice.com/Energy/Crude-Oil/How-Significant-Is-WTIs-Breakout17010.html
Enterprise Products will add an additional 35,000 b/d of new capacity to its Midland to Sealy, Texas, crude pipeline in May, taking its total throughput to 575,000 b/d, the company said Monday.
The new volumes have already been subscribed under long-term deals, Enterprise said.
Separately, Enterprise in July will complete a 143-mile pipeline gathering system in the Permian's Delaware Basin that will help producers move over 300,000 b/d of crude and condensate to Enterprise's Midland terminal, also in the Permian.
The project is supported by long-term shipper commitments, spokesman Rick Rainey said in an email.
The Midland terminal has about 1.4 million barrels of storage capacity, he said.
Crude and condensate barrels from the gathering system will likely move on trucks and other pipelines, rather than the Midland to Sealy pipeline, due to different origination points, Rainey said.
"The gathering system is not additive to the Midland to Sealy downstream capacity," he said.
The 416-mile Midland to Sealy pipeline was started up in early 2018 at an initial rate of 300,000 b/d, and is now in full service with a capacity of 540,000 b/d, delivering multiple grades of crude oil from the Permian Basin to the Houston Ship Channel, Enterprise said. The line is shipping WTI, light WTI, West Texas Sour and condensate.
Enterprise's announcement Monday comes at a time when midstream companies are struggling to keep up with the growth in Permian crude production.
Pipeline capacity is currently constrained out of the Permian, reflected in wide price discounts for Midland WTI crude. Midland WTI is averaging at a $4.33/b discount to Cushing WTI so far in April, compared to a 93 cents/b premium in January, S&P Global Platts data shows.
WTI Midland moved higher on the news of additional takeaway capacity Monday. WTI Midland was assessed at a $3.70/b discount to Cushing WTI, up 35 cents/b on the day.
S&P Global Platts Analytics is projecting crude oil output in the Permian to reach 5.266 million b/d by 2020, compared with 3.657 million b/d in 2018.
Several other pipeline projects plan to offer new Permian takeaway capacity by late 2020.
For instance, Magellan is planning to add 40,000 b/d of capacity by early 2019 to its BridgeTex line, which runs from the Permian to the Houston Ship Channel. That will be followed by the EPIC pipeline, which is expected to move 440,000 b/d of Permian crude by mid-2019.
OPEC's next planned meeting in June will be a chance to review its oil production cut agreement, but the producer group will continue with cuts through 2018, Kuwait's oil minister Bakheet al-Rashidi said Monday.
While it will be discussed in June, a decision on whether to extend the deal into 2019, would be taken later this year, Rashidi told journalists on the sidelines of the Kuwait Oil and Gas Summit.
OPEC, which along with 10 non-OPEC allies led by Russia, is in the midst of a 1.8 million b/d production cut agreement, aimed at drawing down crude oil inventory levels and creating market stability, so that upstream investment can occur to meet the projected increases in demand.
Saudi Arabia and Russia are leading discussions on extending the OPEC/non-OPEC coalition's alliance.
OPEC secretary general Mohammed Barkindo, who was speaking at the same event, added that OECD commercial crude oil inventories had fallen to less than 50 million barrels over the five-year average, compared to around 340 million barrels in 2014. This trend was expected to continue in the coming months, he added.
Oman's oil minister Mohammed al-Rumhy, who signed up to the cuts as a non-OPEC producer, warned that the group should not consider its job done yet.
"We have not reached the steady state conditions yet and the game is not over. The uncertainty monkey is still on our shoulder and it's not the time to offload that," he said at the same conference.
Crude oil imports by China's independent refiners are likely to fall in April from March levels and the companies' crude intake may remain tepid for the rest of the second quarter as China's new tax reporting system continue to hurt their refining margins.
The launch of China's stricter tax reporting rules on March 1 has practically shut the loophole for many independent refiners that used to claim crude oil purchases as fuel oil imports in a way to receive tax rebates.
The increased tax costs have resulted in narrower refining margins, prompting various independent refiners to cut run rates and trim their crude procurement volumes.
Latest survey of Chinese independent refiners conducted by S&P Global Platts showed that around 8.44 million mt of crude oil is expected to call at the ports in Tianjin and Shandong in April, about 11.9% lower from an expected arrival of 9.58 million mt in March.
"The tax burdens for independent refineries have increased a lot in March compared with the previous months," a source with a Dongying-based independent refiner in Shandong said, without giving a specific number on the cost, as it varies greatly among refineries.
Under the old tax system, independent refiners could take advantage of a loophole and managed a tax exemption of as high as Yuan 1,218/mt ($192/mt) for their refined products, which they said was produced from fuel oil and not crude oil.
"It's really hard to give exact figures on how much the costs have increased, but it is clear that the real hard time has yet to come," a Beijing-based analyst said.
Apart from rising tax costs, independent companies' refining margins have also been hit by the recent upward trend in international outright crude prices, as well as the weakness in gasoline retail prices in Shandong, according to Beijing-based local information provider JLC.
Independents' theoretical refining margins for cracking Oman crude, calculated by JLC last month, had fallen in March to around Yuan 293/mt ($46.50/mt), after increasing by Yuan 156/mt in February.
OFFLOADING MAY, JUNE CARGOES
Trade sources recently indicated that some independent refiners were offering various light and medium sweet West African crude cargoes that the companies had initially bought for May and June delivery.
Angola's Kissanje, Cabinda and Plutonio were among the grades heard re-offered into the regional spot market this week, in addition to Brazil's Lula and Sapinhoa grades, for arrival over the later part of the second quarter.
"Some refineries which previously plan to import crude for June are hesitant to take cargoes as planned in view of the current market situation," a crude trader based in Shandong said, indicating that the independent sector's overall crude intake in May and June could fall quite significantly from the previous months.
China's independent refiners would normally fix cargoes for June delivery in around mid-April, but "we don't see healthy buying interest yet," he added.
FALTERING RUN RATES
Amid the narrowing refining margins, some independent refineries have opted to shut for maintenance.
The average run rate at 42 independent refineries surveyed by JLC fell to 61.3% as of April 11, from an average of 62.5% in March.
Four refineries with a combined capacity of 16 million mt/year (320,000 b/d) will be shut for maintenance in April. They are: Shengxing Petrochemical, Zhonghai Fine Chemical, Tianhong Chemical and Chambroad Petrochemical.
Last month, around 16 million mt/year of capacity was taken offline for maintenance.
Jincheng Petrochemical is also likely to shut for maintenance in April, although the start date has not been fixed yet.
Those refineries are quite flexible in shutting for maintenance this year, indicating that they are not confident of the market demand ahead, sources said.
"Shutting down for maintenance at this moment is seen as negative news, which may indicate those refineries are not operating well," an analyst in Shandong said.
HUANGDAO PORT CLOSURE
Adding to this, the possible closure of Huangdao port under Qingdao Port Group around June during the international summit could also encourage some refineries to schedule their seasonal maintenance around the closure time.
Xintai Petrochemical in Zibo for one, plans to shut for a full maintenance during the period.
"The port may be closed for five to six days during the summit, which will probably start from June 9 and will last for three days," a source with Qingdao Port said, adding firm notice has not been received yet.
But this will be much shorter from an initial plan of 20 days, where the Shanghai Cooperation Organization Summit 2018 venue is near the crude berths in Huangdao.
"If it is only shut for less than one week, that won't affect port operations much for crude," the source said.
Russia's oil export duty CL-EXPDTY-RU is expected to rise to $118.5 per tonne in May from $111.4 per tonne in April amid higher oil prices, data from the finance ministry showed on Monday.
The rate is calculated by the finance ministry and is based on the monitoring of seaborne Urals URL-E URL-NWE-E crude oil prices from March 15 to April 14.
WTI Midland-Cushing spread
WTI Midland-Cushing spread has seen quite the move in April, with it narrowing from a $6/bbl discount to almost $3/bbl. Increased take-away capacity from the Permian region supports the move, but offtake capacity unlikely to keep up with output growth in the medium term.
Phillips 66 has been restarting the Borger refinery (jointly owned by P66 and Cenovus Energy) in Hutchinson County, TX (50 miles northeast of Amarillo) after a few months of maintenance. This restored some much-needed demand back into the basin.
@warrenpatCMDTY
Asian refiners and petrochemical companies have started to cautiously monitor China's downstream industry in recent weeks, as the upcoming restart of a giant petrochemical complex in Fujian province could further intensify competition among regional end-users to secure ultra-light crude feedstocks.
China's Fuhaichuang, formerly known as Dragon Aromatics, plans to restart operations at its 4 million mt/year condensate splitter in July following a lengthy three-year closure, a company source told S&P Global Platts last week.
The rapid decline in Iran's condensate exports since late 2017 had already raised alarm bells among many Northeast Asian end-users that require a stable supply of ultra-light crude feedstocks, and the return of the giant condensate consumer in China does not bode well for the buyers overall, market participants said.
Regional end-users were especially concerned about the possible spike in spot differentials for Southeast Asian and Oceania sweet condensate grades, as Fuhaichuang intends to procure low sulfur ultra-light crude cargoes for the first two months of its operations.
"Australian [sweet] condensate has been our staple diet, but now we have to compete with South Korean and Chinese companies [to secure monthly supply]," a trading source at a Southeast Asian refiner said. South Korean and Japanese refinery sources noted that the balance of demand and supply is tilting heavily against the buyers in the Asia Pacific ultra-light crude market, as many Northeast Asian end-users shift focus to regional sweet condensate grades in response to the shortage of Iranian supplies.
"If multiple buyers aim for the same regional grades, that's going to end up hurting the overall margins," a trading manager at a South Korean refiner said.
Fuhaichuang's condensate splitter is located in a larger petrochemical complex that also includes a 90,000 b/d hydrocracker and two 800,000 mt/year paraxylene plants.
The former Dragon Aromatics was restructured and renamed as Fujian Fuhaichuang Petroleum and Petrochemical on October 27, 2017.
The plant located in southern Fujian province has been shut since April 6, 2015, following an explosion, which resulted in damage to the plant's infrastructure.
COMMON FEEDSTOCK INTEREST
Fuhaichuang recently indicated that the condensate grades under consideration are mostly sweet regional ultra-light grades, including Australia's North West Shelf, Pluto and Indonesia's Senoro.
South Korean and Japanese refinery sources said competition to secure African and European condensate cargoes could also heat up, as Fuhaichuang had previously expressed interest in grades outside the Asia Pacific market, including Equatorial Guinea's Alba and Libya's Mellitah.
"Availabilities of these condensates are small while prices are high. But we have to take some, as we need low sulfur feedstocks in the initial stage," the company source said.
Hanwha Total Petrochemical, Asia's biggest condensate consumer, imported 529,000 barrels of Libyan Mellitah condensate in January and 521,000 barrels in February, a company source previously told Platts.
"We are worried about the growing number of bidders. What we want, [Fuhaichuang] will very likely feel the same," a trading manager at Hanwha Total said.
Among the recent trades concluded in the international spot market, Fuhaichuang was said to have purchased a cargo of Pluto condensate for loading May 19-23 from Woodside Petroleum, as well as around 600,000 barrels of Alba condensate from an unidentified Western trading company.
Australian and Equatorial Guinean condensates often serve as key feedstock grades for various regional end-users, including SK Innovation, Hanwha Total, Jurong Aromatics, CPC Taiwan, PTT and Pertamina.
Japan has also tapped into the Oceania market for some extra condensate barrels this year. The country imported around 681,000 barrels of Pluto condensate in January, Ministry of Economy, Trade and Industry data showed.
NOT ENOUGH SOUTH PARS
Apart from low sulfur condensates, Fuhaichuang will likely consider purchasing sour grades like Iranian South Pars once the plant's desulfurizer becomes operational, the company source said.
Fuhaichuang is currently building a desulfurizer that is expected to start operations in August or September, though this is subject to change, the source said.
Prior to the shutdown in 2015, Dragon Aromatics used to purchase through state-owned Zhuhai Zhenrong between 2 million barrels and 3 million barrels of Iran's South Pars condensate every month to use as feedstock.
"There is simply not going to be enough South Pars for everyone, if China starts to take a big chunk of the small pie left in the market," a Singapore-based condensate trader said.
Reflecting Iran's increasing domestic requirements following the start-up of phase two of the country's Persian Gulf Star condensate refinery in February, the National Iranian Oil Company has slashed South Pars condensate term allocations for Q2 by 25% from Q1 to around 350,000 b/d.
The Persian Gulf producer exported as much as 600,000 b/d of South Pars condensate during the first half of 2017, an NIOC source had previously told Platts.
Top oil exporter Saudi Arabia would be happy to see crude rise to $80 or even $100 a barrel, three industry sources said, a sign Riyadh will seek no changes to an OPEC supply-cutting deal even though the agreement’s original target is within sight.
The Organization of the Petroleum Exporting Countries, Russia and several other producers began to reduce supply in January 2017 in an attempt to erase a glut. They have extended the pact until December 2018 and meet in June to review policy.
OPEC is closing in on the original target of the pact - reducing industrialized nations’ oil inventories to their five-year average. There is no indication yet, however, that Saudi Arabia or its allies want to wind down the supply cut.
Over the past year, Saudi Arabia has emerged as OPEC’s leading supporter of measures to boost prices, a change from its more moderate stance in earlier years. Iran, once a keen OPEC price hawk, now wants lower prices than Saudi Arabia.
Industry sources have linked this shift in Saudi Arabia’s stance to its desire to support the valuation of state oil company Aramco ahead of the kingdom’s planned sale of a minority stake in an initial public offering.
The supply cut has helped boost oil prices this year to $73 a barrel, the highest since November 2014. Oil began a slide from above $100 - a price that Saudi Arabia endorsed in 2012 - in mid-2014, when growing supply from rival sources such as U.S. shale began to swamp the market.
But the kingdom wants the rally to go further. Two industry sources said a desired crude price of $80 or even $100 was circulated by senior Saudi officials in closed-door briefings in recent weeks.
“We have come full circle,” a separate high-level industry source said of the change in Saudi thinking. “I would not be surprised if Saudi Arabia wanted oil at $100 until this IPO is out of the way.”
Once the Aramco share sale is done, Riyadh would still want higher prices to help fund initiatives such as Vision 2030, an economic reform plan championed by Crown Prince Mohammed bin Salman.
“Saudi Arabia wants higher oil prices and yes, probably for the IPO, but it isn’t just that,” an OPEC source said.
“Look at the economic reforms and projects they want to do, and the war in Yemen. How are they going to pay for all that? They need higher prices.”
To be sure, OPEC and Saudi Arabia have no official price target and say the objective of the production cut is to balance supply and demand, and reduce the inventory glut.
But guidance on preferred price levels comes from officials speaking off the record, and from industry sources who have discussed the issue with Saudi officials.
“I personally think that now $70 is the floor for oil prices,” a second OPEC source said. “But OPEC is unlikely to make any changes in June, maybe by the end of the year. The market still needs support.”
TALKS IN JEDDAH
OPEC and its partners meet on June 22 to review policy and before then a ministerial monitoring panel gathers in Jeddah, Saudi Arabia, on April 20.
By OPEC’s parameters, the deal has worked. Oil stocks in developed economies in February stood a mere 43 million barrels above the latest five-year average, down from 340 million barrels above in January 2017.
The cuts have been even bigger than those specified in the deal, thanks in part to a slide in Venezuelan production due to an economic crisis in the South American country.
Compliance has reached 150 percent, according to OPEC, meaning the organization’s members have cut production by about 1.8 million barrels per day, 600,000 bpd more than pledged.
Few OPEC sources call for an exit strategy. Most officials are talking of introducing additional inventory metrics to assess the success of the deal, and of a need to support investment in new production to avert any supply crunch.
The impression is that oil prices are seen as not yet high enough to encourage sufficient oil investment.
“We will know what will be the good price when the market is balanced and we have enough investments,” the United Arab Emirates’ energy minister, Suhail al-Mazroui, told Reuters last week. “We need to have more investments coming.”
The Jeddah meeting of the Joint Ministerial Monitoring Committee is unlikely to change the parameters for assessing the deal’s success, Mazroui and other OPEC officials said, and sources see little chance of a major tweak in June.
“Even if we reach the five-year average before June, it does not mean we just go and open the taps,” a third OPEC source said. “We have to test it.”
Texas crude oil and natural gas production is accelerating along with higher commodity prices, but payroll numbers are lower, a trade group reported.
The Texas Alliance of Energy Producers estimated about 215,000 people were on the payrolls of oil and gas firms in the state, about 27.5 percent below the estimated peak in December 2014. A decade ago, one person was employed in the exploration and production sector in Texas per 2,000 barrels of production. By 2016, that ratio was closer to 6,000 barrels per employee.
Federal data show that, nation-wide, the sector is hiring. In March, about 2,000 workers were added to payrolls for oil and gas extraction, while the mining sector added 9,000. Total non-farm payroll employment edged up by 103,000 in March
For the sector as a whole, exploration and production activity is on the rise. Reported as rig counts, Baker Hughes data show activity increased more than 25 percent from last year. Activity, however, peaked in September 2008, with 946 rigs reported. The February rig count averaged 476 in Texas.
Total crude oil production in Texas, meanwhile, was more than 20 percent higher than last year at around 110 million barrels for February, the last full month for which the alliance published data. Gas production increased 3 percent.
"The implications are striking: record crude oil and natural gas production at significantly lower prices, rig counts, and number of industry workers," Karr Ingham, the chief economist at the alliance, said in an emailed statement. "It means that fewer employees are needed to produce more crude oil in Texas and the United States than has ever been produced."
A survey published late March by the Federal Reserve Bank of Dallas found uneven enthusiasm about U.S. policies in the energy sector. Survey respondents were optimistic in general about federal deregulation efforts, but uncertainty on steel tariffs.
President Donald Trump last month signed off on a 25 percent tariff on steel imports and a 10 percent tariff for aluminum. With steel a fundamental component of the exploration and production side of the industry, Ingham's group called for more consideration from the White House.
The Dallas Fed's survey found production from Texas increased for the sixth quarter in a row. Texas is the No. 1 oil producer in the country and hosts two of the more lucrative shale basins - Eagle Ford and Permian.
Indian far-right regional party Shiv Sena will not allow under any circumstances the newly announced Saudi Aramco-Indian project for a US$44-billion mega refinery and petrochemical complex in the Maharashtra state to be completed, the party’s leader Uddhav Thackeray said on Thursday.
On Wednesday, Saudi oil giant Aramco signed an agreement to build the refinery on India’s West Coast. The refinery will be able to refine 1.2 million barrels per day, and goes a long way towards satisfying both India’s and Saudi Arabia’s interests. The project will be one of the world’s largest refining and petrochemical facilities, Aramco says.
However, Shiv Sena—which is a partner in India’s state government—fiercely opposes the project, citing environmental concerns as their primary reason for the opposition.
Shiv Sena’s leader Thackeray said on Thursday that the agreement for the complex is “cheating the people of Maharashtra” and criticized Maharashtra state’s Chief Minister Devendra Fadnavis for allowing the project in the area.
“The Chief Minister had promised that this project will not be imposed upon people. However, that is what has happened. This is cheating. It indicates that the chief minister’s word is not valued by the Centre,” Thackeray said in a statement, as carried by The Economic Times.
The refinery and petrochemical complex will destroy mango and bamboo cultivations and large swaths of forest, according to Thackeray.
Related: Shell To Shift From Oil ‘When This Makes Commercial Sense’
Shiv Sena will continue to oppose the project because it will not benefit the region of Konkan, he said.
India’s Petroleum Minister Dharmendra Pradhan has expressed hope that the opposition to the refinery plan could soon end, according to India Today.
The project would ensure favorable crude oil supplies for India and partly help it to achieve its goal to increase its refinery capacity by 77 percent to 8.8 million barrels per day by 2030.
Saudi Arabia—which was India’s largest crude oil supplier before Iraq ousted it from that spot—has been looking to regain its position as top crude supplier to the thirsty Asian nation, and has been investing in other Asian refineries abroad in an attempt to lock in as much demand as it can.
French liquefied natural gas (LNG) containment system specialist, GTT, saw a sharp increase in orders in the first quarter of the year, with revenues rising.
The company reported a 12.4 percent increase in the first quarter revenue, reaching €64.2 million compared to €57 million in the corresponding quarter last year.
Philippe Berterottière, chairman and CEO of GTT, said, “The first quarter of 2018 was marked by a sharp increase in orders. We have already booked orders for 10 LNG carriers, 1 FSRU, and the fitting of a bunker vessel.”
The pace of order bookings is a clear sign of the good performance of the LNG market, Berterottière said. The vessels are all due to be delivered between late 2019 and early 2020.
“The liquefaction projects under construction – or lined up for construction – should continue to generate significant demand for additional LNG carriers and FSRUs. We are also highly proactive in LNG fuel, which shows strong potential,” he said.
Berterottière added that, from a financial standpoint, the revenues earned during the first three months of the year are in line with the company’s expectations, and it is maintaining its annual objectives.
GTT’s order book, which comprised 89 units at January 1, 2018, saw several changes as 17 LNG carriers have been delivered while new orders came in.
At the end of March 31, the order book stood at 83 units, including 65 LNG carriers, 13 FSRUs, two FLNGs, two onshore storage tanks and a barge.
With the first quarter developments, GTT confirmed its objectives for the year 2018.
https://www.lngworldnews.com/gtt-notes-orders-increase-as-q1-revenues-rise/
Kenya’s National Oil Corporation and U.S. oil services company Schlumberger have agreed to finalize a field development plan on behalf of the government for oil blocks in the northwest of the country.
The East African nation discovered commercial oil reserves in its Lokichar basin in 2012.
National Oil said in a statement seen by Reuters on Friday that the agreement with Schlumberger would create a development blueprint for the field in the next year.
“This FDP (field development plan) will provide the government with an independent view of the development of the Lokichar oil discoveries, which will be useful in supporting the government in evaluating work already being done by investors Tullow, Africa Oil and Maersk,” National Oil said.
Britain’s Tullow Oil and Canada’s Africa Oil were first to discover oil in Kenya, holding an equal share in the 10 BB and 13T blocks where Tullow is the operator.
French oil major Total later acquired a stake in the blocks from AP Moeller-Maersk and the Kenyan government is expected to take a stake through National Oil.
National Oil did not disclose the value of the deal.
Tullow expects to reach a final investment decision (FID) on the project in 2019 and first oil production by 2021-22.
Last year the government signed an agreement with Tullow and its partners for a feasibility study on a proposed pipeline to transport the crude oil to a seaport on the Indian Ocean coast.
Recoverable reserves are estimated at 750 million barrels and considered feasible for production with oil prices at $55 a barrel, which is below current levels.
The ministry said last year that the pipeline — to run 820km (500 miles) between Lokichar and Lamu on Kenya’s coast — would cost $2.1 billion and was expected to be completed in the first quarter of 2021.
National Oil handles the government’s interest in both the upstream and downstream oil activities. It owns exploration blocks and runs petrol stations in Kenya with about a 5 percent share of the fuel retail market.
China’s refined oil products exports rose to the highest on record in March at 6.69 million tonnes, official customs data showed on Friday.
The March level exceeded the previous record in December 2017 at 6.17 million tonnes, data showed.
The active number of drilling rigs continues to grow thanks to increasing activity in Texas and the Gulf of Mexico.
The overall rig count grew by five - up to 1,008 - courtesy of four rigs added to the Gulf and three in Texas. The loss of two rigs drilling for natural gas kept the rig count from growing higher.
As oil prices have risen for much of the last year or so, the rig count has steadily climbed, finally rising above 1,000 rigs a week ago for first time since April 2015.
Oil drilling currently accounts for 815 rigs of the total.
Despite uncertainties over wide-open elections in October, investors in Brazil’s oil sector can expect the country to continue to pursue policies supportive of the oil and gas industry, the chief executive of Brazil’s state-controlled oil firm Petrobras, Pedro Parente, said in an interview with S&P Global Platts published on Friday.
In October, Brazil will vote to elect a new president and renew two-thirds of the Congress. There has been some concern that far-right or far-left candidates could deter investments in the Brazilian oil sector, due to uncertainties over how the new administration would view the current terms and contracts for international companies doing business in Brazil’s oil and gas industry.
Speaking to Platts, Petrobras’s Parente said that “the situation is totally unclear...We have a spectrum of candidates from far right to far left.”
“Of course a new government will have its own views on how to manage the country. I do not see that they would have different views in relation to the rule of law, especially respecting contracts -- and if that happened you will see that the Congress would not allow this,” he told Platts, alleviating some of the concerns.
Over the past couple of years, Brazil has been doing well in attracting international majors to its offshore areas, especially to its coveted pre-salt layer.
At the end of last month, ExxonMobil snapped up eight offshore exploration blocks in the latest Brazilian bid round, leading Big Oil’s aggressive move on acreage next to the pre-salt layer that resulted in a record-high signature bonus proceeds for the government.
Some experts had expected that this auction and one under production sharing contracts (PSCs) scheduled for June could attract higher-than-usual bids before the October election. The deadline for parties to register their respective candidates running in the election is August 15.
The most likely leftist candidate, Ciro Ferreira Gomes, has said that he would expropriate oil assets bought by private companies if he won the election. According to Reuters, Gomes is currently behind the possible rightist candidate Jair Bolsonaro in opinion polls. Most analysts and oil executives who have spoken to Reuters said that they did not expect Brazil—or Mexico, which is also holding a presidential election this year—to fully reverse oil reforms, but many say that contract term changes or slower oil auction calendars are possible.
Global energy trader Mercuria Group agreed to take an interest in the oil refining system of China’s ChemChina, sources familiar with the matter said.
As part of the deal, ChemChina would increase its stake in Mercuria. ChemChina already holds a 12 percent stake in the trading firm and would remain a minority shareholder.
The deal, once signed, would be the first time that a foreign company had gained a stake in Chinese refineries.
Chevron Corp will proceed with the second stage of its giant Gorgon liquefied natural gas (LNG) export plant off the northwest coast of Western Australia, the company said on Saturday.
Chevron and its joint venture partners plan to sink 11 new wells in the Gorgon and Jansz-Io fields and build offshore pipelines and subsea structures to pipe the gas to the nearby 15.6 million tonne a year LNG plant on Barrow Island.
The $54 billion Gorgon project came on stream in March 2016 but suffered numerous unplanned shutdowns in its early stages.
Chevron declined to put a cost on stage two of the project, but a spokesman said the development would fit within its planned annual investment of $18 billion to $20 billion through 2020.
Drilling should start next year and the full expansion could take about four years, a source with knowledge of the plans said.
Seven new wells will be drilled thousands of meters below sea level in the Gorgon field while four will be sunk in the Jansz-Io field, about 70 km (44 miles) further out to sea.
Gorgon Stage Two is part of the original Gorgon development plan which includes the expansion of the subsea gas network required to maintain long-term natural gas supply to Barrow Island.
