Beijing will not help Washington turn around its trade deficit by agreeing to measures aimed at devaluing the US dollar, according to China’s top envoy to the United States.
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Cui Tiankai, Chinese ambassador to the United States, also blamed advisers in Washington for lacking “common sense” amid the escalating trade war.
Cui was speaking on Friday to the US-based think tank Centre for Strategic and International Studies as the world’s two largest economies continue to escalate their tit-for-tat tariff war.
He ruled out a Plaza Accord approach to resolving the US trade deficit, referring to a controversial international agreement which was used in the 1980s to improve the US trade position by devaluing the dollar.
US President Donald Trump has applied tariffs on a total of US$50 billion worth of Chinese imports since July, and is preparing to impose duties on another US$200 billion of Chinese goods next month.
Trump has accused China of using unfair trade practices and industrial policies, leading to a US$375 billion trade deficit with China in 2017.
Beijing has so far retaliated by levying duties on US$50 billion of US goods, and threatened tariffs on an additional US$60 billion of American imports.
“Honestly speaking, we are facing a big problem. Some people who are in high places or are advising the government and leaders on economic and strategic issues don’t have sufficient common sense,” Cui said, without naming the US.
“I wish to advise people to give up the illusion that another Plaza Accord could be imposed on China. They should give up the illusion that China will ever give in to intimidation, coercion or groundless accusation,” he said at the meeting in Washington attended by both US and China experts.
https://www.wsj.com/articles/am-i-paying-too-little-for-stuff-1535979601
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5 days ago - President Donald Trump told lawmakers on Thursday he wants to scrap a pay raise for civilian federal workers, saying the nation's budget ...
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22 hours ago - House puts off formally beginning negotiations with the Senate on a spending package that could contain a raise for federal workers.
£46k new, 2.5 years old. 57% loss of value. Diesel..
China’s environment ministry has called for action to prevent emissions monitoring fraud in the wake of a scandal in which officials in one city repeatedly manipulated sensoring equipment to distort pollution readings.
Officials in the city of Linfen in China’s top coal producing province of Shanxi were found to have tampered with state air monitoring stations on nearly 100 occasions in the space of just a year.
In a notice on its website late on Thursday, the Ministry of Ecology and Environment said the scandal was the result of an “organized and premeditated criminal act.”
It ordered environmental monitoring agencies in all regions to create clear guidelines on responsibility for ensuring the integrity of the data, in order to help prevent violations and punish offenders. Agencies were also told to close regulatory loopholes and improve management procedures.
Accurate data is key to China’s anti-pollution campaign as it works to develop a more nuanced, scientific approach to cutting smog. It has been cracking down hard on firms and local governments accused of tampering with equipment or falsifying data.
The environment ministry promised earlier this month to make all monitoring institutes and staff completely independent of local governments by 2020 in a bid to ensure data is “accurate, genuine, objective and comprehensive”.
By the end of this year, China aims to plug all major polluting enterprises into a real-time, online monitoring system that will alert agencies when firms exceed emission limits.
Japan’s consumption of liquefied natural gas (LNG) is set to fall as the country’s nuclear reactors restart, with output from atomic power set for its highest since the aftermath of the Fukushima disaster.
Kansai Electric Power will restart the 870-megawatt (MW) No. 4 reactor at its Takahama station later on Friday, a spokesman told Reuters.
The Kansai restart followed Kyushu Electric Power bringing back the 890-MW No. 2 reactor at its Sendai plant on Wednesday. Kyushu now has four reactors running.
Each returning reactor will cut demand for LNG by as much as 1 million tonnes a year, said Kosho Tamura, a gas analyst at Japan Oil, Gas and Metals National Corp.
The return of Japan’s nuclear capacity should lead to lower imports of fossil fuels, especially LNG. While that is a positive for Japan’s utilities, especially as LNG prices are near four-year highs in Asia, the loss of Japanese demand could undermine the demand outlook for the global market.
Japan is the world’s biggest buyer of LNG.
“It’s a good thing that the power utilities in western Japan have restarted nuclear plants, which is leading to the cuts in fossil fuel costs, primarily LNG, through the continued operations of nuclear plants,” said Tomoko Murakami, manager of the nuclear energy group at the Institute of Energy Economics, Japan (IEEJ).
Kansai is Japan’s second-largest utility by sales and was the most reliant on nuclear power before the March 2011 Fukushima disaster, when a nuclear power plant owned by Tokyo Electric Power suffered meltdowns after an earthquake and tsunami.
Before the disaster, Japan had the world’s third-largest reactor fleet which provided about one-third of its electricity. But the plants were shut down for relicensing after Fukushima highlighted regulatory failings.
Kansai will have three units operating and expects to have another reactor at Takahama restarted in November after shutting it down earlier this month for maintenance and refueling, its spokesman said.
Those three units will save about $1.5 billion in fuel costs each year they are running, the Kansai spokesman said, declining to comment on what fuels it would substitute.
Operating Kyushu’s nuclear units will save the company about $2.2 billion in annual costs based on current LNG prices, its spokeswoman said.
With two more reactors likely to restart by the end of the year, when Japan enters its peak demand period, as much as 9 million tonnes of LNG demand could be replaced by nuclear operations.
The country’s use of LNG in power generation has been declining this year as more reactors return. In June, LNG imports fell to the lowest monthly amount since May 2016 and for the year through to July are down 2.4 percent.
The Fukushima disaster sparked the country’s worst energy crisis in the post-war period, forcing it to import record amounts of LNG and driving prices to record highs. Utilities also turned to cheaper coal imports.
China’s manufacturing activity grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month and employers cutting more staff, a private survey showed on Monday.
The gloomy findings reinforce views of a further cooling in China’s economy in coming months, as the United States ramps up tariffs on Chinese goods. That is likely to prompt more spending and other growth boosting steps from Beijing.
The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 50.6 in August from July’s 50.8, matching economists’ forecasts.
Though the index remained above the 50-point mark that separates growth from contraction for the 15th consecutive month, it was the weakest since June 2017. While output improved modestly, most of the other readings were lackluster.
“The manufacturing sector continued to weaken amid soft demand, even though the supply side was still stable...I don’t think that stable supply can be sustained amid weak demand,” Zhengsheng Zhong, director of Macroeconomic Analysis at CEBM Group, said in a note accompanying the survey.
“In addition, the worsening employment situation is likely to have an impact on consumption growth. China’s economy is now facing relatively obvious downward pressure.”
The economy was already showing signs of stress before the U.S. trade row flared. A regulatory crackdown on financial risks and debt was pushing up borrowing costs and making it tougher for firms to get funding, sparking a growing number of defaults.
But the steady reports of weaker export orders suggest the deepening trade dispute is now adding to that pressure, with the impact starting to ripple through to China’s factory floors.
New export orders - an indicator of future activity — have contracted for the longest stretch since the first half of 2016, the Caixin PMI showed.
The sub-index came in at 48.8 in August, compared with 48.4 in July. As a result, total new business, domestic and foreign, rose at the weakest pace since May 2017.
An official PMI survey on Friday also showed another month of sliding export orders, though its overall activity reading ticked higher.
President Donald Trump’s administration could slap tariffs on another $200 billion of Chinese imports as early as this week.
COST PRESSURES
Facing rising costs and sluggish demand, China’s manufacturers have been reducing their payrolls for nearly five years straight, according to the Caixin survey, which focuses more on small and mid-sized firms. But the August staff cuts were the sharpest in over a year.
An analysis of financial data of Shanghai-listed companies published by the Shanghai Stock Exchange on Sunday confirmed that some companies are grappling with cost pressures.
Their report found that downstream consumer firms were being squeezed in the first half of the year by higher raw materials costs and weaker-than-expected consumer demand, while upstream and midstream oil, metals and chemicals manufacturers posted the strongest profit growth.
Some firms are also facing operating difficulties due to trade frictions between the United States and China and economic restructuring, the report said.
Chinese officials have pledged to prevent extensive job losses as trade risks mount, following a rise in the July unemployment rate.
Policymakers are accelerating approvals for road and rail projects and are trying to reduce business costs. More cash is being pumped into the financial system to bring down lending rates, taxes are being cut and state banks are being urged to keep credit flowing to companies hit by trade tensions.
But economists caution it will take some time for actual infrastructure construction to get going and put a floor under the cooling economy. Fixed-asset investment growth in the first seven months of the year fell to a record low.
Meanwhile, corporate price pressures continue to rise, the private survey showed. Input costs increased at a sharp and accelerated pace last month but only one in 10 respondents said they were able to pass these on to their customers.
FEATURE
Sep 3, 2018 at 04:00 UTC | Updated Sep 3, 2018 at 12:15 UTC
Three years ago, Microsoft Azure was the first to bring blockchain to the cloud. Now it's connecting the technology to just about everything else.
The software giant has quietly been building bridges between its blockchain services and other, widely used infrastructure and platforms, such as Office 365 Outlook, SharePoint Online, Salesforce, Dynamics 365 CRM Online, SAP, and even Twitter, according to Matt Kerner, the general manager of Microsoft Azure. The idea is to allow Microsoft customers to port their data from these platforms into the cloud, and from there onto a blockchain.
Why? In addition to the usually touted blockchain efficiencies, one of the less-discussed benefits of distributed ledger technology (DLT) in a cloud environment like Azure, according to Microsoft, is that it amasses data from multiple companies in a standardized format at scale. The potential to mine data for all sorts of insights then becomes limitless, the company reckons.
Hence, the company is integrating tools such as Microsoft Flow and Logic Apps – which offer hundreds of connectors to thousands of applications – into Azure Blockchain Workbench, a service it launched in May to make the creation of blockchain apps easier (Workbench currently has ethereum Proof of Authority configured as the consensus protocol).
It's all a part of the evolution of Big Data, Kerner explained. Prior to blockchain, he pointed out, cloud computing enabled departments within the same company to break out of their data silos and collaborate on heterogeneous data sets, increasing smarts through machine learning (ML) and artificial intelligence (AI).
"Blockchain empowers the next step – enabling a single, authentic data set shared across counterparties. This is already improving the way transactions happen," Kerner told CoinDesk, adding, "We believe the same will be true with data analytics."
Stepping back, many would argue that data is now the most valuable naturally occurring resource on the planet. As the race to prove the best data analytics intensifies, firms are springing up whose sole purpose is to structure and format data to run AI algorithms on.
But with enterprise blockchain, you get the structured and formatted data part thrown in for free, as Kerner said many Azure customers were discovering.
"What blockchain is doing is creating a multi-party business process that is moving out of email, phone calls, spreadsheets and into a single system with a single view on the data that all of the participants can rely upon and trust," he said.
Looking ahead, Kerner said bringing vast amounts of unstructured and siloed data into a context where it could be leveraged and even shared would drive exponential change. He said:
"Even the fiercest of competitors can onboard and mutually derive benefit from that system and find new revenue streams."
A good example of Azure connecting and balancing components in a large and complex production environment is Insurwave, which simplifies maritime insurance for shipping hauls carried by Maersk.
The platform was built using R3's Corda platform with help from EY and Guardtime and is now in commercial production with insurers such as Willis Towers Watson, XL Catlin, and MS Amlin.
Insurwave, which tracks cargos and adjusts insurance premiums in real time, collates all sorts of data, everything from internet of things (IoT) sensors monitoring temperature, to whether the ship is going to hit a storm, or enter a war zone or an area heavily populated with pirates. Once this data is shared on the blockchain, Power BI, a Microsoft business analytics tool, can be used to gain insights about shipping hauls, Kerner said.
Further, Ricardo Correia, a managing director and head of partner management at R3, said its relationship with Microsoft is a good deal more than Azure being Corda's default preferred cloud.
In addition to a one-click Corda capability, Correia pointed to integrating Corda into modules within the Azure marketplace.
"This enables Corda to plug into a number of different capabilities including Azure SQL, active directory for identity access management and key vault for key management," he said.
Some of this is already in place because of Insurwave, with deeper integration also happening in a number of use cases. Notable ones include the webJet blockchain, which aims to reconcile hotels and other travel arrangements on a single ledger, and was cited by R3's CTO Richard Brown as an example of Corda extending beyond mainstream finance.
Widening the lens, the ability to track items in real time and share things like IoT data using a blockchain has made global trade and supply chain a leading light in terms of domains to chase. From a strategic point of view, Insurwave challenges IBM's bid for global trade dominance, which also has Maersk in the position of flagship, so to speak.
IBM has openly stated that this was its No. 1 target. However, Correia said Microsoft is also making its mark in supply chain – perhaps with a little less fanfare. "It's in their interest given they too have very large supply chains with a number of their product offerings," he said.
In terms of offering blockchain as a service, IBM has championed Hyperledger Composer for the past couple of years. However, there may be some question marks over the design of Composer, at least from an IBM perspective.
Azure's Kerner was tactfully equivocal about Microsoft's enterprise blockchain rivals, adding that everything is built with an eye towards enabling a consortium that's not exclusively on Azure.
"It's got to be open. Any meaningful consortium is going to have members who have different choices that they have made around their cloud provider and who they choose to work with," he said.
China's railway freight volume, an indicator of the broad economic activity, expanded at a faster pace in the first seven months of this year.
Railways carried a total of 2.29 billion tonnes of cargo during the January-July period, up 7.9 percent from one year earlier, according to data from the National Bureau of Statistics.
The growth accelerated from the 7.7-percent rise registered in the first half (H1) and 7.2-percent increase for January-May period.
In July alone, railway freight climbed 8.7 percent year on year to 337.12 million tonnes.
Rail, road, water, and air carried a total of 27.54 billion tonnes of cargo in the first seven months, up 6.8 percent year on year.
The data added to a series of indicators that showed resilience in the economy. The country's economy recorded a strong growth of 6.8 percent in H1, on track to achieve the government's annual target of around 6.5 percent for 2018.
Brazil’s top electoral court ruled that jailed former president Luiz Inacio Lula da Silva cannot run in this year’s presidential election due to a corruption conviction.
The ruling by a 4-1 majority of the seven-member court removes some doubt about Brazil’s most uncertain election in decades - though Lula’s lawyers have said they would appeal any adverse decision to the Supreme Court.
Vedanta Resources’ Chairman Anil Agarwal will take the London-listed miner private on Oct. 1, his family trust said on Monday, a step seen by some in the industry as a prelude to a potentially broader deal with bigger miner Anglo American.
The Volcan Investments trust, which held about two thirds of Vedanta’s London-listed arm before it announced a roughly $1 billion buyout offer in July, said holders of 26 percent of shares had agreed to sell.
Volcan now holds or has received acceptances for 92.31 percent of Vedanta's shares, it said bit.ly/2wAdTMA, adding the offer would remain open for acceptances from shareholders until further notice.
Agarwal has said he wanted to buy out the London listing, which is dwarfed by Vedanta’s Indian operation, to simplify the company’s structure. Analysts and fund managers have said the move could also reduce the scrutiny the company has received as a result of leaks and fatalities.
Industry players have speculated too that Agarwal, who holds almost 20 percent of Anglo American, wants some form of tie-up with the global miner, and they see the move on Vedanta Resources as a step to creating a more sellable group.
Indian newspaper Mint reported in early July that Agarwal was seeking to merge Vedanta with Anglo’s South African unit and Srinivasan Venkatakrishnan, formerly head of Johannesberg-listed AngloGold Ashanti has just taken over as CEO of Vedanta Resources.
Agarwal, who is Anglo American’s biggest shareholder through his family trust, has played down speculation he is seeking a tie-up with Anglo.
However, he has indicated that he wants to grow Vedanta into a major diversified player.
Volcan had been expected to face some shareholder resistance to the buyout.
Vedanta’s international operations are copper mines in Zambia and Vedanta Zinc, with operations in South Africa and Namibia. A tie-up with Anglo American would give the Indian firm access to diamonds, copper, platinum, coal, iron ore, nickel and manganese markets.
The appointment of Venkat, who worked with AngloGold for 18 years and led it for five, follows a bounce in metals prices that has prompted Vedanta to expand zinc and aluminium output, bolstering a recovery from the commodities price slump that ended in 2016.
The first Indian company to list in London in 2003 in a 500 million pound ($644 million) offering, Vedanta is also waiting to hear from a judicial committee on whether it can reopen a copper smelter in southern India that was shut by authorities after violent protests in which 13 were killed.
A surge in populism has sent Sweden's far-right Sweden Democrats (SD) Party surging in the polls leading up to the country's September 9 election - placing them neck and neck with the Moderate party. The current ruling party, the Swedish Social Democrats (S), however, remain strongly in the lead.
Perhaps dozens of cars torched by "misguided youths", rapes, swiming pool sex assaults, news crew attacks, grenade attacks and government funded sex courses to teach migrants that 14 is just too young, aren't sitting well with Swedes who may regret following their "feminist" government in welcoming over 400,000 people from countries and cultures not exactly known for their embrace of feminism.
What's more, Sweden's Social Democrats have been criticized by "average wage-earners, pensioners and first-time voters" who now accuse Prime Minister Stefan Lofven of imperiling the country's cherished welfare state by welcoming a flood of asylum seekers who are seen "as an economic and cultural threat," according to Stockholm University sociology professor Jens Rydgren.
"The balance of power has shifted, because of the EU, globalisation and digitalisation, and the Social Democrats are no longer able to keep their promises," Sweden's paper of reference Dagens Nyheter wrote recently. -AFP via France 24
A poll by Sifo has the Sweden Democrats, led by Jimmie Åkesson, ahead of the Moderates by 1 point, while Ipsos has the Moderates ahead by the same amount.
Prime Minister Stefan Lofven's Social Democrats, who have dominated Swedish politics since the 1930s, will remain the biggest party in the country but likely with a record low score, polls suggest.
The far-right Sweden Democrats (SD) are heading to make the most gains and come in a close second, followed by the conservative Moderates. -AFP
The Argentinian government imposed tariffs on all exports, including steel products, to avoid a great percentage of exported products following the country's currency devaluation in the past week, President Mauricio Macri said Monday.
The tariff varies between primary products and finished products. For primary products, for every $1 exported, a duty of Argentinian Pesos 4 is charged, while for finished products, for every $1 exported a duty of Pesos 3 is charged.
No breakdown was provided for categories of primary or finished products.
"We know that it is a bad tariff, very bad, that goes against what we want to encourage, which is more exports to encourage more work," Macri said in a video. "But I have to ask them to understand that it is an emergency and we need your input."
Besides the tariffs, Macri said the government will cut its ministries more than 50% and decrease public spending by 4%. All measures are already in place. The goal is to advance the fiscal deficit reduction to zero already in 2019, first expected for 2020.
Argentina is subject to a quota for steel exports to the US under Section 232 as well as aluminum imports. Argentina is able to export 180,000 mt/year of value-added steel and 180,000 mt/year aluminum to the US without facing tariffs.
So far in 2018, Argentina exported 86,054 mt of steel products to the US, down 11.9% from 97,747 mt in the same period of 2017. From January to December 2017, Argentina exported 211,465 mt of steel products to the US -- the highest annual figure since 2013.
Argentina plays an important role supplying finished steel to South American markets. The country does not provide official custom data.
Iran's annual inflation rate is the highest it has ever been in its history. Measured for today, 9/3/18, annual inflation is 244%.
@steve_hanke
The United Nations' mission in Libya says rival armed groups in Tripoli have reached a ceasefire agreement to end heavy fighting that has rocked the capital for more than a week.
The announcement on Tuesday came after Libyan authorities said that the death toll from the violence had risen to at least 61. Scores of people were also wounded.
"Under the auspices of [UN envoy Ghassan Salame], a ceasefire agreement was reached and signed today to end all hostilities, protect civilians, safeguard public and private property and reopen Mitiga airport in Tripoli," the United Nations Support Mission in Libya (UNSMIL) mission said.
Fierce battles broke out in Tripoli's southern districts on August 27 after the Seventh Brigade, an armed group based in Tarhouna, 65km southeast of the capital, launched a surprise offensive against rival militias.
Earlier on Tuesday, Al Jazeera's Mahmoud Abdelwahed reported from Tripoli that the situation remained tense, with sporadic fighting and indiscriminate rocket fire hitting residential areas.
Libyan utility LPTIC, which owns the two state-run telecoms firms, said in a statement that a lack of security had led to outages. Maintenance engineers were unable to reach some stations which had stopped working due to a lack of power.
It did not comment on Facebook's blocking.
Access to the web is controlled by state firms and monitored by security bodies which are effectively controlled by armed groups working with the weak GNA.
Independent national media based inside Libya scarcely exists as journalists often face threats from armed groups or officials unhappy with critical coverage
Libya slid into chaos after the 2011 uprising that overthrew and ruler Muammar Gaddafiand led to his death.
The country is governed by rival authorities in Tripoli and the country's east, both of which are backed by an array of militias.
Libyan explains Tripoli's bewildering militia dynamic.
A Libyan on FB trying to explain Militia dynamics in Tripoli today: It's like a divorced woman with kids, married a divorced man with kids...The couple also made babies together...One day man comes home to a fight.. woman says 'My kids and your kids are fighting our kids"
@Rana_J01
Tropical Storm Gordon made landfall on Tuesday just west of the Alabama-Mississippi border, lashing the U.S. Gulf Coast with high winds and heavy rain, the U.S. National Hurricane Center (NHC) said.
Gordon was about 35 miles (55 km) south-southwest of Mobile, Alabama and was packing maximum sustained winds of 70 miles per hour (110 km/h) after making landfall, the Miami-based weather forecaster said.
“Rapid weakening is forecast after Gordon moves inland, and is forecast to become a tropical depression on Wednesday,” the NHC added.
As of Tuesday night, the storm had not reached 74 mph winds, the minimum to become a hurricane.
Hurricane and storm surge warnings and watches were in effect across the region, the NHC said.
Though the Louisiana coast remained calm as of early Tuesday evening, Governor John Bel Edwards declared a state of emergency and companies cut 9 percent of U.S. Gulf of Mexico oil and gas production.
“I’m asking all residents to do their part in getting ready for this storm,” New Orleans Mayor LaToya Cantrell said in a statement. “The city’s absolute No.1 priority is to ensure the safety of our residents.”
Tropical-storm force winds were already lashing the Alabama and western Florida panhandle coastlines and some areas still recovering from last year’s storms could see 12 inches (30 cm) of rain.
Beaches around Mobile, Alabama were washed by storm-driven waves, said Stephen Miller, a meteorologist for the National Weather Service.
“We’re expecting an increase in winds,” Miller said in a telephone interview. “We could see flooding.”
Sea levels could rise as much as 5 feet (1.5 m) from Shell Beach, Louisiana, to Dauphin Island, Alabama, forecasters said.
U.S. oil producer Anadarko Petroleum Corp evacuated workers and shut production at two offshore oil platforms on Monday, and other companies with production and refining operations along the Gulf Coast said they were securing facilities.
The Gulf of Mexico is home to 17 percent of U.S. crude oil and 5 percent of natural gas output daily, according to the U.S. Energy Information Administration.
Brazil’s federal police have recommended to prosecutors that President Michel Temer be charged with taking bribes and money laundering, according to a police document reviewed on Wednesday by Reuters.
The investigation involves 10 million reais ($2.41 million) in illicit funds Temer’s Brazilian Democratic Party allegedly received from construction firm Odebrecht [ODBES.UL] in 2014, according to the police document.
Odebrecht made the alleged payment in 2014, when Temer was vice president.
Temer’s office said in a written statement that the president had done no wrongdoing and that the funds received from Odebrecht were legal campaign donations.
Brazil’s Prosecutor General Raquel Dodge requested in March that Temer be investigated despite the constitution barring him from standing trial for crimes committed before he became president as long as he remains in power.
The police document indicated that mines and energy minister Wellington Moreira Franco and Temer’s chief of staff Eliseu Padilha were also involved in the alleged scheme and requested they face corruption charges.
Requests for comment from Moreira Franco and Padilha were not immediately returned.
Under Brazilian law, at the conclusion of an investigation police must request that prosecutors make any formal charges. If they do so, it is then up to a judge to decide if the charges merit a trial.
Dodge’s office did not return after hours calls seeking comment, and it was not clear if or when she would decide to act on the police requests for corruption charges.
Temer has already faced previous corruption charges, which were blocked by Congress last year. Under Brazilian law, congressmen must approve any charges related to conduct in office against a sitting president, who could then only be tried before the Supreme Court.
Once Temer leaves office on Jan. 1, he could still face the charges that Congress blocked and any new charges that may be filed against him while still in office.
The United States expects India to increase purchases of U.S. energy products and aircraft so the U.S. trade deficit with the South Asian country is rectified, U.S. Secretary of State Mike Pompeo said on Thursday.
“They’re going to buy more energy products from the United States, they’re going to purchase more aircraft from the United States, we truly do appreciate that but the gap will remain,” Pompeo told reporters after high-level talks with Indian officials in New Delhi.
“So we are urging them to do all that they can to narrow that gap. And at the same time it’s important that the trade barriers that are there, places that American companies, that American workers products, can’t be sold here be reduced.”
Mexico wants to end to a tariff dispute over steel and aluminum with the United States prior to signing off on a reworked trade agreement with its northern neighbor, Mexican Economy Minister Ildefonso Guajardo said on Thursday.
“Now, what are we going to do here? A deal before we get to signing, to clearly get rid of all these ... tariff-related aggressions,” Guajardo said on Mexican television after referring to the steel and aluminum dispute.
Mexico and the United States last week said they had reached a deal after more than a year’s negotiations to revamp the North American Free Trade Agreement (NAFTA).
Canada, the other NAFTA signatory, is still locked in discussions with Washington to see if it can join the accord.
Mexico and Canada launched a series of tit-for-tat measures against the United States when the Trump administration at the end of May decided to slap tariffs on steel and aluminum imports from a range of countries, including its NAFTA partners.
Mexico aims to sign off its trade deal with Washington by the end of November, and hopes Canada will remain part of it.
U.S.-Canada trade talks grind on, but 'final' issues unresolved
U.S. and Canadian negotiators pushed ahead in grinding talks to rescue the North American Free Trade Agreement on Thursday, but a few stubborn issues stood in the way of a deal, including dairy quotas, protection for Canadian media companies, and how to resolve future trade disputes.
A U.S. source familiar with the discussions in Washington said it was still unclear whether the two sides could bridge the gaps or whether President Donald Trump will opt for a Mexico-only bilateral trade deal.
“We’re down to three issues: Chapter 19, the cultural issues and dairy. We’ve created leverage and driven Canada to the table,” the source said. “Part of our problem is that Canada has been backsliding on its commitments (on dairy).”
Mexican President-elect Andres Manuel Lopez Obrador said on Thursday his government would launch tenders for drilling oil wells from early December as part of a plan to quickly increase the nation’s crude output.
Lopez Obrador has long criticized the outgoing government’s policy of opening the oil industry to private capital and promises an new approach aimed at strengthening state oil company Petróleos Mexicanos [PEMX.UL], known as Pemex, and refining more crude in Mexico.
The veteran leftist has said he will suspend auctions to give private companies rights to explore and produce from Mexican oil fields until his team had checked existing contracts for irregularities.
Lopez Obrador, who takes office on Dec. 1, did not give details of the new tenders that he announced during a news conference to unveil new members of his economic team, including deputy ministers for mining and foreign trade.
However, an industry source, who requested anonymity because he was not authorized to speak publicly on the matter, said Lopez Obrador was likely planning to offer service contracts to private companies to help Pemex extract more crude.
Mexico’s crude production has fallen to 1.8 million barrels per day, the lowest in decades.
“Tenders to drill wells are already being drawn up, and prepare yourselves, because we are going to launch them from the first days of December,” Lopez Obrador said.
Full-blown exploration and production auctions usually take about six months’ preparation.
Pemex and members of Lopez Obrador’s energy team did not respond to requests for further details.
The former mayor of Mexico City also said he would travel to his home state of Tabasco on Saturday for his first formal meeting with oil companies since the election.
“We’re preparing the rescue plan for the oil industry, which will consist of extracting more oil soon, and we’re going to need these companies that have experience, mainly national companies,” he said.
The incoming president said he did not intend to raise mining taxes in Latin America’s No. 2 economy, but would better distribute resources gathered under a 2014 mining law that created a tax for mining companies.
As part of a plan to stimulate the economy and reduce migration to the United States, Lopez Obrador said he would double the minimum wage in a 30 km (20 mile) zone along the border, halve the value-added tax (VAT) rate there to 8 percent, and lower income tax to 20 percent in the region.