“Through ongoing collaboration, we need to invest in both the infrastructure and the local skills and capability required to maintain our long-term energy position and contribute to the jobs of the future,” Chevron Australia managing director Nigel Hearne said in a statement.
“Benefits are expected to flow through to Australian industry, arising from local project management, drilling and completion activities and subsea infrastructure installation.”
Chevron is the Gorgon project operator and holds a controlling 47.3 percent, while ExxonMobil and Shell each have a 25 percent stake. The remaining stakes are held by Osaka Gas, Tokyo Gas and JERA.
Chevron also leads the development of the Wheatstone natural gas project, manages a one-sixth interest in the North West Shelf Venture and operates Australia’s largest onshore oilfield on Barrow Island.
Investors in Brazil can expect a continuity of policy aimed at supporting oil and gas development despite recent election turbulence, and will see further decisions on the gas and refining segments in the months ahead, the CEO of state-controlled Petrobras told S&P Global Platts in an interview.
Pedro Parente, interviewed at Brazil's embassy in London, said he expected the country's net oil exports -- currently around 400,000 b/d -- to keep rising, with the Lula field reaching 1 million b/d of output early next year as two production units are added.
Petrobras's own oil and gas output should reach 3.5 million b/d of oil equivalent in 2021, up from 2.77 million boe/d last year, and Brazil's total oil and gas production could be 5 million boe/d in 2027, Parente said in the interview, days after a successful 15th bid round.
Following the arrest of ex-president Luiz Inacio Lula da Silva, "the situation is totally unclear...We have a spectrum of candidates from far right to far left," Parente said of the October elections to choose a new president and two thirds of the Congress.
Parente noted that during Brazil's only previous major electoral shift in 2002, when Lula took office, contracts were respected and the new government stuck to existing policies on oil and gas. He forecast that Congress would be a source of moderation, as would continuity of leadership at industry regulator the ANP.
"Of course a new government will have its own views on how to manage the country. I do not see that they would have different views in relation to the rule of law, especially respecting contracts -- and if that happened you will see that the Congress would not allow this," Parente said.
"You can bet the composition of the Congress will not be a majority of the far right or far left...The Congress will be a very well-balanced Congress."
Parente voiced confidence in Petrobras's recovery following the 'Car Wash' corruption scandal and a company debt crisis, along with a class action law suit in the US, expected to cost it nearly $3 billion.
Brazil has organized a series of bid rounds to revive the sector after a near-collapse in exploration drilling. A sub-salt round is due on June 7 and another round may be held this year combining the Saturno and adjacent fields, Parente said. Petrobras aims to cut its net debt to $77 billion by the end of this year, from $100 billion at the end of 2015, on the back of cash flows and asset sales.
The company has an average interest rate on its debt instruments of just over 6%, and $20 billion of debt due for repayment in the next three years.
Parente played down doubts about Petrobras's $21 billion divestment program, which includes the Nigerian fields Agbami and Akpo, nearly 100 Brazilian shallow-water and offshore fields, a gas pipeline network and a retail business in Paraguay.
Brazil's audit court has imposed additional checks, slowing the process, and last year just $4.5 billion of the planned $21 billion of assets were sold. The process will be completed this year, however, Parente said.
Last year "we prepared the company and fulfilled many steps for a number of assets, however the actual signing of the contracts we will see this year," he said, noting other assets that could be included, such as a refinery in Pasadena, Texas. "We are very confident we will reach the target."
Parente underlined that foreign investors would be chosen purely on their track record and the size of their bids, and said attracting medium-sized and smaller buyers of onshore and offshore assets would create more jobs in the regions than could Petrobras, with its centralized hiring.
"It is only a matter of the track record and the price, not the so-called nationality of the company. What is really important is to generate jobs in Brazil and income in Brazil."
Parente confirmed that under its five-year plan Petrobras has no interest in investing in west Africa, as Angola looks to revive its deepwater sector. Brazil's sub-salt fields have lessened its need to import lighter oil, but the strategy may change after the current, domestically focused plan expires in 2021, he said.
"For the time being we are not interested [in Angola], except if there is a very good opportunity, we would look at it."
GAS, REFINING RETHINK
Parente said Petrobras would frame a policy on gas by the middle of this year, possibly involving increasing the share of gas in its production through foreign purchases.
He highlighted the award of a contract last month to build a gas processing plant near the Comperj refinery. Targeted at industrial users of gas, the plant is needed to handle associated gas from Brazil's sub-salt fields and without it oil output would have to be curbed due to flaring regulations, Parente said, noting the construction timeframe was 2-3 years.
Parente also highlighted a planned rethink of Petrobras' refining role. The company has put on hold two refinery expansions, at Comperj, near Rio, and RNEST near Recife, but seeks partners to resume them.
Petrobras is likely to remain responsible for "almost 100%" of Brazil's refineries and does not plan to close any, as it strives for a "comfortable" market share, but does need partners, he said.
"It is important to reduce the practical monopoly Petrobras has in the refining area. We are discussing what would be the model. It is very important for the country and Petrobras, and for the suppliers to have not just one player."
A new model should be agreed by Petrobras's leadership as soon as possible and have "its own track, regardless of the electoral period," Parente said.
Petrobras will maintain its retail prices close to those of imported products to preserve market share following a surge in imports last year, in which its share of the diesel market fell to under 70%, he said. Diesel accounts for 35% of Petrobras's refining output, reflecting mainly trucking demand.
"It is really important that we keep a comfortable market share for the company considering the refinery park we have," Parente said.
The first contractual liquefied natural gas (LNG) cargo from Dominion Energy Inc’s newly constructed Cove Point LNG export plant in Maryland in the United States left the facility on Monday, Thomson Reuters Eikon ship tracking data showed.
The cargo is expected to act as a drag on spot LNG prices as it coincides with the resumption of exports of the fuel from the Papua New Guinea LNG plant, which had been shut following a powerful earthquake.
The 160,000-cubic meter LNG tanker Adam LNG left Cove Point on Monday with a draft of 91 percent, suggesting it was full, according to the data. Its destination was not immediately clear.
The facility has exported two commissioning or test cargoes already, which were sold to Royal Dutch Shell. The first cargo from the facility left the terminal in early March heading for Britain’s Dragon LNG terminal.
Dominion Energy was not immediately available for comment outside operating hours.
But the company said last week the terminal had entered commercial service for natural gas liquefaction and exports.
After completing a planned outage for maintenance, the facility has been ramping up to full production of LNG from natural gas provided by its export customers since late March, the company said.
The 177,000-cubic meter tanker LNG Sakura and the 163,000-cubic meter tanker Meridian Spirit are heading to the Cove Point terminal, according to Eikon data.
Cove Point is the second LNG export plant in the lower 48 U.S. states after Cheniere Energy Inc’s Sabine Pass terminal in Louisiana, which exported its first cargo in February, 2016.
Dominion sold the project’s capacity for 20 years to a subsidiary of GAIL (India) Ltd and to ST Cove Point, a joint venture of units of Japanese trading company Sumitomo Corp and Tokyo Gas Co Ltd.
Some of the LNG for ST Cove Point will go to Tokyo Gas and some will go to Kansai Electric Power Co Inc, according to Sumitomo’s Pacific Summit Energy (PSE) unit.
ConocoPhillips announced it has concluded its 2018 winter exploration and appraisal program in Alaska.
The company’s original plan was to drill five wells on the Western North Slope comprising two appraisal wells of the Willow Discovery announced in January 2017, plus three exploration wells. Due to improved drilling efficiencies, the company was able to drill a total of six wells, including an additional Willow appraisal well. All six wells plus a sidetrack encountered oil and verified the potential of the play.
The three Willow appraisal wells support the previously announced estimate of a recoverable resource potential of at least 300 MMbo.
The three exploration wells represent new discoveries for the company and further extend the play concept across the Western North Slope.
As part of the exploration program, a total of five production flow tests were conducted. Results from all five tests were encouraging.
The company will assess the extensive information and results from this winter’s activities in anticipation of another active exploration and appraisal season in 2019.
“The results of this year’s program are promising,” said Matt Fox, V.P., strategy, exploration and technology. “We are excited about the opportunity to extend our legacy in Alaska where we have a long track record of operational success and value creation."
Japan's Sumitomo Corporation will sell cargoes from US Cove Point LNG facility if the extra volume reserved as a buffer is not needed, a company executive said Monday.
ST Cove Point, which is a joint venture between Japan's Sumitomo and Tokyo Gas, has a 20-year service agreement to take 2.3 million tonnes per year.
ST Cove Point will export 1.4 million mt/year to Tokyo Gas and 0.8 million mt/year to Kansai Electric Power through Sumitomo's subsidiary PSE, leaving 100,000 mt/year in unsold volume.
"This extra volume of 100,000 mt/year is regarded as a buffer for Tokyo Gas and Kansai Electric to cope with seasonal fluctuations. But when this buffer is not needed, we will sell into the spot market," Hirofumi Nakamura, head of Sumitomo's LNG Business Development and Natural Gas & LNG Business Department, told during a press briefing.
The Cove Point started its commercial operations on April 9, and the first cargo for Tokyo Gas, which is expected to load after late April, will likely deliver into Tokyo Gas Negishi terminal in a month's time, according to Yoshihisa Yamada, general manager for Gas Resources Management Section and Gas Resources Dept. for Tokyo Gas.
Yamada said that while Henry Hub-linked LNG cargoes will help diversify Tokyo Gas' portfolio and alleviate changes in oil prices, the company will seek to optimize cargoes from the Cove Point project, which has no destination clause.
US LNG will account for about 10% of Tokyo Gas LNG portfolio, Yamada said.
In 2016, Tokyo Gas signed a Memorandum of Understanding with UK company Centrica, under which LNG procured by Tokyo Gas from the US would be swapped on a cargo unit basis with Pacific-sourced LNG belonging to Centrica.
Australia’s Northern Territory on Tuesday lifted a nearly two-year moratorium on fracking to extract gas, unlocking vast onshore reserves in the resource-rich region and raising the possibility of other provinces following suit.
The Northern Territory (NT), a 1.4 million sq km (540,000 sq miles) expanse of outback extending from the center of Australia to its northern coastline, had banned hydraulic fracturing, commonly known as fracking, in September, 2016 amid concerns the drilling method could harm the environment.
It commissioned an inquiry into the environmental, social and economic risks of the extraction process and on Tuesday accepted the inquiry’s conclusion that the risks were manageable.
“The moratorium on fracking in the Northern Territory will be lifted, with strict new laws to be in place before exploration or production can occur,” Chief Minister Michael Gunner told reporters in the Territory’s capital, Darwin.
The announcement, which drew criticism from environmentalists, reopens shale gas reserves in the Beetaloo and McArthur basins for development. It immediately sent shares in commodity explorers in the region sharply higher, even though production is not expected to begin for about a decade.
It also raised industry hopes for pushing Australia, with 88 trillion cubic feet of identified unconventional gas reserves, like the United States before it toward energy self-sufficiency if blocks on fracking were lifted elsewhere in the country.
Origin Energy Ltd said it would resume plans “as soon as practical” to drill and frack the Beetaloo Basin shale gas field, which it says contains 6.6 trillion cubic feet in contingent reserves. Its shares rose 1.4 percent.
Shares of McArthur basin explorer Empire Energy Group Ltd jumped by two thirds and shares in Armour Energy Ltd, which also holds exploration acreage in the region rose 6.7 percent. The broader market edged higher.
Jemena Ltd, owned by China State Grid Corp Ltd and Singapore Power Ltd], said it now intends to expand the capacity of a gas pipeline linking the Territory with the state of Queensland sevenfold.
“Given the vast geography we are talking about, some significant infrastructure investment will be needed to bring this gas to domestic and international markets,” said Andrew Koscharsky, director for energy at commodity trading house RCMA, which deals in Australian power and gas.
FLASHPOINT
Tuesday’s announcement lifted industry hopes for an end to fracking bans elsewhere in Australia, where the process has become a flashpoint between a national government desperate to quell rising gas prices and popular environmentalist opposition.
Victoria state has outlawed fracking. New South Wales and Tasmania have introduced moratoriums as has Western Australia in its gas-rich Canning Basin. In South Australia, a newly-elected center-right government has promised a ban on fracking in the state’s gas-rich southeast.
“There’s been this cascading effect and so one place has a moratorium then the next place has a moratorium,” said Graeme Bethune, chief executive of Energy Quest, an Adelaide-based energy consultancy.
“This should cause thoughts by other jurisdictions about moratoria,” he said.
The NT government said it would tightly regulate the industry after lifting the ban. Almost half the territory will remain “frack-free”, including national parks and reserves.
Drillers will need to make wells compliant with new design codes and present plans for decommissioning and rehabilitation before production begins, it said in a statement.
But environmentalists condemned the move.
“This decision ... is a betrayal of the science and of the significant community opposition which has been expressed over the last few years,” said Lauren Mellor, a spokeswoman for environmental group Frack Free NT Alliance.
| Drilled but uncompleted wells (DUC) wells | ||||
|---|---|---|---|---|
| Region | February 2018 | March 2018 | change | |
| Anadarko | 991 | 995 | 4 | |
| Appalachia | 764 | 749 | (15) | |
| Bakken | 717 | 716 | (1) | |
| Eagle Ford | 1,485 | 1,507 | 22 | |
| Haynesville | 174 | 175 | 1 | |
| Niobrara | 545 | 506 | (39) | |
| Permian | 2,922 | 3,044 | 122 | |
| Total | 7,598 | 7,692 | 94 | |
The Drilling Productivity Report uses recent data on the total number of drilling rigs in operation along with estimates of drilling productivity and estimated changes in production from existing oil and natural gas wells to provide estimated changes in oil and natural gas production for seven key regions. EIA's approach does not distinguish between oil-directed rigs and gas-directed rigs because once a well is completed it may produce both oil and gas; more than half of the wells produce both.
https://www.eia.gov/petroleum/drilling/#tabs-summary-3
Vermilion Energy Inc. agreed to buy Spartan Energy Corp. for about C$1.08 billion ($860 million) in stock, adding to its production and acreage in southeast Saskatchewan in the largest oil and gas company takeover in Canada this year.
Spartan holders will get 0.1476 of a Vermilion share for each Spartan share, Vermilion said in statement Monday. That represents a premium of 5 percent, based on Friday’s closing prices. Vermilion also will assume about C$175 million of debt. The company expects the transaction to close on or about June 15.
The deal is the latest in a series of moves by Vermilion to boost its position in Saskatchewan, an area the company prefers for profitability and a favorable regulatory environment as Canadian oil companies struggle with pipeline bottlenecks and prices that have trailed the global rebound. Vermilion entered the region in 2014 with the purchase of Elkhorn Resources Inc. and added acreage there in 2017 and 2018.
"At first glance this looks like a very good deal for Vermilion,” Dave Popowich, an analyst at CIBC World Markets said in a note to clients. “We have seen Vermilion as a natural acquirer of assets in the ongoing industry downturn, and the company clearly sees good value in Canada at current asset prices.”
Energy Deals
Vermilion’s takeover of Spartan comes amid a moribund environment for deals in Canada’s energy patch, with the value of mergers and acquisitions falling to $5.2 billion through April 16 from $34.2 billion for the same period last year.
Investors have shied from Canadian oil stocks with pipeline and political frustrations reaching new heights, while analysts see the potential for deals providing a potential catalyst. “While the equity markets may penalize acquirers in the short-term, we think well-priced acquisitions of quality assets can generate significant value for shareholders over time,” BMO Capital Markets told clients earlier this month.
Canada’s S&P/TSX Composite Energy index has slumped 10% over the past 12 months compared with a gain of 4.3% for their U.S. peers, though Western Canadian Select, a benchmark for oil sands producers, has rebounded recently to trade $15 below WTI futures, the smallest gap since November.
Pipeline Politics
Canadian pipeline politics have grabbed global attention as Kinder Morgan Inc. seeks to push its Trans Mountain pipeline project ahead amid objections from the province of British Columbia. Unable to dissuade British Columbia in its fight against the C$7.4 billion pipeline which exits on the west coast, Prime Minister Justin Trudeau has said his government will start talks with Kinder to backstop the pipeline.
Spartan has annual production of about 23,000 bbl and covers about 480,000 acres, according to the statement. The output is 91% oil.
As a result of the deal, Vermilion raised its 2018 production forecast to a range of 86,000 boed to 90,000 a day, up from 75,000 to 77,500 a day. It raised the capital budget about 32% to C$430 million from C$325 million.
http://www.worldoil.com/news/2018/4/16/vermilion-to-buy-spartan-energy-for-860-million-in-stock
Could it get any worse? Possibly, but the last time we saw petchem margins this bad was in the depths of the 2008-09 economic meltdown, and back then the atrocious margin levels resulted in drastic plant curtailments and in some cases permanent shutdowns. But this time around the petchem industry is in the process of bringing on even more capacity! Is the current situation a fluke, or a harbinger of things to come? In today’s blog we examine recent trends in steam cracker margins, by far the largest demand sector for natural gas liquids (NGLs) and consider what these developments may mean for NGL markets in general, and ethane in particular.
Petrochemical markets are a frequent topic here in the RBN blogosphere, almost always in the context of steam cracker feedstocks, with NGLs making up about 95% of those feedstock barrels. Or, looked at from the other end of the pipe, these plants make up about 60% of total domestic NGL demand, and 100% of domestic liquid ethane demand. So it is always a good thing — for both the petchems and producers of NGLs — when petchem margins are high. When the petrochemical industry makes money, they buy a lot of feedstocks, supporting NGL prices (and, with that, NGL producers). We recently looked at ethane margins in Ethane Asylum Revisited, where we considered the expected price impact from several new ethane-only crackers coming online, and covered new NGL supplies from “wet” shale gas production in Bring It On. Basically, the story has been that demand is increasing, but so is supply. So you’d think that petchem margins might be under some pressure, but no catastrophic collapse would be in the offing.
Yet, as shown in Figure 1, collapse is just what we have. The graphs show the cents-per-pound margins for producing a pound of ethylene from each of the major feedstocks used by U.S. steam crackers, adjusted for the value of byproduct credits — that is, the value of other petrochemicals produced when each feedstock is “cracked.” (For a more in-depth discussion on calculating margins for producing ethylene, see Let’s Get Cracking – How Petrochemicals Set NGL Prices.)
Figure 1. Sources: RBN, OPIS NGL Prices, PetroChem Wire Olefins Prices (Click to Enlarge)
In September 2014 the margin to crack ethane hit an all-time high of 70 cnts/lb. Then the next year it fell into the mid-teens, but still averaged 19 cnts/lb during 2016-17. Lately, though — as shown in the red oval on the left graph — the margin from cracking ethane is down to less than a nickel. That’s lower than any time since the economic meltdown of 2008-09, when petchem demand evaporated. The ethane margin could very well fall even lower. In fact, that has already happened to the other feedstocks. Propane’s margin hit a decade low three weeks ago at -8 cnts/lb (that’s negative eight cents; purple oval, middle graph) and still wallows below zero. It was 60 cnts/lb back in 2014. The margin for producing ethylene from natural gasoline (light naphtha) was nearly 50 cnts/lb just last year (2017), but now it’s in the doghouse, averaging -12 cnts/lb last week (black oval, right graph).
So what’s going on? By far the most significant market factor is the price of ethylene — or, more precisely, the lack thereof. As shown in the leftmost graph in Figure 2, the price of ethylene is down from 75 cnts/lb in 2014 to only 14 cnts/lb today (blue oval), after averaging 27 cnts/lb from 2016 through 2017. Unlike 2008-09, this is certainly not happening because of an economic meltdown. In fact, it is a problem of prosperity: too much ethylene and not enough downstream market. Ethylene is a petrochemical intermediate used to produce polyethylene, ethylene glycol (antifreeze), and a host of other petchem products.
Supplies of ethylene have been increasing lately, putting downward pressure on prices for two reasons. First, several olefin crackers that were down due to Hurricane Harvey are making up for lost time and running hard. Second, multiple new crackers that are totally or mostly dedicated to ethane as a feedstock are coming online — Dow’s is running; CP Chem’s started up in March. Another six of these facilities are not far behind and will be adding to the supply of Gulf Coast ethylene over the next two years.
Most of these plants are tied to downstream units that take ethylene as a feed for derivative products. But for right now, there are not enough of these downstream units operational to prevent an oversupply situation. Some of the new polyethylene plants expected to absorb incremental ethylene supplies are not running at full capacity, and a couple are offline. Of course, eventually these operational issues will be resolved. But over the longer run, how the supply/demand balance of ethylene evolves is the 64-billion-dollar question for the U.S. petrochemical industry.
One data point to note: In mid-2017, Enterprise Products Partners announced the development of a new ethylene export terminal at its Morgan’s Point ethane export facility along the Houston Ship Channel to enable surplus U.S. ethylene to be delivered to international markets. That tells you that Enterprise has concluded a U.S. surplus of ethylene will be around for a while.
Figure 2. Sources: RBN, OPIS NGL Prices, PetroChem Wire Olefins Prices (Click to Enlarge)
You might think that if the price of ethylene is down, then the price of its feedstocks would be under downward pressure too. But as shown in the ethane graphs in Figure 2, the price of ethane over the past few years has been increasing gradually (OPIS Mont Belvieu average). After a big drop in 2012, mostly due to huge volumes of ethane coming on to the market sourced from wet shale gas production, the price of ethane (middle graph) averaged just over 20 cnts/gallon (2013-17). But over the past year (inset to right), the price of ethane has bounced between 20 to 29 cnts/gallon, averaging about 25 cnts/gallon — with a slight upward trend. Lately, ethane prices have been in the 27-28 cnts/gallon range.
So the market for ethane is getting tighter, although ethane inventories are still high and ethane rejection (the sale of ethane as natural gas, see Can't Get There from Here) continues in most markets, even with gas prices low. But clearly, the relative stability of ethane prices while ethylene prices are collapsing has done a number on petchem margins. And it’s worse for other feedstocks that tend to be more influenced by the price of crude oil than ethane is. Higher crude oil prices in 2018, along with robust export volumes have supported propane and natural gasoline prices, which has resulted in negative petchem cracking margins for both of those products (Figure 1).
As more ethane-only cracker capacity comes online, ethane demand will increase, and ethane rejection will decline. As we covered in Bring It On, future ethane prices will depend, in part, on the cost of extracting, transporting and fractionating the marginal ethane barrel. Said another way, how much ethane needs to come from the next producing location in line with the lowest cost of transport (the nearest) before the markets balance out will have a big impact on ethane prices. On the other hand, the future price of ethylene will depend primarily on how much surplus ethylene is produced relative to new demand from downstream units intended to absorb that surplus. If it turns out that surplus ethylene supplies keep the lid on ethylene prices and margins remain in the doldrums, then some crackers could be forced to curtail production, or some aging units could be shut down — much like what happened 10 years ago. That would be bad news — not only for the petchem industry — but for NGL producers as well.
https://rbnenergy.com/good-margin-gone-bad-todays-horrific-petchem-margins-and-implications-for-ngls
Norwegian E&P player Aker BP has drilled a dry well southwest of the Knarr field located in the North Sea offshore Norway.
The wildcat well 34/2-5 S is located in production license 790 where Aker BP is the operator. This is the first exploration well in this production license which was awarded in APA 2014.
Aker BP received a drilling permit for the well as well as consent to use the Transocean Arctic rig for it in December 2017.
The well was drilled about 6 km southwest of the Knarr field and 20 km north of the Visund field. Water depth is 388 meters.
The primary exploration targets for the well were to prove petroleum in reservoir rocks from the Early Jurassic – Triassic (sandstones in the Statfjord group and in the Lunde formation).
The secondary exploration target was to prove reservoir quality and petroleum in underlying reservoir rocks from the Triassic Age (Lunde formation) sandstones. The well encountered the primary exploration target with a total of 72 meters of aquiferous sandstone layers in the Statfjord group with varying reservoir characteristics from moderate to very good.
In the secondary exploration target, aquiferous sandstone layers totaling 42 meters were encountered, mainly with moderate to good reservoir characteristics.
The well has been classified as dry, with traces of petroleum. The well was not formation-tested, but data has been acquired.
The well was drilled to a vertical depth of 3190 meters below sea level and 3656 meters measured depth below the sea surface. It was terminated in the Lunde formation in the Upper Triassic.
The well has been permanently plugged and abandoned.
The Transocean Arctic drilling rig will now drill a wildcat well on the west flank of the Valhall field, where Aker BP is also the operator.
https://www.offshoreenergytoday.com/aker-bp-bites-dust-in-north-sea-well/
Global liquefied natural gas (LNG) markets are expected to be oversupplied until 2022 with capacity utilization forecasted to be in the range of 81-88% on average between 2019-22, but become undersupplied thereafter, according to a report by Qatar National Bank.
New LNG supply is expected up to 2020 mainly from the US and Australia, boosting global production by up to 96.5 mmtpa (million metric tons per annum) – or about 30% compared to the 2017 level, QNB said in the report issued on Sunday.
However, around 2024, the market is expected to tighten with supply broadly flat as few new LNG projects, which take about 5-7 years to complete, have been given the green light since the sharp decline of prices in 2014, the report said.
At the same time, global demand is expected to grow by a compound annual growth rate of about 5% over the period 2023-30 as domestic production in Europe and South East Asia declines, and the demand for clean energy in economies such as China gathers pace, it said.
Nonetheless, there are a number of potential projects waiting on the side-lines.
The report, citing Bloomberg New Energy Finance data, said that about 362 mmtpa additional capacity at the pre-FID (final investment decision) stage has some chance of coming online before 2030.
On the other side, Japan LNG spot import prices have risen from a low of $4 per million British thermal units (MMBtu) in mid- 2016 to an average of $10 for the first three months of 2018.
Hence, “now is a good time” for Qatar, the world’s lowest cost major producer of LNG, to step back into the market to deter new investments elsewhere given its comparative advantages, the report said.
Qatar previously announced a new development from the giant North Field which would produce 23 million tonnes per year by 2024 – an increase of 30% from current total LNG production levels to about 100 million tonnes per year.
“The total cost of new production is estimated to be $2-5 per MMBtu, below the level at which other potential new projects are viable. Second, as the world’s largest producer, Qatar already has the reputation for reliability and the relationships to agree long-term supply agreements with importers,” the report added.
https://www.lngworldnews.com/global-lng-market-to-tighten-from-around-2024-qnb-says/
Perth-based LNG Limited completed the sale of all the shares in Gladstone LNG, completing the exit from the Fisherman’s Landing liquefied natural gas export project in Gladstone.
Under the executed share sale agreement with an unnamed third-party, LNG received $800,000, previously held in a trust account under a previously disclosed license transfer deal, as well as a reimbursement for security deposits posted by Gladstone LNG related to the Fisherman’s Landing project licenses.
With the execution of the agreement, the buyer secured ownership of the proposed Fisherman’s Landing LNG project, including the licenses and the opportunity to utilize LNGL’s OSMR technology on a future LNG project at the Fisherman’s Landing Gladstone site.
The buyer shall pay LNGL an additional $4 million if financial close is achieved for an LNG project at the site.
“This agreement completes LNG Limited’s exit from the Fisherman’s Landing project,” said Greg Vesey, Managing Director and CEO of LNGL.
He noted the company is focused on its activities for both the Magnolia LNG project in Louisiana, United States, and the Bear Head LNG project in Nova Scotia, Canada.
https://www.lngworldnews.com/lng-limited-completes-fishermans-landing-project-exit/
The Alberta government introduced late Monday a new bill that would allow it to "restrict" exports of crude oil, refined products and natural gas, in response to ongoing challenges with its neighbor British Columbia over Kinder Morgan's proposed Trans Mountain Pipeline expansion.
"We did not start this fight, but let there be no doubt we will do whatever it takes to build this pipeline and get top dollar in return for the oil and gas products that are owned by all Albertans," the province's Premier Rachel Notley said in a statement.
Of particular focus will be the Trans Mountain Pipeline that has a current capacity of 300,000 b/d, and runs from Edmonton, Alberta to Burnaby, British Columbia. In December the line shipped an average 258,000 b/d of crude oil and diluted bitumen and nearly 44,000 b/d of refined fuels, including gasoline and diesel, the Alberta government said.
The Kinder Morgan pipeline feeds British Columbia refineries, such as the 55,000 b/d Parkland facility in the Lower Midland area.
Puget Sound pipeline ships crude from Burnaby to Anacortes in Washington where it serves local refineries.
No comments were immediately available from Parkland on the potential impact of the bill.
Also it was not immediately clear if the export restrictions, if imposed, would include US refineries in Washington.
The bill does not stipulate any location to which crude oil or refined products cannot be exported through the pipeline, said Mike McKinnon, a spokesman at the energy ministry. The energy minister has the mandate to decide, he said.
Washington refineries imported 6.21 million barrels of crude in January, of which 5.36 million barrels was from Canada, according to the US Energy Information Administration.
The Puget Sound pipeline delivers Canadian crude from the Trans Mountain system to Phillips 66's 101,000 b/d Ferndale refinery and Andeavor's 120,000 b/d Anacortes refinery. The line also delivers crude to BP's Cherry Point refinery and Shell's Anacortes refinery.
Alberta government officials could not be reached for comment.
Kinder Morgan said last week it was stopping on non-essential spending on its proposed Trans Mountain expansion until it has regulatory certainty. The federal government has cleared the project, but British Columbia is opposing the expansion for environmental reasons.
Under the bill -- labeled as Canada's Economic Prosperity Act -- companies exporting petroleum and natural gas from Alberta will be required to obtain a license, the provincial government said.
The license would be issued by the minister of energy if it is determined to be in the public interest, including whether adequate pipeline capacity exists to maximize the return on these resources produced in Alberta, it said. Shippers would not be automatically required to apply for an export license and would only be directed to do so if the minister deemed it necessary.
"Consideration would also be given to ensuring enough supply is maintained for Alberta's needs, now and into the future," it said. "A licence could be issued to a company but for a lower amount than it has previously been exporting."
Shippers that do not comply with the terms of a license could face fines of up to C$10 million/day, while individuals could face fines of up to C$1 million/day, it said.
Of the total 300,000 b/d of capacity on Trans Mountain, 221,000 b/d is allocated to refineries with connections in British Columbia and Washington State and the remaining 79,000 b/d is allocated for the Westridge terminal for exports, the Canadian Association of Petroleum Producers said in it latest annual report.
The first cargo of LNG from Cameroon's floating LNG project could be delayed until the end of April after the timetable for the maiden delivery was pushed back, a spokesman for project partner Perenco said Monday.
Production from the 1.2 million mt/year facility -- the Hilli Episeyo -- anchored offshore the West African country has already been much delayed. First output had been expected to start in the second quarter of 2017.
Cameroon LNG was one of only two new supply projects that had been set to start up in the first half of this year -- after Cove Point in the US -- with other new production facilities due online later in 2018.
"The first cargo has slipped by a few weeks," a Perenco spokesman said. "It is now scheduled for April 22/23 but may be delayed by a further week, until the end of the month," he said.
Perenco and its partners, Cameroon's state-owned Societe Nationale des Hydrocarbures and Golar LNG, took the final investment decision on the facility in November 2015.
The FID coincided with a deal with Gazprom Marketing & Trading to buy all of the LNG to be produced from the project over its eight-year life.
Gazprom will be the sole offtaker of the project, which is based on the 500 Bcf of gas reserves from the offshore Kribi fields.
Golar in March said it had begun LNG production from the plant, with final commissioning on track for mid-April 2018.
Once it delivers its first cargo, Cameroon will join the likes of Algeria, Nigeria, Angola, Equatorial Guinea and Egypt as African LNG exporters.
Productivity growth is slowing
EnerCom has released the latest Effective Rig Count, examining the state of drilling activity in major shale basins.
The EERC is now 2,712, meaning the current level of growth would require 2,712 rigs from January 2014 to achieve. Rigs in today’s drilling environment are now 3.09 times more productive than January 2014 rigs, as operations have shown significant improvement since before the downturn.
https://www.oilandgas360.com/effective-rig-count-passes-2700/
Energy Transfer Partners' Rover natural gas pipeline asked US regulators on Friday to quickly give it permission to begin service on additional facilities so stranded US Northeast shale gas can be transported to Midwest markets.
The project began initial service on September 1, 2017, bringing about 700 MMcf/d of its certificated 3.25 Bcf/d capacity online, on a limited path. Since then, Rover has placed additional supply laterals and compressors into service, raising capacity to current levels of around 2 Bcf/d.
The latest in-service request to the US Federal Energy Regulatory Commission involves mainline compressor stations, mainline pipeline segments and a Vector Pipeline delivery meter station. The second phase of the project, the market zone north section, is designed to allow access to Vector and the Dawn Hub in Ontario.
"Rover respectfully requests that the commission promptly issue an order granting commencement of service by April 25, 2018, so that its shippers can make the requisite contractual and operational arrangements to flow natural gas on the Rover Pipeline system," the operator said.
It added that "Rover's shippers have urgently requested Rover to place these facilities in service."
Earlier this month, Rover fired back at landowners who oppose start of service on several laterals associated with the project. Rover started up its Clarington and Seneca laterals, and since then it has been seeking to place additional laterals into service.
The American Petroleum Institute reported Tuesday that U.S. crude supplies fell by roughly 1 million barrels for the week ended April 13, according to sources. The API data also showed a decline of nearly 2.5 million barrels in gasoline stockpiles, while inventories of distillates fell by 854,000 barrels, sources said.
Supply data from the Energy Information Administration will be released Wednesday morning. Analysts polled by S&P Global Platts expect the EIA to report on Wednesday a rise of 625,000 barrels in crude supplies. They also forecast supply declines of 1.9 million barrels for gasoline and 1.6 million for distillates.
Royal Dutch Shell said it will resume deep-water exploration for oil and gas off Egypt’s Mediterranean coast, Executive Vice President Sami Iskander told a news conference on Tuesday.
Egypt is looking to production from recently discovered fields to halt energy imports by 2019.
A petroleum ministry official said last month that new production at Shell’s West Nile Delta field 9B is expected to reach 350-400 million cubic feet per day by 2019.
Separately, production from the first 3 wells in the field is set to begin in the 2018-2019 fiscal year.
The field is owned by Egypt’s General Petroleum Corporation (EGPC), Malaysia’s Petronas and Shell.
The Papua New Guinea-focused oil and gas producer and PNG LNG stakeholder, Oil Search, saw its first-quarter production slashed due to the shut-in following the February earthquake.
Compared to the 7.59 million barrels of oil equivalent produced in the last quarter of 2017, first quarter 2018 production was at 4.84 mmboe, 36 percent lower, OilSearch said in a report.
Speaking of the company’s results, Oil Search’s managing director, Peter Botten said the first quarter was one of the most challenging in the company’s and Papua New Guinea’s history.
In weeks following the earthquake, numerous aftershocks took place, many of a magnitude greater than 5.
As a precautionary measure to ensure the safety of all staff and contractors, as well as assess any damage to facilities, production from Oil Search’s operated oil and gas fields in the Highlands was shut-in.
ExxonMobil, operator of the PNG LNG Project, also shut in the wells at Hides, the Hides Gas Conditioning Plant (HGCP) and the LNG trains at the LNG plant site near Port Moresby. The project has since restarted production and shipped its first cargo following the restart.
Before the production was shut in, the project shipped a total of 20 LNG cargoes, 18 being under long-term deals while two were sold on the spot market. this compares to 28 cargoes sold in the previous quarter.
The company has also revised its production guidance for 2018, as it is currently forecast to be in the range of 23 to 26 million barrels of oil equivalent, compared to the previous guidance of 28.5-30.5 mmboe, prior to the earthquake. However, Oil Search noted these estimates may change, subject to completion of remaining remedial work.
LNG expansion activities progress despite earthquake
While the PNG Highlands earthquake disrupted our production operations during the quarter, it had no impact on the progress of LNG expansion activities, which have accelerated following the achievement of broad alignment on the preferred downstream development concept between Oil Search, Total and ExxonMobil in early 2018, Botten said.
“The proposed development concept comprises the construction of three LNG trains, with total capacity of approximately 8 MTPA, on the existing PNG LNG plant site,” he said.
Two of these trains are expected to be dedicated to Papua LNG, supplied with gas from the Elk-Antelope fields, with the third expansion train underpinned by gas from the existing PNG LNG fields and the P’nyang field.
During the quarter, discussions on LNG expansion between the PNG LNG Project, P’nyang (PRL 3) and Papua LNG (PRL 15) joint ventures intensified in order to advance the technical concept, project financing and commercial agreements required to enable integration of the projects.
Oil Search expects to reach a decision on the front end engineering and design (FEED) phase in the second half of the year.
https://www.lngworldnews.com/oil-search-results-hit-by-earthquake-guidance-revised/
Stock levels were drawn down to their lowest point in seven years at the end of the winter season following back-to-back cold snaps in February and March that led to a significant increase in withdrawals.
ENTSOG said EU storage levels as of April 1 were at just 17.5% of capacity, compared with 26% at the end of the Winter 16-17 season.
"To achieve the same storage inventory level as the previous season more injection into storages would be needed," it said.
"Achieving a target level beyond 80% capacity will require injection levels significantly exceeding those observed over the three last summers," it said.
Ahead of the winter 2017-18, a total of 1,021 TWh (96.5 Bcm) of working gas volume was stockpiled, representing around 85% of capacity, but from a higher starting point of 26%.
The total increased storage demand this summer (April-September) to match that level, it said, would be 52 TWh -- the equivalent of 4.9 Bcm.
To have storages filled to 90% capacity by the end of September a total of 989 TWh (93.5 Bcm) of gas is required, ENTSOG said.
ENTSOG did, though, make the point that the storage injection season has been longer over the past few years.
"For many operators the injection season continues in October enabling a full injection if decided by market players," it said.
Total EU gas demand in the six-month period is expected to rise by just 0.8% to around 9,800 GWh/d (926 million cu m/d), ENTSOG said.
This, it said, is in line with the last two summers when demand rose due to an increase in demand for power generation and the need to refill storage stocks.
Nonetheless, ENTSOG said, the European gas network is sufficiently robust in most parts of Europe to enable at least 90% stock level of the gas storages in preparation of the upcoming winter.
It is also strong enough to enable: maintenance to ensure infrastructure reliability in the long term; flexibility for network users' supply strategy; and the supply of gas to Ukraine at volumes comparable to previous summer seasons.
SUPPLY ASSUMPTIONS
To meet the 90% target, ENTSOG assumes that overall summer supplies of 2,640 TWh (250 Bcm) would be required.
These volumes differ under an 80% target assumption (2,531 TWh) and a 100% target assumption (2,749 TWh).
"Reaching a 100% storage level would imply an increase in the imports from LNG, Russia and Norway compare with the supplies for target 90%," it said.
Lower domestic gas production is also expected -- mainly due to the decline in output from the Dutch Groningen field.
ENTSOG said that this summer, domestic European production was expected to total around 580 TWh (55 Bcm), down by around 9.4% from some 640 TWh in Summer 2017.
Under the 90% stock fill scenario, 35% of supplies will come from Russia, 22% from Norway, 22% from domestic production, 12% in the form of LNG, 7% from Algeria and 2% from Libya.
ENTSOG said that under the given supply assumptions, the summer supply outlook "confirms the capability of the European gas network to enable shippers to reach at least a 90% stock level in all but one underground gas storages by the end of this Summer 2018."
The exception to the 90% target is in Latvia.
In the specific case of Latvian storage, the 90% target is not expected to be achieved due to the limited entry capacity in the country and the assumption that no gas coming from northwest Russia will be injected.
This assumption, it said, stems from the fact that in the summers of 2016 and 2017, mainly volumes of gas intended for customers in Latvia were injected into the storage.
"This resulted from the decision of Gazprom not to use Incukalns facility for customers in Russia since, after enhancement of gas transmission network in the Russian northwest region, there are enough capacities in the network to supply customers directly by pipeline," it said.
Australia’s Woodside Petroleum said on Wednesday first quarter revenue rose 30 percent from a year earlier on increased output and higher liquefied natural gas (LNG) prices.
The country’s largest independent oil and gas producer said revenue rose to $1.17 billion for the quarter ended March 31, compared with $902.4 million a year ago.
Output increased to 22.2 million barrels of oil equivalent (mmboe) from 21.4 mmboe in the March quarter last year, helped by a ramp-up in production at the Wheatstone LNG project in Western Australia.
“Output from Wheatstone underpinned an increase in LNG production in the first three months of this year,” said Woodside CEO Peter Coleman.
The company bought a stake in the Wheatstone project, which is operated by Chevron Corp, in 2015. Woodside expects Wheatstone to contribute more than 13 mmboe to annual output once it becomes fully operational.
The company confirmed that the first LNG from the project’s second train is expected by the second quarter of 2018.
Revenue for the quarter was underpinned by higher prices for LNG, which are determined by prices for crude oil.
Woodside in February also upped its stake in the Scarborough gas field by buying ExxonMobil Corp’s 50 percent interest.
Gazprom Neft has confirmed the digital transformation of its business as a priority area of focus, with the creation of a new Digital Transformation Directorate, to be headed by Andrei Belevtsev as chief digital officer (CDO).
The key objective of the Digital Transformation Directorate will be to create a single and inclusive system covering the company’s full digital strategy, directed at game-changing improvements to the operational efficiency of all business processes, as well as the development of the company’s own smart services.
Commencing work in April 2018, the structural unit has now set about creating a long-term digital strategy for the company, to include plans for implementing new technologies, transforming organizational processes, and engendering a team culture in testing IT solutions. The new directorate will approve the company’s “road map” on digitalization, assess opportunities for synergies across the most viable projects, and will be involved in accelerating corporate change and developing digital competencies throughout the business.
Gazprom Neft’s plans include developing its own IT platforms for creating new information flows and datasets, and developing predictive analysis tools, with the requirements and architecture for a prototype platform already being worked out. Gazprom Neft plans also to begin developing new products and services based around the implementation of cutting-edge digital technologies.
Gazprom Neft has already implemented a range of successful projects over the past two years, including implementing blockchain technologies, AI systems, predictive analysis systems, and the Industrial Internet of Things. The creation of digital twins for wells, drilling sites and refining facilities has also proved highly effective. The Digital Transformation Directorate will be responsible for collating information and data on the company’s projects and its experience in implementing cutting-edge technologies, and will determine strategies for their further development.
Gazprom Neft CEO Alexander Dyukov commented, “Digital transformation is creating further competitive advantages for our company, further enhancing its technological leadership of the industry. We are already using digital technologies at every stage of the production chain; in upstream, refining and in sales. Further developing this crucial and integral area of activity requires a holistic and inclusive strategy, together with the identification of new — and breakthrough — opportunities for utilizing digital technologies throughout all areas of our business."
An opinion issued by a two-judge panel of the Pennsylvania Superior Court threatens to set back the state's natural gas sector, attorneys for Southwestern Energy asserted Monday in asking the full court to review the decision.
At issue is an April 2 decision in the case of Briggs vs. Southwestern Energy, in which a Susquehanna County family claimed that the producer had trespassed on their property by hydraulically fracturing two wells on a neighboring tract of land.
The two-judge panel reversed a ruling by the Court of Common Pleas of Susquehanna County that had granted Southwestern's request for a summary judgment to dismiss the case. That decision sends the case back to the lower court.
The case has drawn the attention of the state's exploration-and-production industry, which fears that the Superior Court's decision, if allowed to stand, could throw into question the industry's right to produce oil and gas from fractured wells under the more than century-old doctrine of "rule of capture."
Also on Monday, the American Petroleum Institute filed in support of Southwestern's application for an en banc re-argument of the case.
In its filing, Southwestern argued that the decision to remand the case "threatens to set back this industry" and runs counter to Pennsylvania Supreme Court precedent.
Rather than being a new production technique, as the decision seemed to imply, fracking "has been utilized in the vast majority of the more than 75,000 conventional and unconventional wells drilled in this state over the past 50 years," the producer argued.
Southwestern attorneys stated that the decision of the two-judge panel "creates a new type of tort liability that stands to unleash a torrent of speculative lawsuits that could result in harm to Pennsylvania citizens who receive royalty payments or work in the oil and gas industry."
In its filing, API noted that the "rule of capture," which holds that oil and gas resources belong to the person or entity able to capture them through drilling wells, dates back to the state's first oil boom in the 19th century. The court's decision risks establishing a new legal claim, "trespass by fracture," that could "create a flood of unwarranted and unanticipated claims and litigation," according to the API filing.
ATTORNEY SAYS FAMILY HAS RIGHT TO COLLECT DAMAGES
However, Laurence Kelly, a Montrose, Pennsylvania-based attorney representing the Briggs family, dismissed those arguments, saying his clients have the right to collect damages from Southwestern under the laws of trespass and conversion.
"We are not alleging entitlement to royalties," Kelly said in an interview Tuesday. "My argument is that the rule of capture does not provide immunity to the gas companies."
Kelly said he is satisfied with the Superior Court decision to remand the case to the lower court. However, he declined to say how he planned to overcome Southwestern's arguments that the case should be dismissed. "I'm not going to discuss trial tactics," he said.
Spanish giant Repsol has made an oil discovery with the Ivela-1 exploration well off the coast of Gabon. Joint venture partner Woodside Petroleum revealed in its first quarter report on Wednesday the wildcat was completed during the first quarter of the year and ll intersected a 78-metre gross oil column.
http://www.upstreamonline.com/live/1473814/repsol-strikes-oil-off-gabon
China Petroleum and Chemical Corp., or Sinopec, Tuesday said that its newly built Tianjin LNG terminal has started commercial operations, the company said on its website Wednesday.
The terminal comprises an LNG receiving terminal, pipelines, docks and associated facilities. It has an annual transfer capacity of 3 million mt, which can supply around 4 Bcm/year of gas to the China market, the company said.
The Tianjin LNG terminal, which is connected to Sinopec's Shandong natural gas pipeline, the Ordos-Anping-Cangzhou natural gas pipeline as well as the company's natural gas storage facilities in northern China, supplies natural gas to the Beijing-Tianjin-Hebei-Shandong regions through its pipeline networks, Sinopec said.
Construction work on the LNG terminal began on September 30, 2014, and was completed on March 28, 2017. The terminal has been ready to begin operations since last July, Sinopec added.
The Tianjin LNG terminal received its first commissioning cargo on February 6, S&P Global Platts reported previously.
Sinopec's Tianjin LNG terminal is expected to ease the tightness in supply of natural gas in the northern regions, market sources said.
China launched a policy to encourage the use of gas for heating instead of burning coal in January in an effort to combat air pollution.
This had boosted gas demand and caused a brief period of supply shortages in the northern regions, Platts reported previously.
Interior Secretary Ryan Zinke said on Tuesday he will not lower royalty rates for offshore oil and gas lease sales “at this time” despite a recommendation from an advisory panel to do so.
Zinke cited the success of President Donald Trump’s energy strategy as a reason for not adhering to the recommendation of his appointed Royalty Policy Committee, which in late February advised him to slash the royalty rate for offshore drilling by nearly one-third to 12.5 percent.
“Right now, we can maintain higher royalties from our offshore waters without compromising the record production and record exports our nation is experiencing,” Zinke said.
The committee’s late February recommendation to lower the royalty rate companies pay on petroleum produced in federal offshore waters to 12.5 percent from 18.75 percent was meant to encourage more U.S. energy production.
Democrats and environmental groups decried the recommendation as a giveaway to some of the most profitable companies in the world that would rob taxpayers of revenues.
Vincent DeVito, the chair of Zinke’s Royalty Policy Committee, said Tuesday’s decision reflected improving market conditions for the oil and gas industry.
Last month, oil and gas drillers bid on only a tiny fraction of Gulf of Mexico acreage offered in the largest lease sale in American history, which Zinke said would be a “bellwether” of industry demand in the region.
When asked about whether there was data supporting the policy committee’s recommendation last month at a Senate hearing, Zinke said there was no data yet but there was an argument to be made for lowering the royalty rate.
China National Offshore Oil Corp (CNOOC) on Wednesday sold cargoes of liquefied natural gas (LNG) on a domestic exchange for the first time, the latest step by China to boost supplies of the clean fuel as the nation shifts away from coal.
CNOOC sold 60,000 tonnes of LNG for delivery in July at prices between 3,380 yuan ($537.80) to 3,390 yuan per tonne. It sold another 30,000 tonnes for November delivery at between 4,200 yuan and 4,210 yuan per tonne through an auction on the Shanghai Petroleum and Gas Exchange, an official at the exchange and a source briefed on the auction details said.
Prices for November delivery was 200 yuan lower than the spot LNG prices in the same period last year, the source said.
Eighteen bidders took part with the total volume sold within 30 minutes and 12 companies won the bidding, two sources said.
“Interest in the auction was very strong,” he said. He declined to be identified as he was not authorised to speak to media. He would not disclose the identity of the interested parties.
Though the volume is tiny compared to the nearly 70 million tonnes of natural gas China imported last year, the auction could help Chinese industrial buyers avoid the shortages that occurred this past winter.
Ahead of the winter, China moved millions of residential customers from coal heating to gas heating as part of its fight against air pollution. Supplies, however, were not enough to meet the new demand and industrial users were interrupted to make residential supply available.
Buying forward supplies through auctions like the Shanghai Exchange’s would give factories a chance to lock in prices and gas ahead of the winter heating season.
More auctions would also help build liquidity on the Shanghai Exchange. CNOOC is likely to hold another auction next month, the exchange official said. China is the world’s third-biggest consumer of natural gas.
The exchange official would not disclose the cargo prices, but said they were “relatively low” compared with market expectations.
Shanghai launched its electronic platform in 2015 to create a pricing benchmark for China’s burgeoning gas market. It faces potential competition from a rival in Chongqing.
Trading volumes on the Shanghai Exchange were thin during its first two year, but picked up last year ahead of the gas crunch this past winter.
Saskatchewan joins Alberta in Trans Mountain fight
If fuel tanks in British Columbia run dry because of export restrictions from Alberta, it won't be able to look for help from Saskatchewan, the premier said.
Legislation proposed by the provincial government in Alberta could block exports of oil, natural gas or fuels to its neighbors. Alberta Premier Rachel Notely said the proposal was necessary because of restrictions put in place in British Columbia, which has voiced steady opposition to the expansion of the Trans Mountain oil pipeline.
Notely met during the weekend with Canadian Prime Minister Justin Trudeau and British Columbia Premier John Horgan to discuss the project. Through his Twitter account, Saskatchewan Premier Scott Moe said Horgan's administration has shown willingness only to stand in the way since that meeting.
"In the coming days, we'll be introducing legislation to join Alberta in restricting oil exports to British Columbia," he tweeted. "If fuel tanks in British Columbia start to run dry because Alberta has turned the taps off, it won't be Saskatchewan filling them up."
Horgan has been relatively quiet on Trans Mountain since the weekend meetings. His administration in January considered new regulations on bitumen, a heavier type of oil found in Canada. Included among the proposals was a restriction on transportation until the government determined what would happen if there was a spill of the thicker type of oil.
After spending more than $850 million since it petitioned federal regulators for the project, pipeline company Kinder Morgan last week said that opposition to its plans to triple the design capacity for its Trans Mountain network to the western coast of Canada exposed its shareholders to undue risk. That opposition, the company added, has led to increased provincial tensions.
Alberta's government estimated that pipeline projects like Trans Mountain could stimulate economic growth by as much as 2 percent by 2023. Notely said not moving ahead with the project was costing the Canadian economy around $30 million every day, adding her administration was in discussions to set up a financial mechanism to reduce the risk for Kinder Morgan.
Last Week Week Before Last Year
Domestic Production '000....... 10,540 10,525 9,252
Alaska ......................................... 488 498 530
Lower 48 ................................ 10,052 10,027 8,722
Exports ..................................... 1,749 1,205 565
Cushing down 1.1 mln bbls
Kinder Morgan Inc said on Wednesday that recent events confirm an investment in the Trans Mountain pipeline expansion may be “untenable” and said Ottawa’s pledge of financial support does not resolve political risk related to British Columbia’s opposition.
The comments come as the British Columbia (B.C.) government pledged to file a legal challenge by month-end to determine whether it has the jurisdiction to stop the C$7.4 billion ($5.9 billion) project, which was approved by the federal government in 2016 and would nearly triple capacity on the pipeline from Alberta to a Vancouver-area port.
Kinder Morgan Canada (KML.TO), a unit of Kinder Morgan, halted most spending on the expansion earlier this month and set a May 31 deadline to decide if it would scrap the project entirely, citing legal and jurisdictional issues.
“As we said then, it’s become clear this particular investment may be untenable for a private party to undertake. The events of the last 10 days have confirmed those views,” Chief Executive Steven Kean said on a conference call.
While Canadian Prime Minister Justin Trudeau has said Canada is prepared to offer financial aid to ensure the project goes ahead, Kean dodged a question about whether that support would ensure construction.
“They’re really two separate things,” he said. “Most of the investment is in British Columbia, where the government is in opposition to the project ... That is an issue that, in our view, needs to be resolved.”
The Trans Mountain expansion is considered crucial for Alberta’s oil industry which has been beset by transportation bottlenecks. It is fiercely opposed by some B.C. cities, some aboriginal groups, and environmentalists concerned about possible oil spills.
M&A ON THE TABLE
The company said while it is not in a position to move on takeovers until the uncertainty around Trans Mountain is resolved, it sees good opportunities in the western Canadian midstream space.