The border area includes several of Mexico’s biggest cities such as Tijuana, Ciudad Juarez and Reynosa.
Trevali: zinc.
Micron. DRAM as a commodity.
Gazprom: Putin's Property not ours.
Texas oil production fell in June from a year earlier for the first time in 16 months, according to figures released on Thursday by the state’s energy regulator, a fresh sign that a lack of pipeline space in the nation’s largest shale field may be curbing production.
Texas June oil production was 98.9 million barrels, down about 2 percent from the same month last year and off 7 percent from the previous month, the Texas Railroad Commission estimated in a monthly report. So far this year, the state’s crude output had been rising 10.4 percent annually.
The slowdown comes as oil prices in West Texas, home of the oil-rich Permian Basin, have fallen to near four-year lows as production outpaces takeaway capacity, including pipelines, local refineries and rail cars.
This week, West Texas Intermediate (WTI) in Midland, Texas, traded at a more than $18-a-barrel discount to the U.S. benchmark, its lowest level since August 2014 WTC-WTM. Back then, local oil prices also sank because there were not enough pipelines to carry away production.
Some West Texas producers have said they will pull back on activity and delay well completions as a result of falling local oil prices. The number of drilled but uncompleted wells (DUCs) in the Permian rose by 167 in July, to 3,470, accounting for around 43 percent of all DUCs in the United States, the U.S. Energy Information Administration said this month.
Keane Group, which hydraulically fractures shale wells, last month said it expected DUCs to rise as operators continue to drill wells to hold onto specialized rigs. When prices are weak, producers will hold off completing wells and grow their DUC count.
The U.S. Department of Energy forecasts West Texas oil production will grow next month, despite the weaker prices and transportation bottlenecks. It calls for output to rise by 34,000 barrels per day to 3.42 million, the EIA said this month.
http://www.upstreamonline.com/live/1568381/oil-production-falls-in-texas
Shanghai Zhida Hailan Energy Co Ltd, a private energy trader set up in May last year, is one of the companies that delivered crude oil against the Shanghai September futures contract on Friday, a company spokesman told Reuters.
The Shanghai firm’s participation in the delivery is a sign that the nascent oil contract could potentially attract more private participation.
It was the first physical settlement of the contract that China hopes to grow into a global benchmark that can take on established markets like Brent.
The Shanghai-based company delivered 100,000 barrels of Iraqi oil Basra Light into storage in Zhanjiang, the only private firm among the five companies that delivered a total of 601,000 barrels of crude oil through the exchange.
The other four companies that made deliveries are all state-run, including Chinaoil, Unipec, CNPC Fuel Oil, Zhenhua Oil.
The September-delivery crude contract on the Shanghai International Energy Exchange (INE) expired on Friday.
The INE contract is the first yuan-denominated oil contract and is aimed at building a regional benchmark to reflect China’s purchasing and pricing power in the crude market. China is the world’s biggest oil importer.
“As China is set to deregulate its energy markets further, it offers immense opportunities for the private companies to be engaged in the value chain,” said an industry executive familiar with the Shanghai company’s strategy.
Zhida Hailan, a joint venture between Shanghai Zhida Holding Group and Shanghai Hailan Energy Corp, procures and trades road-paving bitumen, said the executive, who declined to be named as he’s not authorized to speak to the press.
The firm also trades bitumen and fuel oil contracts at the Shanghai exchange, he added.
Zhida Holding Group, which controls 55 percent of the trading firm, is engaged in highway building and information technology, according to the company website.
Chen Yang, Zhida Hailan’s spokesman, confirmed the company’s delivery into the crude oil contract, adding that the company sees the Shanghai oil contract as an opportunity to break into the energy trading business.
Saudi Arabia’s crude oil production in August rose to 10.424 million barrels per day (bpd) compared to 10.288 million bpd in July, an OPEC source said on Friday.
Crude supply in August was 10.467 million bpd, the OPEC source familiar the kindgom’s output plans said, compared to 10.380 million bpd in July.
Supply to the market - domestically and for export - may differ from production depending on the movement of barrels in and out of storage.
“This reflects customers needs, and is in accordance with the OPEC+ agreement,” the OPEC source said, referring to the deal between the Organization of the Petroleum Exporting Countries, Russia and other producers to rein in production.
The source said the drop in July output was due to lower exports after Riyadh halted oil shipments through Bab al Mandeb, following an attack by Yemen’s Houthi movement on Saudi oil tankers in the waterway between the Indian Ocean and Red Sea.
OPEC and its allies pledged on June 22-23 to return to 100 percent compliance with their agreement to reduce their combined output by 1.8 million bpd. The pact was first implemented in January 2017.
Libya's crude oil production edged up again this week, with increased output from two smaller fields in the east of the country, sources said Friday.
With all its oil terminals currently open, the country's crude output has climbed to over two-month highs of around 1 million b/d.
Two more eastern oil fields -- Amal and As-Sarah -- are also back contributing to Libya's exports. Crudes from both fields are blended into the Amna crude stream which is shipped from Libya's Ras Lanuf oil terminal.
A spokesman from Germany's Wintershall which operates the As-Sarah field confirmed output was gradually ramping up.
"End of August we were able to start up production in C96 [oil block] again with a capacity of up to 50,000 b/d. Production volumes are still depending on availability of external export pipelines and capacity of loading terminals," the spokesman said.
Harouge Oil Operations, a joint venture of state-owned National Oil Corp. and PetroCanada, raised output from the Amal field to 25,000 b/d, sources said.
The field had been producing at just 8,000 b/d due to maintenance in July and August, the sources added.
The Ras Lanuf terminal was only receiving 30,000 b/d of crude as of Saturday, compared to 125,000 b/d in January to May this year.
But a number of its crude storage tanks were destroyed during fighting in June over Libya's eastern oil ports, leaving just four intact. The limited storage capacity could prove a key constraint on exports.
The last tanker to load from Ras Lanuf was the Stemnitsa, which sailed Thursday and is currently heading to the Italian port of Trieste, according to S&P Global Platts trade flow software cFlow.
Wintershall, the operator of the NC-96 and NC-97 blocks, which includes As-Sarah, has been locked in a dispute with NOC since the beginning of 2017 over the terms of its contract.
The situation was complicated last November by Wintershall being forced to shut the As-Sarah field due to protests. It was only re-opened in late-January.
Hurricane Says Spirit Energy Farms-In to 50% of Warwick Licenses
2018-09-03 06:39:01.640 GMT
By James Cone
(Bloomberg) -- Hurricane Energy says that Spirit Energy has
farmed-in to 50% of its Lincoln and Warwick licenses, together
covering the Greater Warwick Area.
* Farm-in opens up a significant new work program across
Hurricane’s assets, widening strategic options and accelerating
their potential monetisation
* Hurricane and Spirit Energy committing to a work program which
envisages first oil on the GWA by 2020 and final investment
decision on the first phase of a full field development by 2021
* Commitment by Spirit Energy of up to $387m in carry
U.S. energy companies added oil rigs for the first time in three weeks, energy services firm Baker Hughes reported on Friday, while the rig count inched up this month as drilling steadied over the last three months.
Drillers added two oil rigs in the week to Aug. 31, bringing the total count to 862, the General Electric Co unit said in its closely followed report.
The U.S. rig count, an early indicator of future output, is much higher than a year ago when 759 rigs were active. Energy companies have been ramping up production in tandem with OPEC’s efforts over the past year-and-a-half to cut global output.
A total of 1,048 oil and gas rigs are currently in service.
So far this year, the total number of oil and gas rigs active in the United States has averaged 1,015. That keeps the total count for 2018 on track to be the highest since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.
U.S. crude oil production in 2018 is expected to rise 1.31 million barrels per day (bpd) to 10.68 million bpd, lower than last month’s forecast of growth of 1.44 million bpd to 10.79 million, the U.S. Energy Information Administration said earlier this month.
Discounts, bartering and smuggling are among the tactics Iran may lean on to keep almost 800,000 barrels a day of its oil exports flowing after U.S. sanctions resume in November.
Iran’s Oil Minister Bijan Namdar Zanganeh alluded to this toolbox, which was used in the past, when he said Iran will find “other ways” to keep its crude in the market. The measures won’t be enough to blunt the full impact of sanctions on oil exports, which have already slumped to the lowest level since March 2016.
In the last era of oil industry sanctions, the OPEC nation disabled tracking systems on its fleet of tankers, concealing destinations and volumes of oil exports. Millions of barrels of Iranian oil were unaccounted without the trackers.
Almost 200,000 barrels a day of the country’s post-sanctions oil sales could be undisclosed, according to Robin Mills, chief executive officer of consultancy Qamar Energy in Dubai. “Exports at these levels will be important in cushioning the financial blow to Iran, but will not have a major impact on the world market.”
China, Turkey and India will likely continue to buy Iranian oil after the resumption of sanctions on November 4, with China’s smaller refineries taking some of the murky, undisclosed shipments, according to Iman Nasseri, managing director of the middle east at FGE London. In total, Iran could export 800,000 barrels of oil a day well into 2019, including some 20,000 barrels sent by trucks to Iraq, Afghanistan and Pakistan, he said.
History shows that Iran can keep exports going, albeit at a far lower rate, even as Japan, South Korea and most European countries shun its oil months before the resumption of sanctions in November. Many buyers won’t be able to resist steep discounts, and some may revamp a barter trade that was effective earlier this decade.
“Barter trade and special funding mechanisms are among ways that could allow payments to Iran to continue within the framework of the sanctions,” said Ehsan Khoman, head of Middle East and North African research at Mitsubishi UFJ Financial Group Inc. He said India devised agreements between 2012 and 2016 to buy Iranian oil with rupees, and then Iran used the proceeds to import goods from India.
Despite access to these tactics, there is little doubt that Iran’s energy industry and economy will be hurt by the U.S. penalties. The country’s exports to Europe have already plunged 45 percent, or 226,000 barrels a day, since May, and Total SA and Royal Dutch Shell Plc have completely stopped buying the country’s oil.
Buru Energy (ASX: BRU) is hoping for a second chance at success with sidetrack drilling of its Ungani-4 development well in Western Australia’s onshore Canning Basin after the original well failed to live it up to the hype.
The company today announced the commencement of sidetrack operations, including the removal of the beam pump and preparations to install Drilling Industries Australia’s DDGT rig over the well.
Buru is anticipating a 14-day timeline to drill to the bottom of this new hole, which is about 60m southwest of the current bottom hole location. Completion activities are then expected to take a further 20 days.
The Ungani-4 well spudded back in October last year and was expected to boost Buru’s production rate in the Ungani oilfield by around 1000 barrels of oil per day.
However, drilling issues and wet weather conditions led to some setbacks at the Ungani oilfield and production testing from the well did not begin until this May.
Crude oil barrels headed to Asia from the Middle East saw dwindling interest in August from buyers that had plenty of other regions to choose from, market sources said Friday. Spot trades for October loading -- physical crude oil typically trades two months ahead of the current calendar month -- saw Asian traders increasingly reach out to European or US crude grades, they told S&P Global Platts.
"Economically it's just making sense to take US crude right now," said one Northeast Asian refiner with more than 20 million barrels of crude requirement each month.
Major geopolitical events in recent months have shaped the crude oil flows such that sour crude grades linked to the Middle East Dubai benchmark are becoming increasingly expensive compared with lighter, sweeter, and usually more premium crude grades from the North Sea, the Mediterranean and the US.
Heavy, sour Iranian and Venezuelan crude being in short supply due to sanctions are starting to have an impact, said traders.
"Not all of Iranian production will go off the market, but others have already increased production in anticipation of it," a Singapore-based crude trader said.
"The Asian crude market is open to arbitrage from everywhere at the moment," he added.
The market dynamics can be observed in two key indicators for Asia: the M1-M3 cash Dubai spread that is closely correlated to spot market strength, and the Brent/Dubai Exchange of Futures for Swaps, or EFS that serves as a barometer for arbitrage economics to Asia. M1-M3 cash Dubai structure started to slip for the first time since it moved into a backwardation of 77 cents/b in April this year, Platts data showed. The structure averaged 50 cents/b over July, and stood at 47 cents/b average for August.
Similarly, the Brent/Dubai EFS, which dived sharply to an average of $1.22/b in July, was down from $3.44/b in June.
The EFS, however, has recently started to widen once again, and stood at a month-to-date average of $1.85/b for August. This could indicate a rebalancing of incoming supply of arbitrage crude grades. Traders typically see a closed arbitrage into Asia when the EFS is wider than $3/b.
SPOT DEALS RECAP
Lighter sour crude grades produced in the Persian Gulf were the hardest hit of the bunch in August. October loading barrels of Middle Eastern mainstays such as Murban, Das Blend and Qatar Land fell rapidly to deep discounts in spot market trading early on.
Where Murban had last traded at a discount of 38 cents/b to its official selling price the previous month, offers in August began from discounts of 50 cents/b in August. The Abu Dhabi grade traded throughout the month at discounts ranging from 50-55 cents/b.
Murban's sister crude, Das Blend, saw even deeper discounts. Das Blend cargoes were consistently heard concluded in the spot market at discounts of 70-75 cents/b to its OSP, according to traders.
The Persian Gulf's other light sour crude, Qatar Land, was of similar value to buyers. Spot trades of Qatar Land were heard at discounts of around 60 cents/b to its OSP throughout the month.
Heavier crude grades also faced bearish sentiment and discounted spot market differentials, albeit to a lesser extent.
Several cargoes of Abu Dhabi's Upper Zakum were quickly picked up at "attractive" discounts of 25-35 cents/b to its OSP, said traders, leading to a shortage of Upper Zakum by the third week of the trading cycle.
Qatar's medium sour Marine crude grade traded at around parity, initially selling at small premiums to end-users, but barrels traded later in the month were heard to have been concluded at discounts of 10 cents/b against the OSP.
Qatar's other medium heavy crude, Al-Shaheen, held up in the light of healthy demand from end-users, sources said. Pre-tender spot market cargoes sold at Dubai plus 38 cents/b, compared with premiums of 35 cents/b the previous month. Both the tender and post tender cargoes traded at premiums of 35 cents/b over Dubai.
Similarly, cargoes of Banoco Arab Medium were sold at small premiums to the Saudi AM OSP, said traders. End-users were heard to have paid premiums ranging from 5-15 cents/b for the grade.
The Asian spot market will turn to November loading barrels in the coming days, once Persian Gulf producers announce the next cycle of OSPs. Traders surveyed by Platts Thursday said they largely expect producers to cut OSPs in line with spot market trade levels this month.
Russia’s oil industry is awash with cash and will be able to withstand the planned 1 trillion rubles ($15 billion) in extra taxes over the next six years, Alexei Sazanov, the head of the tax department in the finance ministry, said in an interview.
The government is looking for extra money to implement President Vladimir Putin’s pledges of higher social spending and better infrastructure over the next six years, expected to cost around 8 trillion rubles.
Russia wants to curb fuel exports to Belarus, seeks more transparent oil deal
The new oil tax changes will see an increase in the mineral extraction tax and a gradual reduction in oil and oil products export duty. The changes will be introduced step by step over the next six years starting from Jan. 1, 2019.
“The oil industry expects 2 trillion rubles worth of free cash flow this year. This is the money which they may send either for dividends, share buybacks or to redeem loans. Those are huge figures,” Sazanov said.
“So we have found resources to additionally finance budget spending worth 1 trillion rubles over six years (from oil taxes).” Russia’s top oil producers Rosneft and Lukoil both recently announced share buyback plans.
Sazanov said the oil tax reform was unlikely to affect domestic oil production, which is close to a 30-year high of more than 11.2 million barrels per day. <O/RUS1>
As a protective measure against Western sanctions over Moscow’s role in Ukraine’s conflict and alleged hacking in the United States, and part of the tax overhaul, oil refineries will be able to get compensation in the form of a negative excise tax.
Sazanov said the negative excise tax would amount to around 600 rubles per tonne of oil on average under a scenario where the oil price was $60 per barrel and the rouble at 58 per $1.
He said the level of negative excise tax, as well as some other components of the tax reform, were still subject to discussions and tweaks.
The government in May decided to curb excise tax on fuel to rein in fast rising retail gasoline prices, which led to protests among drivers across the country.
Sazanov said excise tax on fuel would rise in 2019, as initially planned.
Top oil exporter Saudi Arabia is expected to keep prices for the light crude grades it sells to Asia largely unchanged in October from the previous month to keep its oil competitive against other suppliers, several trade sources said on Monday.
Saudi Arabia has cut the prices for Arab Light and Arab Extra Light to Asia over the past two months as it fends off competition from other Middle East oil suppliers, Europe and the United States. [OSP/O]
Since June, the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producer Russia have increased production to make up for falling output from Venezuela, Libya and ahead of U.S. sanctions on Iran.
The rise in exports from the Middle East and Russia, plus arbitrage flows from Europe and the United States, has kept Asia well-supplied, especially in light grades.
“Calculations based on the Saudi price formula point to a small increase but because there are so many light grades coming from other regions, we expect Saudi to maintain or cut its prices to stay competitive,” a source at a North Asian refiner said.
Half of the six respondents in a Reuters survey said they expect the October official selling price (OSP) for flagship Arab Light crude to rise by 5 cents to 30 cents from the previous month while the other half expect prices to fall by up to 30 cents.
All except one respondent expect Saudi Arabia to cut Arab Heavy crude’s OSP in October to track a 72 percent drop in fuel oil margins last month but their view on Arab Medium’s OSP was mixed.
“Demand for Middle East crude is improving,” a second source at a North Asian refiner said, adding that he expects Saudi to raise prices by 5 cents to 10 cents a barrel for all grades.
Asia’s demand for medium-sour grades was strong last month partly as South Korea and Japan have cut Iranian crude imports ahead of U.S. sanctions in November, the trade sources said.
The October OSPs will also mark the first change in Saudi’s crude price benchmarks since the mid-1980s.
Saudi Aramco’s OSPs for October will be based on the average settlement prices for the DME December Oman contract and the December Dubai cash price assessed by Platts, both of which are set in October.Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.
State oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.
Saudi Arabia and Kuwait have agreed to restart production from the Neutral Zone’s Khafji oil field, which was shuttered in 2014 over a dispute.
http://www.energyintel.com/pages/login.aspx?fid=art&DocId=1009906
China’s Unipec has provisionally booked two very large crude carriers (VLCC) to ship crude oil from U.S. Gulf coast to Asia, shipping fixtures showed on Tuesday.
“New Courage” has been tentatively booked to load crude oil from U.S. Gulf coast on Sept. 22 while “Awtad” has been booked to load oil from U.S. Gulf coast over Sept. 23 to 26, according to the fixtures.
The destination for both tankers has been provisionally set for Singapore, though this could potentially change.
Sinopec, Unipec’s parent company, did not immediately respond to an email query on the matter.
Reuters reported in August that Unipec will resume purchases of U.S. crude oil in October after a two-month halt due to the trade dispute between the world’s two largest economies.
There has not been a single loading of crude oil from the United States bound for China since July 31, Thomson Reuters Eikon data showed.
India is allowing state refiners to import Iranian oil with Tehran arranging tankers and insurance after firms including the country’s top shipper Shipping Corp of India (SCI) (SCI.NS) halted voyages to Iran due to U.S. sanctions, sources said.
New Delhi’s attempt to keep Iranian oil flowing mirrors a step by China, where buyers are shifting nearly all their Iranian oil imports to vessels owned by National Iranian Tanker Co (NITC).
The moves by the two top buyers of Iranian crude indicate that the Islamic Republic may not be fully cut off from global oil markets from November, when U.S. sanctions against Tehran’s petroleum sector are due to start.
President Donald Trump ordered the reimposition of economic curbs after withdrawing the United States from a 2015 nuclear deal between Iran and six world powers. No one trading with Iran will do business with America, he said.
“We have the same situation (as most Western shippers) because there is no cover, so we cannot go (to Iran),” an SCI official told Reuters.
New Delhi turned to the NITC fleet after most insurers and reinsurers had begun winding down services for Iran, wanting to avoid falling foul of the sanctions given their large exposure to the United States.
SCI had a contract until August to import Iranian oil for Mangalore Refinery and Petrochemicals Ltd (MRPL) (MRPL.NS), two sources familiar with the matter said.
Eurotankers, which had a deal with MRPL to import two Iranian oil cargoes every month, has also said it cannot undertake Iranian voyages from September, the sources said.
The sources spoke on condition of anonymity as they were not allowed to talk to the media about commercial deals.
“The shipping ministry has given refiners permission to buy Iranian oil on a CIF (cost, insurance and freight) basis,” a government source said.
Under a CIF arrangement, Iran would provide shipping and insurance, enabling Indian refiners to continue purchases of the country’s oil despite the non-availability of cover from Western insurers due to the restrictions imposed by Washington.
The move would benefit Indian Oil Corp (IOC) (IOC.NS), Bharat Petroleum Corp Ltd (BPCL) (BPCL.NS) and MRPL, which plan to lift Iranian cargoes during the rest of the fiscal year ending on March 31.
India wants to continue buying oil from OPEC member Iran as Tehran is offering almost free shipping and an extended credit period.
State refiners, which drove India’s July imports of Iranian oil to a record 768,000 barrels per day, had planned to nearly double oil imports from Iran in 2018/19.
Unlike their private peers, India’s state-run refiners need government permission to import oil on a delivered, or CIF, basis. Federal policy requires them to favor Indian insurers and shippers by buying only on a free on board (FOB) basis.
The permission for CIF purchases applies only to existing annual contracts with Iran, the government source said.
India, Iran’s top oil client after China, will finalize its strategy on crude purchases from Tehran after a meeting with top U.S. officials this week, a senior government official told Reuters last week.
Iraq set a new record for oil shipments from its southern ports in August, sending out 3.583 million bpd of oil last month and beating the July record of 3.543 million bpd, data by Iraq’s oil ministry showed over the weekend.
Iraq, OPEC’s second-largest oil producer after Saudi Arabia, has been boosting its oil exports since June, after OPEC and its Russia-led non-OPEC partners in the deal agreed to reverse some of their production cuts—or as they frame it, to ease compliance rates to 100 percent.
Iraq’s federal government exported 3.583 million bpd in August, or a total of 111,061,618 barrels from central and south Iraq, reaping a total of US$7.73 billion in revenues at the price of its oil averaging US$69.593, the oil ministry quoted the Iraqi State Oil Marketing Organization (SOMO) as saying this weekend.
Iraq’s exports from the south were set on a record pace in August, judging from the high levels of exports in the first 19 days—around 3.7 million bpd, an industry source who compiled ship-tracking data told Reuters earlier this month.
Iraq has been ramping up exports from its southern ports not only in a sign that OPEC’s second-largest producer is following through with the cartel’s decision to ease compliance rates, but also to compensate for lost exports in the north. Around 300,000 bpd of crude oil previously pumped and exported in the Kirkuk province have been shut in since the Iraqi federal government moved in October to take control over the oil fields in Kirkuk from Kurdish forces. The dispute between Iraq’s federal government and the Kurdistan Regional Government (KRG) over oil exports via Turkey has yet to be resolved.
KRG saw its August oil exports from the Turkish Mediterranean port of Ceyhan surge by 40 percent compared to July’s 320,000 bpd exports, sources in the Kurdistan region to S&P Global Platts.
Kurdistan exported a total of 445,000 bpd from Ceyhan in August, of which 370,000 bpd was by way of the KRG’s independent pipeline through Turkey. The remainder was drawn from storage at Ceyhan, according to Platts’ sources.
The North Sea’s largest producing oil field has been shutdown amid planned maintenance, according to a report from Reuters.
Quoting trade sources, the news agency said Buzzard, which is operated by Nexen, is undergoing planned maintenance which was originally scheduled for August.
The field is the largest contributor to the Forties crude oil grade, pumping around 150,000 barrels of oil per day.
Reuters reports the field is due back by the end of the week and that the volume going through Forties has not dropped unexpectedly.
When asked for comment by Energy Voice, a Nexen spokeswoman said: “Nexen does not comment on production of individual assets.”
Buzzard, which lies 60 miles north-east of Aberdeen, was discovered in 2001 and produced first oil in 2007.
Last month Nexen confirmed Phase 2 of Buzzard would go ahead, extending its life by another decade.
First oil from Phase 2 is expected in 2021.
A unit of state defense giant Norinco and privately owned Hengli are in discussions with the creditors of CEFC China Energy to potentially taking over an oil stake in Middle Eastern producer Abu Dhabi, sources with knowledge of the talks said.
CEFC’s creditors have over the past months been conducting sales of the debt-laden conglomerate’s global assets, including oil and gas stakes in Abu Dhabi and Chad, and properties in Europe and Shanghai.
CEFC won in February 2017 a 4 percent stake for $900 million in a giant onshore field majority-owned by Abu Dhabi National Oil Co (ADNOC).
Thread: Comments by Paal Kibsgaard, Schlumberger Chairman & CEO
1- "Still, the well-established market consensus that the #Permian can continue to provide 1.5 million barrels per day of annual production growth for the foreseeable future is now starting to be called into question"
2- "In fact, so far in the third quarter, the hydraulic fracturing market has already softened significantly more than we expected in spite of the overall rig count holding up relatively well."
3- "Still, what is already clear is that unit well performance, normalized for lateral length and pounds of proppant pumped, is dropping in the Eagle Ford as the percentage of child wells continues to increase." #Oil #Permian #EagleFord #shale
4- "These production headwinds have, in recent years, been overcome by drilling longer laterals and pumping ever greater volumes of sand and water. However, the use of these remedies seems to be coming to an end, both from a technical and commercial standpoint." #shale
5- "Today, the percentage of child wells being drilled in the Eagle Ford has already reached 70% and, in the 3-year period since this percentage broke the 50% level, we have seen a steady reduction in unit well productivity" #shale #oil #EagleFord
6- "In the Midland Wolfcamp basin of the Permian, the percentage of child wells has just reached 50%, & we are already starting to see a similar reduction in unit well productivity already seen in the Eagle Ford." See next
7- "This suggests that the Permian growth potential could be lower than earlier expected."
8- "The increase in activity we currently see is still focused on the existing production base, while investments into new FIDs for larger developments and eventually more exploration activity to address the record low reserves replacement is still to come".
9- "....any major demand worries are premature at this stage. Furthermore, even if 2019 demand growth was to come in 20% lower than the 1.5 million barrels per day currently projected, we still expect to see consistent draws in global oil inventories throughout next year"
10- this slide regarding point 5 above about the impact of Parent-Child wells in the Eagle Ford. Shale EagleFord SLB
11- and this is about the Permian Shale oil
12- For the record, as I indicated in the past, the threat to global oil demand from TradeWars and Currency devaluation in the emergingeconomies is SERIOUS . I am NOT as optimistic about demand growth as $SLB. But, if I am correct, we might see a production cut!
@anasalhajji
Saudi Arabia wants oil to stay between $70 and $80 a barrel for now as the world’s biggest crude exporter strikes a balance between maximizing revenue and keeping a lid on prices until U.S. congressional elections, OPEC and industry sources said.
A worker walks at a petrol station in Riyadh, Saudi Arabia February 21, 2017. REUTERS/Faisal Al Nasser
After announcing the flotation of Saudi Aramco in 2016, the kingdom began pushing for higher crude prices partly to help maximize the valuation of the state oil company ahead of an initial public offering (IPO), originally scheduled for 2018.
That changed in April when U.S. President Donald Trump put public pressure on Riyadh to keep crude prices in check, wanting to stop U.S. fuel costs rising ahead of the U.S. midterm elections in November.
Now, even though the IPO has been shelved, Saudi Arabia still wants to keep oil prices as high as possible without offending Washington, the sources said. Saudi needs cash to finance a series of economic development projects.
OPEC and Saudi Arabia do not have an official price target and are unlikely to adopt one formally.
“The Saudis need oil at about $80 and they don’t want prices to go below $70. They want to manage the market like this,” one of the sources told Reuters.
“They need cash. They have plans and reforms and now the IPO is delayed. But they don’t want anyone else talking about oil prices now. It’s all because of Trump,” the source said.
An informal target of $70 to $80 raises the prospect of Saudi Arabia making regular tweaks to its output to influence the cost of crude as the market responds to other factors affecting global supply and demand.
One industry source said it may have done precisely that last week.
With Brent heading toward $80 a barrel, Saudi Arabia told the market about an increase in its production last month sooner than it would have usually released such information, the source, who follows Saudi output policy, said.