“There are some very capable players with good midstream assets,” Kean said, adding: “Intent is, and was, that KML would be the vehicle to invest in those opportunities.”
The company has a strong balance sheet and is well positioned for takeovers, especially if cash earmarked for capital projects is freed up, said M. Paul Bloom, investment manager with Bloom Investment Counsel.
“I think you can expect if the Trans Mountain pipeline does not go ahead (Kinder Morgan) will be bidders for various assets here in Canada, and probably fairly quickly as well,” he said.
Kinder Morgan Canada, which was spun off from parent Kinder Morgan in May last year, reported a net income of C$44.4 million ($35.17 million) for the first quarter ended March 31, down from C$46.8 million for the same period last year.
Texas-based Kinder Morgan separately reported net income available to common stockholders of $485 million, or 22 cents per share, in the quarter to the end of March, compared with $401 million, or 18 cents per share, a year earlier.
Shares of Kinder Morgan were up 1.6 percent at $16.43 in after-hours trading. Canadian shares closed up 2.8 percent at C$17.99, while the broader energy index rose 3.57 percent.
Exxon faces setback in Iraq as oil and water mix
Talks between Exxon Mobil and Iraq on a multi-billion-dollar infrastructure contract have reached an impasse, Iraqi officials and two industry sources said, in a potential setback to the oil major’s ambitions to expand in the country.
More than two years of negotiations on awarding the U.S. firm a project to build a water treatment facility and related pipelines needed to boost Iraq’s oil production capacity have hit difficulties because the two sides differ on contract terms and costs, the officials and sources told Reuters.
Unless the differences can be resolved, the project could be awarded to another company in a tender, the officials said, without elaborating on the points of dispute.
Losing the contract could deal a blow to Exxon’s broader Iraqi plans, as it would be handed rights to develop at least two southern oilfields - Nahr Bin Umar and Artawi - as part of the deal.
Exxon declined to comment.
Further delays to the project could also hold back the oil industry in Iraq, OPEC’s second-largest producer; the country needs to inject water into its wells or risk losing pressure and face severe decline rates, especially at its mature oilfields. As freshwater is a scarce resource in Iraq, using treated seawater is one of the best alternatives.
The Common Seawater Supply Project (CSSP), which would supply water to more than six southern oilfields, including Exxon’s existing West Qurna 1 field and BP’s (BP.L) Rumaila, was initially planned to be completed in 2013 but has now been delayed until 2022.
“The CSSP would be expensive and challenging but there’s opportunity here (for Exxon) ... to get access to resources on a very large scale and to achieve something and really make a difference to its own business,” said Ian Thom, principal analyst at consultancy Wood Mackenzie.
Many of the world’s biggest oil companies, like BP, Total (TOTF.PA), Royal Dutch Shell (RDSa.L) and Eni (ENI.MI), have operations in Iraq, where a low-return environment and strict contract terms have squeezed returns in recent years.
With total oil production at West Qurna 1 at around 430,000 bpd, Exxon’s presence in Iraq is small compared with dominant player BP whose Rumaila oilfield accounts for around a third of the country’s total production of around 4.4 million bpd.
While the Texas-based firm is looking to grow in Iraq, its geographical focus remains on the Americas, including U.S. shale fields and Brazil, in contrast to rivals like France’s Total and Italy’s Eni who have been significantly expanding their activities in the Middle East in recent years.
‘ANOTHER APPROACH’
The talks between Iraqi authorities and Exxon are still ongoing, according to the industry sources and officials from the Iraqi oil ministry.
However the state-run Basra Oil Company (BOC), which is overseeing the project, said it could now tender the project this month in a parallel process with the aim of completing a first phase by 2022.
“We have this one approach but we can have another approach as well,” Abdul Mahdi al-Ameedi, head of the Iraqi oil ministry’s licensing and contracts office, told Reuters.
Iraq chose Exxon to coordinate the initial studies of the CSSP in 2010 [story here here]. At the time, Baghdad aimed to raise its oil production capacity to 12 million barrels per day (bpd) by 2018, rivaling Saudi Arabia. That target has been missed and now been cut to 6.5 million bpd by 2022 from around 5 million bpd now.
“Iraq can probably get to 5.5 million bpd production without a major seawater supply project, but I think they will struggle to get to 7 million bpd,” said Thom.
Negotiations with Exxon fell through in 2012 due to red tape and cost disputes. In 2015, the company reentered talks with the oil ministry, this time in partnership with China's CNPC and with the CSSP folded into a much bigger development project known as the Integrated South Project. [story here here]
CNPC did not reply to a request for comment.
For Iraq, going down the non-Exxon route raises two major concerns: how to integrate the project between the water treatment facility and the oilfields and how to finance the project, Thom said.
Two Iraqi oil sources told Reuters that taking the non-Exxon path would raise financing concerns for Iraq.
“If you decouple it, it’s not the same project,” one of the industry sources said of a non-integrated project.
Projected costs of the scheme have not been disclosed.
ILF Consulting Engineers, which did the front end engineering and design (FEED) for the project in 2014 based on treating 12.5 million bpd of seawater transported to six oilfields, put the cost at $12 billion.
The capacity has been revised downwards, with the first phase set to have a 5 million bpd of water, and in the second phase an additional 2.5 million bpd of water will be added for additional fields.
The shipping industry and oil refineries are not doing enough to prepare for new rules cutting the amount of sulphur that vessels can emit from 2020, according to the head of the International Energy Agency’s (IEA) oil industry and market division.
The new rules drastically cut the amount of sulphur that the world’s ships can emit, from 3.5 percent currently to just 0.5 percent. Ships that install “scrubbers” that remove sulphur as the fuel is burned can continue to use higher sulphur fuels, but the rest of the world’s fleet will need to purchase lower sulfur fuel in order to comply.
“The reality is that the industry has already passed the date beyond the smooth transition,” the IEA’s Neil Atkinson, told an energy seminar in Oslo. “We don’t think it’s going to be a smooth transition.”
The change is the most significant for the global shipping and refining sectors in decades, and experts and analysts expect it to reduce fuel oil demand by 2-3.5 million barrels per day (bpd) as a result.
Atkinson said that there has not been enough investment in scrubbers, and that the IEA is worried about the market’s ability to meet demand for the low sulphur marine fuel that ships without scrubbers will need.
“There will be a scramble for new compliant fuel... it could be a huge issue in terms of a spike in prices for marine fuel and a very, very disruptive market, and that’s only 18 months away,” he said.
While some refineries have announced investments in new pieces of equipments to strip sulphur from the fuel they produce, enabling them to supply more compliant fuels, analysts at KBC said that some 40 percent of Middle Eastern and European oil refineries are not ready for the new rules.
Experts have said the deadline is now too close for new upgrades to be ready in time.
“There is going to be a huge disruption in the shipping markets, particularly in those markets where (there) is rigorous enforcement,” Atkinson said.
Halliburton released the e-cd Plus system – a new technology that automates and enhances continuous circulation connections during drilling and tripping operations. Continuous circulation provides the uninterrupted flow of drilling fluid into the well throughout the process of adding or removing drillpipe joints to the drillstring.
After connecting the e-cd Plus system to surface control equipment, a proprietary software remotely controls all steps of the flow diversion and side port connection process that is currently completed via manual human operation. The overall system maintains a small footprint and can reduce the number of rig personnel required to safely provide continuous downhole circulation.
The system also helps improve success in challenging projects such as wells with narrow pore pressure/fracture gradients by keeping bottom-hole pressure and fluid properties constant, cooling equipment in high-pressure and high temperature applications and providing continuous wellbore cleaning by movement of cuttings in extended reach wells.
"We designed the e-cd Plus system to meet the growing market demand for continuous circulation technology in highly regulated markets by improving safety, efficiency and reducing overall connection time to save valuable rig time," said Daniel Casale, vice president of testing and subsea. "With the automated system, not only is a dual pressure barrier maintained during operations, but it has the versatility to run either as a standalone solution or to be used in managed pressure drilling operations to help reduce risk in difficult wells."
On a recent project in the North Sea, an operator was previously unable to successfully reach target depth due to poor cuttings movement and wellbore stress. They deployed the automated diversion portion of the e-cd Plus system to provide continuous circulation over two well sections and approximately 6,800 ft of total open-hole drilling. The operator successfully reached total depth and cemented the liner in each section, helping eliminate the challenges that halted operation in the previous offset well.
http://www.worldoil.com/news/2018/4/18/halliburton-launches-automated-continuous-circulation-system
Scottish engineering firm Weir Group plans to buy US mining tools firm Esco Corporation for about £900million.
Glasgow-headquartered Weir, which makes pumps, wellheads and valves, said the deal would create a “unique mining services provider”.
Weir, which employs about 14,000 people in more than 70 countries and has a number of bases in the north-east of Scotland, also said the takeover would result in savings in excess of £20million.
The transaction is expected to go through early in the third quarter.
Weir also said it would sell its flow control division as it looks to prioritise growth in minerals and oil and gas.
Weir chief executive Jon Stanton said: “We are acquiring a high quality business at the right time, with the market in the early stages of its recovery, providing opportunities for long-term growth. We intend to initiate a process to sell flow control to reallocate capital to build further on our core platforms.
“Weir will be a focused premium brand business with leading technology, increased scale, an improved mix of mining and oil and gas markets, higher aftermarket sales and the financial strength to invest in growth.”
The company also announced plans to list 16.7million new shares to help pay for the acquisition.
In a trading update, Weir said first quarter orders were up 22% year-on-year, thanks in part to high activity levels for US onshore oil and gas production.
https://www.energyvoice.com/other-news/169332/weir-in-900m-takeover-of-us-mining-tools-firm/
Oil and gas producer Santos Ltd on Thursday cuts its full-year production guidance slightly and reported a near 7 percent dip in first quarter output after its Papua New Guinea liquified natural gas production was hit by a quake in February.
Santos, the target of a $10.4 billion takeover offer by U.S. based investor Harbour Energy, said production for the quarter ended March 31 eased to 13.8 million barrels of oil equivalent (mmboe) from 14.8 mmboe a year ago.
“The temporary PNG LNG shutdown, combined with planned maintenance at our facilities in Moomba and in Queensland, reduced first quarter production,” the company said.
The company narrowed its production forecast range for 2018 to 55-58 mmboe from 55-60 mmboe expected earlier, taking into account the outage from its LNG operation in Papua New Guinea (PNG).
In February, a 7.5 magnitude quake rocked Papua New Guinea’s energy-rich interior, causing landslides and killing 100 people, and forcing PNG LNG project operator ExxonMobil Corp to shut down operations. Production resumed last week, about two weeks ahead of schedule.
Santos is a foundation partner and holds a 13.5 percent interest in PNG LNG.
Revenue for the quarter, however, rose 16.1 percent to $794 million from $684 million a year ago, thanks to higher commodity prices, the company said in its quarterly earnings report. Oil prices currently stand at around $73.48 per barrel.
On the Harbour proposal, Santos directors reiterated that shareholder should ‘take no action’, adding that Harbour had commenced due diligence process on the company.
Russian oil company Lukoil plans to produce 30,000-40,000 mt/month, or 360,000-480,000 mt/year, of 0.5% sulphur bunker fuel after sulphur emission limits for the shipping industry are cut to that level.
Global bunker sulphur limit wil drop from 3.5% to 0.5% at the start of 2020, forcing most shipowners to switch from fuel oil to new, more expensive 0.5% sulphur blends.
Lukoil has already developed its new 0.5% sulphur product, which it will produce at its Volgograd refinery, Anna Zhigulina, leading specialist in Lukoil's foreign vessels bunkering department, said at the International Bunker Conference in the Baltic region Wednesday.
The company's figures for its production plans are "very rough" and subject to change as Lukoil learns more about its Russian competitors' plans and likely demand from the shipping industry, Zhigulina said.
As well as 30,000-40,000 mt/month of 0.5% sulphur fuels, Lukoil plans to produce about 50,000 mt/month of ultra low sulphur fuel oil and about 50,000 mt/month of marine gasoil from 2020.
The numbers are for the Russian bunker market only and do not include products and blending components made for export, Zhigulina said.
Lukoil is likely to review its plans in the second half of 2019 once 2020 bunker fuel demand becomes clearer, and the company may increase production at that point, she added.
Three tankers hauling liquefied natural gas sailed through the Panama Canal on the same day this week, marking a first for the newly expanded waterway and highlighting the booming global gas trade.
All three ships -- Gaslog Hong Kong, Gaslog Gibraltar and Clean Ocean -- entered the canal on a staggered basis from the Pacific side Tuesday and had completed their crossings by early Wednesday, according to vessel tracking data compiled by Bloomberg. A representative for the canal authority confirmed the tanker moves.
The crossings underscore how the LNG trade has surged worldwide as new export facilities from the U.S. to Australia rumble to life and buyers in Asia boost their demand for the fuel. Since the canal completed a $5 billion expansion almost two years ago, traders and terminal developers have been closely watching the authority’s ability to accommodate the jump in tanker traffic.
Dominion Energy Inc.’s Cove Point LNG terminal -- the second to send shale gas overseas -- started commercial service this week, roughly two years after Cheniere Energy Inc. opened up its Sabine Pass terminal in Louisiana. Thus far, Sabine Pass has shipped more than 300 cargoes to 26 countries.
UK’s giant BP and India’s Reliance Industries have sanctioned the second phase of integrated Block KG D6 development, the ‘Satellite cluster’ project, located in the Bay of Bengal off India.
The companies are moving forward to develop the Block’s discovered deep-water gas fields in an integrated series of projects, bringing new gas production for India, BP said in a statement on Thursday.
The ‘Satellite cluster’ is the second of three projects in the Block KG D6 integrated development. The first of the projects, development of the ‘R-Series’ deep-water gas fields, was sanctioned in June 2017.
Together, the three projects will develop a total of about 3 trillion cubic feet of discovered gas resources with a total investment of c. INR 40,000 crore ($6 billion).
According to BP, they are expected to bring a total c. 30-35 million cubic meters (1 billion cubic feet) of gas a day new domestic gas production onstream, phased over 2020-2022.
Mukesh Ambani, Chairman and Managing Director of Reliance, said: “In consonance with our announcements last year to raise domestic gas production, we are delighted to announce the on-schedule progress of the Satellite cluster in the east coast of India. This development supports the country’s imminent need of increasing domestic gas supply and is a firm step towards making India a gas-based economy.”
BP chief executive, Bob Dudley, said: “Through our partnership, Reliance and BP are able to develop these discovered gas resources efficiently and economically, working closely with the Government of India. These new developments will produce much needed energy for India’s thriving economy.”
Integrated field development of deep-water gas fields
The Satellites cluster is a dry gas development and comprises four discoveries with five well subsea development in ~1700 meters water depth, up to ~15 kilometers east and southeast of the producing D1D3 fields in KG D6.
The first of the KG D6 projects to be sanctioned, the R-series project, is already in execution phase with all major contracts awarded. The Satellites cluster project will draw on execution synergies with the R-series project being developed concurrently.
India today consumes over 5 billion cubic feet a day of natural gas and aspires to double gas consumption by 2022. Gas production from the integrated development is expected to help reduce India’s import dependence and amount to over 10% of the country’s projected gas demand in 2022.
Brazil’s state-controlled oil company Petroleo Brasileiro SA is considering a proposal to divide its refining assets in two regional blocks and sell 60 percent stakes in them, the company said in a securities filing on Thursday.
Petrobras, as the company is known, will present its suggestions for the partnership model to the refineries at an event Thursday in Rio de Janeiro.
The company is considering including two refineries and logistic assets in each regional block, one in the Northeast and one in the Southern region of the country, according to its planned presentation.
The northeastern block would have refineries in the states of Pernambuco and Bahia, and the southern block, two units in the states of Paraná and Rio Grande do Sul. Each block would include logistics assets such as terminals and pipelines.
The model to be presented is the result of internal discussions but no final decision has been made, and the company hopes to discuss the model with private investors, the filing said.
The Asian naphtha physical crack spread hovered near three-month low levels on the back of strong underlying crude markers, amid weak buying interest after the market moved into a new trading cycle.
Front-month ICE Brent crude futures have been steadily climbing, having reached the highest level in more than three years of $72.50/b at the Asian close on March 13. The crude futures was last seen higher at $75.94/b on November 27, 2014. The CFR Japan naphtha physical crack spread on the second-line naphtha trading cycle against prompt-month ICE Brent futures declined steadily to a near three-month low of $65.275/mt Wednesday. The crack spread had peaked at $86.275/mt on March 29, which was the highest level in three months.
The backwardated market structure on the Asian naphtha physical spread crimped a little as well, with the spread between CFR Japan second-line naphtha trading cycle on a 45-60 days delivery basis and the third-line trading cycle on a 60-75 days delivery basis dipped to a month-to-date low at plus $3.00/mt on April 17.
Market sources said buyers were cautious in taking more supplies given that a slew of naphtha cracker units were lined-up in the coming months for maintenance in the north Asian region, which suggested lower requirements.
In Japan, Mitsubishi Chem's No. 2 naphtha steam cracker at Kashima will be shut for maintenance over May 9-July 3. The naphtha cracker unit has a capacity of 526,000 of ethylene and 260,000 mt/year of propylene.
Keiyo Ethylene naphtha cracker unit in Chiba, which has a capacity of 700,000 mt/year of ethylene and 400,000 mt/year of propylene, will be shut for maintenance over May 13 to July 3.
Sinopec Zhenhai Refining & Chemical in China has scheduled to shut its naphtha-fed steam cracker at Zhenhai, Zhejiang province, from H2 May until end-June, or about 40-45 days, for maintenance, S&P Global Platts reported previously. The cracker is able to produce 1 million mt/year of ethylene, 550,000 mt/year of propylene and 180,000 mt/year of butadiene.
Starting June, Mitsui Chem will be taking its Sakai naphtha cracker offline between mid-June to end-July. The cracker has a capacity of 500,000 mt of ethylene and 280,000 mt/year of propylene.
This is also followed by Formosa Petrochemical's plan to shut its No. 1 naphtha-fed steam cracker in Mailiao, Taiwan, from June 5 to July 17 for annual maintenance. The No. 1 steam cracker is able to produce 700,000 mt/year of ethylene and 350,000 mt/year of propylene.
End-users said key ethylene-naphtha cracking margin had been relatively flat since it last touched a four-month high of $777.50/mt on March 13.
The CFR Northeast Asia ethylene over CFR Japan naphtha spread averaged around $758/mt in the first three trade sessions this week and a week ago.
The naphtha cargo differentials reflected this weakness when the CFR Japan naphtha and CFR Korea naphtha premiums edged down on Wednesday to plus $8.50/mt and plus $7.50/mt, respectively, both at its month-to-date low. On April 6, the CFR Japan naphtha premium was at the highest level in three years at $15.00/mt, while the CFR Korea naphtha premium hovered at $14.50/mt around the same time, which was the highest level in more than three and a half years.
Planned and unplanned outages continued to bedevil Norwegian natural gas flows to the UK and European continent Thursday.
Heimdal output down 10.3 million cu m/d
Kollsnes capacity reduced by 18.5 million cu m/d
Capacity at the Heimdal gas field remained down by 10.3 million cu m/d, as it has been since Saturday, with the drop in output affecting both within-day and day-ahead gas. Norwegian transmission system operator Gassco puts the expected event duration at six to seven days.
Capacity at the 144.5 million cu m/d Kollsnes gas processing plant has been reduced since Saturday. Within-day and day-ahead flows were down by 18.5 million cu m/d Thursday, with Gassco estimating that corrective maintenance will last a further 10 to 13 days.
These unplanned events come at the beginning of the summer maintenance schedule. Flow capacity from Norway to the UK has been reduced by about 12% since late March due to work at the St. Fergus receiving terminal on Scotland's east coast, which is due to end at the beginning of the April 25 gas day. Additional maintenance at the terminal is planned for May.
Norwegian natural gas flows into the UK National Transmission System fell to their lowest in over six months during Tuesday's gas day as the recent spate of planned and unplanned outages hit the UK harder than Continental European markets, data from S&P Global Platts Analytics showed Wednesday.
Last October, at the height of a political crisis in Iraq’s Kurdistan region, a letter arrived at the Iraqi oil ministry in Baghdad from Igor Sechin, head of Kremlin oil major Rosneft.
The Baghdad government was showing a “lack of constructive position and interest” about Rosneft’s offer to develop southern Iraqi oilfields, Sechin wrote in the letter, a copy of which was seen by Reuters.
Kurdistan, a region of about 6 million people in northern Iraq, had just tried and failed to break away from the rest of the country. Baghdad had dismissed the Sept. 25 independence referendum and sent in troops to seize control of key oilfields - Kurdistan’s main source of income.
Now Sechin, one of the closest allies of President Vladimir Putin, said that given Baghdad’s reluctance to work with Rosneft, his firm would instead do business with the Kurdistan Regional Government (KRG), which showed “a higher interest in expanding strategic cooperation”.
Russia InsightTake a deep dive into the mechanisms of Russian political and economic life.
Global powers including the United States and European Union, which had previously expressed sympathy with the Kurdish independence drive, would eventually reassure Baghdad they recognized its sovereignty over the whole of Iraq, including Kurdistan.
But there was no hint of such conciliation in Sechin’s letter. Rosneft had pledged to invest billions of dollars in Kurdistan to the anger of the Baghdad government. Now, instead of backing off, it was doubling down.
And Sechin held a stronger hand than many Iraqi officials realized, according to seven sources familiar with the matter. Days before, Rosneft had taken over ownership of landlocked Kurdistan’s oil export pipelines to Turkey from the KRG in return for $1.8 billion.
The aim of the deal for Rosneft was not only commercial, but to cement Russia’s political influence in Iraq and the Middle East, according to the Rosneft, oil industry, Kurdish and Iraqi government sources.
Control of the pipelines has given Rosneft a central role in ongoing talks between the KRG and Baghdad aimed at resuming full oil exports, which were disrupted by the referendum and Iraqi seizure of oilfields, said the sources.
Kurdistan has large oil reserves - possibly a third of Iraq’s total - and its exports are vital to both the regional and national economies.
In a sign of Rosneft’s influence, Kurdish officials have said they will not restart oil flows and transfer funds raised to the Iraqi government unless pipeline transit fees are paid to the Russian oil major, according to three industry sources in Erbil and Baghdad.
Iraqi oil minister Jabar al-Luaibi effectively recognized the firm’s growing role in Kurdistan when he met Sechin’s right-hand man Didier Casimiro in Baghdad this month and said he was ready to cooperate with Rosneft “in renovating pipelines”.
Rosneft, Sechin, the Kremlin and the Iraq’s prime minister’s office did not respond to requests for comment on this story. Sechin and the Kremlin have repeatedly said Rosneft’s projects are purely commercial, not political.
The Iraqi oil ministry declined to comment on any political aspects of the Rosneft deal.
FROM CARACAS TO NEW DELHI
Rosneft’s actions in Kurdistan, a region long allied to the United States, provide an insight into how the Kremlin uses Rosneft - and its bold chief executive - as an instrument of Russian foreign policy across the world, from Erbil to Caracas and New Delhi, the sources said.
Many countries, including Italy and France, have used their oil majors as tools of foreign policy, but Moscow’s use of Rosneft in this way has increased significantly over the past two decades under Putin’s rule.
For Kurdistan, Russia’s growing influence represents a sharp geopolitical reversal. The region has been closely aligned to the United States since the toppling of Saddam Hussein during the U.S.-led invasion of Iraq in 2003.
Amos Hochstein, who served as the U.S. Special Energy Envoy in the Obama administration, said while Rosneft and other Russian state firms sought to make profits, they also acted as a political entities when necessary.
“They report directly to President Putin. Not every transaction that they do is political. But when Putin wants to perform a political transaction, they will definitely do it,” he told Reuters. “Russia doesn’t have a lot of tools to exercise political influence, and energy is the most efficient one”.
Baghdad, which does not recognize the deal for the pipelines, has found itself in a difficult situation.
The Iraqi government’s finances have been strained by its battle with Islamic State so it has little money to build new pipelines from Kurdistan, while it is loath to significantly disrupt the region’s oil flows, which it is banking on to deliver much-needed revenue.
‘SECOND FOREIGN MINISTER’
The role played by Rosneft in furthering Kremlin foreign policy is not unique to Iraq and has also played out in other parts of the world, according to the Rosneft and industry sources.
“Sechin behaves like a second Russian foreign minister. Or to put it differently, he represents the economic might behind Russian foreign policies,” said one of the industry sources, an acquaintance of the Rosneft boss. “Very often these policies are about poking the Americans right in the eye.”
In Venezuela, Rosneft lent around $6 billion to support the government. The company could end up owning large Texan refineries, currently belonging to Venezuelan state oil firm PDVSA, because the plants are collateral against the debt.
In India, Rosneft invested $13 billion in a refinery – an abnormally high price for an oil processing complex – as it sought to outbid Saudi firm Aramco and boost Russian ties with the country, traditionally allied with the United States.
Sechin said earlier this year in a rare interview with Frankfurter Allgemeine Zeitung he was confident that both Venezuela and Kurdistan would repay their debts in full and denied the deals were political.
Asked if he saw himself as a politician, the 57-year-old responded: “It is a difficult question. It often feels like I have already lived several different lives.
“I think the right word is a manager.”
Born in St Petersburg, he was sent in the 1980s to act as a military interpreter in Mozambique and Angola, where Moscow and Washington were fighting proxy wars.
Putin, who had known Sechin since the early 1990s in St Petersburg, took him to Moscow when he rose to power. Sechin helped him nationalize much of the Russian oil industry and was appointed Rosneft CEO in 2012.
MOSCOW MEETING
The Kurds have long argued that as an autonomous region of Iraq they have the authority to make agreements with foreign companies about pumping oil in their territory. In 2014, they started independent oil exports via Turkey.
Iraq’s central government, however, says any Kurdish deals with overseas firms, or to export oil from Kurdistan, are illegal without Baghdad’s blessing.
Russia was the only major world power that did not oppose the referendum, saying it understood Kurdish aspirations for independence. The United States, EU, Turkey and Iran all urged Erbil to cancel or postpone the vote in the weeks before it.
As U.S. State Secretary Rex Tillerson unsuccessfully tried to negotiate a delay to the independence vote, Sechin was busy negotiating the pipelines deal.
In the days following the referendum, Kurdish officials including natural resources minister Ashti Hawrami were flown to Moscow to meet Rosneft executives and Russian foreign ministry officials, according to two of the sources.
On Oct. 20, at the peak of the post-referendum chaos when Iraqi Shiite militia backed by Iranian troops ousted Kurdish Peshmerga forces from Kirkuk oilfields, Sechin closed the deal.
Rosneft paid the last tranche of the $1.8 billion deal sum to Erbil, the sources said. Rosneft and Sechin, both subject to Western sanctions over Russia’s annexation of Crimea, have never disclosed how much the company paid for the pipelines.