“The Saudis will probably put a few more dampening signals out, given where prices have gone,” the industry source said.
OPEC U-TURN
The aspiration for $70 to $80 is similar to that of other producers within the Organization of the Petroleum Exporting Countries. Algeria, for example, says it sees $75 as fair.
“Everybody has been talking about these kinds of numbers,” said an OPEC delegate from outside the Gulf.
Brent crude has fluctuated between $70 and $80 since April 10. After hitting $70.30 on Aug. 15 the oil price has climbed steadily to touch $79.72 on Tuesday.
Earlier this year, Riyadh hoped to see oil prices above $80 and was ready to continue with a supply cut pact until the end of 2018, only to make a U-turn after Trump called on OPEC in April to boost supplies.
Riyadh has long been a close Washington ally. But ever since Trump became president in 2017, Saudi Arabia has become even more sensitive to U.S. requests and both countries have coordinated policy more closely than under Trump’s predecessor.
In June, for example, OPEC agreed with Russia and other oil-producing allies last month to raise output from July - with Saudi Arabia pledging a “measurable” supply boost.
Saudi industry sources briefed the market about record oil production in which Aramco was planning to pump 10.6-10.8 million barrels per day (bpd) in June and as much as 11 million bpd in July, the highest in its history.
In the end, Saudi Arabia’s production in June was 10.488 million bpd and in July it fell to 10.29 million.
‘DIFFICULT TASK’
The plan to boost output to record highs had been driven mainly by worries of a sudden supply shock after U.S. officials said Washington aimed to reduce Iran’s oil revenue to zero, the sources said.
But since then, Washington has said it would consider waivers on Iranian sanctions and worries about a trade war between Washington and Beijing have threatened to hit future demand for oil, the sources said.
One industry source said the kingdom’s crude production plans were made according to its customers’ needs and that oil demand has not materialized as forecast.
“We can raise production as high as 11 (mln bpd) or even 12 but then where will it go? We can’t push oil to the market,” that industry source said.
In an August report, the Oxford Institute for Energy Studies www.oxfordenergy.orgsaid Saudi Arabia was trying to manage the Brent price within a very narrow range of $70 to $80 - and it was not an easy task.
It said the strategy was mainly to put a ceiling on crude amid concerns about the impact of high prices on demand as the trade war between Washington and Beijing escalates - and to keep a floor under prices to maintain revenues and market stability.
This echoes Saudi price aspirations from a decade ago, when the kingdom identified $75 as a fair price. This held for a few years, only to be dropped as prices moved much higher.
“Striking a balance between the various objectives, and doing it within a narrow price range, is an extremely difficult task given the wide uncertainties and the different shocks hitting the oil market,” the Oxford Institute’s note said.
“Saudi Arabia is in need of flexibility in its output policy.”
Africa is entering the oil-hunt spotlight as drillers, flush with cash after crude’s recovery, are turning their attention back to the continent’s potentially vast resources.
The world’s biggest companies from Exxon Mobil Corp. to Royal Dutch Shell Plc and BP Plc are setting up camp across Africa. Armed with stronger balance sheets and higher crude prices the industry is on track to double drilling in African waters this year. Rising natural gas demand is adding to the attraction.
“The majors starting to move into these areas for exploration again is probably the first sign of things picking up,” said Adam Pollard, an analyst at consultant Wood MacKenzie Ltd. He said Africa “may be one of the first to get hit when the price goes against explorers, but equally it’s perceived to be one of the places where people are keen to get involved when the price is supportive.”
There are plenty of signs of a recovery. Rigs working in waters off Africa have increased to the highest in two years, according to Baker Hughes data. Consultant Rystad Energy AS expects 30 offshore exploration wells to be drilled this year compared with 17 last year.
Acquisitions along the west coast, seen as a geological mirror of the other side of the Atlantic where huge discoveries have been made from Guyana to Brazil, have also accelerated. Shell secured its first exploration acreage offshore Mauritania in July and Exxon bought stakes in Namibian fields in August.
Companies drilled almost 100 exploration wells in African waters each year on average from 2011 to 2014, as Brent prices stayed above $100 a barrel, according to Rystad’s data. Then came crude’s slump and spending suffered because the best prospects are in deep waters, making them expensive to drill. The slowdown contributed to declining production.
Oil has since recovered, making exploration attractive again, according to Tracey Henderson, who has lived through three boom and bust cycles in the continent.
“The more you see the less you tend to get too fussed about” the troughs and crests, Henderson, senior vice president of exploration at Dallas-based Kosmos Energy Ltd., which gets almost all its revenue from Africa, said in an interview.
For companies willing to take the risk, the prize could be significant. There’s a high probability that there’s at least 41 billion barrels of oil and 319 trillion cubic feet of gas yet to be discovered in sub-Saharan Africa, according to a U.S. Geological Survey report of 2016. That’s equivalent to more than five years of the U.S.’s oil consumption and 12 years of gas.
Kosmos used oil’s downturn to buy up licenses. Last year it acquired five offshore blocks in Ivory Coast. At the same time, it also sold stakes in fields in Mauritania and Senegal to BP in 2016, as the British company builds its natural gas business in anticipation of rising demand. Kosmos and BP have said they’re continuing exploration in the assets.
In another part of the continent, London-based Tullow Oil Plc is scheduled to drill a much anticipated well offshore Namibia this month, hoping to revive prospects in the southern African nation that went quiet after at least 14 wells failed to find commercial oil deposits.
They are plenty of prospects and “any discovery will only spark further interest and excitement,” Wood Mackenzie’s Pollard said.
“We always intended to return to exploration but clearly market conditions are now more favorable, and we have the portfolio to return to drilling in a careful and disciplined way,” Tullow’s spokesman George Cazenove said in an email.
Exploration budgets are one of the first to be cut by companies during downturns. But when prices steady, unlocking new reservoirs becomes paramount as they secure future output. Investors value oil firms on how much new reserves they are adding to compensate for what they produce.
“The sense of optimism has definitely taken hold at this point,” Kosmos’s Henderson said.
As the crude powerhouse that is Texas’ Permian Basin becomes old news, oil explorers are looking for the next big thing--and they have found it in the more-than 4000 feet of stacked pay in Wyoming’s Powder River Basin. In Powder River, Big Oil has found less-congested pipelines, cheaper land, and more importantly, a whole lot of oil.
It’s not the first time that the Powder River Basin has garnered industry attention. In 2014, when oil prices were soaring, many industry players were already eyeing the basin as the next big thing, but when oil prices waned in the following years many drilling plans in Powder River were abandoned for established operations. Now, as United States crude prices ballooned by nearly 50 percent over the last year, there has been a renewed rush for land deals in oil rich areas, and the Powder River Basin is no exception. Although the deals are largely undisclosed, we know that there have been a number of deals in Wyoming, bringing industry-wide interest to the conventional and shale formations found there.
In the last month the state of Wyoming has seen Oklahoma-based firm Rebellion Energy pay more than $100 million for 19,000 acres, Vermilion Energy spend $150 million for 55,000 acres, and Navigation Powder River LLC spend about $10 million for 3,000 acres. Not bad for a month’s work.
Another potential catalyst for growth in Wyoming oil is currently underway just south in neighboring Colorado, where votes will decide on November 6th whether to further limit the drilling of oil by increasing the buffer zone between dwellings and oil and gas wells to 2,500 feet. If the Colorado electorate votes to increase the buffer, drilling will become impossible in much of the state, a development that with almost certainly push even more investors over the state line into Wyoming, where the laws are friendlier to oil and gas extractors. To highlight this fact, Wyoming gubernatorial candidates were tripping over each other to proclaim their love for fossil fuels, the state’s major jobs creator, in the run-up to the August 21st election, and winner Mark Gordon is strongly backed by Peter Wold of Wold Oil Properties, a prominent figure in Wyoming oil.Related: The Collapse Of Venezuela's Imaginary Oil Currency
Now, just this week, the major NPL gas project has finally been greenlit, and its 3,500 wells are soon to follow (much to the dismay, it must be said, of many environmentalists and wildlife activists). The NPL is projected to bring in as much as $17 billion to the Wyoming economy--a particularly large price tag when considering the fact that Wyoming has the smallest population of any state in the nation.
A representative for Juniper Capital Advisors, the financial backer of Navigation Powder River LLC, told Reuters that Powder River is in much the same position that the Permian Basin was in a few years ago, just before it exploded into the fastest growing oil region in the world. Now, the Permian has more oil than they know what to do with, and real estate is at a premium, whereas in Powder River, things are still affordable and accessible--for now.
In large part due to the Permian’s smashing success, the US has quickly become the world’s largest crude oil producer, with soaring export rates, but the production level has far outpaced the infrastructure. The problem is particularly marked in the Permian, forcing producers like ConocoPhillips and Noble Energy to relocate their rigs and even pause production until there is more pipeline volume available. Even as oil prices have risen in the last year, Permian producers have had to undersell their oil to pipelines in Cushing, Oklahoma. Now, as a result, oil from the Rocky Mountains and Midwest is more than $17 per barrel more expensive than Permian oil.
Now that the Permian has reached its limits, Wyoming can expect a major uptick in drilling. The conditions are perfect, as neighboring Colorado pushes to move away from oil-friendly policy, the oil prices are high, and the incoming Wyoming governor has shown himself to be wide open to drilling expansion. Wyoming’s oil rush has already begun, and unlike in 2014, this time the tide shows no signs of receding.
https://oilprice.com/Energy/Energy-General/Oils-Next-Hotspot-The-Cowboy-State.html
Updated list also includes Petrobras and US supermajors ExxonMobil and Chevron
Six more companies have qualified to bid in Brazil’s fifth pre-salt round set to take place on 28 September. State-controlled company Petrobras, US supermajors ExxonMobil and Chevron, Norway’s Equinor, Colombia’s Ecopetrol
http://www.upstreamonline.com/live/1573090/brazils-fifth-pre-salt-round-will-feature-12-companies
Many think that debt and negative cash flow by U.S. shale companies will crash the global financial system. I believe the opposite is more likely, that a developing financial crisis may crash oil prices and test the survival of shale plays.
In The Next Financial Crisis Lurks Underground, Bethany McLean argues that the U.S. energy boom is on shaky ground because of excessive debt and failure to show profits after a decade of drilling. This thoughtful op-ed raises concerns that many have expressed since the advent of tight oil production.
The problem with her thesis is that debt from the U.S. oil sector is just not big enough to crash the global financial system. Losses and bankruptcies in that sector in 2015-16 were substantial and yet, did not threaten the stability of world financial markets. In the improbable worst case scenario, the U.S. government would step in as it did for the auto industry in 2009.
Higher oil prices are inevitable at some time sooner than later because of under-investment over the last several years of low prices. This is compounded by lack of big discoveries and ever-present geopolitical supply interruptions and outages.
Ms. McClean correctly identifies the link between near-zero interest rates and the rise of tight oil financing. She fails, however, to acknowledge the 2004-2008 plateau of world production at the same time that demand from China greatly increased. This pushed oil prices to more than $100/barrel–the main factor that made tight oil development feasible. Because that price trend continued for 4 years, supply overshoot led to the oil-price collapse of late 2014.
The two price cycles since then are shown in Figure 1 as a cross plot of oil price vs comparative inventory (current oil + product stock levels minus the 5-year average of those stock levels).
Figure 1. Markets have devalued oil prices by approximately 20% over the last year 2014-June 2017 comparative inventory yield curve indicated a mid-cycle price of $75. July 2017-2018 yield curve suggests a mid-cycle price of $60/barrel. Source: EIA and Labyrinth Consulting Services, Inc.
The data is connected by an interpreted yield curve. It is similar to a bond yield curve except in place of interest rates vs maturity dates, it shows oil price vs comparative inventory.
The point at which the yield curve intersects the y-axis represents the 5-year average or “mid-cycle price.” It is the value of the marginal unit of production needed to maintain adequate supply over the duration of that particular price cycle.
The mid-cycle price from 2014 to June 2017 was approximately $75/barrel. The mid-cycle price from June 2017 to the present is about $60/barrel. In other words, markets have devalued oil by at least 20% over the last year.
A C.I. minimum was reached in May 2017 at $71.25/barrel. Since then, C.I. has been trending back toward the 5-year average along the yield curve. The fact that oil prices are once again approaching $70 at a lower C.I. than in May suggests that price is being supported more by sentiment than by fundamentals of supply and demand.
That sentiment is concern about medium-term supply. It is moving prices higher and must be taken seriously. At the same time, C.I. suggests that lower prices are as likely as higher prices in the near term.
WTI at $70 and Brent near $80/barrel make “demand destruction” or weakened consumption a possibility. Prices averaged only $47/barrel in 2016 and 2017. Today’s price is 70% higher and may cause lower consumption and, therefore, lower oil prices.
Adding to that, emerging-market economies are in trouble. A credit bust in Argentina, Turkey, and South Africa may spread to Brazil, India, and China. Lower consumer demand in those regions would put downward pressure on oil prices. Trade wars and tariffs increase the cost of goods and services. Higher oil prices and interest rates add to that burden.
The global economy is more fragile than ever as debt continues to grow and has not been successfully “inflated away.” A recession in emerging economies may move a delicate oil price-consumption balance toward over-supply. Combined IEA, OPEC and EIA market balance forecasts suggest this by mid-2019 or sooner.
Slowing global economic growth in fact is probably the main downside factor for oil demand and price going forward. A recent report by The Oxford Institute for Energy Studies concluded that global growth risks far outweigh geopolitical and U.S. shale growth as risks to the downside for oil prices through 2019 (Figure 2).
Figure 2. The balance of risks to oil-price outlook for 2018 and 2019. Modified from Fattouh & Economou (2018) by Labyrinth Consulting Services, Inc.
Concern about future oil supply has moved prices higher since mid-August but the current price rally has stalled at $70/barrel…for now(Figure 3).
Figure 3. The current oil-price rally has stalled at $70 per barrel for now.
Source: Quandl and Labyrinth Consulting Services, Inc.
Before that, markets were confident enough of adequate supply for the near term that WTI prices fell from $74 to $65/barrel from early July to mid-August. Nothing has materially changed since then except for market sentiment.
Prices are more likely to remain in the current $65-$70 range than to move much higher. The world has ample supply for now but tighter supply seems probable before year-end in a business-as-usual world. If the global economy weakens, it’s anyone’s guess where oil prices may go.
What is certain is that tight oil plays are here to stay. High debt load and failure to demonstrate sustained positive cash flow are nothing new in the oil business, and are not unique to shale plays. The plays survived the dark days of 2016 without crashing global financial markets.
The return of much lower oil prices would test them again. Today, however, half of U.S. production is from tight oil and it is difficult to imagine that investors or the federal government would allow the suppliers of our master resource to fail.
http://www.artberman.com/shale-plays-will-not-cause-the-next-financial-crisis/
One protester died and 25 more were injured on Wednesday night, in a third day of violent clashes with security forces in Iraq’s southern city Basra, and unrest spread to the country’s main port, local health, security and human rights sources said.
Southern Iraq, heartland of the Shi’ite majority, has erupted in unrest in recent weeks as protesters express rage over collapsing infrastructure, power cuts and corruption.
Residents in Basra, a city of more than 2 million people, say the water supply has become contaminated with salt, making them vulnerable and desperate in the hot summer months. Hundreds of people have been hospitalized from drinking it.
Smoke rises from the governorate and municipalities buildings of Basra, Iraq September 6, 2018. REUTERS/Essam al-Sudani
Overnight, protesters blocked the entrance to the nearby Umm Qasr port, the main lifeline for grain and other commodity imports that feed the country. They blocked the highway from Basra to Baghdad and set fire to the main provincial government building where they had been demonstrating for a third night.
Protesters continued on Thursday to block the entrance to the port, port employees and local officials said, but it was not yet possible to determine whether the unrest would have a serious impact on its operations.
Public anger has grown at a time when politicians are struggling to form a new government after an inconclusive parliamentary election in May. Residents of the south complain of decades of neglect in the region that produces the bulk of Iraq’s oil wealth.
Earlier on Wednesday, security forces sprayed tear gas and fired into the air to try to disperse demonstrators. According to health sources, the dead protester was struck in the head by a smoke grenade during the clashes.
The deaths of five protesters in clashes with security forces on Tuesday added to the fury. Security and health sources said 22 members of the security forces had been injured in Tuesday’s violence, some by a hand grenade.
The American Petroleum Institute reported Wednesday that U.S. crude supplies fell 1.2 million barrels for the week ended Aug. 31, according to sources. The API data, which were released a day later than usual because of Monday's Labor Day holiday, showed supplies of gasoline rose 1 million barrels and distillate stockpiles climbed by 1.8 million barrels, sources said.
Supply data from the Energy Information Administration will be released Thursday. Analysts polled by S&P Global Platts expect the EIA to report a fall of 2.5 million barrels in crude supplies. They also forecast a supply decline of 1.5 million barrels for gasoline and expect distillate stocks to be unchanged for the week.
India imported about 523,000 barrels per day (bpd) of oil from Iran in August, down 32 percent on a month earlier, preliminary tanker arrival data showed, as the United States steps up pressure on buyers to halt Iranian energy imports from November.
Some of the shipments were loaded in July and arrived in August, the data obtained by Reuters from trade sources showed.
The August 2018 imports were still 56 percent higher than the same month last year, the data showed, as state refiners were attracted by discounts offered by Iran this year.
Annual import plans by Indian state refiners for 2018/2019 were finalised before President Donald Trump’s decision in May to withdraw from a 2015 international nuclear deal with Iran and to reimpose sanctions.
A senior Indian government official said India, Iran’s top oil client after China, would not completely halt Iranian imports and would finalise its strategy on crude purchases after a meeting U.S. officials on Thursday.
In April-August, the first five months of the 2018/2019 fiscal year, India’s oil imports from Iran rose 43 percent to 646,200 bpd compared to the same period a year earlier, the data showed.
State-run Indian Oil Corp, the country’s top refiner, imported about 4 million barrels in August, equivalent to about 134,000 bpd, or half the amount it imported in July.
State refiners have faced delays in securing permission to use Iranian tankers and insurance, as federal policy requires them to favour Indian shippers and insurers, industry experts said. Western and Indian shippers are winding down their exposure to Iran before sanctions take effect.
Bharat Petroleum Corp’s received about 131,000 bpd Iranian oil in August, a third less than July, the data showed.
Reliance Industries Ltd, operator of the world’s biggest refining complex, and Hindustan Petroleum Corp NS> did not buy oil from Iran in August. Monthly imports by Mangalore Refinery and Petrochemicals’ and Nayara Energy, part owned by Russian oil giant Rosneft, were little changed at about 120,000 bpd and 138,000 bpd, respectively, the data showed.
In January-August 2018, India’s oil imports from Iran were up 21 percent at 600,400 bpd compared with the same period a year ago, the data showed.
The UAE is ramping up output from its offshore Umm Lulu oil field to help boost its overall production to nearly 3 million b/d, sources close to the matter said Wednesday, as OPEC producers continue to loosen the taps.
The UAE's reported production already hit 2.975 million b/d in July, its highest level in a year, up about 85,000 b/d from June.
Further increases will come mainly from its new offshore concession, which includes the Umm Lulu and Satah al-Razboot (SARB) oil fields, an industry source said on condition of anonymity.
Abu Dhabi National Oil Co., which produces nearly all of the UAE's crude, launched its new light, sweet Umm Lulu grade earlier this year as a blend of crudes from those two fields, with an expected API density of around 39 degrees.
Umm Lulu was producing around 30,000 b/d in August, but is now starting to ramp up, and could hit 75,000 b/d, one UAE oil observer said.
The first Umm Lulu cargo was lifted in July from Zirku Island in the Gulf. In the longer term, ADNOC has said it wants to reach a combined 215,000 b/d from the Umm Lulu and SARB fields.
The grade is Abu Dhabi's first since it introduced Das Blend in 2014 from crudes produced at the offshore Umm Shaif and Lower Zakum fields. ADNOC also exports offshore Upper Zakum crude and its flagship Murban grade, which comes from onshore fields.
The company's plans to raise Upper Zakum production capacity by 20% has been delayed from this year until at least the first quarter of 2019, one of the contractors working on the project said last week.
OPEC and 10 non-OPEC allies on June 23 agreed to a 1 million b/d output boost but have yet to reveal how they plan to allocate those extra barrels.
UAE energy minister Suhail al-Mazrouei serves as OPEC's rotating president this year and will attend a September 23 meeting in Algiers of the six-country monitoring committee overseeing the deal, where production allocations are expected to be discussed.
ADNOC, which aims to achieve a production capacity of 3.5 million b/d by the end of 2018, said in a statement in July that it "has the ability to increase oil production by several hundred thousand barrels of oil per day, should this be required."
Flint Hills Resources is planning to expand its Ingleside crude oil export facility as exports of U.S. crude continue to ramp up along Texas' Gulf Coast.
The terminal expansion will include four new crude oil storage tanks and 60,000 barrels per hour of loading capability. The Wichita, Kansas company said the terminal will have a loading capacity of 380,000 barrels a day and storage capacity of about 4 million barrels when the work is completed by October 2019.
Flint Hills did not disclose the cost of the project.
The Ingleside facility is located along the Corpus Christi Ship Channel, which is undergoing a multi-year, $327 million deepening and widening project.
The current terminal use two docks that can handle Suezmax-sized crude oil tankers, which can load 1 million barrels of oil. Flint Hills, which is a subsidiary of Koch Industries, Inc., said it is evaluating a separate project that would allow for Very Large Crude Carriers or VLCCs, which have a capacity of 2 million barrels, to be loaded.
Despite the fact that production and export figures presented by Iraqi sources are showing a significant improvement, optimism should be tempered.
Iraq continues to head towards a major showdown between the two main political rival blocks, led by Prime Minister Al Abadi and former PM Al Maliki. Both are currently in a race to lead the country, while being confronted by internal and external threats.
Iraqi oil production and export figures are showing very positive developments, even though internally, the country is teetering on the brink. The latest data from the Iraqi ministry of oil shows that it has boosted its southern crude oil exports to 3.583 million b/d in August, 40,000 bpd higher than in July. Since the OPEC meeting in Vienna, Baghdad has been pushing to increase its total production to a three-month average of 3.549 million b/d, an increase of 109,000 b/d from the first five months of 2018.
It is surprising to see that even with continuing unrest in the Basra region, exports from its southern terminals are up. Loadings from the Khor al-Amaya terminal have been suspended since the start of 2018. Iraq’s State Oil Marketing Organization (SOMO) reported that 2.727 million b/d of Basrah Light have been shipped from the terminals, along with 856,000 b/d of Basrah Heavy crude. At present another seven tankers have berthed, while four are waiting for their turn, with a total of around 7 million barrels.
Northern Iraqi oil figures are also promising, as exports from the semi-autonomous Kurdistan Regional Government to the Turkish Mediterranean port of Ceyhan are have kept up. Kurdish sources indicate that the KRG is currently 445,000 bpd to Ceyhan, which is a 40 percent increase in comparison to July. Government oil production in the north however is still blocked, as there is no agreement still between Baghdad and the KRG. A potential 200,000 bpd is currently not being exported due to this issue.
The future could however be less bright than the above data suggests. The country is facing a total shutdown if the competing political blocks are not able to reach a deal in the parliament soon. Several days ago the Iraqi parliament met for the first time since the May elections. At present, current Prime Minister Haider al-Abadi is still trying to reach a majority coalition, but is until now blocked by his rivals, led by former Prime Minister Nouri al-Maliki. After several heated discussions, no solution has been reached.
Al Abadi is trying to stay in power as he has been able to reach a coalition agreement with Muqtada Al Sadr’s Sairoon movement. Al Sadr, a powerful Shi’ite cleric, already has warned the government that his patience is running out. Al Sadr, mainly known for his hardline position and power hunger, could be the deciding factor in the current power struggle. He also has become one of the main supporters of the ongoing violent protests in and around the southern Iraqi city of Basra, where protesters are fighting Iraqi security forces in a bid to force the Baghdad-based government to take action on food, water and power shortages in the country. The last weeks, dozens of protestors have been killed and many more have gotten injured in numerous protests that are now threatening to spill over into the whole southern part of Iraq.Related: Saudis Boosted Oil Production To 10.424 Million Bpd In August
Nouri Al Maliki, the former PM, however has been able to form an alliance with militia commander Hadi al-Amiri, the leader of the Shi’a militia Hashd al Shaabi. The latter is strongly supported or even partly led by Iran’s Islamic Revolutionary Guards Corps (IRGC). Tehran is trying not only to consolidate its power position in Iraq but even attempts to get grip on the Iraqi government in a bid to block part of the ongoing Arab efforts to get Iraq back into the Arab fold or weaken the Iranian military influence inside of Iraq, as a bridge to the Syrian battle grounds.
Adding more fuel to the fire, the Hashd Al Shaabi also have stated that they will be targeting U.S. and other foreign forces in Iraq. The militia stated that they will take action if non-Iraqis attempt to form a pro-Washington and pro-Saudi government in Baghdad. Iraqi media sources report that the statements were signed by the Badr Brigade, Asayib Ahl al-Hagh, Kata’ib Sayyid al-Shuhada, Kata'ib Jund al-Imam, Ansar Allah al-Awfiya’, Saraya Ashura, Saraya Ansar al-‘Aqeeda, Saraya Khurasan, and Kata’ib Imam Ali. All these groups are known to be supported and directed by Iran.
The West has put its support behind Al Abadi who is seen as a weaker politician than his predecessor Al Maliki. Several Western analysts have stated that Al Maliki has been much more focused on tribal and sectarian conflicts, while Al Abadi has a more open (or weaker) position. The U.S. and E.U. are still partly blaming Al Maliki to have supported a pro-Shi’a power struggle, leaving other sectarian and religious groups behind. In the eyes of the West, this pro-Shi’a policy has created a breeding ground for terrorism and was one of the reasons behind the rise and success of IS/Daesh in Iraq, as Sunni and other groups in the country were left behind.
Western analysts, however, need to keep an eye on the ongoing power struggle as the outcome will not ease the growing resentment among the Iraqi people. The growing distrust or outright hate of a growing group of voters has already led to unrest in the oil-rich Basra region. The fall-out of these ongoing clashes and violence between the Iraqi army and the protestors will for sure lead to a movement resisting any new government based on the old guard.Related: Can We Expect An Oil Price Spike In November?
At the same time, it will lead to a possible violent movement against Iranian backed political parties and militias in other regions. Clashes between these groups have already been reported, but a further increase in violence could lead to a new civil war, in which Iran will be engaged in full. Looking at the current situation in Syria and Lebanon (Hezbollah-Israel), Tehran will likely not be willing to remove part of its hold on Iraq. The link with Baghdad, the Hashd Al Shaabi and other militias, are of immense strategic importance to the struggling regime in Tehran. Renewed fighting is to be expected, especially if the ongoing power implosion in Baghdad will give Kurdish and Sunni groups the option to counter.
A further escalation on the ground between government security forces and protestors could lead to a shutdown of oil fields and ports. At the same time, increased bloodshed could lead to direct confrontations in Baghdad and other areas. Such an escalation could trigger Iranian militias and proxies to engage as the Iranian hold on the Iraqi government could be threatened.
In short, the current oil production numbers may look encouraging, but if the opposing parties in Baghdad fail to close a deal and address the problems in the South, oil exports could be seriously impacted.
https://oilprice.com/Geopolitics/Middle-East/Iraq-Is-Facing-A-Major-Internal-Crisis.html
Crude oil shipments from Brazil for China's independent refineries surged 81.4% month on month to 1.21 million mt in August, replacing Angola as the top supplier to the sector in the month, S&P Global Platts' monthly survey showed.
The Brazilian arrivals for the sector soared 209.2% from a year earlier in August, and over January-August jumped 80.7% on year to 10.37 million mt.
Eight companies in China, including trader Taifeng Hairun, imported Brazilian crudes including Lula, Iracema and Sapinhoa in the month. Lula comprised 66.5% of the total, and was the top grade received by Shandong independent refineries in August.
Platts' survey covers the barrels imported for independent refineries via ports in Shandong province and Tianjin, as well as those for the upcoming greenfield Hengli Petrochemical mega refinery in Liaoning province and Zhejiang Petrochemical refinery in Zhejiang province.
Among these crude consumers, 36 were crude import quota holders, which have been awarded a total quota of 120.83 million mt this year, accounting for 86.8% of the country's total 2018 crude import quota allocation. In addition to the regular grades from West Africa and South America, new grades Shaikan from Iraq and Canadian Cold Lake also landed in Shandong in August to replace Venezuelan Merey as feedstock to produce asphalt.
"We have to fix some alternate feedstocks for asphalt production as supply from Venezuela will decrease gradually in the coming months," a source with Chambroad Petrochemical said.
Shaikan is a heavy crude with an API of around 16-18 and sulfur content of around 4.8% that can be used to produce asphalt. Chambroad imported 70,000 mt of Shaikan in August, which was supplied by a trading company and loaded from storage in Malaysia.
Hongrun Petrochemical imported around 100,000 mt of Cold Lake crude in August, the first cargo from Canada into the Shandong market this year. It is also a good feedstock for producing asphalt, and came after Hongrun imported Kuwaiti crude cargoes in July.
Other independent refineries, including Chambroad, have also booked Cold Lake cargoes for arrival in the coming months.
Hongrun also received around 60,000 mt of Mesla crude from Libya in August, the first of the grade into the sector. Melsa crude from Libya is a light crude with API of around 37 and sulfur of around 0.67%.
The independent refineries shied away from both US crudes and crudes from other origins that load from US ports in August due to the ongoing trade tension between China and the US.
Sinoenergy offered Canadian crude that loads from Portland in the US for August arrival, but failed to attract buying interest.
"Independent refiners worry that all crude barrels loaded from the US could attract tariffs due to the trade war," a source with Sinoenergy said.
As a result, Cold Lake was the only Canadian crude that flowed into the sector in August, as it loads in Canada.
Following the fall in total imports, feedstock inventories at major ports in Shandong fell to 4.03 million mt as of August 30, down 14% from end July, data from local information provider JLC showed.
The August total was the lowest in 13 months, and down 26% from the record high set end June at 5.42 million mt.
OPEC's crude oil production in August, not including newest member Congo, rose to a 10-month high, with Iraq surging to record output and Libya recovering from militia fighting, more than offsetting Iran's slide as the sanctions-hit country struggles to keep its customers, according to the latest S&P Global Platts survey.
The 15 members of OPEC pumped 32.89 million b/d in the month, the survey found. Taking away Congo, which joined the organization in June, OPEC's August output of 32.57 million b/d is the highest since it produced the same amount in October 2017, as it unwinds supply cuts that have been in place since January 2017.
Pressure from US president Donald Trump to moderate oil prices, plus fears of an overtightening market due to US oil sanctions on Iran that go into effect in November, prompted OPEC and 10 allies to agree June 23 in Vienna to reduce overcompliance with their cuts and increase output by 1 million b/d in the months ahead.
The 12 OPEC members with firm quotas achieved 115% compliance in August, according to Platts calculations. Libya and Nigeria are exempt, while Congo has yet to be given an allocation.
Iranian production has already begun to suffer in advance of the sanctions, falling to 3.60 million b/d in August, the lowest in more than two years, according to the survey. Oil exports from the country plunged 17% from July, as key buyers China and India significantly cut their purchases, data from Platts trade flow software cFlow showed.
Platts Analytics estimates that some 1.4 million b/d of Iranian oil is expected to leave the market by November.
Meanwhile, Iraqi production swelled to 4.68 million b/d in August, up 110,000 b/d from July and the highest recorded in the 30-year history of the Platts OPEC survey, as exports from both the country's southern port of Basra and through the Turkish port of Ceyhan saw increases.
Saudi Arabia, OPEC's biggest producer and the world's largest crude exporter, pumped 10.49 million b/d in August, the survey found. That is far above its quota of 10.06 million b/d under the supply cut agreement, but below the 10.8 million to 11 million b/d that it had signaled it would produce at the June meeting. Kingdom officials have said demand for Saudi crude has yet to require such levels of production just yet, but added that they stand ready to supply the market as needed.
LIBYA RISES, VENEZUELA FALLS
Libya added the most barrels in August within OPEC, as output recovered to 940,000 b/d with the lifting of force majeure in July on loadings from the country's eastern ports, which had been blockaded for about a month by a militia group, as well as the ramping up of production from the Sharara field after the kidnapping of some workers there in mid-July was resolved.
Libyan production in July was 670,000 b/d, the lowest it had been since April 2017.
Nigeria increased its production by 70,000 b/d in August, according to the survey, with loadings up in the month.
Venezuela continued its production decline, as output slumped to 1.22 million b/d in August, a year-on-year plunge of 680,000 b/d, the survey found. The country is in the throes of an economic crisis that has impaired its ability to maintain its oil facilities, pay workers and afford diluent to produce its extra heavy crude from the Orinoco basin. August output was also affected by a tanker collision at the Jose terminal late in the month that led to its shuttering for repairs.
But a settlement reached August 20 with ConocoPhillips over $2 billion owed to it by Venezuelan state oil company PDVSA provides some hope that the country's crude exports could rise in the weeks ahead. ConocoPhillips had been seeking to seize PDVSA's assets in the Caribbean under an international court ruling which had severely impaired the Venezuelan company's ability to export crude.
The Platts OPEC figures were compiled by surveying OPEC and oil industry officials, traders and analysts, as well as reviewing proprietary shipping data.
A six-country monitoring committee overseeing the OPEC/non-OPEC supply accord will meet September 23 in Algiers to assess market fundamentals and potentially make output policy recommendations.
Declines in open interest of WTI forward contracts seen: CFTC
Shale boom has shifted producers’ need to hedge farther out
The vibrations of the shale boom are now shaking the futures market.
A visible decline in open interest of West Texas Intermediate crude futures contracts for delivery five or more years in the future is due to the growth of tight oil fields and the shift in producers’ need to hedge oil so far out in the future, according to a study by the U.S. Commodity Futures Trading Commission. That’s because oil extraction has become more efficient in tight oil fields compared to conventional wells and producers have more flexibility in turning on and off the taps in response to oil prices.
The increasing amount of crude coming in from tight oil in portfolios of production firms has left them with less crude to sell five or more years forward, reducing their need for long-dated futures contracts, according to the study. U.S. weekly production has skyrocketed to 11 million barrels a day, the highest level on record, according to Energy Information Administration data.
The Market Intelligence Branch in the Division of Market Oversight conducted research and analyzed data from Jan. 3, 2003 and March 30, 2018.
EIA Weekly U.S. Ending Stocks to Friday 31st August Crude oil down -4.3 million barrels Oil products up +4.9 Overall total, up +0.6 Natural Gas: Propane & NGPLs up +3.3
For years, large volumes of oil produced off Canada’s eastern coast were shipped to U.S. refiners. But booming U.S. output has cut the demand from nearby refineries. Newfoundland’s oil exports to countries other than the U.S. are already up 59% compared to all of last year, totaling almost 23 MMbbl, according to data compiled by Bloomberg. The number of non-U.S. recipients has grown to 14 countries from just six.
That means crude from Newfoundland is ending up in places like Croatia for the first time. With sanctions on Iran’s oil looming and ship fuel regulations set to make the province’s crude more attractive, the number of new customers may continue to grow.
The declining price of U.S. benchmark crude relative to international prices -- which Newfoundland uses -- has spurred more East Coast refiners to look for shale, according to Gerry Goobie, general manager for marketing and transportation at Canada Hibernia Holding Corp., a government-owned company that has an 8.5% interest in Newfoundland’s Hibernia field.
“Newfoundland crude sellers would need to find other buyers,” Goobie said by phone. “That’s why it’s going further afield."
As the province moves forward with plans to double production by 2030, Newfoundland oil has made its way as far north as Norway and as far east as China. Croatia is set to become the newest customer.
The ship Minerva Clara is en route to Omisalj on Croatia’s southern coast after loading at Newfoundland’s Whiffen Head crude terminal on Aug. 18, according to ship tracking data compiled by Bloomberg. INA Industrija Nafte DD owns the Mediterranean nation’s only operating refinery in Rijeka near the port of Omisalj. It will be INA’s first purchase of Canadian crude, according to a person familiar with the matter.
A looming cap on sulfur emissions for ship fuels may also spur new customers. “This is a market opportunity for heavy, sweet crude in Newfoundland,” said Allan Fogwill, CEO of the Canadian Energy Research Institute.
U.S. sanctions on Iran and Venezuela’s chronic production issues could also mean more interest for Eastern Canada’s barrels despite the difference in qualities. Buyers looking to replace those sour crudes are likely to try the heavy to medium sweet Newfoundland oil given its proximity in quality even though it won’t be an exact replacement. That might open up additional markets in Europe for Newfoundland.
Asian spot liquefied natural gas (LNG) prices this week rose for a third week, buoyed by firm demand from Japan and South Korea and by loading delays from Brunei that have now ended, industry sources said on Friday.
Spot prices for October LNG-AS delivery in Asia rose to $11.50 per million British thermal units (mmBtu) this week, up 10 cents from the week before, the sources said.
Japanese utilities bought spot cargoes for delivery in October, likely stocking up ahead of peak winter demand, the sources said.
Kyushu Electric bought a cargo for delivery in October at about $11.50 per mmBtu, an industry source said, though this could not immediately be confirmed. Kansai Electric was also seeking a cargo for delivery in October this week, the source said.
Kyushu’s demand came even though it restarted a nuclear reactor at its Sendai station this week, suggesting Japanese companies are likely building up inventory for winter, a second source said.
“This year’s summer was quite hot, so they were probably depleting their inventory then, which they are now building up,” the second source added.
All sources declined to be identified as they were not authorised to speak with media, while energy companies and utilities do not typically comment on commercial transactions.
Japan’s Saibu Gas is seeking one cargo every quarter for delivery over 2019 to early 2022, industry sources said. It is expected to award that in October, one of them said.
Project partners of the giant Ichthys project in Australia were last week looking for LNG cargoes for delivery in November and December, trade sources said. It was not immediately clear if they had bought the cargoes.
They are likely seeking the cargoes to fulfil term commitments, the sources said. The project has been delayed repeatedly and is now expected to start shipping condensate, LNG and liquefied petroleum gas (LPG) in that order from around end-September to end-December.
A South Korean buyer is also in the market looking for cargoes to be delivered over 5 to 10 years, two trade sources said.
Loading delays at the Brunei LNG plant may have resolved, trade sources said. LNG tanker Amani, which had been anchored near Brunei port for a week, loaded from the plant on Thursday and has now left, shipping data on Thomson Reuters Eikon showed.
Delivery of term cargoes to term customers of Russia’s Sakhalin-2 LNG project may have been delayed after one of two production lines at the project were halted last week due to a problem, a third industry source said. But the issue is expected to be resolved soon.
Russia’s Yamal LNG plant has offered cargoes for delivery in winter to Asian customers, traders said. It was not clear if it had sold any yet.
China Gas Holdings signed an agreement with CNOOC Gas and Power Group for strategic cooperation on the development of the entire industrial chain of natural gas.
Under the agreement, the two companies plan on constructing LNG bunkering stations, LNG filling stations for vehicles as well as in other downstream projects and transportation projects for LNG tank containers.
In respect of LNG bunkering stations, CNOOC Gas and Power Group aims to use its know-how from setting up its liquefied natural gas terminals while the China Gas Holdings will support the projects through planning sites, ports and resources.
The pair will also pick existing fuel stations owned by China Gas Holdings in order to carry out equity cooperation and also seek cooperation on new projects.
In addition to vehicle and vessel refilling projects, the parties will select high-quality downstream projects, which include but not limited to city gas, rural coal-to gas replacement, industrial park gas supply, coal-fired boiler renovation, LNG point-to-point supply, co-generation, and distributed energy.
Both parties agreed to set up five joint ventures in Shandong Province, Hebei Province, Hainan Province, Guangdong Province and Jiangsu Province by the end of September in 2018. The two companies noted they will provide resources for at least 50 percent of the demand of the projects.
Other than the above-mentioned demand with secured gas supply, China Gas Holdings will continue to purchase resources from CNOOC Gas and Power Group under the market-oriented principle, it will continue to purchase other domestic resources on its own, but shall, under the same conditions, preferentially purchase resources from CNOOC Gas and Power Group.
Further under the agreement China Gas Holdings will adopt the centralized purchase mode adopted by CNOOC Gas and Power Group or organize international resource procurement by itself, and CNOOC Gas and Power Group may arrange a certain window period for the qualified LNG receiving terminals owned or operated by them in China, in order to provide resource processing services.
Additionally, the two companies have agreed to establish an intermodal transportation joint venture for LNG tank containers with China Gas Holdings being responsible for the logistics management and operation.
Jointly, the two companies aim to promote the investment, construction and operation of the transportation projects for LNG tank containers.
https://www.lngworldnews.com/chinese-duo-forms-lng-fueling-pact/
Two Chinese companies are battling to deliver first gas from their shale acreage in central China’s Hubei province, aiming to build up 5 billion cubic metres per annum of shale gas production capacity by 2025 to become the country’s third-largest shale producer.
http://www.upstreamonline.com/hardcopy/1564680/companies-fighting-to-deliver-first-gas-from-hubei
Line 1 space on the Colonial Pipeline flipped to positive for the first time since April on Thursday amid a widening spread between US Gulf Coast and US Atlantic Coast gasoline prices.
Market sources attributed the wider spread to ongoing refinery issues in the USAC along with expected upcoming maintenance in the fall.
Line 1 space traded at 0 cent/gal early Thursday morning and was rebid at that level, sources said.
S&P Global Platts assessed space on the 1.37 million b/d line at 0.05 cent/gal on Thursday, the highest level since April 23, on the back of the bid and an offer heard at 0.15 cent/gal.
The value of Line 1 space should not be interpreted as a proxy for shipping demand on Colonial Pipeline, but as a reflection of differences in gasoline prices between the pipeline's Gulf Coast origin and East Coast terminus. The wider spread between the regions contributes to a more economically tenable arbitrage up the pipeline, which is reflected in higher Line 1 space values.
"The Gulf Coast is getting weaker, New York is getting stronger, and summer-grade Gulf Coast barrels blend into winter-grade barrels in New York," a USGC market source said, adding that there was the possibility of arbitrage volumes up the pipeline.
Colonial Pipeline CBOB at 9 RVP was assessed at $1.997/gal in Houston and at $2.081/gal in Linden, New Jersey, on Thursday. The 8.4 cents/gal spread between Houston and Linden is the widest since April 9.
Another USGC market source said that Line 1 arbitrage has "been better since the Bayway problems", referring to issues at Phillips 66's 238,000 b/d refinery in Linden, New Jersey.
The plant's 145,000 b/d fluid catalytic cracking unit was shut on August 13, sources said.
The FCC was shut again on August 20 after an unsuccessful restart attempt, sources said. A Phillips 66 spokesman had declined to comment on Bayway operations at the time, but said there was no planned maintenance underway.
The refinery continued to run at reduced rates on Wednesday, Platts reported.
The disruption at the Bayway plant, the USAC's second-largest refinery, put pressure on regional supplies. In the week ended August 17, stocks of gasoline fell to a 14-week low, according to Energy Information Administration data.
Most recently, in the week ended August 24, USAC refineries ran at 88.2% of available capacity, which is the lowest since the week ended April 6, EIA data showed.
With the arbitrage from Europe to New York Harbor shut, gasoline barrels have been making their way up from the US Gulf Coast, a USAC market source said.
Sources said that volumes from the Colonial Pipeline restored supply in the region, which climbed by 837,000 barrels to 64.10 million barrels for the week ended August 24, a five-week high, EIA data showed.
USAC MAINTENANCE
USAC refineries are expected to be shut for maintenance in early October and this was supporting interest in the Colonial Pipeline, sources said. With the upcoming seasonal RVP change, market participants were preparing for winter-grade gasoline blending, they added.
Monroe Energy plans to shut its 190,000 b/d Trainer Refinery on September 24 for maintenance.
"A [number] of blenders move their product to New York [on Colonial] this time of the year, when [USAC] refineries start to [shut for] turnaround," another USAC market source said.
Market participants usually buy gasoline about 10 days before Colonial pumps and it takes about 15 days for the product to come off the pipeline in Linden, New Jersey, he said.
"So these barrels don't land [in Linden] until later in September, then figure a few days to blend and it's close to being in line with the turnaround," he added.
Last year, Line 1 space was assessed in negative territory from April to August before flipping into positive territory on August 18. In early September it fell back into negative territory due to Hurricane Harvey.
Backwardation in the front month Singapore gasoline September/October timespread steepened Thursday, while Singapore gasoline swaps continued to hover at a 3-month high, S&P Global Platts data showed.
Industry sources attributed the bullishness to firmer fundamentals amid recent refinery troubles.
The September/October swap spread was assessed Thursday at plus $1.02/b and October/November swap spread at plus 78 cents/b, up from 90 cents/b and 72 cents/b respectively a day earlier.
Early Friday, market participants pegged the September/October swap spread higher at plus $1.1-$1.18/b and the October/November swap spread higher at plus 87-92 cents/b.
Further out, the Q4/Q1 Singapore gasoline quarterly spread was unchanged day on day Thursday at 51 cents/b.
For the outright price, front month Singapore September gasoline swaps jumped $1.92/b on the day to be assessed at $85.05/b Thursday. It was the biggest day-on-day jump since May 17.
In the physical market, bullish sentiment was supported by the recent refinery troubles and buy tenders from key Asian buyer Pertamina, market sources said Friday.
Cargo supply from Asia was limited as Reliance's export-oriented Jamnagar refinery in India had only just resumed its usual 60,000 mt shipments of gasoline after declaring force majeure on gasoline exports on August 14, according to Platts trade flow software cFlow.
Reliance officials have declined comment on the force majeure, other than saying on August 20 that the company expects no major impact on its refining business due to the outage.
"[Reliance exported] some gasoline but it was not the whole quantity [bought]; we are pretty sure the force majeure is not lifted yet," a Singapore-based gasoline trader said Friday.
Prior to the Shell-chartered BW Danube, which sailed from Jamnagar Thursday, the only smaller shipments had been heard, traders said.
One regular lifter of 60,000 mt sized parcels, ENOC, had shipped only a partial volume of the cargo it purchased, a source with knowledge of the matter confirmed.
On cracks, the FOB Singapore 92 RON gasoline crack against October ICE Brent crude futures rose 41 cents on the day to $8.20/b at the Asian close Thursday, S&P Global Platts data showed.
Liquefied natural gas exports from Novatek’s Yamal terminal in the Arctic have come on stream faster than expected over the summer and exceeded volumes from Russia’s only other LNG facility, Sakhalin, for the first time in August.
The pace of commissioning the multi-billion dollar project has surprised a market used to chronic delays. Additional volumes from the start of another facility should now come in time for the northern hemisphere winter, a time of price spikes.
Novatek said earlier this week it had begun commissioning the third train, or plant, and that its first two trains were running at capacity, which is 11 million tonnes a year (mtpa).
Russian LNG exports amounted to 10.8 mtpa last year, almost all of which came from Gazprom’s Sakhalin-2 site. Full production at the current trains of Yamal and Sakhalin doubles Russian LNG output to just over 20 mtpa, making the country the fifth largest LNG exporter in the world.
Yamal loaded its first cargo at the end of last year. The second train produced LNG late July with normal operations by Aug. 9. Commissioning of the second train took around three months, from when the compressor gas turbines were first fired up, although the commissioning period is not clearly defined.
Barring any technical glitches and should the pace of commissioning continue, the third train should be producing LNG at capacity by November, far ahead of the scheduled first quarter of 2019 and market expectations of mid-next year.
Yamal LNG and Novatek did not respond to queries about the exact timing of the train’s start-up.
In August, Yamal loaded 1.95 million cubic meters (mcm) of LNG, more than double the 818,000 cubic meters it loaded in July, according to Thomson Reuters shipping data. That is also more than the 1.58 mcm loaded by the Sakhalin-2 LNG plant in August, surpassing production there for the first time.
There were already signs that the project was moving ahead with speed when two LNG shipping companies said they would expedite the delivery of Arctic-class LNG carriers to the Yamal project at its request.
Dynagas, an LNG shipping company specializing in carriers able to navigate the icy waters of the Arctic, said on Monday it had delivered the Yenisei River tanker three months early to Yamal on Aug. 14.
Teekay LNG, one of the largest LNG shipping companies, said earlier this month it sought to provide two Arctic-class carriers to Yamal early, noting Yamal’s ahead of schedule ramp-up.
The opening up of the Northern Sea Route through the Arctic during the summer months has raised concerns from environmentalists, but for shipping companies it provides a much cheaper and faster way of transporting goods to and from China.
Novatek estimates the route saves 17 days of shipping from Yamal to China compared to a 36-day round trip through the Mediterranean and Suez Canal and 33 percent in costs per million British thermal unit (mmBtu) shipped.
https://www.reuters.com/article/us-lng-russia/russias-yamal-lng-exports-accelerate-in-time-for-winter-top-sakhalin-idUSKCN1LG1BI
PetroChina is rewarding shareholders with a higher -- and symbolic -- payout after its best half-year profit in more than three years.
The nation’s biggest oil and gas producer raised total dividends for the first six months by almost one-third to 0.0888 yuan per share. The lucky payout -- eight is widely considered an auspicious number in China like seven is in the U.S. -- rounds out a banner earnings season for China’s three oil majors as crude’s rally allowed them to return more money to shareholders.
PetroChina’s earnings, released Thursday, follow higher results from state-owned peers China Petroleum & Chemical Corp. and Cnooc Ltd., driven by a global crude price rally and deep cost cuts. Benchmark Brent crude averaged 35% higher in the first six months at $71/bbl.
“The recovery of crude price was the biggest driver for its strong performance,” said Tian Miao, a Beijing-based analyst at Everbright Sun Hung Kai Co. “PetroChina may continue to benefit from a rise in the price in the second half.”
While PetroChina did raise its dividend, the increase trailed its peers and only used up about one-third of its free cash flow, according to Neil Beveridge at Sanford C. Bernstein Co. in Hong Kong. China Petroleum, known as Sinopec, boosted dividends by 60% to 0.16 yuan a share when it announced record earnings on Sunday. Cnooc will pay HK$0.30 a share, 50% more than the previous year.
Shares on Friday fell as much as 4.5% to HK$5.80 in Hong Kong before paring losses to 3.5%, compared with a 1.4% slide in the city’s Hang Seng Index.
Marching Orders
Parent China National Petroleum, along the other two state giants, are under a mandate by President Xi Jinping to ramp up domestic oil and gas output amid a trade dispute that threatens to curb shipments from the U.S. For the first six months of the year, oil and natural gas output increased 1.5% to 736.3 MMboe from a year ago.
PetroChina is “born with a mission” to produce oil and gas for China and will “spare no efforts” in fulfilling that goal, Vice Chairman Zhang Jianhua said at a briefing in Hong Kong. The company aims to expand natural gas output annually by 4% to 5%, and oil production by 1%, from next year, he said.
PetroChina said net income jumped to 27.1 billion yuan ($3.96 billion) in the first six months, from 12.7 billion a year ago, according to a filing to the Hong Kong stock exchange. That’s the highest semi-annual profit since the second half of 2014, according to data compiled by Bloomberg.
The company had already flagged last month that profits would more than double, citing improved operations and higher realized prices of crude oil, products and natural gas.
The Beijing-based energy giant will pay out an interim dividend of 0.0666 yuan per share, as well as a special dividend of 0.0222 yuan. Last year, it declared a total of 0.069 yuan a share for the first half, which included a 0.038 yuan special dividend.
Gas Losses
While the company’s dominance in the world’s top energy user allows it to better benefit from higher oil prices and a nationwide drive to boost gas demand, it also bears the burden of having to resell overseas gas supply domestically at lower regulated rates. Losses from gas imports deepened to 13.4 billion yuan in the first half, from 11.8 billion.
CNPC has set out a new pricing strategy for winter gas supply between November and March that proposes to raise prices by as much as 40% for some users, according to an Energy Observer report this month. Morgan Stanley said the hikes will be a “material positive catalyst” for PetroChina.
Operating profits from its exploration and production unit climbed to 29.9 billion yuan from 6.9 billion a year ago, while the refining and chemicals division gained to 23.2 billion yuan from 15.8 billion.
On a quarterly basis, PetroChina made a profit of 16.9 billion yuan in the three months ended June, the highest since the second quarter of 2015, compared with 6.98 billion yuan a year ago, according to data compiled by Bloomberg.
Additional Details
Capital expenditures rose 20% in the first half to 74.6 billion yuan, compared with a full-year estimate of 225.8 billion. Revenue gained 14% to 1.11 trillion yuan. Overall crude output was steady at 437.7 million bbl, with overseas supply rising 9.6% versus a 1.3% drop in domestic production. Natural gas output expanded 3% to 1.79 trillion cubic feet. Refinery throughput gained 16% to 551.6 million bbl. Gasoline output increased 22% to 21 million tons, while diesel climbed 13% to 25.7 million tons.
https://www.worldoil.com/news/2018/8/31/oil-rally-doubles-petrochina-s-profits
09/03/2018 at 05h00 Lyondell wants to avoid dilution in the purchase of petrochemicals By Graziella Valenti and Stella Fontes | From Sao Paulo LyondellBasell wants to issue about 10% more shares to buy Braskem. Not much more than that, according to sources familiar with the matter. The company is now worth just under $ 45 billion on the New York Stock Exchange.Braskem, for its part, is valued at B3 at US $ 11 billion. Lyondell does not want the final composition to be very different from 40% in stocks and 60% in cash.
Este trecho é parte de conteúdo que pode ser compartilhado utilizando o link https://www.valor.com.br/empresas/5795909/lyondell-quer-evitar-diluicao-na-compra-da-petroquimica ou as ferramentas oferecidas na página.
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French oil giant Total and its partners are selling their Joslyn oil sands project in Alberta to a Canadian energy company for $225 million Canadian dollars, or just over $170 million U.S.
The project near Alberta had been shuttered since 2014 due to lower oil prices and is being sold to Canadian Natural Resources Limited, Total said in the news release. Prior to the shutdown Total reported the Joslyn project had a capacity of 100,000 barrels a day, according to a 2013 presentation.
Canadian Natural Resources Limited holds extensive acreage in Alberta and in the second quarter produced over 710,000 barrels of oil from its North American operations.
Total held a 38.25 percent stake in the project, while other partners included Suncor Energy at
36.75 percent, the Joslyn Partnership at 15 percent and Inpex Canada Ltd at 10 percent.
Total still owns interests in two oil sand fields in Canada, the Surmont and Fort Hills oil sands projects.
Dutch FPSO provider SBM Offshore has reached a deal with the Brazilian prosecutor under which the prosecutor will refrain from initiating new legal proceedings against the company related to legacy bribery issues in Brazil.
Following a leniency agreement in July with Brazilian Authorities CGU (Ministério da Transparência e Controladoria-Geral da União) and AGU (Advocacia Geral da União) and Petrobras that allowed the company to resume normal business activities with Petrobras, SBM Offshore has now also signed an additional agreement with the Brazilian Federal Prosecutor’s Office (Ministério Público Federal – MPF).
Final settlement
SBM said on Saturday, September 1 that the agreement means that the company had also reached a final settlement with the MPF over alleged improper sales practices before 2012, in addition to that with the Brazilian Authorities and Petrobras.
As with all such agreements signed by the MPF, the agreement is subject to approval by the Fifth Chamber of the MPF. Earlier comments by the Fifth Chamber in 2016, when it did not approve an earlier agreement, have been addressed. As such it is anticipated that approval from the Fifth Chamber should be forthcoming, SBM said.
Under the agreement, the MPF commits to refrain from initiating new legal proceedings against the company under the Improbity Law, Anti-Corruption Law and Public-Procurement Law in relation to the legacy issues in Brazil. The MPF and the company will jointly request the court to formally close the Improbity Lawsuit filed by the MPF in 2017, including the associated provisional measure to secure payment of potential damages. Once approved the case will be closed and the agreement will become fully effective.
The fine
The agreement provides – in addition to the amounts agreed in the leniency agreement – for the payment of an additional fine by SBM Offshore of BRL 200 million (Brazilian Reais) (approximately $48 million). The additional fine is to be paid to Petrobras in installments: an upfront payment of BRL 60 million, with seven BRL 20 million installments thereafter.
This additional agreement brings the total amount of the provision established by the company in respect of legacy issues in Brazil from $299 million to $347 million.
CGU, AGU and Petrobras have expressed support for this additional agreement with the MPF.