U.S. President Donald Trump said on Thursday his administration may allow the sale of gasoline containing 15 percent ethanol year-round, which could help farmers by firing up corn demand but faces opposition from Big Oil.
The proposal marks the latest move by the Trump administration to navigate the rival oil and corn constituencies as they clash over the nation’s biofuels policy. Oil refiners say the Renewable Fuel Standard requiring them to add biofuels into gasoline is costly and displaces petroleum, while the farm sector says the law provides critical support to growers.
The Environmental Protection Agency currently bans the higher ethanol blend, called E15, during summer because of concerns it contributes to smog on hot days - a worry biofuels advocates say is unfounded.
Gasoline typically contains just 10 percent ethanol.
“We’re going to be going probably, probably to 15 and we’re going to be going to a 12-month period,” Trump told reporters during a White House meeting. “We’re going to work out something during the transition period, which is not easy, very complicated.”
Earlier on Thursday, EPA spokeswoman Liz Bowman said the agency “has been assessing the legal validity of granting an E15 waiver since last summer” and is awaiting an outcome from discussions with the White House, the Department of Agriculture and Congress before making any final decisions.
Monte Shaw, executive director of the Iowa Renewable Fuels Association, said the proposed shift to year-round E15 sales would be “very exciting news.”
“It would be a great morale boost for rural America, and more importantly a real demand boost if it can be moved forward quickly,” he said in an interview.
Under the RFS, the EPA sets the volume of ethanol and other biofuels that must be mixed into the nation’s fuel supply on a yearly basis - and a move to expand E15 sales could encourage the EPA to set those volumes higher in coming years.
Currently, refiners are required to blend around 15 billion gallons of ethanol into the nation’s fuel annually.
Shares of major biofuels producers rose slightly after the announcement. Archer Daniels Midland Co shares gained 2.7 percent to close at $45.30.
It was unclear, however, whether the move would help the refining sector - which has been lobbying hard instead for a cap on the price of blending credits that refiners must acquire to prove compliance with the RFS.
Greater blending of ethanol through year-round E15 sales would theoretically increase supplies of the tradable credits, and thus reduce prices. But at the same time, more ethanol translates to a smaller share of petroleum-based fuel in American gas tanks, which would hurt refiner sales.
The American Petroleum Institute, which represents big oil companies, issued a statement opposing Trump’s proposal to expand E15 sales, arguing that high-ethanol fuel can damage engines and is incompatible with certain boats, motorcycles and lawn mowers.
“The industry plans to consider all options to prevent such a waiver. The RFS is broken and we continue to believe the best solution is comprehensive legislation,” API Downstream Group Director Frank Macchiarola said in the statement.
Refiners’ shares were mixed after Trump’s comments, with Andeavor closing down 2.6 percent at $110.13 and Valero Energy Corp up 0.2 percent at $100.53.
Bids for benchmark D6 blending credits slipped to 34 cents on Thursday afternoon, after deals were struck at 37.5 cents ahead of the announcement, a U.S. trader said.
Workers at a rural South Korean factory are busy extracting some of the world’s most coveted metals, used in the batteries that power electric cars.
But they’re not digging in the ground or refining ore. Instead, they are sorting through a pile of lithium-ion batteries from old mobile phones and laptops.
As China’s aggressive hunt for overseas cobalt and lithium for electric vehicles pushes up prices and causes a global shortage of the key metals, South Korea is increasingly turning to such “urban mining” to recover cobalt, lithium and other scarce metals from electronic waste.
In 2016, the most recent year from which data is available, 19.6 trillion won ($18.38 billion) worth of metals were extracted from recycled materials, meeting roughly 22 percent of the country’s total metal demand, according to a report by the Korea Institute of Industrial Technology.
SungEel HiTech is South Korea’s largest battery recycler. A decade ago, the company was at a crossroads as plasma TV panels, from which it extracted gold and silver, began to phase out.
Now it is part of a supply chain for some of the world’s major battery makers, including Samsung SDI and LG Chem.
Yi Kang-myung, SungEel HiTech’s president, said the shortage of mined metals had led his company to boost capacity by threefold this year. It plans to list in 2020.
“We are receiving phone calls from many who are showing interest,” Yi said in an interview at the plant.
“Major automobile companies are interested in our products,: he said, without naming the automakers. He added that battery companies and POSCO, a South Korean steelmaker, are interested in getting into the recycling business themselves.
The scarcity is unlikely to abate anytime soon, as China, the world’s biggest user of metals, snaps up mineral resources in countries like the Democratic Republic of Congo and Chile.
JUMPING DEMAND
SungEel HiTech, based in the southwestern city of Gunsan, can process about 8,000 tonnes per year of spent lithium-ion batteries and metal scraps.
From that, it can produce about 830 tonnes of lithium phosphate, 1,000 tonnes of cobalt metal equivalent and 600 tonnes of nickel.
POSCO (005490.KS) processes lithium phosphate from SungEel to produce lithium carbonate for rechargeable battery makers LG and Samsung, according to SungEel and POSCO.
The battery recycler plans to increase its processing capacity to 24,000 tonnes by 2019 and expand further in 2021, including growing its overseas operations, Yi said.
The company, however, is smaller than foreign competitors such as China’s Jiangxi Ganfeng Lithium and GEM Co, and Belgium’s Umicore SA.
Over the past three years, South Korea’s imports of key metals for lithium-ion batteries have jumped, according to data from state-run Korea Institute of Geoscience and Mineral Resources. In 2017, South Korea imported 3.5 million tonnes of nickel, up 2 percent from 2016. Cobalt imports rose 3.4 percent to 13,972 tonnes from a year ago.
Cobalt prices CBDO jumped to average $87,615 a tonne in March, about a four-fold increase from January 2016.
That has led to more long-term supply contracts and investments in developing mines, as well as recycling efforts. Samsung SDI may start its own recycling business, a company spokesman said.
Park Jai-koo, an urban mining expert at Hanyang University in Seoul, said electronic waste recycling can help mitigate high prices and limit reliance on outside sources for rare metals.
“South Korea needs to secure resources but mostly all of them are imported,” Park said. “Urban mining is more likely to become a way to go.”
DIFFERENCE MAKER
About 150 small-and-medium sized companies do urban mining, according to the Korea Urban Mining Association.
At SungEel HiTech, the process is not complex or highly automated. After workers pull batteries from recycled devices, the units are drained of power and then ground into a powder from which individual metals can be separated.
Most of the products that are recycled - 60 to 70 percent - come from the United States and Europe, with the remainder from South Korea.
The recycling companies mainly focus on extracting precious metals like gold and silver. But four, including SungEel HiTech, can directly recover cobalt or produce powders from which rare metals can be extracted.
South Korea’s environment ministry changed regulations in January to promote recycling by charging higher prices for waste disposal.
Yum Un-joo, chairman of the Korea Urban Mining Association, said recycled resources, if developed correctly, could be a difference maker for the industry and for his country.
“For South Korea, we don’t have an option but if we have recycled resources, that could be our strength,” Yum said.
With an incremental supply of 33,000 mt, China's lithium carbonate supply is expected to exceed demand in 2018, according to senior analyst at SMM, Hong Lu.
Chinese demand for this year is expected to increase by 8,100 mt lithium carbonate equivalent compared with the previous year, Hong told delegates at the SMM CoLiNi Summit on Friday April 13 in Quzhou, Zhejiang province.
From 2016 to 2020, the global lithium supply is forecast to grow at an annual compound growth rate of 31%.
China's cobalt demand to add 2,200 mt in 2018
China's demand for cobalt this year is expected to increase by 2,200 mt in metal content, according to Hong Lu, SMM senior analyst.
There is no apparent shortage in the global cobalt market, but spot supply is hardly in surplus due to speculative inventories, Hong said at the SMM CoLiNi Summit on Friday April 13 in Quzhou, Zhejiang province.
While domestic cobalt price rise was partly influenced by the overseas market, Hong said cobalt sulphate prices in China are expected to stay firm with increasing demand from the new-energy vehicle industry.
China's renewable energy consumption is expanding rapidly, with an expected rise of 9.5% per year from 2016 until 2040, according to a BP report.
China is expected to account for 31% of global renewable energy consumption by 2040, according to the "BP Energy Outlook 2018" report released in Beijing on April 10.
BP publishes its energy outlook annually to examine and discuss potential energy demand based on assumptions about future changes in policy, technology, and the economy.
China's energy mix continues to evolve, with coal's dominance predicted to decline from 62% in 2016 to 36% in 2040, and natural gas is expected to nearly double to 13% by 2040, according to the report. The share of renewable energy is forecast to rise from 3% in 2016 to 18% in 2040.
As China transitions to a more sustainable pattern of growth, its energy needs change, the report said. The country's changing energy mix is driven by its shifting economic structure and its commitment to moving to cleaner, lower carbon fuels.
The expansion in renewable energy is broad-based, with China and other parts of the developing world taking over from the EU as the main engine of growth, according to the outlook.
Investment in new European wind farms and equipment is expected to increase this year after a sharp drop in 2017, helped by several large project auctions, according to a major industry body.
Spending is forecast to rise 4 percent to 23.2 billion euros ($28.7 billion), WindEurope said in its financing report, after a 19-percent decline in 2017 due to a sector shift toward competitive tender-based auctions and away from subsidies.
Investment is expected to rise to 26 billion euros next year, before falling back to 24.2 billion in 2020, the estimates show.
“Both 2016 and 2017 have been transitional years for the wind sector,” WindEurope said. “However, investment volumes are expected to stabilize in 2018 with the roll-out of auctions across Europe and projects awarded support expecting to reach final investment decisions.”
Europe is home to a large number of leading players in the global wind power sector, be it project developers or equipment manufacturers, including Vestas, Orsted, Siemens Gamesa, EnBW, Nordex and Innogy.
At 22.3 billion euros, investments in new wind capacity were by far the biggest driver of spending on renewable energy projects on the continent in 2017, accounting for half of investments, WindEurope said.
Spending on new assets does not reflect refinancing, mergers and acquisitions and the raising of debt across the industry. Including these figures, total wind investment stood at 51.2 billion euros in 2017, an all-time high.
This was primarily driven by project and company acquisitions, which more than doubled to 14.4 billion euros last year, compared with 6.8 billion in 2016.
“Sector maturity and technology competitiveness have brought in more investors as equity partners in projects, in particular from the financial services industry. These partnerships are key for power producers who need to recycle capital to finance new assets,” WindEurope said.
It added infrastructure and pension funds, asset managers and other financial service companies owned more than a third of the capacity that was bought or sold last year, up from 27 percent in 2016.
Cobalt has been drifting lower after hitting near 10-year peaks last month to exchange hands for $91,500 a tonne on the LME on Friday. Cobalt remains up more than 300% since hitting multi-year lows at the beginning of 2016 as demand for the metal, a crucial element in batteries used in cellphones and electric vehicles, spikes.
While some of the froth has gone out of the spot market, the jostling among to secure long-term supply continues unabated.
Milewski said he has at least 17 such meetings lined up in major Chinese cities over the next three days
According to a Bloomberg report on Monday, Cobalt 27 Capital, owner of the world’s largest private stockpile of cobalt, said it is in talks for potential tie-ups with major Chinese companies seeking to secure supplies of the key metal in batteries powering electric vehicles.
Car and battery makers from China have approachedCobalt 27 to discuss long-term partnerships and supply contracts, Anthony Milewski, chief executive officer of the Canadian firm, said in an interview in Beijing on Monday. Milewski said he has at least 17 such meetings lined up in major Chinese cities over the next three days:
“There’s a lot of interest and it is natural because it is where all this will happen,” Milewski said, declining to identify the companies. “China is going to be the world leader of electric vehicles.”
Cobalt 27 stockpiles the metal (around 3,000 tonnes), holds options on cobalt juniors and enters into streaming and royalty dealsin an effort to be a pure play on the cobalt price.
While the stock is well down from its March peak, investors who bought into the battery metals story when Cobalt 27 listed in June last year are now enjoying a 33% jump in the value of the stock.
Cobalt 27 is weighing a dual stock listing in Shanghai or Hong Kong to expand its investor base, Milewski told Bloomberg, without giving a timing.
“EVs are happening in the region and so access to the investor community is important. Investors understand the EV story and valuations reflect that.”
Beijing has made electric vehicles a centerpiece of its war on pollution. It also wants the sector to spearhead the country’s Made in China 2025 innovation drive.
The Asian nation is rapidly accelerating the development of low- or zero-emission vehicles, targeting 7 million sales on new-energy vehicles by 2025.
Sales of battery-powered, plug-in hybrid and fuel-cell vehicles in China represent the largest global market, and could rise more than a fifth to surpass 1 million this year, according the estimates by the China Association of Automobile Manufacturers.
The auto industry is "waking up too late" to the fact that China will hold most of the world's supply of battery raw material cobalt, Ivan Glasenberg, CEO of top producer of the metal Glencore, said in March.
The 3Cs: Cobalt-Congo-China
Annual production of the raw material is only around 100,000 tonnes primarily as a byproduct of nickel and copper mining. The Democratic Republic of the Congo today has six of the top 10 cobalt mines globally. Due primarily to Chinese investment, by 2022, the central African nation will host the nine largest cobalt producers.
Not only is primary production highly concentrated, but the downstream industry is beginning to resemble a monopsony
With ERG's $1 billion RTR operation comes on stream later this year and Glencore restarting its Katanga operations in the country will see the DRC's share of global production increase from around 60% to nearly three-quarters. Congo also holds half the world’s reserves.
Not only is primary production highly concentrated, but the downstream industry is beginning to resemble a monopsony. China, despite having no cobalt resources of its own, is responsible for some 80% of the world’s cobalt chemical production, which overtook metal production around four years ago.
Zhejiang Huayou Cobalt, the world's top cobalt refiner, increased output 35% last year and on its own was responsible for 20% of global output. The company sources nearly half its requirements from mines it owns in the DRC.
The China-Congo-Cobalt-nexus poses particular problems for automakers in the US and Europe. Not only in terms of securing supply but also the growing consumer awareness of ethical sourcing of materials. This could lead to premium pricing for cobalt produced outside Congo.
http://www.mining.com/chinese-investors-key-cobalt-price-hits-month-low/
All 116 turbines at top German utility E.ON’s Rampion offshore wind farm in Britain are now able to generate electricity and are delivering power to the grid, the company said on Tuesday.
The 400-megawatt project is being built off the coast of Sussex in southeast England by E.ON, UK Green Investment Rampion Ltd and Canadian energy infrastructure company Enbridge.
“Over the coming months work will continue both on and offshore, to prepare the site for full operation later this year,” E.ON said in a statement.
The farm will generate electricity to supply 347,000 homes, equivalent to around half of the households in Sussex.
In March, British wind power output hit a record high at 14.2 gigawatts, accounting for about 34 percent of domestic electricity generation. Wind power is needed to bridge a supply gap as old nuclear plants and coal-fired power stations close.
The city of Yanan, a major wind power base in northwest China’s Shaanxi province, has introduced a lottery system to decide which wind projects will go ahead this year, a sign that grid constraints are forcing local governments to restrict capacity.
China has been aggressively developing alternative power as part of its efforts to cut pollution and greenhouse gas emissions. Grid-connected wind power reached 163.7 gigawatts (GW) last year, up 10.1 percent on the year and amounting to 9.2 percent of total generating capacity.
But capacity expansion has outpaced grid construction, and large numbers of wind, solar and hydropower plants are unable to deliver all their power to consumers as a result of transmission deficiencies, a problem known as curtailment.
According to a Yanan planning agency notice seen by Reuters, the city was given permission to build 900 megawatts of wind capacity this year, but 1,300 megawatts (or 1.3 GW) have already been declared eligible for construction, forcing authorities to whittle down the total number of projects.
“After study it was decided that the lottery method should be used to determine what plans will be submitted (for approval) to the provincial development and reform commission,” it said.
The authenticity of the document was confirmed by a local municipal government official. He declined to give his name or provide details.
China aims to raise the share of non-fossil fuels in its total energy mix to around 15 percent by the end of the decade, up from 12 percent in 2015.
But while renewable power has grown rapidly, around 80 GW of wind capacity was still unable to transmit electricity to consumers in 2015. Wasted wind power amounted to around 12 percent of total generation in 2017, according to the energy regulator.
An environmental group is currently suing grid companies in the northwest for failing to fulfill their legal obligation to maximize purchases of local renewable power.
To try to prevent waste, China has drawn up guidelines aimed at preventing new plant construction in regions already suffering from surplus capacity.
It also released draft guidelines last month for a new renewable energy certificate system that will force regions to meet mandatory clean electricity utilization targets. The scheme is expected to help alleviate curtailment.
HP Billiton is expanding its business as a supplier of battery minerals at its nickel refinery in Western Australia, planning to start producing nickel sulphate next year and looking at cobalt output as well, a company executive said.
Cobalt and nickel are both critical ingredients for lithium ion batteries, and are expected to see a boom in demand as global automakers transition into producing electric vehicles.
Most of the world’s cobalt supply comes from the Democratic Republic of Congo (DRC), which has been beset by governance and human rights concerns. After the DRC, Australia has the world’s second-largest mineral reserves.
“Part of our transition to becoming a global supplier of battery materials means we have started looking at cobalt options as well,” Eduard Haegel, president of BHP Billiton’s Nickel West refinery, said on Wednesday at a battery materials conference in Shanghai.
“We see cobalt as remaining in short supply ... For this reason we are looking to broaden our support of the battery sector by increasing our contribution to cobalt supply.”
BHP is already due to start producing nickel sulphate at its Nickel West project next year, Haegel said, and is in the early stages of considering a plan to double that output.
The miner could grow its cobalt production and sell it as cobalt sulphate, a battery ready form of the metal, he said.
BHP could do this by developing a cobalt circuit at its Kwinana Nickel refinery and by increasing cobalt recovery at its Kalgoorlie smelter, both in Western Australia, as well as potentially taking third party cobalt concentrate, he said.
The miner said last year it would retool its Nickel West operations to focus on producing supply for the battery industry, and Haegel said it has been building a solid chain of battery customers.
It expects to have sold 90 percent of its nickel sulphate supply by the end of 2019, two years earlier than anticipated.
BHP expects to sell 65-70 percent of this year’s nickel output to the battery sector, about 45,000-50,000 tonnes of metal, based on last year’s figures, Haegel said.
Although an investment decision to go ahead has not yet been made, BHP is advancing plans to potentially double capacity at its nickel sulphate operations to 200,000 tonnes, depending on industry demand, which would create the world’s largest nickel sulphate plant at Nickel West, he said.
Russia’s Norilsk Nickel , or Nornickel, is in talks with battery makers over possible investment in its mining assets, but is also interested in downstream joint ventures in return, a company executive said on Wednesday.
“We might be interested in having some deeper cooperation, say on the battery side, and building a more complete value chain,” Anton Berlin told Reuters in an interview on the sidelines of a battery materials conference in Shanghai.
Nornickel is looking for “more than just an offtake (sales) agreement,” he said, adding that a downstream joint venture in China would be a possibility.
Discussions are at an early stage however, and the company is “not in any rush,” he said.
Battery makers in China, the world’s biggest electric vehicle market, have been looking to buy equity stakes in overseas producers of battery ingredients such as cobalt, nickel and lithium in order to ensure critical supplies.
Companies from China, elsewhere in Asia and beyond have been to visit Nornickel assets with a view to making investments, Berlin said.
But he added: “We don’t need an investor in our existing mining assets. We are happy to own them and run them.”
“What we are trying to do is use the increasing demand for nickel and cobalt to our advantage and see if we can get something more than just an offtake agreement.”
“As you probably know, the Chinese are tough negotiators, so you don’t expect them to come and offer a generous deal at the first instance. It’s a process.”
Nornickel sees potential for the battery sector to become the second-biggest target market for nickel globally, behind stainless steel. Stainless steel now accounts for slightly less than half percent of the company’s nickel sales, versus 80 percent in around 2013.
“Batteries is something that catches the eye today. The other sectors for nickel are more traditional. They don’t experience the same exciting, double-digit growth,” Berlin added.
SunPower Corp on Wednesday said it would buy U.S. solar panel maker SolarWorld Americas, expanding its domestic manufacturing as it seeks to stem the impact of Trump administration tariffs on panel imports.
The White House cheered the deal, saying it was proof that Trump’s trade policies were stimulating U.S. investment.
Terms of the transaction were not disclosed.
The news sent SunPower’s shares up 12 percent on the Nasdaq to their highest level since before President Donald Trump imposed 30 percent tariffs on imported solar panels in January.
“The time is right for SunPower to invest in U.S. manufacturing,” Chief Executive Tom Werner said in a statement.
SunPower is based in San Jose, California but most of its manufacturing is in the Philippines and Mexico. The company had lobbied heavily against the solar trade case brought last year by U.S. manufacturers, including SolarWorld, which said they could not compete with a flood of cheap imports.
The deal is a win for the Trump administration’s efforts to revive U.S. solar manufacturing through the tariffs. SunPower will manufacture its cheaper “P-series” panels, which more directly compete with Chinese products, at the SolarWorld factory in Hillsboro, Oregon, it said. It will also make SolarWorld’s legacy products.
“This is great news for the hundreds of Americans working at SolarWorld’s factory in Oregon and is further proof that the president’s trade policies are bringing investment back to the United States,” White House Deputy Press Secretary Lindsay Walters said in an emailed statement.
The announcement comes as SunPower is seeking an exemption from tariffs on its higher-priced, more efficient panels manufactured overseas. It has argued to the U.S. Trade Representative, which will make a decision on exemptions in the coming weeks, that those products should be excluded because there is no U.S. competitor that makes a similar product.
In a note to clients, Baird analyst Ben Kallo said the SolarWorld deal would enable the company to compete against Chinese imports should SunPower’s products not receive an exemption. But he added that skeptics “may question the company’s ability to generate profits with U.S. manufacturing.”
The deal will inject much-needed capital into SolarWorld’s long-suffering manufacturing plant and give it the support of a major market player. SunPower is one of the largest solar companies in the world and is majority owned by France’s deep-pocketed oil giant Total SA (TOTF.PA).
The U.S. arm of Germany’s SolarWorld AG (SWVKk.F) opened the Hillsboro factory in 2008 as it sought to capitalize on surging solar demand in the United States. But its start coincided with a dramatic increase in the production of cheaper solar products in Asia, and SolarWorld struggled to compete.
Twice, in 2012 and 2014, trade cases brought by SolarWorld prompted the U.S. Commerce Department to slap import duties on solar products from China and Taiwan. Yet prices on solar panels continued their free fall, and just three years later, in 2017, the company joined rival Suniva in asking for new tariffs.
SolarWorld called the outcome “ideal” for its hundreds of employees in Hillsboro.
During the trade case and after the tariffs were announced, the solar industry’s trade group, the Solar Energy Industries Association, argued that the tariffs would not be enough to keep SolarWorld and Suniva afloat.
Indeed, Suniva’s future remains uncertain after a U.S. bankruptcy court judge this week granted a request by its biggest creditor that will allow it to sell a portion of the company’s solar manufacturing equipment through a public auction.
SunPower shares were up 87 cents, or 10.4 percent, at $9.22 in mid-day trade on the Nasdaq. The stock hit a high of $9.75 earlier in the session, its highest since late 2017.
Pilbara Minerals Ltd aims to ship the first cargo of spodumene concentrate from its Pilgangoora lithium-tantalum development in Australia to China in August, its managing director said on Thursday.
Spodumene is a mineral mined as a source of lithium, a key ingredient in electric vehicle batteries, for which China is the world’s biggest market.
“We haven’t made any promises but we do expect to be shipping from about August,” Pilbara Minerals Managing Director Ken Brinsden told Reuters in an interview in Shanghai.
The cargo will go to one of two key Chinese offtakers for the project’s first phase, Jiangxi Ganfeng Lithium Co Ltd or General Lithium, or may be shared by both, he added.
Pilbara Minerals is on track to produce its first batch of spodumene concentrate by the end of June, he said, and would then work on building up enough inventory to launch its first ship.
The size of the cargo, which will take around 13 days to sail from Port Hedland in Western Australia to China, would typically be about 10,000 to 20,000 tonnes, he added.
Ganfeng, which is also a 4.84 percent equity stakeholder in Pilbara Minerals, has an offtake agreement for 160,000 tonnes of spodumene concentrate from Pilgangoora’s first phase for an initial 10-year term.
The 840,000 tonnes of annual output from phases 1 and 2 has already been sold out, Brinsden said.
“I reckon we could have sold our offtake position two or three times over, given the enquiries that we had,” Brinsden said.
It will take six to nine months to ramp up towards first phase production capacity of 350,000 tonnes per year, Brinsden said, adding that the second phase was due to start commissioning in September 2019.
“That’s coincident with the (needs of) other counter-parties that are offtakers to that project,” including China’s Great Wall Motor and South Korea’s Posco, which also hold small equity stakes in Pilbara Minerals, he said. Ganfeng is also a second-phase offtaker.
Pilbara Minerals is jointly investing in a downstream chemical facility in South Korea with Posco to tap the local battery market, with commissioning expected in late 2019, Brinsden said.
“From our point of view we’re opening up a new supply chain to take the concentrate into South Korea, as opposed to just China,” where similar joint ventures are planned, he added.
Wind power generated a record 6.3-percent share of total U.S. electricity last year, with four states generating more than 30 percent of their electricity from wind power, the American Wind Energy Association (AWEA) said in its newly released U.S. Wind Industry Annual Market Report 2017.
In 2016, wind accounted for almost 6 percent of the U.S. utility-scale electricity generation, according to the EIA.
Last year, Iowa, Kansas, Oklahoma, and South Dakota were the states which generated over 30 percent of their electricity from wind energy, AWEA said in its report. Across the U.S., 14 states currently generate more than 10 percent of their electricity from wind.
Wind power capacity increased by 9 percent in 2017, with installation of wind capacity totaling 7,017 megawatts. This brought the total U.S. installed wind power capacity to 88,973 MW—just under 54,000 wind turbines operating in 41 states, Guam, and Puerto Rico, enough installed capacity to power 27 million American homes, the AWEA says.
The fastest-growing ‘wind state’ last year was New Mexico, adding capacity at a faster rate than any other state. New Mexico’s wind capacity jumped by 51 percent in 2017, or by 570 MW, compared to the 1,112 MW capacity installed as at the end of 2016. Wind power provided more than 13 percent of New Mexico’s electricity generation in 2017. The state is now ranked 15th in the U.S. in terms of installed capacity, which is expected to further grow thanks to a wave of new investment in wind power generation. New Mexico has 1,723 MW of capacity currently under construction or in advanced development, so its wind capacity is on track to double in the near term, according to the AWEA.
Across the U.S., electricity generation from fossil fuels dropped last year, while renewables generation increased, EIA said last month.