Erik Lagendijk, Chief Governance and Compliance Officer and Member of the Management Board, commented: “We are pleased that following the recent agreement with Petrobras and Brazilian Authorities we now also have reached an agreement that removes the uncertainties around the remaining litigation risk over our historical legacy issues in Brazil.”
https://www.offshoreenergytoday.com/sbm-offshore-reaches-final-settlement-with-brazilian-prosecutor/
Executives from Petróleo Brasileiro SA will meet with economic aides to presidential candidates this month to discuss their agenda for the state-controlled oil company, newspaper Estado de S.Paulo said on Sunday.
Executives Nelson Silva, Rafael Grisolia and Eberaldo de Almeida Neto will schedule meetings this month to showcase the firm’s debt-cutting and divestment efforts, the report said, without specifying how it obtained the information.
Petrobras, as the company is known, was cast to the center of political debate in the wake of a sweeping corruption scandal ensnaring well-known executives and high-ranking politicians.
All candidates in this year’s presidential elections, the most hard-to-predict in decades, have presented some sort of plan for the oil firm. Most, Estado said, would support the sale of some or all of Petrobras’ refineries.
The United States Federal Energy Regulatory Commission has issued the notice of schedule for environmental review to Texas LNG Brownsville, the developer of a mid-sized LNG export project.
The notice sets the anticipated dates for issuance of its final environmental impact statement (FEIS) and federal authorization decision deadline for Texas LNG’s proposed 2 train, 4 million tonnes per annum LNG export facility located in the Port of Brownsville, according to a Texas LNG statement.
These steps are the final major steps in the FERC permitting process before issuance of the final order.
Based on the FEIS date and timelines of other approved LNG export projects, Texas LNG expects to receive its final FERC order authorizing construction and operation of its facility in the second half of 2019, in accordance with previously announced estimates, the statement said.
As per FERC’s expected timeline, Texas LNG would receive its draft environmental impact statement (DEIS) in October 2018, and FEIS by March 15, 2019.
Other agencies issuing federal authorizations have 90 days to complete all necessary reviews and to reach a final decision on the request for a federal authorization. The federal authorization decision deadline is June 13, 2019, the statement reads.
Vivek Chandra, Founder & CEO of Texas LNG said, “We are confident the Texas LNG project will provide benefits for all our stakeholders, especially the Brownsville community, and look forward to progressing toward final investment decision (FID) for the first 2 MTA train in 2019, and construction beginning soon thereafter.”
Langtry Meyer, Founder & COO of Texas LNG stated, “FERC’s schedule provides clarity to Texas LNG stakeholders including LNG buyers and investors that Texas LNG will receive its final FERC approval and is on track to achieving final investment decision in 2019.”
https://www.lngworldnews.com/texas-lng-export-project-moving-forward/
Researched by Industrial Info Resources (Sugar Land, Texas)--While large-scale liquefied natural gas (LNG) production and export facilities generally get a lot of press because of their size, cost and construction time, several smaller-scale micro LNG plants also are making their way into the U.S. Many of these are to supply the domestic markets, unlike their larger counterparts.
While most (but not all) of the large-scale export facilities are being constructed along the U.S. Gulf Coast, the geographic range of micro LNG plants in the U.S. is much broader. Industrial Info is tracking $2.76 billion of active small-scale LNG projects in the U.S.
https://www.industrialinfo.com/news/abstract.jsp?newsitemID=265747
U.S. energy giant ConocoPhillips has asked Indonesia’s energy ministry to extend its operations in the Corridor natural gas block after its contract ends in December 2023, a ministry official said.
ConocoPhillips (Grissik) Ltd had submitted a letter regarding its Corridor plans but still needed to submit a formal proposal, Oil and Gas Director General Djoko Siswanto told reporters on Monday.
Without a formal proposal this month, the right to operate the block would be “given to Pertamina”, Siswanto said, noting that the sizeable output from the block in South Sumatra province would be attractive to the state oil company.
ConocoPhillips (Grissik) Vice President for Commercial and Business Development Taufik Ahmad confirmed that the company had sent the letter expressing its interest in extending its Corridor operations.
However, Ahmad said that Conoco “still needed more comprehensive discussions” with SKKMigas - Indonesia’s upstream oil and gas regulator - before it could submit a proposal for the extension.
Pertamina spokesman Adiatma Sardjito told Reuters by text message that the state energy company had not submitted a proposal to take over as operator of the Corridor block but that the matter was “still being evaluated”.
Indonesia is pushing to nationalize more of its oil and gas assets as it tries to reduce imports and boost government revenue, but experts warn that this approach discourages investors and global energy companies with expertise crucial to maintaining its energy output.
Corridor produced 828.4 million standard cubic feet of natural gas per day (mmcfd) on average from January to July this year and is expected to churn out 810 mmcfd in 2019, recent SKKMigas data showed.
Repsol holds a 36 percent participating interest in the block.
The Federal Labor Party’s proposal for permanent controls on Australia’s LNG exports will not lower long-term domestic gas prices, according to APPEA, the national body representing Australia’s oil and gas exploration and production industry.
APPEA said in a statement on Monday that more regulation and political uncertainty risks deterring investment in new gas supply which, over time, will mean higher prices.
“Like manufacturers, gas producers compete in a tough global market and understand the pressures to stay competitive. However, trying to regulate prices does not tackle the real problems – the rising cost of producing gas and tightening local supply in Victoria and New South Wales,” APPEA Chief Executive Malcolm Roberts said in the statement.
“As manufacturers themselves accept, the only effective way to put downward pressure on gas prices is creating more supply from more suppliers. That supply needs to be local supply to avoid customers paying significant shipping costs,” Roberts said.
He went on to say that APPEA sees no justification for the government to apply LNG export controls in 2019 and “certainly no justification for making controls – with a price trigger – permanent.”
In June this year, the Australian Energy Market Operator (AEMO) forecasted that it does not expect supply gaps until 2030. The Australian Competition and Consumer Commission (ACCC) made a similar finding in its July 2018 Gas Market Inquiry 2017-2020 report, he said.
“The export controls introduced last year were not needed to ensure supply in 2018 and will not be needed in 2019 or into the future,” Roberts said.
“APPEA members are committed to supplying local customers at competitive prices. The east coast LNG projects are offering all their uncontracted gas to domestic buyers first,” he said.
The ACCC reported that the three LNG projects in Queensland have contracted to sell 305 petajoules (PJ) of natural gas to domestic customers in 2018 – about half of east coast demand – and are likely to do the same in 2019.
Companies operating from offshore Victoria, South Australia and other Queensland gas projects supply the rest of demand, he said.
Roberts added that ACCC monitoring of the market shows that prices have fallen sharply over the last twelve months.
“APPEA encourages all governments to focus on lasting solutions. It is bizarre that Labor in New South Wales and Victoria supports bans on local gas projects while Federal Labor now proposes to penalize the gas industry in states that do support development,” he said.
Roberts said that restricting exports and killing jobs in Queensland “does not lower gas prices in Sydney and Melbourne.”
“Unless new gas resources in New South Wales and Victoria are developed, families and businesses in those states will pay more than those in states continuing to develop new supply,” he said.
“As the ACCC has pointed out; shipping gas from Queensland to southern customers adds $2‑$4 in transport costs,” Roberts said.
“The ACCC has also found placing downward pressure on prices in the southern states requires more supply to be developed in those southern states,” he said.
“APPEA believes it is vital that any future policy changes support continuing investment in new supply. Without that new supply, the market will tighten and prices will rise,” Roberts concluded.
https://www.lngworldnews.com/appea-says-restricting-lng-exports-will-not-lower-gas-prices/
China's Sinopec Group announced a range of measures to shore up winter gas supplies including ramping up spot cargoes purchases,expanding LNG terminal capacities and pipeline connectivity.
Sinopecs LNG sales increased 13.4% this summer, some cities and companies say they are starving for more gas.
The company plans to book 2600 truck drivers and 1600 trucks to move LNG supply from southern ports to northern cities this winter.
Three major importers plan to combine gas pipeline networks.
Norwegian FSRU giant Höegh LNG said on Tuesday it has received commitment letter for a sale and leaseback financing for its tenth FSRU of up to $206 million.
The company’s tenth floating storage and regasification unit or FSRU is currently under construction at Samsung Heavy Industries in South Korea, and is scheduled for delivery in the second quarter of 2019.
The facility is being provided by CCB Financial Leasing Co. Ltd. (CCBFL), a wholly owned subsidiary of China Construction Bank (CCB), and is available to fund 70% of the delivered cost of the FSRU, increasing to 80% once long-term employment for the unit has been secured, according to Höegh LNG.
The facility also bears a 20 year amortisation profile and has a tenor of 12 years.
Höegh LNG intends to fix the interest rate, and based on the current swap rate environment, the fixed interest rate is expected to be around 6%. The facility is subject to final documentation.
Sveinung J.S. Støhle, CEO & President of Höegh LNG, stated: “With this sale and leaseback facility, Höegh LNG’s current newbuilding programme is now fully equity and debt funded. Combined with the recent three newbuilding debt facilities, Höegh LNG continues to demonstrate support from a wide group of leading international banks and credit institutions, now also including CCB.”
“We are pleased to welcome CCBFL to our lending group and appreciate its support in the financing of the last FSRU in our current newbuilding programme, at a combination of tenor, amortisation profile, flexibility and interest rate that is attractive and supportive of our commercial strategy. This agreement is also fully in line with HLNG’s strategy of expanding our activities in China, where we currently have the FSRU Höegh Esperanza on charter to CNOOC, and are actively pursuing new projects,” he said.
https://www.lngworldnews.com/hoegh-lng-secures-debt-financing-for-tenth-fsru/
Russian natural gas flows to western and central Europe recovered strongly in August -- after a dip in July because of pipeline maintenance -- as demand for Russian gas remained buoyant to meet demand from both the power and storage sectors, an analysis of S&P Global Platts Analytics data showed Monday.
Russian deliveries are also likely to remain high in the coming months as oil-indexed contract prices continue to be competitive versus European hub prices, prompting buyers to nominate more Russian gas now than later in the year when it becomes more expensive.
Russian gas flows via its three main pipeline routes to western and central Europe totalled 11.64 Bcm in August, the highest monthly level since May, according to the data from S&P Global Platts Analytics.
Russian deliveries have been strong all year, and in the first eight months of 2018 totaled 86.74 Bcm, 1.5 Bcm up on the same period last year.
Supplies via the Nord Stream pipeline totaled 4.9 Bcm last month -- or an average of 158 million cu m/d -- as the link returned to full capacity after its annual two-week maintenance period in the second half of July.
Flows via the Yamal-Europe pipeline at the Mallnow interconnection point to northwest Europe were also effectively maxed out in August, totaling 2.64 Bcm -- or an average of 85 million cu m/d.
With both the northern routes running at full capacity, it was again the route via Ukraine at the Velke Kapusany point on the border with Slovakia that took the swing.
Russian gas exports through Velke Kapusany totaled 4.1 Bcm in August -- back to the stable level in the months of March through June.
Only in July did Velke flows flex upward -- to a six-year monthly high above 5 Bcm -- due to the maintenance on the Nord Stream and Yamal pipelines.
Gazprom's own sales data -- which comprise volumes sold to customers, including from storage, not just physical export volumes -- showed an increase to 133.3 Bcm in Europe and Turkey in the first eight months of the year.
In a statement Monday, Gazprom said supplies to several selected European countries increased in the first eight months of 2018 (see table).
Gazprom's supplies to the Far Abroad hit a new record high of 194.4 Bcm last year, and are on track to break through the 200 Bcm level if current supply rates are maintained.
CEO Alexei Miller said last month supplies to Europe and Turkey were set to reach the maximum foreseen in all of its contracts combined this year and that total sales could reach "205 Bcm or more."
Demand for gas across Europe remains strong. Europe's gas-fired power generation rose in the second half of August on falling wind, low hydro stocks and reduced nuclear availability, which sent gas-for-power demand higher and signaled an increase in demand for carbon allowances.
European gas storage injections also remain strong, with injections across the EU staying in the high 300 million cu m/d range through August, according to Platts Analytics.
PRICE COMPETITIVENESS
But pricing will likely be the most significant factor in determining how much Russian gas is sold in Europe and Turkey over the remainder of 2018.
The range of 85-100% oil-indexed contracts is estimated at Eur19.64-23.11/MWh for September, according to Platts Analytics.
The TTF price for September, by comparison, is considerably higher at just under Eur26/MWh, according to Platts assessments Friday, after a European gas price rally in recent weeks triggered by the tight system and high demand for storage refill and gas-fired generation.
But oil-indexed contracts are set to become significantly more expensive in the coming months themselves, with the top of the range reaching close to Eur26/MWh in Q1, indicating a stronger price incentive to purchase Russian gas ahead of Q1 2019.
Oil-indexed contracts are in contango until April 2019 at which point the curve begins to dip again. But the oil-indexed price remains cheaper than the TTF gas for the entire Q4 and Q1 2019 period.
MPLX's Strategy To Pipe More Northeast Field Condensate And Heavier NGLs
The Utica and “wet” Marcellus plays in eastern Ohio, northern West Virginia and western Pennsylvania are producing increasing volumes of natural gas liquids and field condensates that need to be moved to market. In response, MPLX, a master limited partnership formed by Marathon Petroleum Corporation (MPC) six years ago, has been implementing a multi-part strategy to develop new or expanded pipeline takeaway capacity through the Midwest to deal specifically with the heaviest NGLs — natural gasoline and other pentanes — and with field condensates. That work is now largely done, the results have been positive, and MPLX is now undertaking the next phase of its strategy that will further expand the system’s capacity and add a new element: the ability to transport batches of two other, lighter NGLs — normal butane and isobutane — on a few of the same pipelines. Today, we discuss the next steps the company is taking to facilitate the transport of liquid hydrocarbons out of the Utica and Marcellus.
Plant condensate/natural gasoline, separated out at gas plants and fractionators, is used as a gasoline blending agent, a feedstock for steam crackers and as a diluent — that is, blended into heavy bitumen crudes in Western Canada to reduce viscosity and enable them to flow more easily through pipelines. Field condensate, which is produced at the lease, can be blended into crude oil, run as a feedstock at refineries and condensate splitters or used as diluent, among other things. Also, recall that condensate splitters are simple refineries that process condensate into its component fractions — mostly NGLs, naphtha and distillate or jet kerosene. In both Part 1 and Part 2, we noted that most condensate and natural gasoline was being transported within and out of Marcellus/Utica production areas via truck, rail or barge.
We also described MPLX’s three-part, pipeline-based strategy to more efficiently transport the field condensate and natural gasoline produced in the Utica and wet Marcellus to end-users. The strategy involved the construction of new pipelines, the repurposing of existing pipelines and the development of new storage capacity, all with the aim of piping a good bit of Marcellus/Utica field condensate production to area refineries, piping field condensate and natural gasoline to other refineries throughout the Midwest, and piping Northeast natural gasoline to Western Canada for use as diluent.
Today, we consider how MPLX’s initial strategy — now up and running — turned out, what role it now plays in addressing the region’s substantial and growing NGL and field condensate takeaway needs, and how MPLX is now planning to build on its strategy. Figure 1 shows that Marcellus/Utica production of field condensate (crude oil with an API gravity higher than 50 degrees) has been recovering since crude oil prices bottomed out in early 2016, while production of normal butane and isobutane (center graph) and natural gasoline (graph to right) has been increasing — albeit gradually — over the past three-plus years. [Note that the numbers, from the Energy Information Administration (EIA), include small volumes of butanes (~15 Mb/d, on average) and natural gasoline (~5 Mb/d) produced at the Aux Sable gas plant near Chicago.] Our understanding is that growth in the output of butanes and natural gasoline in Marcellus/Utica slowed earlier this year (2018) as producers focused on dry-gas production so they could meet their commitments on the new gas takeaway pipelines coming online, but that midstream companies like MPLX have recently been seeing stronger gains in NGL and condensate production.
Figure 1. Marcellus/Utica Production of Field Condensate, Normal Butane/Isobutane and Natural Gasoline. Source: EIA
Figure 2 shows the pipelines and other assets that are part of MPLX’s initial strategy — a number of these assets also are elements in the company’s follow-up strategy. As you may recall from the “1-2-3” blog series, the first part of the company’s strategy — moving field condensate to area refineries — centered around its new, 16-inch-diameter Cornerstone Pipeline (longer dashed red line to right in Figure 2 and in inset map, completed in October 2016), which transports field condensate and natural gasoline in discrete “batches” from MPLX’s condensate stabilization facility near Cadiz (OH) and a Utica East Ohio Midstream’s (UEO) condensate stabilizer and NGL fractionator in Scio (OH) to an MPLX storage facility in East Sparta (OH). (See Refined, Piped, Delivered – They’re Yours for an explanation of how batching works.) From East Sparta, Cornerstone runs another eight miles (with 8-inch-diameter pipe; shorter dashed red line in inset map) to MPC’s 93-Mb/d refinery in Canton (OH). Also, MPLX’s new Hopedale Connection (dashed orange line in inset map; completed in January 2017) transports natural gasoline from MPLX’s Hopedale (OH) fractionator to a Cornerstone interconnection about five miles northwest of Cadiz. As expected, MPLX runs mostly condensate through the pipeline from East Sparta to the Canton refinery, which has a 25-Mb/d condensate splitter that until Cornerstone came online was being 100%-supplied by truck.
Figure 2. MPLX Midwest NGL Pipelines and Other Assets. Source: MPLX
The next elements of MPLX’s initial strategy was designed to allow the movement of field condensate and natural gasoline from MPLX’s East Sparta tank farm to refineries in Lima and Toledo, OH; Detroit, MI (owned by MPC); Robinson, IL (also owned by MPC); and Mount Vernon, IN — all of which are identified by orange refinery icons on the main map in Figure 2. The pathways from East Sparta to these far-flung refineries are a little zig-zaggy, but they all begin on MPLX’s existing refined-products pipeline from East Sparta to another tank farm/terminal at Heath, OH (green line with arrow to the center-right of main map). Another MPLX refined-products pipeline then continues northwest from Heath to Harpster and Findlay, OH. The capacity of these pipelines was increased from 20 Mb/d to 50 Mb/d in June 2017 through the addition of larger pumps and station piping, targeted mainline pipe replacements and system hydrotests (using water to test the pipeline to a pressure higher than it will be operated at). With the completion of that work, field condensate and natural gasoline is sent through these pipelines in batches, along with the refined products.
From Harpster, field condensate and natural gasoline can now be sent directly to a refinery in Lima via a new 50-mile, 12-inch-diameter pipe (dashed bright-blue line; also completed in June 2017), or natural gasoline can move north to Findlay and, from there, to refineries in Toledo and Detroit via the Buckeye Pipeline (dashed orange line). From Lima, the liquids can now flow either north or southwest. Field condensate can flow north on the Maumee Pipeline (dashed dark-blue line; 74%-owned by Mid-Valley Pipeline Co. and 26%-owned by MPC’s Hardin Street Holdings subsidiary) to Toledo and to MPLX’s Samaria, MI, tank farm (tank icon at Ohio-Michigan border). From Samaria, MPLX runs a 16-inch-diameter crude oil pipeline to MPC’s 139-Mb/d refinery in Detroit.
Field condensate and natural gasoline can also flow southwest from Lima across central Indiana on MPLX’s 8-inch-diameter RIO Pipeline (dashed green line), whose flow-direction was reversed to east-to-west in January 2017 as part of the company’s initial strategy. RIO now can deliver field condensate and natural gasoline to Robinson (IL), where MPC has a 245-Mb/d refinery. From Robinson, Marcellus/Utica natural gasoline can either flow south on MPLX’s Robinson-to-Mount Vernon system to a CountryMark refinery in Mount Vernon, IN, or north on MPLX’s Wabash Pipeline to several Hammond, IN, and East Chicago, IN, tank farm/terminals (near Chicago), and from there (via the Wolverine/BP pipeline) to Enbridge’s 180-Mb/d Southern Lights diluent pipeline (dashed orange line near Chicago) from Manhattan, IL, to Edmonton, AB. In August 2017, MPLX connected its Wabash Pipeline to Kinder Morgan’s Kankakee, IL, tank farm (tank icon near St. Anne, IL), which is the origin of the 95-Mb/d Cochin diluent pipeline.
That sums up MPLX’s initial strategy — all of which is now completed and in operation, performing (we understand) very much like the company expected, with the field condensate going mostly to Midwest refineries and the natural gasoline being blended into gasoline by Midwest refineries and heading to Western Canada for use as diluent. MPLX’s follow-up strategy, now in the process of being implemented, has three key elements, the first of which is a plan to expand the capacity of its East Sparta-to-Heath-to-Findlay/Lima pipelines in Ohio from current 50 Mb/d to about 70 Mb/d by mid-2020. A second element calls for MPLX to expand the capacity of its RIO Pipeline from the current 34 Mb/d to close to 60 Mb/d, by the middle of next year. (MPLX had previously expanded RIO’s capacity from 24 Mb/d to 34 Mb/d in January 2018.) The expansion of the East Sparta-to-Heath-to-Findlay/Lima pipelines and RIO will allow more Marcellus/Utica-sourced field condensate to flow to Midwest refineries connected to Lima, and to enable more natural gasoline to flow to Chicago-area refineries for gasoline blending and to Western Canada for use as diluent.
The most notable part of MPLX’s follow-up strategy is its plan to start batching normal butane and isobutane through its Midwest pipeline network from fractionators in Scio and Hopedale (both OH) to Midwest refineries and to underground propane/butane storage caverns, including MPLX-owned caverns in Woodhaven, MI, and Robinson, IL. (The batching of butanes is expected to begin in the second half of 2020.) The Robinson cavern, located near MPC’s refinery, is a newly developed, 1.4-MMbbl storage facility (bored out of rock, about 700 feet below the surface) that came online in March 2018. The cavern will receive butanes during the summer months (when refineries minimize their butane use) and send butanes out to its Robinson and Detroit refineries during the winter months (when refineries blend butane into gasoline).
Further enhancements to MPLX’s NGL-related pipeline and storage network are possible as well. For one thing, MPLX sized Cornerstone Pipeline (16-inch-diameter) in Ohio large enough for potential future volumes from additional fractionators in eastern Ohio and northern West Virginia. Also, some think that the Utica and wet Marcellus would benefit from the addition of underground storage capacity — the NGL takeaway constraints that currently trouble the region are made more perilous by the fact that there is little or no local NGL storage capacity to absorb operational hiccups or (as with Mariner East II) delays in the completion of a needed pipeline. In any case, with its Cornerstone, Harpster-Lima, RIO and other pipeline projects, MPLX is making transportation of heavier NGL purity products (natural gasoline and, soon, normal butane and isobutane) substantially more efficient and cost-effective than it had been, and that’s a good thing for Marcellus/Utica producers and Midwest refiners — and Western Canadian producers in need of diluent too.
https://rbnenergy.com/step-by-step-MPLXs-strategy-to-pipe-more-northeast-field-condensate-and-heavier-NGLs
Drilling rig contractor Transocean Ltd said on Tuesday it would acquire peer Ocean Rig UDW Inc in a cash-and-stock deal valued at about $2.7 billion, including debt.
The deal will help Switzerland-based Transocean enhance its fleet of ultra-deepwater and harsh environment floating rigs.
“The combination of constructive and stable oil prices over the last several quarters, streamlined offshore project costs, and undeniable reserve replacement challenges has driven a material increase in offshore contracting activity,” said Transocean Chief Executive Officer Jeremy Thigpen.
Transocean will pay 1.6128 newly issued shares and $12.75 in cash for each share of Ocean Rig’s common stock for a total implied value of $32.28 per Ocean Rig share, which represents a premium of 19.2 percent to the stock’s Friday’s close.
Upon completion, Transocean shareholders will own about 79 percent of the combined company, while Ocean Rig shareholders will hold the remaining 21 percent.
Citi was Transocean’s financial adviser, while Credit Suisse Securities (USA) LLC advised Ocean Rig.
Saudi Aramco has awarded Baker Hughes an integrated services contract for its Marjan oilfield, the Saudi state oil giant said in statement on Tuesday.
The oilfield is one of the three major offshore expansion projects in Saudi Arabia, Aramco said, adding that Baker Hughes will provide drilling services, voiled tubing services and drilling fluids engineering services in Marjan.
Under the contract Baker Hughes, a GE company, “will commence work this month with an aim to increase the field’s capacity,” the statement said.
“Baker Hughes’ provision of drilling services will include logging-while-drilling, reservoir navigation services, and rotary steerable services,” the statement added.
Venezuela will hike the price of its heavily subsidized gasoline by October, President Nicolas Maduro said on Monday, as the crisis-stricken government seeks to shore up its coffers amid hyperinflation that is accelerating a broad economic collapse.
Venezuela's President Nicolas Maduro participates in the process of buying a savings certificate in gold at Venezuela's Central Bank in Caracas, Venezuela in this handout picture obtained by Reuters September 3, 2018. Miraflores Palace/Handout via REUTERS
Despite the crisis, fuel prices are set so low that the equivalent of $1 buys nearly 400,000 gallons of fuel. That cripples the state’s hard currency earnings and drives a lucrative smuggling trade.
The government on Tuesday will launch a new payment system using a state-backed identification card in border states to limit smuggling, Maduro said, and will increase prices to international levels once that system is in place.
“During the course of September, October, once that system is working, we will establish the subsidy systems and the price of gasoline will be set at the international price,” he said during a televised broadcast.
Maduro did not offer additional details.
Any increase would mark the first time in 20 years that Venezuela has significantly raised fuel prices, which have been a sensitive issue ever since riots broke out in 1989 in response to austerity measures that included higher gasoline prices.
Government regulations have kept prices steady at the pump despite inflation that is expected to hit 1,000,000 percent this year, according to the International Monetary Fund.
Drivers have for years paid for fuel in loose change, often tipping service station workers more than they pay to fill their tanks.
Experts estimate Venezuela - where shortages of food and medicine have fueled hunger, disease and a mass exodus of citizens - loses at least $5 billion a year as a result of not selling gasoline at international prices.
Critics have questioned how Venezuelans, whose salaries have been destroyed by unchecked inflation, could afford to pay the same fuel prices as those facing drivers in the United States.
The new system revolves around a state-backed ID known as the Fatherland Card, which Maduro says is meant to provide better services to citizens through data collection.
Opposition critics say the identification cards are meant to channel subsidies and scarce food and medical services to government supporters, while withholding them from Maduro’s adversaries.
Asia's naphtha crack rose to a near three-week high of $104.50 a
tonne on Tuesday, supported by the recent flurry of demand after a brief slump early last week
caused by high supplies.
- South Korea's LG Chem emerged this week to buy open-specification naphtha and traders said the
buyer could have paid a premium of around $1.50 to $2.00 a tonne to Japan quotes on a
cost-and-freight (C&F) basis for the fuel arriving in the first-half of October at Daesan.
- This, however, could not be confirmed as the buyer does not typically comment on deals.
- Naphtha prices for the open-specification grade in South Korea briefly flipped into a discount
on Aug. 28 due to more supplies coming to Asia, but demand has turned the market around.
- Total naphtha cargoes for September arrival in Asia from various regions including the Middle
East and Europe are expected to be higher versus up to 5.1 million tonnes seen for August, said a
report by Thomson Reuters Oil Research.
TENDERS:
- Abu Dhabi National Oil Company (ADNOC) offered 75,000 tonnes of naphtha for
end-September loading and traders expect it to be sold this week.
- ADNOC does not usually offer naphtha in the spot market as most of its supplies are tied up in
long-term contracts.
- Kuwait, on the other hand, has offered 50,000 tonnes of full-range naphtha for Oct. 5-6
loading and another 25,000 tonnes of similar grade for Oct. 7-8 loading through a tender closing on
Wednesday.
GASOLINE:
Asia's gasoline crack eased to a three-session low of $8.65 a barrel as high oil
prices weighed.
- But gasoline cash demand was strong with a total of 12 cargoes changing hands, making this the
largest volume transacted in a single session in more than a year.
- Emirates National Oil Company (ENOC) remained as the top buyer, having scooped up 9 of the 12
cargoes.
- It had already bought a total of 8 cargoes in the previous session.
- The reason behind ENOC's spree was not immediately clear.
Southwestern Energy Company SWN, +4.09% (the “Company”) today announced that it has entered into a definitive agreement with Flywheel Energy, LLC, a private company backed by Kayne Private Energy Income Funds, to sell its Fayetteville Shale E&P and related midstream gathering assets for $1.865 billion in cash, subject to adjustments and customary closing conditions. In addition, the buyer will assume approximately $438 million of future contractual liabilities after taking into account certain obligations retained by the Company. The transaction, which was unanimously approved by Southwestern Energy’s directors, has an effective date of July 1, 2018, and is expected to close in December 2018.
The Company also announced:
A conditional tender offer for up to $900 million of its Senior Notes, as described in a separate press release also issued today;
A share repurchase program of up to $200 million; and
Allocation of up to $600 million over the next two years, in aggregate, supplementing cash flow to further develop the Company’s liquids-rich Appalachia assets and accelerate the path to self-funding. Until investments are made, these funds will be used to repay credit facility borrowings.
Bill Way, President and CEO of Southwestern Energy, said, “The sale of Fayetteville represents a pivotal and deliberate step towards fulfilling our promise to reposition Southwestern Energy to capture greater returns from our higher margin Appalachia assets. We are pleased with the process, the outcome and the resulting valuation of this significant asset. I’d like to thank the employees of Fayetteville for their years of extraordinary service to the Company and its shareholders, particularly during this process.
“This transaction is a significant milestone in advancing our strategic plan. Our shareholders will benefit from an optimized portfolio, stronger balance sheet including improved financial flexibility and the return of capital to all shareholders through a share repurchase program. I am grateful for the tireless work of our entire dedicated and talented SWN team that sets the stage for a stronger future.”
Financial Impact
Following the closing, the Company will have pro-forma debt of approximately $2.3 billion. A portion of proceeds will be used to replace cash flow that would otherwise have been generated by the Fayetteville assets and reinvested into SWN’s liquids-rich assets in West Virginia. The resulting increase in activity in West Virginia is expected to accelerate the Company’s path to self-funded growth in production and shareholder value. The Company targets a long-term sustainable debt/EBITDA ratio of 2x by 2020.
The commitments under the Company’s revolving credit facility are expected to remain at approximately $2.0 billion following the close of the transaction.
As a result of the transaction, Southwestern Energy expects additional annualized interest and organizational cost reductions of $60-75 million. This is incremental to the $110 million in annualized interest and G&A savings announced in the second quarter. The Company expects to offset federal taxes using existing net operating losses.
Company Outlook
Subject to its rigorous capital allocation philosophy, the Company anticipates deploying up to six rigs in 2019, generating total production growth of 8-12% and liquids growth of 15-25%. For 2020, the Company anticipates total production growth in the mid-teens and liquids growth in the mid-twenties. These expected outcomes are dependent upon market conditions and subject to completion of the Company’s annual budget processes.
Activity will be weighted toward Southwest Appalachia’s high margin, liquids-rich inventory. The Company continues to develop its premium acreage, with total production growing over 60% since 2016.
Southwestern Energy has over 475,000 (net) acres in the Appalachia Basin prospective for Upper and Lower Marcellus, Upper Devonian and Utica/Upper Point Pleasant development. Within Appalachia, Southwestern Energy has identified over 40 Tcfe of resource, which includes more than 1,800 economic drilling locations below $2.75/Mcf gas and $50/Bbl oil. The Company’s year-end 2017 Appalachia reserves were 11.1 Tcfe, 33% of which were condensate and natural gas liquids.
Saudi Arabia’s state-owned oil giant Aramco is teaming up with South Korean refiner S-Oil Corp for a joint reception at this year’s Asia Pacific Petroleum Conference (APPEC) in Singapore, according to two industry sources.
“Having two separate receptions is quite redundant, and considering that most of the guests overlap it makes more sense to co-host the party,” said one source with direct knowledge of the matter who declined to be named.
Aramco became the single largest shareholder of S-Oil in January 2015, part of its drive to expand its footprint in the downstream petroleum sector and establish commercial offices in global oil trading hubs like Singapore.
Neither company responded to requests for comment.
Last year, S-Oil and Aramco hosted separate APPEC events. This year’s joint reception will be held at the Ritz Carlton hotel on Sept. 25, the second day of the conference.
Aramco traditionally sells most its crude oil under long-term deals with fixed monthly volumes and prices, but the company is in a drive to become more commercially minded, and plans to gradually increase the amount of crude and refined products it freely trades. (Link: reut.rs/2PxeyoQ)
Aramco’s trading office in Singapore, which opened in 2015 but only stepped up hiring in 2017, is its first overseas trading operation. The Singapore office’s responsibility includes handling physical and derivatives oil trading for its joint venture operations in Asia, which include S-Oil and also Japan’s Showa Shell, said a second source.
S-Oil is South Korea’s third-biggest refiner, selling fuels like gasoline, diesel or jet fuel globally. Its main supplier of feedstock crude oil is Saudi Aramco.
Mexico’s next government plans to build what could be the country’s largest oil refinery, with construction set to begin as soon as next year, President-elect Andres Manuel Lopez Obrador said on Tuesday.
The winner of July’s presidential election is seeking to end Mexico’s massive fuel imports, nearly all of which come from the United States, while boosting domestic refining during the first half of his six-year term.
While his aides have provided some details on the plans, Lopez Obrador himself has mostly spoken in general terms and had not previously provided numbers.
“It will be a refinery that will produce 400,000 barrels per day of gasoline with an approximate cost of $8 billion that we want to build in three years,” Lopez Obrador told a group of business leaders in the northern city of Monterrey, in broadcast comments.
Mexico’s largest refinery at present is the 330,000-barrel-per-day Salina Cruz, owned and operated by state-run oil company Pemex [PEMX.UL] in the southern state of Oaxaca.
It was not clear if Lopez Obrador was referring to the planned refinery’s crude processing capacity or its gasoline production. Two aides did not respond to requests for comment.
Salina Cruz, like Pemex’s other five refineries, has recently been producing far below capacity due to accidents and operational problems, as well as Pemex’s focus on maximizing the value of its oil even if that means refining less domestically.
Mexico’s refining network can process up to 1.6 million bpd of crude. It has been working this year at around 40 percent.
Rocio Nahle, Lopez Obrador’s pick to be the next energy minister, told Reuters in February that the next government wanted to add crude processing capacity of between 300,000 and 600,000 bpd.
Lopez Obrador has previously said the new refinery will be built in Dos Bocas, Tabasco, along Mexico’s southern Gulf coast.
“The commitment is to produce gasoline in Mexico,” Lopez Obrador said on Tuesday. “We want to produce gasoline because we have the raw material, we have crude oil.”
He added the project launch will happen “in the first days” of his government. He takes office in December.
Mexico produces about 1.84 million bpd of crude, more than 60 percent of which is exported, while it imports over 1 million bpd of refined products, including gasoline and diesel, according to U.S. and Mexican government data.
In July, Pemex’s six domestic refineries produced about 213,000 bpd of gasoline.
Talos Energy Inc. has announced that the Company has entered into and completed a transaction to acquire Whistler Energy II, LLC, on Aug. 31, 2018. Year to date gross production from Whistler's assets is approximately 1,900 boed, or net production after royalties of approximately 1,500 boed, of which 82% is oil.
The purchase price was $52 million and, as part of this acquisition, Talos negotiated the release of approximately $77 million of cash collateral that had secured Whistler's surety bonds that the Company will not need to replace. As a result, of the total cash collateral released, Talos received $31 million, with the seller entitled to the remaining $46 million. In addition, Talos also benefited from the $7 million available cash balance at Whistler at the time of the close, resulting in a net cash consideration of $14 million to Talos.
This transaction represents a significant win for both Whistler and Talos, where the seller received approximately $100 million in cash, but the Talos net cash payment was only $14 million, which represents an acquisition metric of $9,333 per net boed.
The acquired assets include a 100% working interest in three blocks in the Central Gulf of Mexico – Green Canyon 18, Green Canyon 60 and Ewing Bank 988 (collectively the Green Canyon 18 field), which comprises 16,494 acres – and a fixed production platform located on Green Canyon Block 18 (GC18 Production Facility) in approximately 750 ft of water. All leases are held-by-production.
The Green Canyon 18 field was originally developed by ExxonMobil and sold to Whistler in 2012. It has cumulative production of over 117 MMboe to date. The GC18 Production Facility, which is approximately 18 mi north of the Talos-operated Phoenix field and Tornado discovery, currently has a nameplate production capacity of 30,000 bopd and 30 MMcfgd, or approximately 35,000 boed of total capacity, with potential for additional expansions.
The strategic benefit of this acquisition goes beyond the current producing leases. Talos had already licensed recent vintage wide azimuth seismic data in the area, which will be reprocessed to assist in the re-mapping of the producing reservoirs and potentially generate additional drilling prospects. Additionally, in the latest Federal lease sale in the Gulf of Mexico, the Company was the high bidder on new leases containing at least three drilling prospects that could be tied back to the GC18 Production Facility.
https://www.worldoil.com/news/2018/9/4/talos-energy-acquires-whistler-energy-ii
As cybersecurity threats to the oil and gas industry have grown exponentially, various strategies have been deployed to safeguard companies’ computer and control systems. One new technology in particular, blockchain, has emerged as a highly innovative and effective solution. Let’s look at how blockchain is redefining oilfield cybersecurity.
Rise of risk consciousness
The ever-increasing onslaught of security threats has driven a major shift in executive thinking, with cybersecurity risk now recognized as a real and significant issue, not merely a periodic inconvenience. Awareness of cyber risk has grown across a wide spectrum of companies globally.
Consciousness of the immediacy and seriousness of cyber risks is closely linked to oilfield digitization. Digitization has re-shaped the industry as companies have recognized the enormous advantages of automation and of doing work remotely, making operations safer, less costly and more real-time. All these benefits, however, require sophisticated security platforms with the ability to protect interconnected devices and automated industrial control systems (ICS).
Protection by design
Designed as a distributed system, blockchain delivers complex services securely, with enforcement capabilities woven directly into distributed oilfield facilities and equipment. Enabling different equipment and vendors to work together by functioning as an electronic communication tissue for different systems, blockchain is as decentralized as the oilfield itself. Providing protection across the industrial edge, edge to center or center to edge and back again, blockchain is a multi-faceted, foundational technology on which a company can build its in-field identity and access management, remote access system, enrollment and transient device control, and ICS protection.
Pivotal to blockchain technology is its consensus system. When a hacker attempts to enter a system surreptitiously, the many different nodes – or computers – within the blockchain “vote” whether or not to allow the requested operation. Policies can be instituted and enforced by the blockchain, allowing the nodes to automatically determine authorized and unauthorized activities.
Even if some nodes are compromised, the vote alerts the system that nodes have gone rogue, allowing the blockchain to expel the compromised nodes and self-heal. Even if a node is destroyed, others pick up the slack with minimal disruption. In addition, unlike traditional security systems, the more nodes that are deployed, the stronger the system becomes. With the single point of failure eliminated and multitudes of nodes forming a consensus, the more difficult (and cost-prohibitive) it becomes for a hacker to compromise enough nodes simultaneously to overwhelm the system.
Blockchain benefits
Employing a tamperproof, self-healing, self-replicating and highly redundant blockchain-protected cybersecurity system provides the oil and gas industry with many unique benefits. Since blockchain is not limited by, but rather benefits from scale, companies employing blockchain, from small operators with only 500 well pads, to mid-size independents, to the largest companies seeking custom configurations, can rest assured that they have the flexibility to operate in a dynamic, digitized, and tamperproof way.
Aside from removing major risks or vulnerabilities, such as a hacker stealing a gateway and modifying it or piggybacking on an upgrade to gain system access, the unprecedented levels of connectivity that blockchain enables between people, devices and applications also allow for new levels of understanding in regard to field processes, providing the building block for future innovations, such as next-generation, multi-party, Artificial Intelligence (AI)-driven production optimization systems.
Outlook
With more and more oilfield operators putting machines, instead of personnel, in charge of production, it is critical to ensure that these highly connected and digitized systems are appropriately secured. With blockchain resolving vital cybersecurity issues, such as remote access, role-based access control, password rotation and Industrial Control Systems (ICS) fingerprinting, it’s no wonder blockchain is becoming the new standard to protect the oil and gas industry.
https://www.worldoil.com/news/2018/9/4/blockchain-quickly-becoming-oilfield-cybersecurity-standard
A World Bank arbitration body has ruled that Egypt must pay US$2 billion to a Spanish-Italian joint venture in a dispute over halted natural gas supplies in the early 2010s, the company Union Fenosa Gas (UFG) said in a statement.
Union Fenosa Gas, a joint venture of Spain’s Naturgy and Italy’s Eni, operates the Damietta liquefied natural gas (LNG) plant in Egypt. The company took the country to court in 2014 to claim compensation and hold Egypt accountable for the interruption of gas supplies to the Damietta facilities, after Egypt suspended supplies to the plant, as it was facing domestic energy shortages in the chaos after the Arab Spring.
Egypt will likely pay that US$2-billion settlement not in cash, but in the form of resumption of gas supplies to the Damietta plant, the Financial Times reported, quoting sources familiar with the issue.
The settlement of the dispute could pave the way to speedier resumption of Egypt’s LNG exports, according to FT.
“UFG expresses its great satisfaction with the outcome of the award since it reinforces its confidence in the final resolution of this long dispute and allows the company to reaffirm its commitment to Egypt and its willingness to continue its operations in the country generating wealth, welfare and social development,” the JV said in the statement.
Related: India Allows State Refiners To Import Iranian Oil In Iran-Owned Tankers
Following the start-up of the giant gas field Zohr, Egypt became an important player in the Mediterranean. Zohr, discovered by Eni in 2015, plays a key role in helping Egypt to avoid the need to import LNG, according to the Italian oil and gas major.
In June, Egypt issued what is likely to be its last LNG import tender, and could begin exports early in 2019, Egypt’s Petroleum Minister Tarek El-Molla told Bloomberg at the time. The June tender was for Egypt’s third-quarter gas needs, and it might not need to import LNG for the fourth quarter and onwards, the minister said.
Meanwhile, the Zohr operator and largest gas producer in Egypt, Eni, said last week that it had made an onshore gas discovery in Egypt’s Western Desert that could raise production in the Western Desert Basin.
China will be replacing Total with an enlarged 80.1% stake in Phase II of a multibillion dollar South Pars project as the French oil giant opted to sell its stake.
A combination of tighter supply and steady demand for gasoil drove the benchmark FOB Singapore 10 ppm sulfur gasoil cash differential to its highest so far this year, rising 9 cents/b to a premium of 62 cents/b to the Mean of Platts Singapore Gasoil assessments at the Asian close Tuesday.
The 10 ppm sulfur gasoil cash differential was last higher on December 29, 2017, at MOPS Gasoil assessments plus $1.06/b, S&P Global Platts data showed.
Asia's gasoil market has been on an upward trajectory since the end of July, with traders saying this week that the momentum might continue through much, if not all, of September.
"I don't think the strength in the market is demand driven ... demand is kind of steady, but supply is very tight. Prompt barrels are needed, and will continue to be needed," a trader said Wednesday.
Agreeing, another trader said this week that regional supplies were seen tightening.
"I think it's more of a supply constraint that is pushing up the [gasoil] market. From Japan, some refiners are beginning their autumn turnarounds, and at the same time, the winter kerosene demand season is coming, so refiners may tweak more of their production towards jet fuel/kerosene," a trader said Tuesday.
While the change in production would not be huge as domestic refiners generally face constraints with regards to refinery configurations, any shortfall in gasoil production in an already thin market would be felt, the source added.
Market participants also said this week that the strength in the Asian gasoil market would be sustained for now.
"For the strength [in the gasoil market] that we're seeing in September now, yes, I think it will continue -- if you look at forward supply, barrels look tight with [sale of] Indian barrels starting kind of late, so for end-September loading barrels, they'll only arrive in H1 October," the first trader said.
Platts previously reported that there had been a spate of refinery issues in India over August, namely a fire at Bharat Petroleum Corp Ltd's refinery in Mumbai, and the shutdown of a fluid catalytic cracker at Reliance Industries Limited's export-oriented refinery in Jamnagar.
Market sources said at the time that both these refinery incidents might have affected the volume of gasoil production at BPCL and RIL, and that other Indian refiners would have likely stepped in to supply the domestic market, resulting in less spot volumes available for export.
The strength in the physical market has also been mirrored in the paper market, with the momentum on the front-month market structure remaining firm after leaping out of contango terrain in late July.
At the Asian close Tuesday, the front-month gasoil backwardation had steepened to a near one-year high of 72 cents/b. Platts data showed that the front-month gasoil market structure was last higher on September 8, 2017, at 87 cents/b. A backdated market structure refers to a product being able to command higher prices for prompt dates, rather than for later dates.
Further bullish sentiment could also be seen further down the curve with the gasoil Q4/Q1 quarterly spread assessed at $1.22/b at the Asian close Tuesday, marking a near seven-month high. The last time the prompt quarterly spread was assessed higher was on February 6, 2018 at $1.26/b.
Meanwhile, the buoyant Asian gasoil market has contrasted sharply with a beleaguered Asian jet fuel/kerosene market, which has been characterized by overwhelmingly lackluster demand on closed arbitrage opportunities for the trans-Pacific and Middle East/India-Northwest Europe routes.
The physical regrade, a measure of the relative strength of that Asian jet/kerosene fuel can command over Asian gasoil, hit a near 11-month low at the Asian close Tuesday.
At 0830 GMT, the spread between FOB Singapore jet fuel/kerosene and 10 ppm sulfur gasoil stood at minus $2.31/b. The last time the spread was deeper in discount was on October 13, 2017, at minus $2.43/b, Platts data showed.
Qatar Petroleum, the world’s top supplier of liquefied natural gas (LNG), is talking to German energy firms Uniper and RWE about teaming up for a potential local LNG terminal, its Chief Executive told a newspaper.
“We have a serious interest in participating in a German LNG terminal and are talking to Uniper and RWE,” Saad Al-Kaabi told business daily Handelsblatt in an interview.
Germany shelved plans for an LNG terminal of its own a few years ago, with major operators participating in foreign projects including Rotterdam’s Gate terminal instead.
However, talks about installing an LNG terminal have been revived in the wake of increasingly dynamic global LNG flows and discussions about using LNG as a possible ship fuel to meet coming requirements for cleaner operations.
Some policymakers also favor LNG readiness in the context of diversifying Europe away from an over-reliance on pipeline gas from Russia.
Al-Kaabi said there were two ways of participating in an LNG terminal, be it via securing capacity as a way to open up supply opportunities or simply via becoming a shareholder of the terminal infrastructure.
“The builders of the terminal will have to think about which option they want, and we have to decide what suits us best,” he said.
Uniper said in response that it had always pointed out that a German LNG terminal would be beneficial in light of declining gas resources in Europe.
“We have had business relationships and a far-reaching strategic partnership with Qatargas for many years - we are in constant contact with them. Such discussions are, of course, confidential,” the group said.
Major ports around the Yangtze River Delta will impose tighter rules on emissions from vessels in and around the ports starting on Oct. 1, a newspaper run by China’s Ministry of Transport said in a report.
The ports affected are Shanghai, the world’s biggest container port, as well as ports in Jiangsu and Zhejiang provinces. The report in the China Water Transport newspaper was dated Aug. 24.
That is earlier than the implementation date of Jan. 1, 2019 announced previously.
China’s Ministry of Transport announced in July it would extend its emission control areas (ECA) to include the country’s entire coastline from 2019. China’s ECAs limit the sulfur content of the fuel ships can burn while operating in the ECAs to 0.5 percent.
Google translate
Equinor's commitment to land in the United States has faced several countermeasures. The total write-downs on investments in the three areas where Equinor manufactures, Marcellus, Eagle Ford and Bakken, is around 60 billion. Worst is the acquisition of Eagle Ford in Texas, where the company has had major problems with producing efficient production while the share of gas in the resources is greater than expected.
However, large write-downs do not scare the company from further investment. Now, the company puts 75 million dollars on the table for the purchase of 60,000 acres in Louisiana, in the so-called Austin Chalk area. By comparison, Statoil's area in Marcellus is around 250,000 acres. The acquisition of the large land area is the first major investment in areas since the acquisition of Bakken in North Dakota in 2011.
"We are constantly looking for opportunities on land in the United States. Here we have an area we want to test, "says Erik Haaland, press spokesman in Equinor.
There is no production Equinor now buys into, but a country area where the company hopes to find oil. The company has not yet decided when to start drilling in the area.
Strong growth
US shale oil production is still in strong growth, driven by production in the Permian Northwest Texas area. At present, Statoil does not have any production. This year, US shale oil production is expected to grow by over one million barrels of the day. The strong growth driven by a steadily rising oil price has also driven costs upwards. At the same time there have been bottlenecks related to the cargo of oil out of Permian. Within some segments of shale oil production, as in fracking, costs have increased by over 30 percent.
https://www.dn.no/nyheter/2018/09/05/1058/Olje/equinor-kjoper-stort-omrade-pa-land-i-usa
ExxonMobil Corp has signed a deal to build a petrochemical complex and liquefied natural gas (LNG) terminal in southern China, state media reported, the second major foreign investment in the world’s top chemical market in as many months.
China is allowing greater access by global majors and local independents to its massive chemicals market to feed plastics, coatings and adhesives to the fast-growing consumer electronics and automotive sectors.
Exxon would be one of only a few international oil majors to invest in LNG infrastructure in China as the country tries to shore up supplies amid a switch to gas-fired boilers by factories and households as part of the government’s battle against smog.
The preliminary deal was signed with the local governments of Guangdong province and the coastal city of Huizhou as well as state power company, Guangdong Yuedian Group, according to the Guangzhou Daily. It did not give a value for the deal.
Exxon chairman and chief executive Darren Woods was at a signing ceremony with provincial party secretary Li Xi and governor Ma Xingrui, the paper said.
Exxon’s plan comes after a similar agreement announced in July by German chemical giant BASF to build a $10 billion plant, also in Guangdong and including a steam cracker producing 1 million tonnes a year of ethylene.
The deal could be seen as a goodwill gesture amid a deepening trade war between the United States and China as the world’s top two economies have traded tit-for-tat punitive tariffs that target $50 billion of each other’s goods.
Washington was holding hearings this week on another round of proposed duties on $200 billion worth of Chinese imports that appear likely to take effect in late September or early October.
The deal comes a day before a planned meeting in Beijing of Chinese Premier Li Keqiang with Woods.
In late 2017, Exxon signed a joint study with the Huizhou government about building a petchem plant. The company already owns a 25-percent stake of a refinery and petrochemical plant in Fujian in partnership with China’s top state refiner Sinopec.
Delta Air Lines has hired two investment banks to offer a stake in its Monroe Energy refining subsidiary, signaling it wants a partner to shoulder the risk of running an energy business.
The Atlanta-based airline acquired the 185,000-barrels-per-day refinery in 2012 for $150 million in a bet that it could lower its cost of jet fuel, among the highest expenses for any airline. The refinery also makes gasoline and diesel for profit.
The U.S refining industry has been consolidating into larger players that can use scale to lower their cost of buying raw materials and paying for regular overhauls. In the U.S. East Coast, four refineries closed in the past decade due to the rising costs of acquiring crude.
Ed Hirs, a professor of energy economics at the University of Houston, said the attempt to recruit a joint venture partner is no sure thing.
“It was a boneheaded decision then, and they are still paying for it. It is going to be tough to sell a refinery that has faced closure several times due to bad economics,” he said.
Delta defended its effort to bring in a partner.
It is planning to invest $120 million in Monroe Energy’s Trainer, Pennsylvania, plant next quarter on maintenance and improvements. That overhaul will curb production for two months.
“After several years of ownership it is natural for Delta to seek other opportunities that might exist to optimize the benefits to Delta and maximize the value of other aspects of the refinery for a potential joint venture partner,” Paul Jacobson, Delta’s finance chief, said in a statement.
Delta has said the refinery’s purchase was more than a way to make a profit from the subsidiary, arguing that if the facility had closed it would have sent jet fuel prices higher across the Northeast, hurting the airline’s results.
But more recently Delta has run the plant like a traditional refinery, choosing to make more of whatever refined product offered the highest margin.
The company has hired investment banks Barclays and Jefferies to manage the sale process. The banks have already begun talking with potential suitors, according to sources familiar with the matter. It was not immediately clear what valuation the company has put on the stake offered.
Delta has grappled with the best way to manage Monroe.
Last year, it hired a consultant to evaluate the impact on jet fuel prices of any sale or closure of the refinery. The company downplayed the evaluation’s significance at the time, calling it routine.
East Coast refiners got a lifeline from the Bakken shale boom in North Dakota earlier this decade. Production there outpaced pipeline capacity, forcing producers to offer steep discounts to East Coast refiners like Monroe.
However, the discounts have vanished in recent years as more pipeline capacity came online in the upper U.S. Midwest. That forced Monroe and other U.S. East Coast refineries once again to buy higher priced crudes for their plants, reverting back to the poor economics that hurt them a few years earlier.
Glasgow engineer Weir (WEIR) is in the market’s black books on Thursday after hinting at pricing pressure and softening industry demand. That some equipment orders have already been put back is adding to the feeling that the company is facing tough times ahead.
Houston's EOG Resources is selling its United Kingdom offshore businesses.
The sale is of EOG Resources operations at the Conwy oil field west of the United Kingdom and its 25 percent interest in the Columbus natural gas development project to Tailwind Energy. The price of the sale was not disclosed.
EOG Resources has been focusing its efforts on Texas shale plays like the Permian Basin in West Texas and South Texas' Eagle Ford Shale field, among other U.S. shale resources.
The Marcellus/Utica region is in the midst of a major turning point. Natural gas production from the region continues to post record highs. But regional basis differentials to Henry Hub are the strongest they’ve been at this time of year since 2013. Spot prices at Dominion South — the representative location for the overall Marcellus-Utica supply — averaged at a $0.35/MMBtu discount to Henry Hub this August, compared with a $1-plus discount to Henry in each of the past four years. The deep discounts in previous years reflected the inadequate takeaway capacity and the resulting pipeline constraints to get gas out of the region. Now, basis shifts suggest those constraints are easing somewhat — a trend that will redefine pricing relationships across the broader gas market. In today’s blog, we continue a series examining the changing flow and price dynamics in the Northeast gas market.
The Permian has been the supply basin du jour of late, but when it comes to natural gas production growth, there’s no competition — the Marcellus/Utica is still second to none. As we noted in Part 1 of this series, of the 8-Bcf/d increase in total Lower-48 production this year, 50% has come from the Northeast. Figure 1 below puts that Marcellus/Utica growth into perspective with its West Texas counterpart, using historical production data from our good friends at OPIS PointLogic. Permian gas production — from West Texas (gray layer in the graph) and southeastern New Mexico (green layer) combined — has more than doubled over the past five years, from nearly 4 Bcf/d in 2013 to upwards of 8 Bcf/d now. Nearly half of that Permian growth has occurred in the past year alone. But compared with the Marcellus/Utica, the Permian’s growth may as well be a rounding error. Marcellus/Utica volumes — shown by the blue area— also more than doubled in the five years since 2013, but the difference in magnitude is staggering. In the time Permian added 4 Bcf/d, the Marcellus/Utica has climbed four times that — by 16 Bcf/d — to an average of 28 Bcf/d in 2018 to date, up from about 12 Bcf/d in 2013.
Figure 1. Marcellus/Utica vs. Permian Gas Production. Sources: RBN, OPIS PointLogic
We’ve written extensively in the RBN blogosphere about the effects of this supply surge on the Northeast gas market. The burgeoning local supply flipped the Northeast supply-demand balance on its head, turning the Northeast from being a gas taker to being a net supplier of gas to the broader U.S. market (see End of the Displacement and One Step Closer). Pipeline operators, in turn, have had to undertake a lengthy reconfiguration and expansion of the regional gas transportation system in order to reverse flows on large-diameter pipes that were originally designed to move gas intothe Northeast but now are needed for moving gas out of the region.
Over the past several years, a combination of brownfield and greenfield pipeline projects have added outbound capacity from the Northeast on a piecemeal basis, with flows reversing on sections of just about all the legacy northbound pipelines, as well as on Tallgrass Energy’s east-west pipeline Rockies Express (REX). We’ve dedicated a series of blogs tracking the progress of these expansions, including They Long to be Close to You, It’s Been a Long Time Comin’, In a Northeast Minute and Fill Me Up Buttercup.