Wind and solar continued to raise their share in 2017, with wind at 6.3 percent and utility-scale solar at 1.3 percent of total U.S. net generation—record shares for both.
The EIA expects wind to become the predominant renewable electricity generation source in 2019, surpassing hydropower, as it expects significant new wind capacity additions to come online in 2018 and 2019, similar to the trend in recent years. The EIA expects wind to account for 6.4 percent of U.S. utility-scale electricity generation in 2018 and for 6.9 percent in 2019, up from 6.3 percent in 2017.
German Agriculture Minister Julia Kloeckner on Tuesday said she was finalizing a draft regulation to end use of the weed-killer glyphosate in household gardens, parks and sports facilities, and to set “massive” limits for its use in agriculture.
The chemical, made by Monsanto, is at the center of a heated debate in Europe over whether it causes cancer.
Chancellor Angela Merkel’s conservatives and the centre-left Social Democrats (SPD) agreed in February to systematically and significantly limit its use, with the goal of entirely ending use of products that contain it, but set no timeframe.
“I am planning a regulatory draft as a first building block in the strategy to minimize use of glyphosate,” said Kloeckner, a member of Merkel’s Christian Democrats (CDU). She said the proposal would be vetted by other ministries, but set no deadline for when Germany would end use of the weed-killer.
German Environment Minister Svenja Schulze, a Social Democrat, welcomed Kloeckner’s proposal as a first step to ending use of the chemical, saying her goal remained to eliminate its use by the end of the legislative session in autumn 2021.
Kloeckner’s predecessor Christian Schmidt had caused international controversy and a major row in the previous German coalition by unexpectedly backing a European Commission proposal to permit use of glyphosate for the next five years.
The move by Schmidt, a conservative, effectively allowed the extension in glyphosate use within the European Union, despite opposition from France and from the SPD.
Kloeckner said on Tuesday she planned “massive restrictions” on the use of glyphosate in agriculture, with exemptions for areas that were prone to erosion and could not be worked with heavy machinery.
Joachim Rukwied, president of Germany’s DBV National Farming Union, said it made sense to adopt a plan to reduce the chemical’s use, but said a complete ban would “dramatically reduce its options for environmentally sustainable production.”
Werner Baumann, chief executive of Bayer AG, which is in the process of acquiring Monsanto, told a research summit in Berlin the issue had become too politicized in Europe and said Germany would wind up banning the chemical without an adequate regulatory framework.
Increasing disposable income in emerging economies, as well as the adoption of greener technologies, rather than a touted electric cars boom, will drive most of the expected increased demand in copper during the next five years, CRU analyst Robert Edwards said.
“Electric vehicles (EVs) are a great long-term story, but demand is only expected to be around 1.5% of world refined copper consumption this year, and even five years out is unlikely to be anything more than 3%,” he told investors and miners attending this week’s World’s Copper Conference in Santiago, Chile.
While is true that electric cars use about four times more copper than gasoline-powered vehicles, their global adoption won’t be explosive, as some may think.
“You can't have an electric vehicle revolution without infrastructure in place,” Colin Hamilton, managing director of commodities research at BMO Capital Markets, told MINING.com, adding that according to his data, the amount of copper used in EVs is been overstated.
Demand for EVs will grow once there are enough charging stations in place, as well as the necessary upgrades to electric grids to support a sharp increase in energy consumption.
Today, less than 1% of the world’s vehicles are electric, but by 2040 more than half of all new cars will run on that form of energy.
The BMO analyst noted that demand for EVs will grow significantly once there are enough charging stations in place, as well as the necessary upgrades to electric grids to support a sharp increase in energy consumption.
It will be that global infrastructure transformation and not the EVs themselves what will first affect global copper demand, he said.
Data released by the International Copper Association (ICA), an industry-funded body, shows more than 40 million charging ports will be needed over the next decade, consuming an extra 100,000 tonnes of copper a year by 2027.
From those stations, at least 3 million will be built in China by 2030, according to the study.
Consumption from the car industry will also weigh on demand, but later. An average gasoline-powered car uses about 20 kg of copper, mainly as wiring. A hybrid needs about 40 kg and a fully electric car has roughly 80 kg of copper (176 pounds).
It means that, in the next decade, global copper demand will increase between 3 and 5 million tonnes, experts predict. Once electric vehicles become popular, they estimate demand to reach 11,000,000 tonnes of new copper for EV’s alone, with potential upside in other green technologies.
Green matters to mining
Data presented by CRU back up most of the experts’ predictions. According to the British consultancy, demand for copper in charging and distribution upgrades will reach 1.2 million tonnes by 2035.
Those numbers could be much more higher depending on how “green” economies, particularly in Latin America, become in the next twelve years, CRU’s managing consultant, Benjamin Jones, said Wednesday.
Courtesy of CRU.
According to Jones, even in a conservative scenario, the adoption of clean technologies would boost copper demand by 10% to 15% by 2030. Lithium demand, in turn, would jump by 80% in the same period.
Green technologies are increasingly reliant on metals, particularly copper and lithium, Jones said. That means that Latin American countries, particularly Chile, Peru and Argentina, could see significant gains both in terms of global market share and economy growth.
CRU expects the mining sector to contribute an additional $10 to $15 million to the GDP of most Latin America’s countries by 2030, and that’s not even under the greenest scenario.
Even without considering the adoption of green technologies, global copper demand is predicted to surpass supply earlier than expected, with the first clear signs coming as early as next year.
The supply deficit could be of over 900,000 tonnes in 2021 and 2022, according to BMO Capital Markets, as supply growth slows due to deteriorating ore grades in major producing countries, lack of new significant discoveries and very low investment in exploration.
http://www.mining.com/impact-electric-cars-medium-term-copper-demand-overrated-experts-say/
Indonesia and the Philippines are likely to export 48.8 million mt nickel ore to China in 2018, according to general manager at Biwei Resources, Yang Qin. Peak export season for nickel ore is traditionally from April to September.
However, as some plants turned to producing carbon steel and with low operating rates at stainless steel plants, demand for low-grade nickel ore is likely to decline in 2018.
The Philippines is likely to export about 1.6 million mt of nickel ore in April, while Indonesia is likely to export 2 million mt. Supplies of nickel ore are likely to see a surplus in the second and third quarter of the year. Supplies are also expected to exceed demand for production at ferronickel plants, Yang told delegates at the SMM CoLiNi Summit on Friday April 13 in Quzhou, Zhejiang province.
Imports from the Philippines accounted for most of China's supply of nickel ore in 2017. Imports from the Philippines stood at 40.05 million mt while imports from Indonesia stood at 4.62 million mt. Supplies in China’s nickel ore market peaked at 100 million mt in 2013. Imports from the Philippines were unable to fully support demand in China after 2014.
Yang also expects large-scale producers of ferronickel to take the lead in price negotiations.
Yang added that, as more plants locate closer to ports, inventory is likely to be distributed more evenly.
China’s alumina export is likely to surge due to the increasing price gap between Chinese and foreign materials as prices of the latter are rising at a faster pace, SMM believes.
Australian alumina prices stood at $550/mt fob on Friday April 13, up 54.1% from $357/mt fob at the end of February. This was due to a 50% production cut at Norsk Hydro’s Alunorte in Brazil on environmental issues since late February as well as the US sanctions on Rusal last week which resulted in force majeure.
Alunorte’s operations see no sign of recovery as Norsk Hydro has also halved the production at its aluminium smelter Albras last week.
We believe alumina prices in the international market have more upward room as long as the US sanctions remain in place.
SMM’s alumina price stood at 2,764 yuan/mt on Friday April 13, compared with 2,819 yuan/mt at the start of March.
The strictest own power plant remediation plan will introduce Shandong Weiqiao future or take responsibility
2018-04-17 10:46 * Source: Securities Daily writer: Yang Meng · Editor: Wang Changyaopower plant; Weiqiao; Shandong
In late March, the National Development and Reform Commission issued the “Specification for the Construction and Operation of Coal-fired Power Plants (Draft for Soliciting Opinions)” (hereinafter referred to as the “Draft for Soliciting Opinions”), which requires strict control of new coal-fired power plants and comprehensive Clean up illegal coal-fired power plants. Since the date of issuance of the plan, if the new coal-fired power plant is not approved or is not included in the plan, strict accountability is required and all power generation projects in the province (region, city) will be stopped. The industry referred to as "the most severe coal-fired power plant self-recovery program."
In fact, as early as last year, the National Development and Reform Commission and the National Energy Administration have formed special inspection teams with the Ministry of Industry and Information Technology, the Ministry of Finance, and the Ministry of Environmental Protection to select some provinces to carry out on-site investigations.
Referring to the captive power plant, it was necessary to mention electrolytic aluminum companies with extremely high power consumption. The production of one ton of electrolytic aluminum required 13,000 degrees and 2 tons of alumina, and the consumption of electricity was about 40% of the production cost. Shandong Weiqiao’s captive power plant, which is the leading company for electrolytic aluminum production in China, has also been the focus of debate on the issue of captive power plants.
Self-contained power plants are criticized
The self-provided power plant is a power plant that an enterprise invests in to meet its own energy consumption requirements such as electricity production and gas consumption, and generally does not send power to the national grid. The emergence of captive power plants has its complicated historical and institutional background. In the 1980s, various industries fell into a serious shortage of electricity.After the power industry policy was changed from exclusive power generation to encouraging multiple power sources and multi-channel power supply, high-energy-consuming enterprises across the country started to set up their own power plants. In the era of insufficient power supply and high electricity prices, self-provided power plants have reduced the cost of electricity for enterprises, and can also take into account the heat demand of peripheral enterprises and residents. However, after the long-term lack of electricity gradually disappeared, in the Chinese power market, captive power plants are often criticized for "unfair assumption of social responsibility," "management confusion," and "enhancement of environmental pollution," and are detached between legal and irregular boundaries. .
As the largest province of self-produced power plants, the installed capacity of self-owned power plants in Shandong accounted for 31.12% of the province's total installed power capacity in 2017, and Shandong Weiqiao is undoubtedly the “leading” of Shandong's captive power plants.
In recent years, the new capacity and output of electrolytic aluminum in China have been mainly concentrated in Xinjiang, Shandong, Inner Mongolia and other places. The capacity of electrolytic aluminum newly put into operation in these regions is based on the premise of a captive power plant. As we all know, the cost of electricity accounts for more than half of the production cost of electrolytic aluminum, and a major factor that has exacerbated China’s excess capacity in electrolytic aluminum production in recent years is the uneven production capacity and costs caused by unbalanced inter-regional electricity prices, and the availability of captive power plants. The company has a huge advantage in terms of cost and continues to increase investment in new electrolytic aluminum production capacity.
In fact, Shandong Weiqiao was not originally concerned by the outside world. Until 2012, “the price of Shandong Weiqiao's self-built power grid was 1/3 cheaper than the national grid”. After that, when it comes to the captive power plant, The company is always the focus of attention.
In the 1990s, China’s power resources were in short supply, power supply was unstable, and there was often a phenomenon of arbitrary power cuts, which severely affected the production order of some high-power-consuming enterprises and caused the production costs of such enterprises to rise substantially. It is understood that before the construction of the self-built power plant, Weiqiao has been producing the steam needed for the production of the boiler in the form of a boiler, which is of poor economics and is not environmentally friendly. According to relevant data, on September 28, 1999, Shandong Weiqiao No. 1 Thermal Power Plant was completed and put into production, with a rated installed capacity of 78,000 watts. Last year, there was 5.7 million kilowatts of coal-fired power units with only shutdown in Weiqiao, Shandong Province.
According to relevant data, Weiqiao, Shandong Province, builds an island grid to generate electricity, dispatch, operate, and supply electricity to power textile and aluminum companies. The power and steam produced by the company's thermal power plant are used for self-use and export respectively, of which the self-use ratio is about 34.76%, which is mainly used by the company itself and its associated subsidiaries. According to public statistics, from 2013 to January 2016, Shandong Weiqiao's self-generation costs were 0.29 yuan, 0.21 yuan, 0.18 yuan, and 0.17 yuan per kilowatt hour, of which the lowest cost in 2016 was 0.17 yuan/kWh. , far lower than the national grid.
Is the law illegal?
Relevant persons who did not wish to be named indicated to the “Securities Daily” reporter that the low power generation cost in Weiqiao, Shandong Province, mainly comes from several reasons. First, coal prices are low. Through monthly bidding, the cost of coal is strictly controlled. Coal prices stand at about 80% of the cost of power generation, so controlling coal prices will reduce natural costs. Second, the labor cost is low. The power plant in Weiqiao, Shandong, is not as good as the state-owned power plant. There are gaps in other benefits, so the cost of power generation is lower than that of state-owned power plants. Third, avoiding government funds and industrial adjustment funds. There was no payment of a government fund of $0.0648 and an industrial adjustment fund of $0.0139/kWh. At the same time, Shandong Weiqiao’s self-produced power plant generates electricity, excluding rural net repayment funds of 0.02 yuan, Three Gorges Project Construction Fund of 0.007 yuan, and urban public utilities surcharge of 0.01 yuan. Fourth, there was no cross-subsidy for residents and agriculture of 0.046 yuan/kWh. Fifth, the utilization hours of power generation are high. The number of hours of power generation utilization is more than 6,500 hours, which is much higher than the current average utilization of thermal power generation of 4,100 hours.
“Since the construction of our own power plant, this model of Shandong Weiqiao has been controversial. Many people believe that this mode of power supply to a lone network is illegal, insecure and environmentally unfriendly.” Indicated.
Although the company's captive power plant has played a significant role in relieving the power supply during the peak period of power generation for many years, with the continued increase in the installed capacity and power generation capacity of the Shandong Weiqiao-owned power plant, the captive power plant and the unified power plant and power grid are operating. Contradictions among enterprises have gradually emerged.
At the same time, some analysts pointed out that Shandong Weiqiao Power Plant is essentially an illegal act. The company's power plants exceeded the scope of power supply to provide electricity to social users, in violation of the "Power Law." The positioning of our country's self-provided power plant is self-owned and used for the rest of the world. The power grid provides backup for it and cannot provide external power supply. This is stipulated by national laws. Shandong Weiqiao Power Plant and Shandong Huaneng Power Plant in Binzhou, Shandong Province, and Shandong Power Grid have been negotiated several times. However, the consensus of remaining power grids has only been running for some time and has been abandoned.
Since Shandong Weiqiao Power Plant avoided government funds and did not assume cross-subsidization for residents and agriculture, and did not assume due social obligations, its rationality was also questioned.
According to the Guiding Opinions on Strengthening and Regulating the Supervision and Management of Coal-fired Power Plants, the self-owned power plant of the company shall bear the full amount of the national major water conservancy project construction fund, the rural network repayment loan, and the renewable energy development fund. Government-funded and government-subsidized cross-subsidies established in accordance with laws and regulations, such as support funds for large- and medium-sized reservoir resettlement funds and urban public utilities.Policy-based cross-subsidy is a consideration by the state for guaranteeing people's livelihood, social stability, etc., and for some types of users (such as residents, agriculture, important public utilities, and public welfare services, etc.) to implement preferential tariffs, through the implementation of large-scale industrial and industrial and commercial users. Subsidize electricity prices above the actual cost of electricity supply.
In addition, Shandong Weiqiao Power Plant is facing pressure reduction and emission reduction and pressure on the pressure. Because the country lacks the normative provisions for the management of captive power plants, many regions have invested in the construction of a group of low-efficiency and high-pollution small units and small thermal power plants under the pretense of comprehensive utilization of resources and cogeneration, bypassing the normal national approval process. . In 2015, the Ministry of Environmental Protection, the National Development and Reform Commission, and the National Energy Administration issued the “Work Plan for the Full Implementation of Ultra-Low Emissions and Energy-Saving Renovation of Coal-fired Power Plants”. As the national environmental policy becomes more and more stringent, the Shandong Weiqiao model itself is also facing obsolescence. Units, new operating pressure of large low-emission units.
These “Circulars on Implementation of the National Requirements for Promoting the Orderly Development of Coal Electricity” issued by Shandong Province on May 5, 2016 clearly stipulate that: Priority shall be given to the elimination of the following units, and pure coagulation with a capacity of 300,000 kilowatts or less for 20 years Units and pumping condensing thermal units that have been in operation for 25 years or more; after the transformation, the coal consumption for the power supply still falls short of the units specified in the “U.S. Per Capita Energy Consumption Limit for Conventional Coal-fired Generating Units” (excluding supercritical units); the pollution emissions are not Units that meet the national environmental protection requirements and do not implement environmental transformation.
At present, there are rumors in the industry that once a coal-fired captive power plant's code construction and operation special control plan is actually promulgated and the Shandong Weiqiao-owned power plant is found to be illegal or illegal, the company may incur fines or even risks related to stopping its own power plant.
Miningmajor Rio Tinto will declare a force majeure on certain contracts with the world’s second-largest aluminium producer, United Company Rusal, after the US government imposed sanctions against a number of Russian businessmen and corporations.
Rio told shareholders that the company had reviewed its arrangements with Rusal, following the US government announcement, including Rusal’s 20% interest in Queensland Alumina refinery, which produces some 3.95-million tonnes a year of alumina.
Rusal also has supply and offtake arrangements associated with the Queensland Alumina operation, as well as bauxite offtake agreements for its refinery in Ireland, along with offtake contracts for alumina used at Rio’s smelters in Franceand Iceland.
Rio said that the company was working with customers to minimise any disruption of supplies, but added that it was committed to fully complying with US sanctions.
The global aluminium market could face supply shortages because of U.S. sanctions on Russia and Norsk Hydro’s production cuts in Brazil, Hydro’s chief executive told Reuters on Monday.
Industries ranging from automakers to soda-can producers are worrying over deliveries and sharp price hikes, Svein Richard Brandtzaeg said in an interview.
Over the weekend, Hydro cut output from the Albras aluminium plant in Brazil by half, as it had previously warned, in response to an unresolved dispute at its nearby Alunorte alumina refinery, which supplies the key raw material.
“If this lasts long, it’s possible it will also lead to production cuts at our Norwegian smelters, which also receive alumina from Alunorte,” Brandtzaeg said.
“This is not positive for the aluminium industry. We’ve got long-term customers seeking stable relations, and our car-making customers are particularly worried in this situation, both by the prices but also by the cost of delivery premiums,” he added.
Aluminium prices hit six-year highs on the London Metal Exchange on Monday, continuing a spike that began when the United States imposed sanctions on UC Rusal, the world’s second-biggest producer, as well as Hydro’s own cuts.
“There is a shortage of alumina, and there will also be a shortage of aluminium unless Rusal can find new markets quite quickly,” Brandtzaeg said at Hydro’s headquarters in Oslo.
Rusal could potentially maintain its production by exporting more to Asian countries, although this could in turn disrupt the regional market balance, he added.
“The metal would remain part of the global balance and we’d have to expect more exports from Asia into our European markets, particularly since China faces restrictions on exports to the U.S.,” Brandtzaeg said.
U.S. President Donald Trump last month imposed import tariffs of 10 percent on aluminum and 25 percent on steel to protect U.S. metal producers from cheap imports.
Rio Tinto’s declaration of force majeure on certain customer contracts as a result of the U.S. sanctions on Rusal also boosted aluminium prices on Monday.
Hydro’s cutbacks at Albras, South America’s largest aluminium plant with an annual capacity of 460,000 tonnes, amount to an equivalent of 230,000 tonnes per year, and will last until Alunorte is back to full capacity.
Following heavy rains in February, Hydro admitted there had been unregulated emissions of water into a river at the Alunorte plant, but denied it had contaminated the environment.
Alunorte, the world’s largest alumina refinery, declared force majeure after Brazilian authorities ordered it to halve its production.
U.S. sanctions on United Co. Rusal have thrown an estimated $3 billion of aluminium into limbo.
Stockpiled metal produced by Rusal accounts for more than a third of the aluminium in warehouses monitored by the London Metal Exchange. While not explicitly subject to U.S. restrictions, it’s now a headache for the banks and traders who own it.
That likely includes Goldman Sachs Group Inc., JPMorgan Chase & Co., Glencore Plc, Trafigura Group, Castleton Commodities International LLC and Engelhart Commodities Trading Partners, who are among the top aluminum traders and inventory financiers. The companies declined to comment when contacted by Bloomberg.
“I don’t think there’s any doubt that it’s less valuable than other material,” said Oliver Nugent, a commodities strategist at ING Bank NV. “Consumers are concerned. Even taking old stuff that is pre-sanctions, they’re nervous.”
The issue for the metals industry is how to navigate a gray area of U.S. sanctions. There’s no legal restriction on buying metal produced and sold by Rusal before the sanctions, according to traders, bankers and lawyers. Even so, the products have become less desirable in the U.S. and Europe.
Eastern European aluminium is a large part of LME stockpiles
The LME has banned Rusal metal produced after April 6, when the sanctions were announced, from being delivered to settle futures contracts. But added that traders were “generally comfortable” dealing in metal produced and sold by Rusal before that date.
That hasn’t been the case for all aluminium buyers. Some told their suppliers they won’t accept delivery of any Rusal metal, regardless of when it was produced, according to executives at trading companies and metal users, who asked not to be identified.
Read more: Winners and Losers as Rusal Sanctions Spur Record Aluminium Trade
Banks are also navigating the issue. Most are willing to finance deals involving Rusal aluminum if the metal dates before the sanctions. But, they’re likely to scrutinize the product’s previous transactions to see if there’s a risk of a violation. For example, banks may want to establish that Rusal or another sanctioned company didn’t receive financing for the metal at any point.
The uncertainties put a large part of the world’s stockpiles in limbo. Russian aluminium has made up a significant proportion of the global aluminium inventories since at least the early 1990s, when the collapse of the Soviet Union triggered a wave of exports.
Metal Tracking
Aluminium from Eastern Europe – likely produced by Rusal – accounted for 450,000 metric tons, or 36 percent, of global stockpiles tracked by the LME, according to exchange data as of April 6. Eoin Dinsmore, head of aluminium at CRU Group, estimated that a quarter, or just under 1 million tons, of global aluminium inventories outside China and outside the LME were likely to be Rusal-produced metal.
Put those numbers together, and the total amount of Russian aluminium sitting in warehouses from Rotterdam to New Orleans would be worth more than $3 billion at current prices.
In practice, the most straightforward way for traders to deal with their stocks of old Rusal metal may be to deliver it to the LME.
Already on Thursday the LME saw its second-largest aluminium delivery in four years. The bulk of the inflow came from Rotterdam and Vlissingen, two locations where traders historically held large volumes of Russian metal.
There could be more coming. Until Tuesday, traders can deliver Rusal aluminium to the exchange as normal. After that, they have to provide evidence that it was produced before April 6 and doesn’t otherwise breach sanctions.
“For stuff on the ground in the U.S., it’s hard to see another option. You’re not going to sell it,” said Dinsmore of CRU. But outside the U.S., the Rusal metal will be in high demand.
“What’s sitting out there in the rest of the world isn’t completely untouchable, people will find the buyers for it. It’s needed to alleviate some of the tightness," he said.
Vale produced 58,600 mt of finished nickel in the first quarter of 2018, down 17.9% from Q1 2017, the Brazilian miner said Monday.
The drop mainly reflected "Vale's rigorous capital allocation process based on returns, that resulted in decreased Voisey's Bay production output to extend its mine life while the Voisey's Bay Mine Extension project is reassessed, as well as, Vale's decision to adjust its nickel supply by placing non-competitive mines, such as Stobie in Sudbury and Birchtree in Manitoba, on care and maintenance," the company said in a statement.
Nickel output was also affected by lower production of finished nickel from Indonesian operations as a result of a planned maintenance in the Matsusaka refinery in Japan; unscheduled maintenance works at Sudbury's Coleman mine; and timing issues with finished production from New Caledonian source material being shipped and consumed at downstream refineries, it said.
New Caledonian production was expected to recover over coming quarters, "given that the production rate at the site is going well," Vale said, adding its total nickel production was expected to increase to about 65,000 mt in Q2.
Production at the Long Harbour processing plant in Canada reached a quarterly record of 8,600 mt in Q1, 2.3% higher than Q4 2017 and 110% higher than in Q1 2017.
The nickel concentrate being produced at Voisey's Bay is processed solely at Long Harbour, and the refinery "continues its successful ramp-up with trials of plating-grade nickel for customers," the company said.
Sales volumes of nickel were 57,900 mt in Q1, down from 72,100 mt in Q1 last year, reflecting lower production volumes as well as a build-up of 700 mt in finished inventories to replenish inventory levels.
China’s aluminium production rose by 4 percent to 2.78 million tonnes in March from a year earlier, data showed on Tuesday, as supply from new smelters outweighed winter output curbs imposed on existing producers in Beijing’s drive to cut pollution.
On a daily basis, the world’s top aluminium producer churned out 89,677 tonnes of the metal, according to the National Bureau of Statistics. That was a share below the rate for the first two months of the year, which was the highest since June last year.
For the first quarter as a whole, China produced 8.12 million tonnes, a rise of 0.3 percent from the same period last year, according to the statistics bureau.
Smelters in smog-prone northern Chinese cities were only allowed to return to full operating rates from March 15, after being ordered to cut production by at least 30 percent during the peak winter heating season that began in mid-November.
But not all were planning to ramp up output immediately, given low aluminium prices last month, the lengthy and expensive process of restarting smelters, and the emergence of new capacity from state-run producers in the Inner Mongolia and Guangxi regions.
The rising output will stir debate about the government’s efforts to shutter outdated, inefficient capacity as the country ramps up exports, adding to a global glut.
Production of a group of 10 nonferrous metals - including copper, aluminium, lead, zinc and nickel – rose 3.0 percent in March to 4.55 million tonnes from a year earlier. Year-to-date output was up 2.4 percent at 13.39 million tonnes.
Approval for copper scrap imports in the 10th batch of approvals for restricted solid scrap material imports stood at the highest levels among the ten batches this year.
4 MIN READ
TOKYO (Reuters) - Major Japanese trading houses have asked Russia’s United Company Rusal to stop shipping refined aluminum and other products in light of U.S. sanctions on the world’s No.2 producer and are scrambling to secure metal elsewhere, industry sources said.
The U.S. Commerce Department said on Tuesday it has made a preliminary determination that common alloy aluminium sheet imports from China are being subsidised, and set countervailing duties of up to 113 percent.
Imports of common alloy aluminium sheet from China were valued at an estimated $600 million in 2016, the department said in a statement.
A final determination in the countervailing duty investigation is scheduled to be announced on Aug. 30, it said.
The Aluminium Association, a U.S. trade group, welcomed the decision. “This is an important first step to begin restoring a level playing field for U.S. aluminium sheet production,” the group’s president, Heidi Brock, said in a statement.
The department’s preliminary finding comes as President Donald Trump has threatened to slap tariffs on some $150 billion of Chinese goods to try to force changes in China’s industrial policies.