However, up until now, production has continued to outpace takeaway capacity, with incremental production volumes quickly inundating any available space on the pipes. As a result, the Marcellus/Utica producing areas across Pennsylvania, West Virginia and Ohio have been, well, dogged by oversupply conditions, including maxed-out takeaway pipes and extreme price weakness relative to other regions. As we discussed in Living in Fast Forward Curves, Northeast prices used to be the highest in the country, but flipped in recent years to be among the weakest. Amid these conditions, an overriding market question has been, when will Northeast pipeline takeaway capacity catch up to production and be enough to correct the long-standing imbalance in the region? Well, a look at recent price trends suggests that the Northeast this year has taken a big step toward that equilibrium.
Figure 2 below plots daily cash basis (physical spot price versus national benchmark Henry Hub) at Dominion South (Dom S; red line in the left graph), which is representative of the broader Marcellus/Utica supply region, and at Tennessee Gas Pipeline Zone 4 Marcellus (TGP Z4; orange line in the right graph) in northeastern Pennsylvania.
Figure 2. Northeast Supply Basis. Source: NGI
Let’s start with Dom S. Since 2014, Dom S basis has remained in negative territory year-round, and averaged close to $1/MMBtu or more below Henry Hub on an annual basis. But, as the peaks and valleys in the red line indicate, basis also has followed a seasonal pattern. In each of the past four years, basis strengthened (got less negative) relative to Henry in the winter months when Northeast gas demand is highest and it weakened (got more negative) during the warmer months when regional demand wanes and supply must price itself low enough to be drawn to other regions.
Not so this summer.
Take the months of July-August. Like clockwork, cash basis in July-August has tanked in each of the past four years, averaging between $1 and as low as $1.50/MMBtu below Henry (blue-dashed ovals). In contrast, this year, basis for the same two months averaged minus $0.40/MMBtu (black-dashed oval), the strongest since 2013. A similar shift has occurred at TGP Z4. Cash basis there has jumped to an average $0.52/MMBtu this July-August, compared to $1.12/MMBtu in 2017 and a five-year average of $1.50/MMBtu. In fact, the deep downward spikes that have been prevalent features of summer basis in prior years have been conspicuously absent this year. That could change as the weather moderates going into the fall months. But indications are that basis drops may not be quite as severe this year, even in the shoulder months.
This relative strength indicates a seismic shift for Northeast basis and a critical tipping point in the precarious balance of production versus takeaway capacity in the region. Why now? The catalyst for this shift is the step-change in takeaway capacity brought on by Energy Transfer Partners’ Rover Pipeline, the nearly completed and fully subscribed greenfield project designed to bump up westbound takeaway capacity from southeastern Ohio by 3.25 Bcf/d (equivalent to more than 10% of total Northeast production currently). Rover began partial service in September 2017 with 700 MMcf/d of capacity. Since then, flows on the line have climbed to more than 2 Bcf/d in recent months as additional mainline capacity and supply laterals have come online (see Against All Odds and Are You Ready Part 1 and Part 2). In fact, as we mentioned in Part 1 of this series, two additional supply laterals — Majorsville and Burgettstown — and their accompanying compressor stations were approved for start-up about two weeks ago, and Rover flows since last Friday (August 31, 2018) jumped to an average 2.8 Bcf/d, from the prior seven-day average of 2.3 Bcf/d.
Unlike with many of the other capacity expansions in recent years, however, not all the Rover volumes have come from new gas production. Pipeline flow data across the takeaway pipelines suggests that some of it is being redirected to Rover from other pipes leaving the Northeast, which has opened up a little space on those other pipes. As pipeline-constrained as Northeast producers have been in recent years, even that little bit of capacity means that for the first time in years, the Marcellus/Utica has slightly more takeaway capacity than there is supply to fill it — at least for the time being — and that’s allowed producers’ supply basis to improve. (It probably helps too that Northeast storage inventories, like the overall U.S., are running at a deficit to prior years.)
That’s not to say that producers are completely out of the woods. There’s more pipeline capacity on the way and, with it, more production. Last Friday, Rover requested approval by September 15 (2018) to start up its final two supply laterals on Rover — Sherwood and Columbia Gas Transmission. Williams also has requested approval to start its 1.7-Bcf/d Atlantic Sunrise expansion on its Transcontinental Pipeline (Transco) by September 10. And, as of an August 22 (2018) presentation, Enbridge said the 1.5-Bcf/d NEXUS Gas Transmission pipeline project — its 50-50 joint-venture with DTE Energy — is expected online by the end of the third quarter (2018). Additionally, even with constraints easing slightly, capacity may remain tight enough that all it would take is a maintenance or other operational event, such as the explosion and force majeure on TransCanada’s Leach Xpress this past June (see Here I Am, Baby) to send basis spiraling again, at least temporarily. However, the current dynamic provides an early look at what an unconstrained Northeast could look like and the implications for downstream markets.
https://rbnenergy.com/dog-days-are-over-part2-have-northeast-natural-gas-supply-prices-turned-a-corner
The State Council, China's cabinet, on September 5 issued a guideline promoting the coordinated and steady development of the natural gas sector.
Stepping up the development and use of natural gas is crucial for reforming China's energy production and consumption, and building a clean, low-carbon, safe and efficient modern energy system, the guideline said.
The country should effectively solve the problem of unbalanced and insufficient development of the sector to deal with the natural gas storage and production capacity, realize balanced supply and demand, make facilities safe and efficient, and improve the market-oriented mechanism.
Last winter, some provincial regions in China experienced a short supply of natural gas, and residents in some areas even suffered supply failures. In the first half of this year, natural gas consumption rose by 17.5% year on year.
The guideline said that China will improve the systems for the production, supply, storage, and sales of natural gas and promote the dynamic balance of supply and demand.
Measures in this respect include reinforcing domestic natural gas exploitation, improving the mechanism for overseas supply from diverse entities, creating a multi-layered storage system, and enhancing the connectivity of natural gas infrastructure.
For the coordinated development of the sector, the country should accurately forecast natural gas demand, offer timely early warnings for possible supply shortages and import risks, increase the number of natural gas sources in local areas, and improve the emergency supply system, the document said.
Rolls-Royce launched on Wednesday its latest in a series of liquefied natural gas (LNG)-fuelled marine engines.
Power output of the LNG-fuelled B36:45 engine is identical to that of the liquid-fuelled B33:45 at 600kW per cylinder at 750 rpm, according to a Rolls-Royce statement.
Specific energy consumption is a low 7300kj/kWh mechanical ISO including two engine driven pumps; specific lubricating oil consumption is less than 0.4g/kWh.
The B36:45 is available in six, eight and nine-cylinder in-line configurations. A V-12 version is now in development, which will be followed by a 20-cylinder V-engine for very high-power applications, the statement said.
Rolls-Royce claims that the latest Bergen gas engines are able to achieve up to 22 percent lower green house gas (GHG) emissions than the equivalent diesel-fuelled version.
As most LNG is sulphur-free fuel, sulphur oxides (SOx) and particulate matter emissions are virtually eliminated, while emissions of nitrogen oxide (NOx) are reduced by over 90 percent compared to an equivalent diesel engine, the statement said.
This means that the Bergen B36:45 is able to meet IMO Tier III and EPA Tier 3 emission levels without the need for additional selective catalytic reduction (SCR) systems, it said.
https://www.lngworldnews.com/rolls-royce-launches-new-lng-engine/
Scania introduces LNG-powered long-distance coach
Volkswagen-owned Swedish truckmaker Scania launched its new Interlink Medium Decker coach for liquefied gas (LNG) operations.
The long-distance coach has a travel range of up to 1,000 kilometres, Scania said in its statement.
“Whereas there are several options for carbon-conscious city and suburban bus operators, there has been a void in long-distance travel market that we have now addressed,” Karin Rådström, Head of Buses and Coaches at Scania said in the statement.
“As LNG is becoming increasingly available throughout Europe, as well as in many other parts of the world, this is a timely and viable alternative,” he said.
LNG operations have the potential to reduce CO2 emissions by 20 percent while also substantially reducing nitrogen oxide and particulate matter emissions. Additionally, noise levels are significantly lower, the statement said.
https://www.lngworldnews.com/scania-introduces-lng-powered-long-distance-coach/
India’s efforts to sell a $1.6 billion stake in Oil & Natural Gas Corp. has run into concerns that government policies on fuel pricing would weigh on the state-run explorer’s share price, according to people with knowledge of the situation.
Investors and fund managers that met with Indian government officials during a U.S. roadshow last month voiced concern that the government may reimpose fuel subsidies and that the nation’s state-set natural gas prices are too low, said the people, who asked not to be identified as the discussions were private.
The tepid response may further set back Prime Minister Narendra Modi’s plans to raise 800 billion rupees ($11 billion) by selling holdings in state-run companies during the fiscal year ending in March. His government has only been able to pull in about 92 billion rupees as of July 5. The 5 percent ONGC stake being marketed would be worth about 111.5 billion rupees as of Wednesday’s closing price.
Shares in the company have declined about 10 percent so far this year, while cash reserves have shrunk after it paid a record dividend and bought the administration’s stake in a refiner. In contrast, the benchmark index has rallied about 12 percent, making it Asia’s best performer, while Brent, the benchmark for half the world’s crude, has climbed about 16 percent. ONGC’s price-earnings ratio lag that of global peers such as BP Plc.
ONGC shares fell as much as 1.2 percent to 171.60 rupees in Mumbai, while the benchmark index gained about 0.3 percent as of 10:39 a.m. local time.
Rising crude prices coupled with the depreciation of the rupee is straining the government’s subsidy budget, ICICI Direct Research analysts said in an Aug. 3 note. The government’s lower provisions for subsidies could lead to the possibility of ONGC sharing that burden, limiting the benefits of higher crude prices.
When fuel prices were set by the government, the explorer would share a portion of the subsidy burden by selling crude to refiners at a discount to compensate them partially for the loss in revenue. ONGC along with Oil India Ltd. has paid for over 40 percent of the country’s annual subsidy bill, Moody’s Investors Service analyst Vikas Halan said in a note in May. That ended when the government freed up retail prices of gasoline in 2010, followed by diesel in 2014.
The government still continues to control prices of kerosene and liquefied petroleum gas. The 208 billion rupees provision for kerosene and LPG subsidies in the year ending March is “clearly inadequate,” Jefferies India analysts led by Somshankar Sinha said in a note last month.
The pattern of price changes by state-run refiners have also led to speculations that they may be influenced by political issues. Earlier this year, refiners didn’t change retail fuel prices for three weeks, despite higher international crude costs, and increased them only after elections in a southern state key to Modi’s coalition ended.
The government holds about 67.7 percent in the explorer followed by state-owned Life Insurance Corp.’s 9.2 percent stake. Two other government-owned companies Indian Oil Corp. and GAIL India Ltd. own about a combined 10 percent stake in ONGC. The government last sold a 5 percent stake in the company in 2012, most of which was bought by Life Insurance Corp. after interest from other buyers failed to materialize.
https://www.energyvoice.com/oilandgas/asia/180995/ongc-1-6bn-stake-sale-faces-subsidy-hurdle/
I lived and worked in Lake Charles when he was Calcasieu Parish District Attorney, before his election to three consecutive terms as state Attorney General. We’ve remained in occasional contact since he left that post in 2004, and I readily agreed to the meeting, which was held the afternoon of Thursday, August 23, in his office.
Ieyoub began by introducing his staff: Assistant Commissioner of Conservation, Gary Ross; Director of the Engineering Regulatory Division, Brent Campbell; Supervisory Attorney, John Adams, and Environmental Division Director, Gary Snellgrove.
Then, he opened by stating, “These are the facts as we see them.”
Ieyoub was at his desk. I sat in a chair to his right, facing the other three in a semi-circle. “Of course, we’ll answer any of your questions as fully as we can,” he said.
My first question was, “You have declared this to be an emergency. You’ve notified GOHSEP and DeSoto Parish Emergency Preparedness. You’ve met with the operators. Have you notified or met with all the property owners and residents in the affected area?”
“No, we haven’t,” Adams, the attorney, readily admitted. “But the main reason we declared it an official emergency was because the process requires us to do so in order to tap the Oilfield Site Restoration (OSR) program, and get a contractor on it.”
Like other state programs, in OSR, the government, in order to better safeguard the public’s health, collects a targeted fee from companies that mine or extract natural, non-renewable resources.
Adams and Ieyoub also wanted to emphasize that OSR (the source of the $1.6 million) is “not technically state money,” which is somewhat misleading.
The funding for the program (sometimes also referred to as the “Orphan Wells Fund”) does not come directly from individual taxpayers. The talking point also appears on the department’s own website: “No tax-payer (sic) dollars are utilized.”
The program, instead, is funded through fees paid quarterly by oil and gas well operators – 1.5 cents for each barrel of oil produced, and three-tenths of a cent for every thousand cubic feet of natural gas produced. All together, the program generates about $4 million a year in revenue.
OSR pays for environmental remediation. “The specific focus of the Oilfield Site Restoration Program is to properly plug and abandon orphan wells and to restore sites to approximate pre-wellsite conditions suitable for redevelopment,” the department’s website explains. “Orphan wellsites are prioritized to direct available funding to those sites that pose the greatest threat to public safety and environment.”
U.S. crude oil refinery inputs averaged 17.6 million barrels per day during the week ending August 31, 2018, which was 81,000 barrels per day more than the previous week’s average. Refineries operated at 96.6% of their operable capacity last week. Gasoline production decreased last week, averaging 10.2 million barrels per day. Distillate fuel production increased last week, averaging 5.4 million barrels per day.
U.S. crude oil imports averaged 7.7 million barrels per day last week, up by 229,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 7.9 million barrels per day, 0.5% less than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 988,000 barrels per day, and distillate fuel imports averaged 286,000 barrels per day.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.3 million barrels from the previous week. At 401.5 million barrels, U.S. crude oil inventories are at the five year average for this time of year. Total motor gasoline inventories increased by 1.8 million barrels last week and are about 7% above the five year average for this time of year. Finished gasoline and blending components inventories both increased last week. Distillate fuel inventories increased by 3.1 million barrels last week and are about 6% below the five year average for this time of year. Propane/propylene inventories increased by 2.0 million barrels last week and are about 12% below the five year average for this time of year. Total commercial petroleum inventories increased last week by 3.6 million barrels last week.
Total products supplied over the last four-week period averaged 21.4 million barrels per day, up by 3.0% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.7 million barrels per day, up by 1.1% from the same period last year. Distillate fuel product supplied averaged 4.2 million barrels per day over the past four weeks, up by 2.9% from the same period last year. Jet fuel product supplied was up 5.1% compared with the same four-week period last year.
Last Week Week Before Last Year
Domestic Production...... 11,000 11,000 8,781
Alaska ................................ 446 462 494
Lower 48 ....................... 10,600 10,500 8,287
Imports ............................ 7,714 7,485 7,083
Exports ............................ 1,508 1,779 153
Cushing up 500,000 bbls
Maersk Tankers is testing the use of wind power to fuel its ships, a new technology it says can cut fuel consumption by up to 10 percent and help the industry reduce polluting emissions.
The move comes as the global shipping industry is suffering from rising oil prices and preparing for fuel costs to rise further by around a quarter, or some $24 billion, in 2020 when new rules limiting sulfur kick in.
The company has installed two 30-metre tall metal cylinders on board the Maersk Pelican, a Long Range 2 (LR2) product tanker vessel. The cylinders, or rotor sails, work as mechanical sails that spin to propel the vessel forward.
The Maersk Pelican will depart Rotterdam on Thursday for a test journey. If successful, Maersk Tankers, which shipping giant Maersk sold last year to its controlling shareholder and Japan’s Mitsui & Co for 1.71 billion, plans to install the cylinders on half its 164 vessels.
The company did not specify what savings could amount to, but said an LR2 vessel on average uses around 35 tonnes of shipping fuel per day.
At the current price of high sulfur fuel of around $420 per ton, that would amount to yearly savings of as much as $365,000 if the vessel sails 250 days a year.
The change in regulations in 2020 forces a portion of the world’s fleet to switch to lower sulfur, but higher cost, fuels such as marine gasoil (MGO) and ultra low sulfur fuel oil.
The total global shipping fuel bill is roughly $100 billion a year, consultants Wood Mackenzie estimated in April.
Maersk Pelican is the third vessel to have the rotor sail technology installed. Norsepower, which delivered the technology, first installed it on a small cargo ship in 2014 and on a ferry sailing between Sweden and Finland in April this year.
Aberdeen Harbour Tours has been operating excursions out of Commercial Quay West in the city for the past 25 years and is now looking to offer close-up views of the newest addition to the North Sea horizon.
Bosses want to sail visitors around Vattenfall’s £300 million wind turbine development.
Tours are expected to start soon, with operator Greenhowe Marine Services taking people up close and personal to the huge structures.
Ricky Greenhowe, who operates the tour boat, said: “A lot of people have been asking about it.
“Instead of an hour, the cruises would be an hour-and-a-half as it is five miles from the harbour to the windfarm.
“There’s a lot of people interested so far.
“We do the harbour tours and we did one trip out there already.”
Ricky said the company is just waiting for the confirmation that the boat can go out before the tours begin. The company also takes visitors out to sea for the opportunity to spot dolphin pods up close, rather than simply viewing them from the harbour.
The boat has previously been used as a water taxi to transfer goods and crew to offshore installations.
He added: “There’s nobody else doing anything like that.
“It’s two-and-a-half miles off the coast, but this way you can see it up close.
“We’ve had a lot of interest from companies as well. It’ll be good – it’s something different.”
Dreams on hold. Desert Lion Energy's President and CEO Tim Johnston at the Walvis Bay port from where the ship Atlantic Dream carried the company's first shipment of lithium concentrate
Oversupply in China has seen lithium prices drop precipitously this year with carbonate now selling for nearly half than during the first quarter.
The Benchmark Mineral Intelligence price assessment released today shows domestic Chinese lithium carbonate of battery grade falling to an average $13,000 per tonne in August, down 47% on the first quarter and at levels last seen in 2015.
Benchmark anticipates more weakness ahead due to the gradual introduction of new spodumene supplies from Western Australia, but the battery minerals research firm offers some consolation saying "decreases are likely to slow as prices approach cost levels for higher-cost converters in China."
"Decreases are likely to slow as prices approach cost levels for higher-cost converters in China"
Free-on-board cargoes from South America are now worth more than ex-works consignments inside China, but Benchmark warns that with no rebound in sight for Chinese prices, producers elsewhere would likely have to settle second half contracts at lower prices. Export prices in Asia at $20,000 a tonne in August are now at their lowest since July last year.
Falling prices have claimed their first high profile victim with Desert Lion Energy announcing on Friday that it has ceased all operations at its hard-rock property in Namibia. The Toronto-listed company announced it's reassessing its strategy and has also commenced negotiations to reprice the off-take agreement with its Chinese partner.
Desert Lion Energy began production of lithium concentrate from stockpiled material at its Helikon and Rubicon property in central Namibia in December 2017 at an annualized rate of roughly 5,250 tonnes of lithium carbonate equivalent. According to the company there was approximately 700,000 tonnes of material and 100,000 tonnes of fines on the site.
Desert Lion Energy's phase 2 expansion envisages a 20,000 tonne per year operation based on a maiden resource and preliminary economic assessment scheduled to be published before the end of the month.
The deposit was first discovered in 1927 and mined for among others, beryl and tantalum, from the 1950s through the 1990s.
http://www.mining.com/lithium-price-plunge-claims-first-victim/
The world’s largest offshore wind farm will open on Thursday off the northwest coast of England when Danish energy group Orsted unveils the Walney Extension project.
The wind farm has a capacity of 659 megawatts (MW), enough to power almost 600,000 homes, and overtakes the London Array off England’s east coast which has a capacity of 630 MW.
Walney Extension is made up of 87 turbines built by Siemens Gamesa and MHI Vestas, and covers 145 square kilometers (55 square miles), which is equivalent to around 20,000 football pitches.
The 40 eight-megawatt MHI Vestas turbines being used stand 195 meters (213 yards) tall and are the largest wind turbines in operation globally.
Orsted said they have been optimized to generate as much as 8.25 MW each.
Matthew Wright, Orsted UK managing director, told Reuters in an interview Britain’s offshore success was due to a combination of strong wind speeds and shallow waters in the North Sea and Irish Sea as well as continued support from the government.
“For the last 10 years governments of all colors have supported renewable energy and offshore wind in the UK, leading to a thriving industry,” he said.
Britain is the world’s largest offshore wind market, hosting 36 percent of globally installed offshore wind capacity, data from the Global Wind Energy Council showed.
Walney Extension was among the first renewable projects to secure a so-called contract for difference (CFD) subsidy from the British government in 2014.
The contract guarantees it a minimum price for electricity of 150 pounds ($195) per megawatt hour (MWh) for 15 years.
Since this was awarded, the cost of offshore wind has fallen dramatically to a low of 57.50 pounds per MWh in the last auction held in 2017.
Blades for both sets of turbines were made at British factories, in Hull and the Isle of Wight, and Wright said the company was keen to use local facilities.
“Approximately 50 percent of the value of the project over its lifetime will have come from UK sources,” he said.
Poor demand in the battery industry continued to weigh on the market for lithium salt, especially for lithium carbonate.
While downstream purchases from cathode materials producers picked up, overall consumption remained sluggish as of Thursday September 6.
As of Thursday September 6, SMM assessed prices of domestic battery-grade 99.5% lithium carbonate at 83,000-88,000 yuan/mt, down 3,000 yuan/mt from last Thursday. Prices fell an average of 82,000 yuan/mt from the end of 2017, when the market began its decline.
A supply glut also accounted for the declining market. At the end of 2017, overall capacity across China's top 25 power battery companies stood at 144.3Gwh, according to a report by research institution EVTank. The figure exceeded demand for power batteries this year, which is expected at 51Gwh, with production of new-energy vehicles estimated at 1.1 million units, showed the report.
Austria plans to appeal against a ruling by Europe’s second-highest court which rejected its objections to Britain’s plans for a nuclear power plant at Hinkley Point, the country’s sustainability minister said on Monday.
“Our lawyers have examined this in detail in the past weeks. We believe the chances of an appeal remain intact,” Sustainability Minister Elisabeth Koestinger said in an interview with newspaper Kronen Zeitung.
The ministry said it expects Austria’s cabinet to formally give the go-ahead for an appeal when it meets on Wednesday.
French utility EDF and China General Nuclear Power Corp aim to have the Hinkley Point C nuclear power station on line in 2025 with costs for the project seen at 19.6 billion pounds ($25.3 billion).
The European Commission cleared the project in 2014, saying it did not see any competition issues. But Austria took its objections to the General Court in Luxembourg, which dismissed them in July.
One aspect Vienna objects to is a guaranteed price for electricity from the plant which is higher than market rates. It also opposes state credit guarantees of up to 17 billion pounds being provided for the project.
Austria can appeal to the European Court of Justice but only on matters of law.
Opposition to nuclear power is widespread in Austria, which built a nuclear reactor but never brought it on line.
Voters rejected plans to bring it into operation in a referendum in 1978 and the reactor, at Zwentendorf on the Danube northwest of Vienna, now serves as a training center.
Uranium explorer and developer Denison Mines has increased its interest in the Wheeler River uranium project to 90% buy buying out Cameco Corp’s minority interest in the undeveloped high-grade project in the eastern Athabasca basin.
Denison will acquire Cameco’s interest in the joint venture (JV) for 24 615 000 shares at a deemed price of $0.65 a share, valuing the transaction at $16-million, the company announced on Tuesday.
Currently, Denison owns 63.3% of the JV, which under a previous earn-in agreement, will increase to about 66% by the end of 2018, while Cameco’s interest of 26.7% will decrease about 24% by year-end and JCU remains at 10%.
The transaction is subject to certain rights of first refusal that JCU can exercise. In terms of the JV, JCU can purchase its proportional interest of Cameco's share of the Wheeler River JV alongside Denison. Based on Denison's expected ownership interest of about 66%, and JCU's ownership interest of 10%, JCU would have the right to purchase about 13.16% of Cameco's expected 24% interest in the Wheeler River JV.
Denison noted that should JCU elect to exercise the right of first refusal, the purchase price would reduce to $13.9-million and Denison would own about 86.84%, rather than 90%, of the Wheeler River JV.
“Denison, Cameco and JCU have worked together, since 2004, to advance Wheeler River to the point of being the largest undeveloped uranium project in the eastern Athabasca basin. We believe this transaction represents a unique opportunity to add to our existing controlling interest in the project and offer significant value accretion to Denison shareholders," said Denison president and CEO David Cates.
Wheeler River project is being advanced to a development decision and Cates reaffirmed that the prefeasibility study would be completed by the end of September.
Wheeler River is host to the Phoenix and Gryphon uranium deposits, which are estimated to contain combined indicated mineral resources of 132.1-million pounds of uranium oxide (U3O8) at an average grade of 3.3% U3O8, plus combined inferred mineral resources of three-million pounds U3O8 at an average grade of 1.7% U3O8.
The project is situated along the road and power line that runs between Cameco's McArthur River mine and Key Lake mill complex in northern Saskatchewan.
Meanwhile, Denison announced the appointment of Tim Gabruch as VP for commercial. He will be based in the Saskatoon office and will be tasked with building an "end to end" sales, marketing and commercial function that is consistent with the company's entrepreneurial culture and long-term strategy surrounding the future development of its flagship Wheeler River uranium project.
Gabruch has nearly two and a half decades of experience in the uranium mining and nuclear energy industries, having spent 23 years with Cameco in various marketing and corporate development roles.
http://www.miningweekly.com/article/denison-buys-out-cameco-in-wheeler-river-jv-2018-09-05
Ukraine and Russia may have less milling wheat than previously expected this year after rain during harvesting hurt the quality of crops, potentially accelerating any curbs on exports from the Black Sea exporters, traders and analysts said.
Kiev and Moscow have said there is no need to impose restrictions on wheat exports for now, but their agriculture ministries are closely monitoring activity of the main exporters for the 2018/19 marketing season.
There are fears that strong milling wheat exports may help drive up the cost of bread in both countries where weak domestic currencies and poor crops have already inflated food prices.
The rouble is near its lowest since April 2016 against the dollar, while Ukraine’s hryvnia is at its weakest since January.
“Undoubtedly, both countries have grounds for controlling actual grain shipments,” Yelizaveta Malyshko at UkrAgroConsult said.
The ministries’ meetings with exporters came under the spotlight in August, causing a jump in global wheat prices as some traders expect curbs on grain exports in some form later in the season, which started on July 1.
Traders said in August exports would speed up in September-December as traders bet on restrictions sometime after December.
“There are fears (of restricting exports) through tightening of the various procedures – like all kinds of inspections,” a Ukraine-focused trader said. “This scenario is most possible. It could be if the milling wheat exports reach 6 million tonnes before the New Year.”
Ukraine’s agriculture ministry has no immediate plan to review a memorandum agreed with traders this month allowing for the export of 16 million tonnes of wheat, including 8 million tonnes of milling wheat, this season, an official said this week.
Russia could consider export curbs once exports reach 30 million tonnes of grain, including 25 million tonnes of wheat, in the 2018/19 season that began on July 1, traders have said. The agriculture ministry has denied export limits were under discussion and made no mention of milling wheat.
Russia and Ukraine have already exported 6.4 million tonnes and 2.6 million tonnes of wheat, respectively, this season. Exports have been boosted by high global prices, weak local currencies and an early harvest.
Initial crop tests in Russia show a decline in the share of milling wheat by 2.5 percentage points from a year ago to 65.2 percent. However, the share of milling wheat is significantly lower in some regions – 44 percent in part of Russia’s Central region – and the sourcing of wheat may become difficult for exporters unless Siberia shows a good quality crop in the coming weeks, SovEcon consultancy said this week.
Any global price spike could spark exports and cause the Russian government to take counter measures if it sees a sharp domestic market move, a Russian industry source said.
Domestic politics could also play a role as Ukraine’s presidential election is scheduled for the end of March.
“I do not think the government will take any official step to limit sales in coming months, but if local wheat prices jump – they will do all their best to curb sales because no one wants to be accused of raising the price of bread on the eve of elections,” one trader said.
Ukraine’s agriculture ministry is unlikely to impose any direct restrictions as it would draw it into a row with exporters, another trader said. “But it does not rule out the potential use of different unofficial methods for slowing exports if something goes wrong.”
Several traders expect Ukraine’s milling wheat limit to be downgraded to 6-7 million tonnes from the current 8 million.