The Commerce Department launched the investigation of imports of Chinese aluminium alloy sheet in November, the first U.S.-initiated anti-subsidy and anti-dumping probes in decades.
Washington’s seldom-used tactic is aimed at accelerating the imposition of duties against what are determined to be unfairly subsidised and dumped products. U.S. companies and industries claiming injury from imports would normally first ask the Commerce Department to open such probes, but government-initiated cases skip that step.
The department said it calculated a preliminary subsidy rate of 31.20 percent for Yong Jie New Material Co Ltd; a rate of 34.99 percent for Henan Mingtai Industrial Co Ltd and Zhengzhou Mingtai Industry Co; and a rate of 113.30 percent for Chalco Ruimin Co Ltd and Chalco-SWA Cold Rolling Co Ltd.
The preliminary subsidy rate for all-other Chinese producers and exporters is 33.10 percent, the department said.
Aluminium surged to a six-year high as the impact of U.S. sanctions against United Co. Rusal continued to reverberate through the global market more than a week after they were announced, with buyers rushing to secure supplies amid forecasts that the price may hit $3,000 a metric ton.
The metal, used to make everything from cans and cars to airplanes, reversed an early drop to gain as much as 1.5 percent to $2,435 a ton on the London Metal Exchange, the highest intraday price since September 2011. It traded at $2,429 at 7:52 a.m. in London, extending Monday’s 5 percent jump.
The aluminium market is in turmoil following the U.S. action against Russia’s Rusal, which has unleashed a supply shock that’s still unfolding as the company accounts for about 17 percent of worldwide production outside China. The Russian supplier has been shut out of the Western financial system, lacerating its share price while boosting rivals. Rio Tinto Group, South32 Ltd. and Alumina Ltd. are among the potential beneficiaries, according to UBS Group AG.
“The market is looking at $2,800, $3,000,” Jackie Wang, an analyst at CRU Group, said from Beijing. There are concerns about possible production cuts by Rusal, either because its sales are blocked or the raw material supply chain is affected, according to Wang. LME prices last topped $3,000 in 2008.
Rusal’s shares rose in Hong Kong after losing more than half their value last week. Russia won’t inject sovereign bonds into Rusal’s capital as the country doesn’t use local-currency sovereign bonds and any public debt to support companies under sanctions, according to the Finance Ministry.
Shares in rival suppliers gained again, including China Hongqiao Group Ltd., which added as much as 3.4 percent in Hong Kong. In Australia — Alumina Ltd., a partner with Alcoa Corp. in the world’s largest bauxite and alumina producer — advanced as much as 4.1 percent before closing level.
Prices of alumina, the semi-processed material used to make aluminium, are rocketing. India’s National Aluminium Co. sold a cargo of alumina last week at $601 a ton free-on-board, the highest level at which Nalco has sold in 12 years, Chairman T.K. Chand said Monday.
The sanctions have thrown an estimated $3 billion of aluminium produced by Rusal into limbo as metal produced by the company accounts for more than a third of holdings in warehouses monitored by LME. The exchange has banned, with effect from April 17, deliveries of Rusal-branded metal into its sheds.
Russia produces about 6 percent of global aluminium supply, and any move to extend the scope of sanctions to nickel could see an more significant impact as the nation contributes 10 percent of supply, UBS said in a note. But including copper would have a smaller impact as Russia accounts for 4 percent.
While Russian aluminium supplies are getting shunned, China continues to churn out the metal. Data on Tuesday showed China’s primary aluminium output rose 4 percent to 2.78 million tons in March. First-quarter production expanded 0.3 percent to 8.12 million tons.
https://www.hellenicshippingnews.com/aluminum-sanctions-convulse-market-as-rally-to-3000-forecast/
As the China-US trade war worsened, stock prices of Chinese minor metal producers dropped for the most part on Wednesday April 18 at Shanghai and Shenzhen Stock Exchanges, SMM learned. This marked a fifth day's dip in a row, and prices approached record two-month lows, with the biggest drop at 2.6% this morning.
Last week, prices of antimony ingots started to decline as sellers sought to destock. This followed US President Trump's tariff dispute with China. Transactions of antimony ingost weakened further as downstream plants worried about a smaller export share of antimony trioxide.
Traded prices of cathode material products were flat from last week as the slower-than-expected downstream consumption weighed on prices upstream. SMM sees downward room in prices of lithium salt in the second quarter of the year as newly arrived lithium salt products in the market will undergo quality improvements.
Due to the volatility of major commodity, indium spot sellers were keen to destock amid pessimistic sentiment in the market, leading to lower indium prices. SMM assessed spot prices of refined indium at 2,000-2,080 yuan/kg as of Friday April 13, down 60 yuan/kg from two weeks ago.
In overseas markets, however, refined indium orders remained firm with relative optimistic buyers. Offered prices were heard at $345-370/kg, up $12.5/kg from two weeks ago.
SMM expects prices of indium to fluctuate in a narrow range if consumption remains stable. With tighter supply, crude indium saw its prices higher than refined indium. Crude indium traded at 1,950-2,000 yuan/kg last week. As prices of refined indium dipped to 2,000 yuan/kg last week, traders adopted a watch-and-wait stance, with only small volumes of inventory on hand.
https://news.metal.com/newscontent/100792882/minor-metals-dip-five-consecutive-days-to-record-lows
China’s copper anode imports have risen as the country continued to expand its copper smelting capacity and as its domestic raw material supply percentage is below 30%.
In 2017, imported copper anode accounted for 9.1% of the total raw materials used for copper smelting in China. This compared with 8.8% in 2016, SMM data showed.
Zambia, Chile, and the Democratic Republic of the Congo are three major sources of China's copper anode imports, accounting for some 90% of the total volume. Imports from Zambia accounted for about 50%.
A total of 277 companies imported copper anode during 2014-2017, with the largest demand from Jiangxi Copper Corporation and CNMC International Trading Corporation, an SMM survey showed. The two companies' annual imports accounted for 35% of China's total imports.
The top 10 major customs received 90% of China’s imports, with Shanghai taking the largest share at 20-30% each year. In recent years, however, imports through Shanghai and Jinan customs saw diversion to others due to the increase in newly-built smelters across the country.
Russia’s Industry and Trade Minister Denis Manturov said that Rusal, which was hit by U.S. sanctions, has asked the government to support the development of the aluminium sector, TASS reported.
The aluminium giant has proposed that the government help create facilities for the primary processing of aluminium, the Interfax news agency reported.
By Alfred Cang and Yuliya Fedorinova
> (Bloomberg) -- United Co. Rusal officials met Chinese
> companies and traders this week to discuss the possibility of
> buying alumina and selling aluminum in the Asian country as U.S.
> sanctions freeze out the Russian producer from markets around
> the world, according to people with knowledge of the talks.
> Rusal is looking for alternative sources of alumina, the
> raw material for aluminum, as sanctions block its normal
> supplies, according to the people, who asked not to be
> identified because the matter is private. At the same time, the
> Russian company is asking traders whether it can boost sales of
> the refined metal in ingot form in China, as its usual customers
> are cut off.
> Rusal’s delegation in China, which includes senior
> marketing and sales representatives, is discussing potential
> options, hasn’t reached any sort of agreement and may not do so,
> according to the people. The Chinese officials were cautious
> about any sort of deal because of the risk of contravening
> sanctions, the people said. Rusal’s press office declined to
> comment.
> The U.S. sanctions are upending the global supply chain for
> aluminum, which is used in planes made by Boeing Co. and Ford
> Motor Co. trucks. Rusal is the world’s biggest producer outside
> China, supplying about 6 percent of the world’s aluminum. It
> operates mines, smelters and refineries across the world from
> Ireland to Jamaica.
> Rusal is likely to target sales in alternative markets
> across the Middle East, Turkey and China to make up for lost
> exports to western markets, Morgan Stanley analyst Susan Bates
> said in an emailed note. China is the world’s biggest producer
> of aluminum and has been exporting increasing volumes of
> aluminum products that it doesn’t require domestically.
> The metal surged to the highest level since 2011 on
> Thursday amid the global scramble for alternative supplies,
> trading at $2,616 a ton at 1:52 p.m. in Singapore. Goldman Sachs
> Group Inc. forecasts prices could surge to $3,000 a ton in the
> near term as the impact overwhelms the market.
> Rusal’s Hong-Kong traded shares have lost more than 60
> percent since the sanctions were announced. They rallied by as
> much as 15 percent on Thursday to HK$1.64.
Acute global supply worries have caused the price of alumina to escalate at a rapid pace rarely seen, industry participants said Wednesday.
Related article: Australian alumina leaps $160/mt on day to $710/mt FOB on supply worries
Towards the close of market in Asia on Wednesday, a 30,000 mt Brazilian cargo was reported to have traded at $800/mt FOB with 30 days credit.
This compares with Platts Australian alumina daily assessment at $550/mt FOB on Tuesday.
In the last week, market participants had estimated FOB Brazil loadings to be at between close to parity to $15/mt premiums, to FOB Western Australia loadings.
Market participants acknowledged a severe lack of supply.
"I think in today's market, people pay any price for anything," a source said. "The Rusal thing has thrown the market in chaos. It is not a normal market."
"It's a crazy price...[but] no one else has anything," another said.
"It's dramatic. There's literally nothing available..smelters globally are on their knees...It's an unprecedented situation in the global industry," said a third.
US sanctions on Russian aluminum producer Rusal have escalated global alumina supply worries, adding to deficits already created by Alunorte's unplanned output cut of 50% in Brazil since March 1 due to environmental breaches, and subsequent force majeure declaration. The run cut is expected to remove about 242,000 mt/month of alumina from the market.
Rusal produces alumina in Australia through its joint venture with Rio Tinto, Queensland Alumina Ltd. Rusal's share of the plant's output is typically shipped to Russia for its smelters, supplemented with further purchases from Australia through term contracts and the open spot market.
In addition, Rusal produces alumina in Ireland and Jamaica, which is exported to third parties, who regularly direct the tons to Africa, Canada Iceland and Europe.
Alunorte is the world's largest alumina refinery, with a nameplate capacity of 6.3 million mt/year and typically turns out about 5.8 million mt/year.
The refinery supports the 45,000 mt/year Albras aluminum smelter in Brazil, and in addition Alunorte exports sizable volumes of alumina to Africa, Europe, Russia, the Americas, and the Middle East.
The Albras smelter has also halved its output due to lack of alumina. In recent weeks, sources have also noted that other smelters in Africa, the Americas and Europe have run down their alumina inventories.
Alcoa said Wednesday that first quarter profits fell 33 percent despite a 16 percent increase in sales. But the Pittsburgh bauxite miner and aluminium producer’s earnings still topped Wall Street estimates.
The company reported net income of $150 million, or 80 cents per share, on sales of $3.09 billion vs. earnings of $225 million, or $1.21 per share, and sales of $2.66 billion in the year-ago quarter.
Excluding one-time items, adjusted income totalled 77 cents per share vs. 63 cents a year ago and analyst estimates of 69 cents per share. Sales were in line with Wall Street estimates.
First quarter 2017 results reflected a $120 million gain on the sale of a hydroelectric dam in North Carolina.
The company disclosed it will take a non-cash, after-tax charge of $128 million against second quarter results related to turning over the pension obligations of about 2,100 retirees and beneficiaries covered by Alcoa’s Canadian pension plans.
Alcoa said it transferred about $555 million in pension obligations and related assets to three insurance companies. Many companies have done the same thing to reduce the risk posed by volatile pension obligations.
The results were disclosed after Wall Street closed. After closing Wednesday at $59,40, up $2.32, Alcoa shares moved higher in after hours trading. They are up 10 percent this year.
Alcoa said that delays in smelter projects in China, which is engaged in back-and-forth tariff threats with the U.S. that includes threatened levies on Chinese aluminium, will increase the deficit of needed aluminium and alumina this year. Alcoa predicts an aluminium deficit of 600,000 metric tons to 1 million metric tons, after stating 300,000 metric tons to 700,000 metric tons last quarter. It now predicts a deficit of up to 1.1 million metric tons for alumina as well, after predicting a balanced market last quarter.
Alcoa pushed its forecast for full-year adjusted Ebitda to a range of $3.5 billion to $3.7 billion, after previously stating $2.6 billion to $2.8 billion.
Alcoa will redirect to the market 800,000 mt of bauxite previously committed to Rusal, the aluminium giant affected by newly imposed US government sanctions on Russian entities and individuals, CEO Roy Harvey said Wednesday.
LME nickel prices jumped 7% overnight and hit a high of $15,875/mt, marking a record high since 2015 on declining inventory, US sanctions against Russia and downstream demand from the new-energy vehicle industry.
Nickel surged to a more than three-year high amid growing fears that Russia's Norilsk Nickel, top producer of the metal, could be the next victim of US sanctions against Russia that has already caused chaos on aluminium markets.
SMM believes nickel prices will see an even stronger upward momentum as LME inventory continued to decrease. As of April 17, inventory stood at 314,454 mt, down over 19% from a high of some 380,000 mt at the end of August last year.
While the US sanctions against Russia have seen global aluminium and alumina prices rise, market participants feared the impact would spill over to Russian nickel.
Separately, demand for high-nickel cathode materials is likely to surge due to rising sales of new-energy cars. China's March production and sales volume of new-energy vehicles stood at 67,932 and 67,778 units respectively, up 105 % and 117% year on year, latest data from China Association of Automobile Manufacturers showed.
A temporary nationalisation of Russian aluminium giant Rusal is one of the options for helping the company, which has been hit by U.S. sanctions, a Kremlin spokesman said on Thursday.
Rusal and its major shareholder Oleg Deripaska were included on a U.S. sanctions blacklist this month, leading to anxiety among many of its customers, suppliers and creditors who fear they too could be hit by sanctions through association with the company.
“You know that in the expert community there are various points of view now on how to help (the sanctioned) companies. This is one of them,” Kremlin spokesman Dmitry Peskov told reporters on a conference call on Thursday.
He was asked to comment on a proposal for the state to buy out shares of affected companies as a way of helping them to mitigate the negative effect of the sanctions.
This proposal, according to a media report by online news portal RBC on Wednesday, was first voiced by the head of Russia’s Federation of Independent Trade Unions, Mikhail Shmakov, and then commented on by Alexander Shokhin, a former deputy prime minister who now heads the Russian Union of Industrialists and Entrepreneurs.
“Of course, it is important to take into account the opinion of the companies’ shareholders, the companies’ owners, the government’s capabilities. Therefore, in this case we are talking about one of the points of view, which are now being actively discussed.
“But, as far as I know, there are still no ready-made scenarios, ready-made support formulas, which is understandable,” Peskov said.
It was not clear what “temporary” nationalisation would mean and how nationalisation would help Rusal as the company is under U.S. sanctions on the so-called SDN list.
Rusal and En+, its largest shareholder which has also been placed under sanctions, declined to comment. Renova, Rusal’s another co-owner, was not available for immediate comment.
* China March iron ore output -0.4 pct y/y at 66.89 mln tonnes - stats bureau
* China March lead output +4.4 pct y/y at 423,000 tonnes - stats bureau
* China March zinc output stood unchanged y/y at 469,000 tonnes - stats bureau
* China March refined copper output +4.6 pct y/y at 753,000 tonnes - stats bureau
* China March alumina output -4.8 pct y/y at 5.63 mln tonnes - stats bureau
Chinese traders are preparing to export alumina to reap the profits from record prices for spot cargoes after the United States imposed sanctions on Russia’s United Company Rusal, among the biggest producers of the aluminium raw material.
China is the world’s the biggest producer and consumer of alumina, a compound extracted from bauxite ore that is then smelted into aluminium metal.
The Rusal sanctions have upended the aluminium supply chain, as companies cut contracts to use Rusal metal, leaving producers of cans or auto parts scrambling for supplies, which is likely to feed into higher costs for end users such as automakers, like Toyota, or beer can makers like Ball.
Rusal, the world’s second-biggest aluminium producer, produces about 6 percent of the global alumina supply and the sanctions have exacerbated a shortfall in the market after a plant in Brazil was forced to halve output earlier in the year.
A logistics source with operations in China confirmed trading houses were preparing alumina for export.
“It hasn’t been exported yet. It’s being stockpiled for export” the source said.
Reuters was unable to confirm the quantities on hand.
Exports in April may remain small but they could increase to between 120,000 to 180,000 tonnes for May, said Wan Ling, an analyst at metals consultancy CRU.
“There are signs that China will start exporting alumina,” said Wan. “Because the arbitrage is quite big, some trading houses in China have started to export alumina from ports in China, from bonded warehouses and from alumina refineries, from some ports in Shandong province and from Guangxi Province.”
Aluminium makers with alumina refineries in Shandong include a plant in Zibo owned by Aluminium Corp of China, or Chalco, a China Hongqiao Ltd refinery in Binzhou and a refinery operated by Chiping Xinfa Huayu Alumina Co in Liaocheng. All three companies did not immediately respond to requests for comment.
The Chinese companies are hoping to cash in on surging alumina prices. An alumina cargo bound for Brazil for May delivery sold at $800 per tonne on Wednesday, said Wan.
This is a 45 percent increase from $550 a tonne for Australian cargoes that was reported on Wednesday. A typical alumina shipment carries 30,000 tonnes of metal.
“We have never seen these prices before. Prices may stay strong or go higher,” said Wan.
U.S. aluminium producer Alcoa said Wednesday during its first-quarter results call that there was a possibility of Chinese alumina exports but it could not confirm there was any supply exiting China yet.
Alcoa forecasts a global alumina market deficit of between 300,000 to 1.1 million metric tonnes this year, primarily due to supply disruptions in the Atlantic region.
Global alumina supply is forecast to be 126 million tonnes this year, according to UBS.
China exported 55,737 tonnes of alumina last year, according to data from the General Administration of Customs.
Kazakhstan is looking to open up new markets for its alumina exports, concerned U.S. sanctions on Russian aluminium giant Rusal could hit business and jobs.
Eurasian Resources Group (ERG), a company part-owned by the Kazakh government, produces 1.5 million tonnes a year of alumina, which is used to make aluminium, selling two-thirds to Rusal.
Timur Toktabayev, deputy minister for investments and development, said on Thursday the cabinet was looking at various options to avoid local plant stoppages and open up new markets.
“It is hard to say (where Kazakh alumina might go instead of Russia) because contracting is mostly done early in the year,” he told reporters on the sidelines of a mining conference.
“We must look at the opportunities. The price (of aluminium) has gone up and therefore I think global smelting volumes will increase, there will be fresh demand and we will find something.”
Higher price, he said, could also make it feasible to ship Kazakh alumina to markets further away.
ERG, which was preparing to gradually boost its own smelting capacity in anticipation of the Rusal contract expiring at the end of 2019, has not replied to questions regarding the impact of Rusal sanctions on its operations.
It is still unclear what Washington wants in return for a permanent EU exemption from steel tariffs, European Trade Commissioner Cecilia Malmstrom said on Thursday.
“We are still in doubt,” Malmstrom said during a visit in Copenhagen.
U.S. President Donald Trump has given the EU and six countries until May 1 to negotiate permanent exemptions from tariffs of 25 percent on steel and 10 percent on aluminium.
Malmstrom said she had not received any new deadline but holds “regular discussions” with U.S. Commerce Secretary Wilbur Ross on the issue.
Japanese utility company Tohoku Electric Power said in a statement sent Thursday that it has settled benchmark prices for thermal coal supply contracts for the financial year 2018-2019 (April-March) with a number of Australian suppliers, without revealing any price details.
"Regarding your inquiry, we have reached agreements with several suppliers," Tohoku Electric said in its emailed response to S&P Global Platts' questions about the progress of its talks for 2018-2019 Japanese financial year supply contracts.
Tohoku Electric went on to state: "And also we are currently in negotiations with several suppliers, too."
The power company said it was unable to disclose any price information for the commercially confidential supply agreements it has entered into with some Australian thermal coal suppliers. It also declined to name the Australian suppliers.
However, market sources said there were indications that recent price discussions for Tohoku's contracts were focused around $95/mt FOB Newcastle, 6,322 kcal/kg GAR, which is broadly equivalent to 6,000 kcal/kg NAR in terms of calorific value.
Tohoku Electric's supply contracts are for the 6,322 kcal/kg GAR grade of Australian thermal coal, shipped from Newcastle port to its power plants in Japan including Noshiro, which has two 600-MW generation units, and Haramachi plant with two 1,000 MW units.
The price agreed by Tohoku Electric with its suppliers is important for the Asia-Pacific market as it tends to be adopted by smaller buyers in the Japanese market for their thermal coal supply contracts, and by buyers in other parts of Asia, including in Taiwan and Thailand.
Though volumes covered under the Japanese financial year vary every year, usually they amount to tens of millions of tons of thermal coal.
A year ago, Tohoku Electric settled early with a number of Australian thermal coal shippers for its April 2017-March 2018 financial year supply contracts at prices of $58-$61.60/mt FOB Newcastle, but held out for longer in its negotiations with other suppliers, including Glencore.
Talks with its major supplier Glencore eventually finished in late April, with an agreement price of $84.97/mt FOB Newcastle, basis 6,322 kcal/kg GAR. It was the highest benchmark since $95/mt in 2013, sources said at the time.
Platts Northeast Asia thermal coal index, or NEAT, which is the delivered-Japan price for shipments of thermal coal on a 5,750 kcal/kg NAR and 15% ash basis slipped below $90/mt this week for the first time since September 2017, and it was assessed Thursday at $88.20/mt CFR Kinuura.
https://www.platts.com/latest-news/coal/perth/japans-tohoku-electric-settles-some-jfy-2018-27956920
Production of #300 stainless steel in China and Indonesia is forecast to grow 13% to 15.2 million mt in 2018 as output from Indonesia stays at high levels, according to senior analyst of nickel at SMM, Yang Bo.
Stainless steel exports from Indonesia to China are expected to remain above 150,000 mt in the first half of this year as Indonesia's plan to sell more to the US was temporarily frustrated by the 25% tariff imposed by US President Donald Trump, Yang said.
In China, demand for stainless steel is expected to grow further this year, driven by growth from the sectors of machinery, petrochemicals and environmental protection facilities. These sectors mainly consume #300 stainless steel, she added.
China’s industry ministry on Friday said it has ordered 12 steel mills to come back into compliance following breaches of environmental, safety and other regulations, while it has removed another 19 companies from a qualified enterprises list.
The breaches range from excessive pollution at Hebei Rongxin Iron and Steel Group to a failure by Shanxi Xintai Iron and Steel to submit a self-inspection report on time, according to a document published by the Ministry of Industry and Information Technology (MIIT).
Neither steel company could be reached for comment outside of normal business hours on Friday evening.
The MIIT has been stepping up its attempts to regulate the sprawling steel industry in China, the world’s biggest producer of the metal, while the Ministry of Ecology and Environment and local authorities have also intensified inspections and imposed restrictions on production in key steel cities.
“The inclusion on the rectification list (for the breaches) is a reminder and warning to the company,” MIIT said.
“If the company rectifies the situation within one year, its withdrawal from the list will be studied.”
Explaining its methodology in a separate document, the MIIT said the system was equivalent to issuing yellow and red cards to offenders in soccer, adding that it has been working to “eliminate blind spots” in the steel sector since 2013.
Yellow and red cards are issued to players in soccer matches to warn players on rules violations. A yellow card is a caution and a red card signifies ejection from a match.
Some of the 19 companies taken off the list of qualified enterprises were removed because they have not been producing for more than a year. Others have been incorporated into other firms or carried out capacity swaps, according to the document.
China will allow foreign investors to trade in domestic iron ore futures markets starting on May 4, the country’s securities regulator said in a news briefing on Friday.
The Dalian Commodity Exchange is currently the only Chinese exchange offering iron ore futures contracts.
Iron ore futures are the second Chinese commodity derivatives market that has been opened to overseas investors after the crude oil futures contract offered by the Shanghai Futures Exchange that started trading last month.
China is the world’s biggest consumer of iron ore, the raw material for manufacturing steel. The country is also biggest steel producer globally.
In February, Dalian issued draft rules to guide foreign investors for participating in the market.
The Dalian Exchange did not immediately respond to requests for a comment on the CSRC announcement when contacted by Reuters.
China granted approvals for the installation of new steelmaking facilities with a capacity of 149.8 million mt a year between the start of 2017 and April 2018, predicated on the closure of 169.7 million mt/year as part of its capacity replacement campaign, S&P Global Platts calculations based on Chinese local government announcements show.
The new capacity, most of which has no fixed timetable, will come on stream mainly over 2018-20. Most of the closures will be carried out once new facilities are commissioned.
Of the total new capacity, 51.4 million mt/year, or 34%, will use electric arc furnaces, while the rest will be converters.
Some 11 million mt/year of this new EAF capacity Will replace converters, while the rest will be the replacement of existing EAFs.
China has been encouraging steel mills to switch from blast furnaces and converters to EAFs since 2017. This is because EAFs are more environmentally friendly, and the supply of ferrous scrap has grown after the elimination of 140 million mt/year of induction furnace capacity in 2017.
Some market sources said the switch from blast furnaces and converters to EAFs would be slow as scrap supply has been unstable and inadequate. However, some said the trend would be irreversible because as China’s fight against air pollution continues the frequent and stringent output controls at blast furnaces would encourage steelmakers to shift gradually to EAFs, which would be spared output cut orders during bad weather.
Meanwhile, from the start of 2017 to April 2018, approvals granted for new pig iron making facilities — blast furnaces, has totaled a combined capacity of 111.66 million mt/year, also predicated on the shutting down of existing blast furnaces with a pig-iron capacity of 130.3 million mt/year.
Daily crude steel production at member mills of China Iron & Steel Association (CISA) averaged 1.7859 million mt during March 21-31, down 0.07% from March 11-20.
Inventory at steel mills stood at 13.38 million mt at the end of last month, down 9.5% from March 20, data from CISA showed.
https://news.metal.com/newscontent/100792235/cisa-member-mills-steel-inventory-down-95-in-late-mar
India’s state-controlled Steel Authority of India (Sail) plans to increase crude steel output by 8.4pc from a year earlier for the 2018-19 year that started 1 April.
The country’s largest steel producer forecast production of 17.8mn t of crude steel in 2018-19 compared with an estimated output of 16.42mn t in 2017-18. Actual production during April-December 2017 was 11.1mn t. Capacity utilisation during April-December was 87pc.
Sail has completed the expansion of its production capacity to 21mn t/yr from 13mn t/yr earlier in a decade-long capacity ramp-up at its five major integrated steel plants.
The company expects to complete the rebuilding of its coke oven battery No.8 at the Bhilai Steel Plant in central India by June next year. Sail is also awaiting pending environmental clearance for starting expansion of of its Gua iron ore mine in east India from the current 4mn dry metric tonne (dmt)/yr to 10mn dmt/yr.
Fellow state-controlled steel producer Vizag Steel plans to expand crude steel production by 23pc in 2018-19 to 5.98mn t from an estimated output of 4.73mn t in 2017-18. Vizag operates a 6.3mn t/yr steel plant in the coastal city of Visakhapatnam in east India’s Andhra Pradesh state. The company is currently upgrading its coke oven battery No.5 and two iron ore sintering units.
https://www.hellenicshippingnews.com/indias-state-run-steel-mills-plan-output-increase/
Chinese steelmakers will increasingly seek out higher-quality coking coal grades as the industry makes further progress in reducing carbon emissions and moves up the steel product value chain.
This will add to Chinese demand for domestic and imported premium hard coking coal, while also widening the price spread with second-tier coking coal that has higher levels of impurity, Wang Yingsheng, vice secretary-general at the China Iron and Steel Association (Cisa), said at the Coaltrans China conference in Beijing.
“Environmental protection will be a permanent fixture of government policy,” Wang said. “Thus, demand for low-sulphur and low-ash coking coal should increase and the price differences between lower and higher quality grades of coking coal should also widen.”
Sentiment in the steel market is still largely bullish, as Chinese consumption is expected to remain high and fairly stable. But demand for steel may have hit a plateau, as China is almost fully developed in terms of infrastructure, Wang said.
Electric trucks now make up almost 62pc of China’s total truck fleet for coal transport, said Shi Hong, director at state-owned rail operator China Railway’s construction and research arm CRSIC.
Chinese rail transport infrastructure has also undergone rapid improvements in speed and scale from 2013-17, Shi added. And the country’s operator has pledged to support price stability in the coal market by ensuring that railway haulage is reliable and efficient.
The past few years have been tumultuous for China’s steel industry, which has been hit with tariffs from various countries that have added to volatility in profit margins for Chinese steelmakers.
The escalating trade war between the US and China could further hinder the progress China has made in manufacturing higher-quality steel grades with lower environmental impact.
“We do not know what the actual scale and end result of this trade war will be,” Cisa’s Wang said. “We will work together to strive for stability in the steel market. All businesses along the steelmaking supply chain must remain sustainable and profitable.”
https://www.hellenicshippingnews.com/chinas-demand-for-cleaner-coking-coal-to-increase/
Coal shipments from Indonesia, the world's top thermal coal exporter, declined 8.9% to 50.78 million tonnes in the first three months of 2018 from 55.73 million tonnes in the same period a year ago, energy ministry data showed.
Indonesia's coal production was also down, falling to 69.33 million tonnes in the first quarter from 74.73 million tonnes in Q1 2017, Energy and Mineral Resources Ministry spokesman Agung Pribadi said in a text message.
"Perhaps production was down because of weather factors, because it's still the rainy season." Pribadi expressed, adding that Chinese demand had also declined.
The ministry revised its data on domestic coal consumption in the first quarter to 21.94 million tonnes from 20.44 million tonnes earlier, Pribadi said, noting that the initial figure only accounted for thermal coal used in power stations.
Thermal and coking coal imports at ports in southern China, including Fangcheng and Xiamen, came under restrictions over the weekend, market sources said Monday.
Mill sources said that port authorities had told them informally that several ports would no longer be able to receive any imported coal, while others may have certain restrictions imposed.
Sources said ports in Fujian province -- Xiamen, Quanzhou and Meizhou -- would no longer be able to receive any coal imports. A mill source in Fujian province said that he had received verbal confirmation late Friday evening from customs officials, but was unable to get any specific details on the restrictions.
With Xiamen port coming under restrictions, the steel mill source said it could no longer consider seaborne coking coal despite it being cheaper than domestic material.
A Xiamen-based trader said that the port restrictions were aimed at limiting thermal coal imports as there were ample stocks at the port.
Other ports such as Fangcheng and Zhoushan in East China were allowed to handle imported coal, but under restrictions, sources said.
More details were, however, unclear, they said, adding that they had received the news only on Monday morning. A mill source said that unloading of vessels at Fangcheng port might face delays as a result of the restrictions.
The authorities were likely to review coal import volumes on a monthly basis and change the restrictions accordingly, a trader said, adding that this increased uncertainty about the impact on the market.
End-users who import directly might be allowed to negotiate, but not the traders as far as imports through certain ports were concerned, a miner source said.
The restrictions were likely to be in place for the next six months, a steelmaker source said, adding that it would take that long for domestic thermal coal prices to stabilize.
China's domestic 5,500 kcal/kg NAR thermal coal was assessed at Yuan 555/mt FOB Qinhuangdao last Friday, down Yuan 85/mt month on month.
As for coking coal, Platts assessed Premium Low Vol CFR China at $199/mt Friday, down $5/mt on the week.
S&P Global Platts assessed the CFR China equivalent of Shanxi PLV at $225.26/mt on April 11, putting the spread between domestic and seaborne prices at $26.26/mt, with seaborne coal being the cheaper material.
China’s steel producers ramped up output in March to the highest level since September, with mills in the world’s top market for the metal rushing to boost operations after winter restrictions to prevent smog were lifted in the middle of the month.
China last month churned out a total of 73.98 million tonnes of steel, up 4.5 percent from same period in 2017, data from the National Bureau of Statistics showed on Tuesday.
Average daily steel output in March reached 2.39 million tonnes, the highest level since September and up 2.8 percent from combined January-February data and also year-on-year, according to Reuters records.
The data will stir worries about mounting oversupply as inventories of rebar used in construction SH-TOT-RBARINV hit their highest in years, dragging steel prices to their worst monthly performance since May, 2016.
Some analysts were surprised by the rise given that winter curbs as part of Beijing’s war on smog were in place until the middle of the month.
But they said the data illustrates the fast pace at which mills were ready to unleash capacity onto the market, taking advantage of robust prices and decent margins.
“Mills in most cities were ramping up output as soon as heating seasons finished in mid-March, although some cities prolonged the curbs,” said Richard Lu, analyst at CRU consultancy in Beijing.
Output over the first three months of the year was 212.15 million tonnes, up 5.4 percent on the same period last year, according to the bureau.
Coke output in March fell 4.7 percent to 35.57 million tonnes compared to the same period last year, the data showed. Year-to-date, total production dropped 3.2 percent to 102.85 million tonnes.
China’s coal production in March fell to its lowest since October, data showed on Tuesday, as miners in the world’s top consumer of the fuel scaled back operations amid falling prices.
The country’s coal output came in at 290 million tonnes in March, according to data from the National Statistics Bureau, although that marked a 1.3-percent rise from the same month last year.
The monthly decline came as local coal prices were down about 20 percent from records hit in January, with warmer weather crimping demand from utilities.
The data showed Chinese coal output for the January-March period grew to 804.5 million tonnes, up 3.9 percent from the same time last year.
Adding to worries of potential oversupply, China has approved five large-scale new coal mines since January. Traders and analysts said new supply from these mines could put further downward pressure on prices.
China’s largest coal producer China Shenhua Energy lowered its sales and production forecasts recently.
Shenhua aims to produce 290 million tonnes of coal in 2018, down 1.8 percent from a year ago, Shenhua said in its annual earnings report on March 23, while sales are likely to decline 3 percent from 2017 to 430 million tonnes.
Whitehaven Coal has reported a lift in production during the March quarter, with run-of-mine (RoM) production up to 5.9-million tonnes during the three months under review.
This was up from the 5.4-million tonnes produced in the previous quarter, and the 5.6-million tonnes produced in the previous corresponding period.
Saleable coal production in the March quarter was reported at 5.2-million tonnes, up from the 5-million tonnes produced in the previous quarter, and the 5-million tonnes reported in the March 2017 quarter.
The Maules Creek mine, in New South Wales, set a RoM production record during the quarter, producing 2.9-million tonnes, an 11% increase on the previous corresponding period. Saleable coal production from the mine was also up by 7% on the March 2017 production figure, to 2.6-million tonnes.
The Narrabri mine produced 1.2-million tonnes RoM coalduring the quarter, an 11% decline on the previous corresponding period, after the operation suffered from production delays due to mechanical problems and localized weighting events.
The Gunnedah opencut operations produced a record 1.7-million tonnes RoM coal for the March quarter, up from the 1.69-million tonnes in the previous corresponding period, while saleable coal production was also up from 1.39-million tonnes to 1.41-million tonnes over the same period.
Whitehaven on Tuesday reported that managed coal sales, including the sale of purchased coal, for the March quarter was up by 10% on the previous corresponding period, to 5.4-million tonnes, while equity coal sales were up by 11% in the same period, to 4.2-million tonnes.
http://www.miningweekly.com/article/whitehaven-reports-another-solid-quarter-2018-04-17
Newcastle thermal coal prices are expected to drift lower for the remainder of 2018 as global supply firms and demand growth slows, Citi analysts said Monday.
Citi forecast the price of Newcastle 6,300 kcal/kg GAR coal for the fourth quarter of this year to drop to $80/mt FOB from $103/mt in the first quarter.
For 2019, Citi expects this price to be at $85/mt before dropping to $80/mt in 2020.
However, medium-term thermal coal prices will likely stay higher for longer as the seaborne market is supported by a lack of investment in new supply, the analysts said. Second-quarter 2018 Newcastle 6,300 kcal/kg GAR prices are expected to be at $90/mt FOB.
"China should remain the bellwether of the seaborne thermal coal market," the analysts said.
Chinese thermal coal demand has had a strong start to the year with thermal power generation up 8.7% year on year, the analysts said.
However, full-year growth could be much weaker, they added.
Strong demand from China and supply tightness at various coal-producing regions have led to a spike in thermal coal prices since the latter half of 2016.
Chinese thermal coal supply has been hampered due to environmental and safety crackdowns, railway transportation bottlenecks and strong demand for coal during the colder-than-expected winter, boosting its domestic prices.
"Physical market tightness has eased since March [in China], with inventories building rapidly at utilities and ports," the analysts said. "Domestic production has picked up and transportation bottlenecks are resolved."
The analysts said that they expect coal inventories in China to remain elevated and domestic coal prices to further weaken in the second quarter.
The domestic Chinese 5,500 kcal/kg NAR coal price had surged to a high of Yuan 770/mt FOB Qinhuangdao in February this year amid strong demand and supply tightness. However, ever since the government's move to cap the price rise and boost production, the prices have come down to be assessed at Yuan 555/mt Friday, S&P Global Platts data showed.
The country's move to restrict low calorific value coal imports, and shipping disruptions due to Daqin railway maintenance could be some of the factors impacting prices in the coming months, the analysts said.
Coal shipments from China's Daqin to Qinhuangdao railway are set to drop to lower levels when the rail corridor undergoes scheduled maintenance from April 7 to May 1.
"The Chinese thermal coal market must navigate through seasonal demand weakness and incremental supply growth in the following months," the analysts said.
For the full year, the market should stay in a reasonably tight balance as the Chinese government has limited the bandwidth to raise production and fix spot prices in the range of Yuan 500-570/mt FOB Qinhuangdao for 5,500 kcal/kg NAR cargoes, they added.
WEAKENING INDIA, SHINING ASEAN
India's coal imports are expected to remain broadly flat year on year in 2018 with rising demand being offset by domestic supply, Citi analysts said.
Coal India, which meets 84% of the country's coal requirements, is targeting to produce 1 billion mt by the end of this decade.
Coal shipments for fiscal year 2017-2018 stood at 580.28 million mt as against a target of 600 million mt but were up by 7% year on year.
"With improving production from Coal India, India's thermal coal imports should moderate over the medium term, albeit at a slow pace," the analysts said.
Indian thermal coal imports are expected to drop to 136 million mt in 2020 from 149.3 million mt in 2017, Citi noted.
However, thermal coal demand in Southeast Asia is expected to rise consistently in the next few years, they added.
Indonesia is planning to add 35 GW of additional generation capacities, with a series of new coal-fired power projects slated to be commissioned in 2019, the analysts noted.
"Similarly, the commissioning of new coal-fired power plants should support thermal coal demand in Philippines, Vietnam, Malaysia and Thailand."
Indonesia's exports could rise to about 340.9 million mt in 2020 from about 318.3 million mt in 2017, as high thermal coal prices propel the restart of idled mines, the analysts said.
However, falling investments in capacity expansion globally should limit seaborne supply growth, they added.
Steel mills in Xuzhou, Jiangsu province are likely to resume operations on Thursday April 19 as the environmental inspection team is expected to leave the region on April 18, SMM learned.
Most steel mills were suspended for rectification earlier this month due to the provincial environmental checks. Daily rebar output of 20,000 mt is expected to be affected during the inspection period.
Spot rebar prices in north Jiangsu jumped last week, with top-tier materials offered up to 3,700-3,800 yuan/mt on supply shortage. However, trading slowed and spot prices fell on Monday April 16 following falls in prices of futures.
Nonetheless, market participants remained bullish and sellers were reluctant to offload their cargoes. We see more upward room for spot rebar prices in the short term as fundamentals remained positive while policies were supportive of higher prices.
https://news.metal.com/newscontent/100792441/steel-mills-in-xuzhou-to-resume-production-on-apr-19
Severstal, one of Russia’s top steelmakers, reported a 22 percent jump in quarterly core earnings as higher steel prices offset U.S. trade restrictions, beating analysts’ forecasts.
The company, controlled by billionaire Alexei Mordashov, previously said it had stopped steel supplies to the United States before Washington imposed an import duty of 25 percent on steel from several countries from March 23.
Severstal increased sales of some of its products to the U.S. market and European destinations due to the attractive pricing environment in the first quarter, it said in a statement on Tuesday. It made no other mention of the U.S. market.
It said last week it may redirect steel which it had previously been supplying to the United States to markets in the Middle East and Asia.
Severstal said its first-quarter earnings before interest, taxation, depreciation and amortisation (EBITDA) totalled $706 million, up from $578 million in the same period a year ago. Analysts polled by Reuters had forecast an EBITDA of $696 million.
Its first-quarter revenue rose 23 percent to $2.2 billion.
“In the first quarter of 2018, steel and raw material demand remained high. Global steel prices were supported by winter restrictions in China and a seasonal increase in Chinese demand in March, which contributed to higher prices of raw materials,” the company said.
On Monday, it recommended a dividend payment of 38.32 roubles ($0.6) per share for the first quarter and amended its dividend policy, linking the payments to its free cash flow and net debt/EBITDA ratio instead of net income and net debt/EBITDA.
Russian export prices are expected to follow global trends in the second quarter, Severstal said, adding that it expected Russian steel demand to grow by 2.6 percent in 2018.
Severstal shares had risen 2.5 percent in Moscow by 0853 GMT in line with Moscow’s benchmark MICEX index. Russian stocks are supported on Tuesday by U.S. President Donald Trump’s decision to delay additional sanctions on Russia.
Shares in many Russian companies have come under pressure in recent days as Washington imposed sanctions on several Russian businessmen, companies and government officials on April 6 with aluminium company Rusal and its public debt most hit.
Neither Severstal nor Mordashov is subject to sanctions.
The chief executive of South Korean steelmaker POSCO will step down before his term ends in 2020 as he is keen for a younger person to lead the firm, the company said on Wednesday.
Kwon Oh-joon, 69, offered his resignation at an emergency board meeting, but will stay in the post until the company appoints a new chief, a spokesman said.
Kwon took over as CEO of the country’s top steelmaker in March 2014. He was re-appointed in March last year, and his term was set to end in March 2020.
POSCO in January reported a 144 percent surge in fourth-quarter operating profit, helped by steel price gains, but fell short of market estimates as higher raw material costs cut into earnings.
The spokesman denied any link between Kwon’s resignation offer and a change of government last May.
POSCO was privatized in 2000, but chief executives have previously been replaced when a new administration takes office, local media reported.
China will resolutely deal with so-called “zombie” steel firms and crack down on irregularities in the steel sector, the country’s state planner said on Wednesday.
China will also step up coal mine closures in the south, Yan Pengcheng, spokesman for the National Development and Reform Commission, told a news conference.
Australian iron ore producer Fortescue Metals has narrowed the discounts for May index-linked contract iron ore cargoes in response to higher prices in China’s portside secondary markets.
Fortescue’s May discount for 56.7pc SSF fines will narrow to 39pc from 40pc for April, while 58.3pc blended fines will narrow to 34pc from 35pc, Chinese market participants said.
Fortescue prices its contract sales to China at a discount to the 62pc fines reference index.
Portside SSF fines narrowed their average discount to the Argus 62pc Fe PCX to 39pc in March compared with an average 40pc in February. Month-to-date SSF is pricing at a 38pc discount, or 168 yuan/wet metric tonne (wmt), to the PCX that has averaged Yn448.91/wmt in the month to date.
SSF discounts could narrow further. The PCX fell by Yn7/wmt to Yn445/wmt today. The SSF differential narrowed by Yn8/wmt to Yn164/wmt below the PCX, or an outright price of Yn281/wmt that is a 36.9pc discount to the PCX.
The decision of India’s coastal state of Goa, a key supplier of low-grade fines, to suspend iron ore mining indefinitely from 15 March may have lifted demand for SSF fines in China. Lower profit margins could also be prompting steel mills to shift to sub-58pc fines to cut costs.
Fortescue last month cut its iron ore price realisation forecast to 65pc of the 62pc Fe benchmark from a previous 70-75pc for the 2017-18 fiscal year ending 30 June.
https://www.hellenicshippingnews.com/fortescue-narrows-may-iron-ore-discounts/
Brazil's Vale increased its iron ore and pellet sales in the first three months of 2018, setting an all-time record for any first quarter. However, iron ore and coking coal production fell both year-on-year and over the last quarter of 2017. The company's iron ore output target for 2018 remains unchanged.
Vale produced 82 million tonnes of iron ore in the first quarter. This is down 4.9% year on year and 12.2% on Q4 2017, showed company's quarterly production report. The reduction was due mainly to Vale's decision to progressively reduce lower grade iron ore production at the Southern and Southeastern Systems, and due to the impact of a more intense rain season in the period.
Vale's Q1 iron ore pellet production totalled 12.8 million tonnes, up 2.9% year on year but down 0.9% quarter on quarter. The YoY improvement was due mainly to the operational start-up of the Tubarão II pellet plant. The company estimates it will restart Tubarão I and São Luís pellet production by the end of Q2 and Q3, respectively.
Iron ore and pellet sales totalled 84.3 million tonnes in Q1, or 6.4 million tonnes more than in the same period of last year. Iron ore sales represented 71.2 million tonnes, while pellets were 13.1 million tonnes. Sales volumes increased due to flexibility and active management of the supply chain, Vale claims.
Many steel mills in Xuzhou, Jiangsu province, have yet to resume operation even as the environmental inspection team departed on Wednesday April 18. Inspectors are set to return on April 23
China’s steel futures climbed on Wednesday, marking their biggest daily gain in two weeks, as sentiment was boosted after the country’s central bank said it would cut down the cash lenders hold as reserves.
The People’s Bank of China late on Tuesday unexpectedly said it would cut the reserve requirement ratio (RRR), the amount of cash that most commercial and foreign banks must hold as reserves to pay back medium-term lending facilities, by 100 basis points for most commercial banks.
“The cut in RRR helps to relieve pressure in capital markets and boost optimism over the macroeconomy,” said Xu Bo, analyst at Haitong Futures.
The most-active construction rebar futures on the Shanghai Futures Exchange closed 1.7 percent higher at 3,446 yuan ($548.37) a tonne on Wednesday, standing at their strongest one-day advance in two weeks.
Prices for steel-making raw materials also climbed. Iron ore contracts for September delivery jumped 2.1 percent to 449 yuan a tonne, slightly stepping back after reaching their biggest intraday gain since early January during early trade.
The most-traded coke futures on the Dalian Commodity Exchange surged 4.8 percent to 1,851 yuan a tonne. Coking coal prices rose 3 percent to 1,149 yuan a tonne.
The pick-up in metal prices was also boosted by an increase of steel billet rates and active trading at physical market, easing fears over sluggish demand.
Average billet prices rose 30 yuan to 3,490 yuan a tonne in top steel-making city Tangshan on Tuesday, with prices of some finished products in the city also seeing an increase, according to data from Mysteel consultancy.
Some analysts and traders, however, warned that the market pick-up may be short-lived.
“Despite the RRR cut, downward pressure on the economy remains… and the slowdown in infrastructure investment is unchanged. That means curbs on long-term steel demand are still there,” said Xu.
CITIC futures said in a note in Mandarin that pressures hanging over iron ore and steel remain due to a slowing destocking process and environmental crackdown at steel mills.
Spot rebar prices edged up 0.03 percent to 4,111.8 yuan a tonne on Tuesday, according to Mysteel.
Iron ore for delivery to Qingdao port .IO62-CNO=MB rose 0.6 percent to $64.51 a tonne on Tuesday, according to Metal Bulletin.
https://www.hellenicshippingnews.com/chinese-steel-prices-climb-after-bank-liquidity-boost/
Rising Indonesian coal production and lower Chinese demand have pulled down Indonesian coal prices by 22% over the last 45 days, a trend that augurs well for plants that import fuel.
China has restricted coal imports at many ports and plans to phase out a large number of thermal plants, hurting demand. Indian power generators are likely to increase imports because they face a supply crunch. It would also ease pressure on Coal India although it would increase dependence on foreign fuel.
Experts said prices are expected to fall further, keeping potential buyers away from the market as they are waiting for lower rates. Public sector power companies would continue to follow centre's directive of not importing fresh consignments.
"As Indonesian prices fall, power plants within a radius of 150 km from ports will find it remunerative to import. Ash content in Indonesian coal is, at most, 10% while Indian coal contains ash of 30-40%." a senior power company executive said.
"Importing Indonesian coal makes sense for coastal plants even when it is costlier than Indian. However, for pit head plants, it is still a costlier option and will continue to be so unless prices fall drastically." he said.
According to a coal importer, the 4,200 kilo calorie gross as received (GAR) variety from Indonesia can be roughly compared to G11 grade sold by Coal India. "Base price of G11 at pit head is Rs 1,145/t ($17.4/t). A consumer pays Rs 2,200-2,300/t after paying handling charges, GST, Royalty and other levies. This coal when offered through e-auction fetches higher prices that could be as higher by 30-40% over the base price. In contrast the landed price of the Indonesian variety comes to around $50.19/t (Rs 3,287/t) at ports." the importer said.
However, price of 3,800 kilo calorie GAR is $42.63/t, whereas basic price of G12 is Rs 1,063/t and its ex-mine comes to Rs 1,800-1,900/t ($27.4-28.9/t).
Nucor Corp’s quarterly profit topped Wall Street estimates, and the No. 1 U.S. steelmaker by market value forecast a better second-quarter while praising the U.S. government’s move to impose tariffs on imported steel.
The results come nearly a month after U.S President Donald Trump announced his plan to impose hefty tariffs on imported steel and aluminum to protect American steel and aluminum makers from foreign competition.
Shares in the company fell in the morning along with other steel firms, as concerns over the prospect of a tit-for-tat trade war with China again dominated trading.
The company did not directly link higher selling prices for its steel and increased shipments in the first quarter, or its forecast, to the imposition of tariffs on foreign competitors in late March.
But its statement followed the upbeat numbers with a reiteration of its support for the moves.
“We are encouraged by recent actions by the government to address the massive flood of dumped and illegally subsidized imports into the United States,” Nucor said.
“Broad-based tariffs with few exceptions are needed to address the historic volume of unfairly traded imports and transshipping that is done to avoid trade duties,” it said.
The move, however, has also provoked a response from China, which published its own list of duties on key U.S. imports earlier this month, including soybeans, planes, cars, whiskey and chemicals.
Nucor’s shares were currently flat at $65.51, while those in U.S. Steel, Steel Dynamics Inc and AK Steel Corp were trading down about 1 percent, dragging the S&P 1500 steel index lower by about 0.2 percent on Thursday.
“Almost everything today involving steel and aluminum companies depends upon viewpoint of the trade disputes. Fears around trade disputes is affecting everything, because the basic underlying business (for Nucor) is good,” Bradford Research analyst Charles Bradford said.
Average selling prices for Charlotte, North Carolina-based Nucor, which makes sheet steel, beam blanks and bar steel among other products, rose 9 percent in the quarter ended March 31.
Steel mill shipments increased 8 percent in the quarter while shipments to outside customers 15 percent from a year earlier.
The company said it expected profit in the second quarter to increase “significantly” compared to the first quarter.
Net income attributable to shareholders dipped to $354.2 million, or $1.10 per share, in the first quarter, from $356.9 million, or $$1.11 per share, year earlier.
Excluding the write-off of deferred tax assets, the company earned $1.17 a share, beating a consensus estimate of $1.10, according to Thomson Reuters I/B/E/S
Revenue rose 15.6 percent to $5.57 billion, also beating the average estimate of $5.46 billion.
Chinese iron ore futures soared nearly 7 percent on Thursday, hitting their highest in almost one month, amid expectations that a move by China’s central bank to reduce the amount of cash lenders keep as reserves would help spur steel demand.
But some traders also say speculative trading activity may be behind the price surge, with supply of the steelmaking raw material staying high.
Along with iron ore, other China-traded commodities also surged, including rubber, nickel, aluminium and zinc.
The most actively traded iron ore for September delivery on the Dalian Commodity Exchange closed up 6.5 percent at 475 yuan ($76) a tonne, just off a session high of 476 yuan, its loftiest since March 23.
China’s central bank unexpectedly said late on Tuesday it will reduce the cash banks hold as reserves by 100 basis points from April 25, helping fuel a rally in prices of steel and its raw materials on Wednesday.
“What our central bank did will give some support to real estate projects, so there should be support for steel demand in the short to medium term,” said a Shanghai-based iron ore trader.
But he said the price increase in iron ore futures, which added to Wednesday’s 2.1 percent spike, may be temporary.
“This could be short-lived because we may also be seeing some speculative money,” he said.
Prices of steel and its other raw materials also scaled multi-week highs.
Coke futures on Dalian rose 3.3 percent to end at 1,893.50 yuan a tonne, after jumping 4.8 percent on Wednesday while coking coal climbed 2.5 percent to 1,174.50 yuan.
Rebar on the Shanghai Futures Exchange increased 2 percent to 3,516 yuan per tonne, having climbed nearly 2 percent in the session before.
Stocks of iron ore at China’s main ports stood at 160.1 million tonnes on April 13, not far below a record high of 161.68 million tonnes reached at the end of March, data compiled by SteelHome consultancy showed.
BHP Billiton Ltd , the world’s No. 3 iron ore producer, cut its 2018 fiscal year iron ore output guidance by 2 percent to 272-274 million tonnes, citing issues in its railroad car unloading system.
The reduction in BHP’s output forecast was marginal and could be filled by other suppliers, the Shanghai trader said.
Iron ore for delivery to China’s Qingdao port rose 2.1 percent to $65.88 a tonne on Wednesday, the highest since March 22, according to Metal Bulletin.