The share of milling wheat in Ukraine’s crop may fall significantly from a year ago to about 40 percent, according to a senior agriculture official. The ministry has said food wheat accounted for around 60 percent.
A Brazilian court on Monday overturned an injunction banning products containing the popular weed-killer glyphosate, knocking down a previous ruling that had promised to up-end the soy planting season set to begin this month.
Last month a Brazilian judge ruled to halt the registration of new glyphosate-based products in the country and to suspend existing registrations after 30 days, until health agency Anvisa issues a pending ruling on its safety.
That 30-day deadline had been expected to pass on Monday, just as the first month of soy planting gets under way.
Brazil is the world’s largest exporter of soybeans and relies heavily on the agrochemical, with Bayer AG’s Monsanto SA being the biggest seller of glyphosate products in the country.
Bayer, Monsanto and a Brazilian pesticide industry group did not immediately respond to requests for comment.
Hundreds of lawsuits alleging Monsanto’s glyphosate products cause cancer are making their way through U.S. courts. Bayer and Monsanto say decades of use and numerous reviews of glyphosate show the chemical to be safe.
China will not face a shortage of soybeans in the fourth quarter, despite tariffs on imports of the oilseed from the United States related to the Sino-U.S. trade war, an official from the China Soybean Industry Association said on Tuesday.
The U.S. typically supplies about a third of China’s soybean imports but Beijing has levied steep tariffs on its beans, which has halted shipments to China.
China will produce over 30 million tonnes of soybeans by 2020, Zhang Lichen, deputy director of the association, also told an industry conference.
China will almost entirely replace its soybean imports from the United States with Brazilian beans and other origins in the upcoming season, but may run out of the oilseed in early 2019, said an executive with a top crusher on Tuesday.
The forecast was one of the most bearish yet on the impact of the Sino-U.S. trade war for American farmers.
The world’s top buyer of soybeans bought about 60 percent of U.S. soybean exports last year, but has been mostly out of the market since Beijing imposed a 25 percent tariff on U.S. beans on July 6 in retaliation for U.S. tariffs on Chinese goods.
Imports from the United States will plunge further in the 2018/19 season starting this month to just 700,000 tonnes, said Guo Yanchao, deputy chairman of Jiusan Group.
That compares with 27.85 million tonnes of U.S. soybeans imported in the prior year.
Overall, China’s imports of soybeans for the year will drop to 84.67 million tonnes, down 10.79 million tonnes from last year’s purchases, Guo told an industry conference.
That would include 71.06 million tonnes from Brazil, 7.5 million from Argentina, and the rest from Canada, Russia and other countries, he said.
Guo’s comments echo those of a top executive at another major crusher, who said last week that China’s imports could tumble to 86 million tonnes.
Still, Guo expected stocks of imported beans at ports to drop to historical lows by November, pushing soymeal prices “very high” and hurting demand for the ingredient in the first quarter of 2019.
Supplies could run out by February or March next year, he warned, when Brazilian beans will be limited. At that time, some private companies could take the risk and buy beans from the United States, he said.
China is also expected to increase imports of alternative meals and boost domestic crushing volume to 3.4 million tonnes, while selling 1.6 million tonnes from state reserves.
Bayer cut its earnings forecast on Wednesday due to delays to its $63 billion takeover of Monsanto, and said sales of its consumer care products fell, hitting its shares, already reeling from a legal battle over the weed killer Roundup.
The weaker earnings forecast adds to a number of challenges facing the German drugmaker as it braces for years of legal wrangling over the alleged cancer risks of glyphosate-based weedkillers.
Bayer said the number of plaintiffs seeking damages over Monsanto’s Roundup and Ranger Pro herbicides had risen to 8,700 from 8,000 from last month, and said that it expected more to sue. It has vowed to defend itself in court, citing regulators and studies as saying the products are safe.
The inventor of aspirin and the maker of Yasmin birth control pills is struggling to stem falling sales at its consumer health arm as U.S. consumers switch from drugstores to online shops, and it faces increasing pressure to strengthen its pharmaceutical division after a string of setbacks.
The company lowered its forecast for adjusted core earnings per share for the year to 5.70 - 5.90 euros, down from 6.64 in 2017, short of analyst expectations, dragging the stock down as much as 3.7 percent in morning trade.
The shares were down 1 percent at 1030 GMT, leading to a loss of about 16 percent since a U.S. jury’s verdict on Aug. 10 for Monsanto to pay close to $300 million in damages in the first of thousands of lawsuits over alleged links between the Roundup weedkiller and cancer.
Second-quarter earnings before interest, tax, depreciation and amortization (EBITDA), adjusted for one-off items, rose to 2.34 billion euros ($2.71 billion), the company said on Wednesday, below an average estimate for 2.44 billion in a Reuters poll of analysts. The company blamed delays to the closure of its mammoth acquisition of Monsanto, which meant it missed out on a typically stronger first-half than the second for the seeds maker it agreed to buy in 2016.
“It is clear that analysts have not appreciated the extent of this phasing deviation,” said analyst Alistair Campbell at brokerage Berenberg. “Nevertheless, this will disappoint.”
The addition of Monsanto will make Bayer as reliant on farming supplies as on pharmaceuticals for earnings. It is in the midst of an overhaul of its drug research and development activities that could result in job cuts as it faces calls to beef up its development pipeline.
Quarterly adjusted EBITDA at the enlarged Crop Science division, now the world’s largest supplier of seeds and pesticides, almost doubled to a better-than-expected 631 million euros, helped by a recovery in Brazil and as Monsanto, part of Bayer since June 7, contributed 70 million.
But its consumer health business, which makes Claritin against allergies, Coppertone sun screen and Dr. Scholl’s foot care products, saw earnings fall by 18.5 percent as a weak U.S. dollar weighed on the value of overseas sales and as customers continued to shop elsewhere for cheaper products.
Berenberg’s Campbell said the “division remains highly problematic”.
Bayer said it would still pay out a dividend per share for 2018 that was at least at the year-earlier level, more than its dividend payout policy of 30 to 40 percent of core earnings per share would command.
JBA Holdings, a joint venture between companies including Heilongjiang Agriculture Co. and Joyvio Group, will invest $100 million over three years to build a soybean crusher and grain port in Russia amid a push by Chinese firms to diversify their sources of crop supplies.
The JV will also lease 100,000 hectares (247,100 acres) of farmland in Russia to grow wheat, corn and soybeans, Ren Jianchao, JBA’s chairman, said in an interview in Harbin on Tuesday. Russia’s far east has vast farmland area and borders China, which, along with low local taxes, should reduce planting costs, Ren said. JBA will also build storage and a grain port in Russia’s Zarubino that could handle 3 million metric tons of grain a year, said Ren.
China is seeking to spur growth and carve out new markets through its Belt and Road initiative that’s backed by hundreds of billions of dollars for infrastructure projects. The Asian country is already building a new port in its northeast that will create shipping routes for grain harvested in Russia by Chinese companies. China is also seeking to diversify its imports of farm goods after an escalating trade spate with the U.S. prompted hefty duties on purchases of American soybeans, spurring concerns about a looming shortage.
Far eastern Russia lacks efficient logistical facilities and building those should encourage farmers to boost grain production in the area, according to Ren. Currently, only some small Chinese companies grow crops in the region and can export between 500,000 tons and 800,000 tons of soybeans to China each year. JBA’s plant will process 2,000 tons of soybeans a day into meal and oil, with the oil exported to China, he said.
Non-genetically-modified Russian soybean oil fetches a premium over China’s domestic edible oils, said Savenkov Dmitrii, a counselor to JBA. Russian corn and wheat are also at premiums to Chinese grain and non-GMO soybean meal is favored by some countries in Europe, he said.
China’s Jiusan Oils & Grains Industries Group Co. is also a partner in JBA.
https://www.hellenicshippingnews.com/china-reaches-into-russias-far-east-in-hunt-for-crop-supplies/
Western Australia, the country’s biggest wheat exporting state, is poised for near-record harvests of the crop this year after rains in the region in August, even as the eastern grain belt grapples with its second year of punishing drought.
Wheat yields in the state, a key supplier to the world’s biggest importer Indonesia, are expected to be better than average in most areas, analysts and traders said.
“Western Australia had very good rains in August and even if it does not rain much in September, the crop is pretty much made,” said Phin Ziebell, an agribusiness economist with National Australia Bank.
“We are looking at above-average yields and half of Australia’s production or more will come from Western Australia this year.”
Higher output in the state could help temper worries about overall supply from Australia, historically the world’s fourth largest exporting nation, where fields in the east have been hit hard by another year of scorching conditions.
Australia’s latest dry spell overlapped with a lack of rains in other key exporting countries in the northern hemisphere, including the world’s biggest exporter Russia, stoking global supply concerns.
Benchmark Chicago Board of Trade wheat futures have gained more than a fifth this year in the face of tighter supply, after enjoying five consecutive years of record production and lower prices.
Wheat output in Western Australia, which has a short voyage of 5-7 days to Indonesia, is expected to reach close to an all-time high of 11 million tonnes compared with an average of 8.4 million tonnes in the last decade, according to the analysts and traders.
They said that overall Australian production would come in at around 20 million tonnes this year, down from last year’s 21.2 million tonnes and well below a record 31.8 million tonnes in 2016/17.
Australia wheat production by state: tmsnrt.rs/2NXMI4I
However, despite the larger overall crop size in Western Australia, grain quality is expected to be below average.
“(The state) will have more Australian Standard White wheat and less Australian Premium wheat,” said a Singapore-based trader at an international trading company.
“For higher quality wheat, buyers will have to look at Canadian or U.S. spring wheat,” he added, declining to be identified as hew was not authorized to speak with media.
In the southern states of Victoria and South Australia, wheat production is expected to be average or below average.
“It has been a bit patchy in South Australia and Victoria,” said Ziebell. “Some areas have done very well, while others have remained dry.”
GETTING WORSE
The drought across Australia’s east coast has recently intensified, the country’s weather bureau said on Wednesday.
Final wheat exports from Australia will depend on how much wheat eastern states ship in from Western Australian to meet local demand. The country exported 15.99 million tonnes last year, official data shows.
“It all depends on feed and milling wheat demand on the east coast and how the summer sorghum crop does,” said a second Singapore-based trader.
“But they have to export, maybe around 10-11 million tonnes, and Australia prices have to come down. As of now the Black Sea region is dominating.”
Australian Premium White wheat is being quoted around $290 a tonne, cost and freight (C&F), into Indonesia for December shipment, compared with Russian wheat trading at $250 a tonne, C&F.
Canada’s Tahoe Resources Inc said on Friday it had temporarily suspended mining operations at its La Arena gold mine in Peru after protesters trespassed on its property and demanded payment for environmental impacts of mining on their community.
Tahoe said it filed charges of illegal trespass against leaders of the protest, which included 80 to 100 people from the community of La Ramada, some three kilometers (1.86 miles) from the mine.
The protest followed recent meetings between the company and some La Ramada residents who say they want compensation for unspecified damage caused by dust and vibrations from blasting at the mine, Tahoe said in a statement.
The company said ongoing monitoring shows that mine blasting complies with the law and environmental quality standards.
The Vancouver-based gold and silver miner, which also has operations in Guatemala and Canada, did not say when mining would resume, but that it was working to a resolution.
Leaching activities at La Arena are continuing as normal, the company said.
Earlier this week, Tahoe said some 600 cubic meters of cyanide and gold bearing solution may have leaked from the mine site into a neighboring creek.
The spill was caused by an apparent theft attempt, the company said. After five holes were cut into a pipeline carrying the solution, bags of carbon were inserted to absorb the gold, but one blocked the pipeline and solution leaked, it said.
Last week, Tahoe said that 12 unarmed security contract workers at its Guatemalan were abducted and held for hours on Friday before being released.
De Beers is allowing its diamond buyers to refuse some lower-quality stones at its sale this week, according to people familiar with the situation.
It’s a rare move by De Beers, which is famous for requiring buyers to take what’s offered, and highlights the weak state of the low-end diamond market. The diamond miner made a similar gesture in 2016, when India’s move to ban high-value currency notes depressed demand.
Prices for cheaper stones, which are often small and low quality, have fallen in recent years. The market has been hurt by too much supply, lower profit margins in major cutting centers such as Surat, in India, and the depreciation of the Indian rupee. There’s also new competition from man-made gems, such as De Beers’s Lightbox brand.
The buyers, known in the industry as sightholders, will still have to purchase their quota of gems before the end of the year, said the people, who asked to not be identified because the sales are private. By delaying their purchases, buyers are hoping that demand will pick up during the gift-giving festival of Diwali, a Hindu celebration in early November.
De Beers, which is 85% owned by Anglo American, operates mines across Southern African and Canada. It sells diamonds at ten sales a year in Botswana to a select group of customers. The buyers are expected to specify the number and type of diamonds they want, and then carry out the purchases at a price set by De Beers. If they reject too many gems, they risk losing their place in the sales.
http://www.miningweekly.com/article/de-beers-will-allow-buyers-to-reject-cheap-diamonds-2018-09-04
China’s Zijin Mining Group Co will buy Canadian gold and copper miner Nevsun Resources Ltd for about C$1.86 billion (US$1.41 billion), the companies said on Wednesday, after Nevsun rejecting multiple bids from rival Lundin Mining Corp.
Zijin Mining, which specializes in gold, copper and zinc, will offer C$6.00 per share in cash for Nevsun, the companies said, representing a premium of about 21 percent to Nevsun’s close in Toronto on Tuesday.
Lundin took its all-cash offer of C$4.75 per share directly to Nevsun shareholders on July 26, after its five previous proposals were rejected by the company.
After rejecting Lundin’s offer, Nevsun said in August it had entered into confidentiality agreements with 18 interested parties, and had received four proposals from mining and smelting companies, indicating their willingness to purchase up to a 19.9 percent stake in Nevsun.
Zijin’s offer is subject to a minimum tender requirement of two-thirds of Nevsun’s shares, they said.
Zijin will have to pay a termination fee of $50 million to Nevsun in certain circumstances, including failure to receive approval from Chinese authorities, according to the statement.
Zijin will be eligible for a termination payment of $50 million if Nevsun accepts a superior offer.
BMO Capital Markets advised Nevsun on the deal, while Morgan Stanley advised Zijin.
Nevsun shares on the Toronto exchange are up nearly 30 percent since Lundin made its offer public on May 7.
The power intensive aluminium industry, hurt by the government’s decision to allocate more coal-bearing railway rakes to the electricity generation sector, has demanded resumption in regular fuel supply as per their contracted quantity.
The Aluminium Association of India (AAI) has written to the Prime Minister’s Office (PMO) intimating about the critical coal shortage situation after supplies were reduced without notifying the industry in advance.
AAI pointed coal rakes allocated to this segment has not been more than 15% since July, 2017. It was less than 9% in June, 2018. Out of the 63 MT requirement, the aluminium sector had received 40 MT in FY18. Captive power consumers, who mainly run their generation units to cater to own industrial production demand, have fuel supply agreements contracted with Coal India. The coal ministry had clarified in 2016 that non-power users should be allocated 25% of the fuel.
Power constitutes about 40% of the production cost of aluminium, where one tonne of the refined metal requires about 14,500 units of electricity generated from burning 11.7 tonne of coal. The aluminium industry has set up about 9,500 MW of captive power capacity.
https://www.hellenicshippingnews.com/aluminium-industry-demands-resumption-of-coal-supply/
Nevada Copper Corps company’s board gave the go-ahead for the construction of its Pumpkin Hollow underground mine.
Nevada Copper said in a statement that the decision follows the company’s recently completed C$108.5 million public offering of common shares and pre-construction activities, which have been ongoing since May this year. The full-scale production decision allows the company to draw down C$70 million from its precious metal streaming agreement.
President and CEO Matt Gili, who joined Nevada Copper earlier this year from Barrick Gold, saidThe Pumpkin Hollow underground project, which will include the processing plant and completion of the underground mine, is the first key step in the company's strategy of capital-efficient, phased growth from its base in Nevada
Roughly US$220m have already been sunk into the Pumpkin Hollow project. Nevada Copper has an aggressive schedule to start producing first concentrate in the fourth quarter of next year. Pre-production capex is pegged at $197 million.
The 5,000 tonnes-per-day underground mine will produce 60m pounds of copper (~27,000 tonnes) in the first five years of operations, as well as 9,000 ounces of gold and 173,000 ounces of silver.
The mine plan is based on total reserves of 23.9m tonnes grading 1.74% copper equivalent, with the grade averaging just over 2% copper during the first five years of production.
Pumpkin Hollow boasts an initial mine life of 13-and-a-half years with “significant extension potential from identified resources” according to Nevada Copper.
The company's November 2017 NI 43-101 Technical Report also provides the option to develop a 70,000 tonnes per day integrated underground and open pit mine at the property.
http://www.mining.com/nevada-copper-shares-jump-construction-decision/
China’s Ministry of Commerce has called domestic aluminium foil makers to a meeting in Beijing on Monday to discuss an anti-dumping probe launched by Mexico, three people with direct knowledge of the matter told Reuters on Friday.
Mexico on Aug. 28 said it was starting an investigation into imports of a type of aluminum foil from China, a day after U.S. President Donald Trump said he had reached a deal with Mexico on a revised North American Free Trade Agreement.
The move threatens to jolt China’s exports of aluminium, which have been booming in recent months. Mexico “is a big market” for Chinese aluminium foil, one of the sources said, describing the timing of the probe as “very interesting”.
Beijing is locked in a trade row with the United States, which slapped steep anti-dumping and anti-subsidy duties on Chinese aluminium foil earlier this year.
In May, Mexican firm Almexa Aluminio filed a complaint alleging aluminium foil of a thickness equal to or less than 0.08 millimeters originating in China was damaging the domestic industry, according to a statement by Mexico’s Secretariat of Economy.
The product is “used as household foil, flexible packaging foil, and lithographic foil,” among other applications, Texas-based consultancy Harbor Aluminum said in an Aug. 28 note. The period under investigation is the calendar year 2017, although damages will be calculated for a three-year period from 2015-17.
“We believe there are high odds for anti-dumping duties of at least 30 percent as a result of this investigation,” given the duties imposed by the United States and evidence presented by the petitioner, Harbor added.
The China Nonferrous Metals Industry Association, which organized an unsuccessful joint legal defense against the U.S. duties with a group of foil makers, will also attend the meeting on Monday, one of the people said.
The people declined to be identified because they were not authorized to speak to the media.
China’s Ministry of Commerce did not immediately respond to a faxed request for comment. Beijing has previously accused the United States of disregarding World Trade Organization rules with its duties on Chinese aluminium foil.
The U.S. Aluminum Association welcomed the Mexican probe.
“The North American aluminium market is highly integrated, and it is vital the region work together to combat unfair trade practices and enforce rules-based trade,” association President and Chief Executive Officer Heidi Brock said in a statement on Thursday.
China’s Zijin Mining has won the tender to become a strategic partner in Serbia’s sole copper complex RTB Bor, pledging to invest $1.26 billion in return for a 63 percent stake, Energy Minister Aleksandar Antic said on Friday.
The company also promised a further $200 million to settle RTB Bor’s debt and said it would keep all 5,000 workers, the minister said.
Antic said that out of the $1.26 billion, $135 million would be invested in improving the environment while another $320 million would be invested in opening a new copper mine.
The deal is part of the government’s plan to sell-off indebted state-run companies to help spur growth and relieve pressure on the budget, as recommended by the International Monetary Fund.
RTB Bor will be the second Serbian company to be run by a Chinese business. In 2016, China’s Hesteel bought Serbia’s steel plant in the town of Smederevo.
RTB Bor’s copper exports in the first half of 2018 rose 23 percent to 15,000 tonnes, company data showed. Export revenue between January and June stood at $107.1 million and it sold copper worth an additional $30.9 million domestically.
RTB Bor accounts for 0.8 percent of Serbia’s GDP, but the government hopes its share will increase after the Chinese investment.
China has invested more than $1 billion in Serbia, mostly in the form of soft loans to finance highway and energy projects, as part of its so-called belt and road initiative to open new foreign trade links.
Serbia had previously failed three times to sell the mining complex. Russian-owned U Gold also placed a valid bid, but Antic said the government opted for the Chinese company as it pledged more investment.
When companies get in trouble over their advertisements, it usually happens quickly. In the case of Sherwin-Williams Co. SHW -0.14% , it took more than a century.
The paint maker is fighting a California court ruling that ordered it and two other companies to collectively pay hundreds of millions of dollars in damages for promoting lead paint over several decades, when they allegedly knew or should have known it was hazardous. The litigation has highlighted Sherwin-Williams ads dating back to 1904.
Sherwin-Williams and its co-defendants in July petitioned the U.S. Supreme Court to take up the case, arguing that they were unaware of the health risks of lead before it became accepted science and are being improperly punished for truthful advertising about a product that was legal at the time. The federal government banned the use of lead paint in homes in 1978.
Copper production at Codelco, Chile's State-owned copper mining company, rose 2% in the first half of 2018 to 813 000 t, CEO Nelson Pizarro said on Friday.
The world´s top copper miner benefited from rising prices, posting a pretax profit of $1.235-billion in the same period, up 25% year-on-year, with a production cost per pound of copper of $1.38, an increase of 4% year-on-year, Pizarro said.
Total production of copper including from red metal mined in its other holdings totalled 875 000 t.
"Without a doubt the result was influenced by the copper price and better management," he told journalists in Santiago.
The company expects to produce around 1.7-million tonnes of copper in the whole of 2018, he added, and will invest $39-billion over the next 10 years to extend the shelf life of its aging facilities.
Pizarro said he was confident global demand for copper would remain robust despite short-term volatility caused by the US-China trade war.
http://www.miningweekly.com/article/codelco-produced-875-000-t-copper-in-h1-2018-09-03
One aluminium producer has offered to Japanese buyers $115/mt plus London Metal Exchange cash, CIF Japan, for fourth quarter shipments, down 13% from Q3's $132/mt plus LME cash, CIF, Japanese buyers said Monday.
The producer could not be reached for confirmation.
The buyers said the 13% reduction in the quarterly premium offer reflected the easing of fears that US sanctions on Russian producer Rusal would dry up global aluminium ingot supplies.
According to the buyers, the producer said the US continued to attract aluminium supplies from the world over and Japanese market premiums remained supported at $115/mt plus LME cash CIF Japan.
The buyers said they have not placed counterbids, as they were awaiting offers from other producers.
They also pointed out to high stock levels of 300,000 mt at Japan's main port warehouses, adding that the offer at $115/mt plus LME cash CIF Japan would likely be rejected.
The Q4 premium negotiations are expected to finalize by the end of September, sources said.
A vote by striking workers at Alcoa’s giant west Australian operations will close on Thursday, with the union anticipating a strong “no” vote that could prolong the four-week old strike.
Around 1,500 workers at three alumina refineries and two bauxite mines in Western Australia state walked out on Aug. 8 over a new workplace agreement that they say does not offer sufficient job security.
The refineries account for around 9.3 million tonnes of capacity or some 8 percent of the world supply of alumina, which is used to make aluminum.
An extended outage threatens to further stress a market already suffering from a global shortfall.
An Alcoa spokeswoman said the company had contingency plans to ensure operations can continue during industrial action.
“We have not experienced any significant impact from the action to date and will continue to assess the situation as it develops,” she said.
Alumina prices rally on global shortfall
A shortfall in alumina has grown this year due to U.S. sanctions against global aluminum maker UC Rusal and the partial closure of the world’s biggest alumina plant, Norsk Hydro’s Alunorte in Brazil.
Prices for alumina futures AALc1 traded at $558 a tonne this week, up by a quarter from $450 in late June. In the physical market, a recent tender went for $632, traders said.
Australian producers of alumina, South 32 and Alumina Ltd, both said last month that they expect high prices for the alumina to stretch into next year based on tight global supply, while Chinese producers have stepped up exports.
Alcoa last year also won regulatory approval to ship 2.5 million tonnes of West Australian bauxite to third-party customers, on top of the production it supplies to feed its Western Australian alumina refineries.
Alcoa said it had offered employees a generous agreement that provided income growth on top of already “very competitive pay and conditions.”
Australian Workers’ Union (AWU) Western Australian branch secretary Mike Zoetbrood said the union had seen “no movement on the ‘job security’ issue” with Alcoa, and was waiting for the ballot result due this Friday.
“We anticipate a very strong ‘no’ vote from the members,” Zoetbrood said in an emailed response to questions.
Alcoa also said there had been an “operational issue” at the Pinjarra alumina refinery over the weekend that was “unrelated” to the industrial action. The problem has been fixed.
The refineries and mines are owned by Alcoa of Australia Ltd, which is part of the AWAC group of companies and owned 60 percent by Alcoa and 40 percent by Alumina Ltd.
https://www.reuters.com/article/us-alcoa-australia-strike/alcoa-braces-for-alumina-strike-vote-in-western-australia-idUSKCN1LK0JM
The London Metal Exchange is exploring launching a nickel sulfate premium contract, following the launch of cash-settled lithium and cobalt contracts possibly in 2019, which will expand its battery metals futures offerings, Oscar Wehtje, the product development head said Tuesday.
Wehtje, speaking at LME Update Forum in Tokyo, said a contract for nickel sulfate premium over LME nickel prices, as well as graphite, manganese and other battery cathode and anode material, are in the pipeline of prospective new contracts.
LME nickel contract volume has reached 16% compound annual growth rate, or CAGR, from 2009 to 2018, Wehtje said.
Primary nickel demand in the battery sector is forecast to rise by over 20% annually between 2017 and 2027, UK consultancy Roskill said previously.
"Nickel sulfate is a small market [compared to nickel market for stainless steel]. We are working closely with the industry," he added.
By 2027, Roskill forecast primary nickel demand in batteries to be above 500,000 mt/year, which is one-third of consumption by the stainless steel sector. But nickel demand growth for batteries will be greater than the rise in consumption by stainless steel mills, Roskill said.
Japanese market participants agreed more industry-wide discussions are required, as the battery metal market needs to evolve. They cited transparency and an increase in new market entrants as keys for a more robust battery metal market.
"Automotive battery market is limited to a few companies that have direct access to automakers. There is limited market information and opportunities for those outside the battery club. The LME battery contracts would be useful for a few such seasoned players, but there is a question whether a robust pricing mechanism can be developed with limited participants," said one Japanese trader.
A second Japanese trader, who was consulted by the LME on the sulfate premium contract recently, said battery-grade nickel sulfate was trading at $2,000-$4,000/mt plus LME nickel prices.
"The premium [calculated basis nickel content in the sulfate] is roughly one-fifth of the nickel cathode prices. The premium would be a reflection of supply and demand specific to nickel sulfate," he said.
There is yet little consensus in the battery industry on what futures contracts will be useful, sources said.
Rather than separate nickel and premium contracts, some have suggested to LME to launch several nickel contracts for various grades, sources said.
LME plans to launch cash-settled cobalt contracts in early 2019, in addition to existing cobalt contracts for physical delivery that started trading in 2010.
Wehtje said there is a risk of splitting liquidity with two contracts.
"In that case, the liquidity will move to that with more liquidity. There will be arbitrage opportunities. It is up to market participants to decide how to make use of the contracts," he said.
The second Japanese trader warned that several contracts on the exchange may confuse the market if one contract is in backwardation and the other is in contango.
Nearly 90% of the 900,000 mt of new, expanded refining capacity this year across Chinese copper smelters have begun the processing stage at the end of August.
These include projects at Chinalco Southeast Copper, Jinchang Copper, Shandong Humon Smelting, and Qinghai Western Mining.
Only some 100,000 mt of annual capacity at SDIC Jincheng Metallurgy has not begun to be processed, SMM learned.
A company owned by Russian billionaire Alisher Usmanov’s holding company said on Tuesday it had started construction of a massive mining and metallurgical plant at the Udokan copper deposit in a remote region in eastern Siberia.
With total reserves of around 26.7 million tonnes of copper, Udokan is the largest undeveloped copper deposit in Russia and one of the biggest in the world.
Copper at the deposit, first discovered in the 1940s, is hard to extract due to the characteristics of the ore and because it is located in a remote area with poor infrastructure, high seismic activity and permafrost ground conditions.
Baikal Mining Company, owned by Usmanov’s USM holding company, said the plant will have the capacity to process up to 12 million tonnes of ore per year after it launches in 2022, producing cathode copper and sulphide concentrate. The company may increase its annual capacity to process 48 million tonnes of ore per year.
Usmanov, 64, is Russia’s tenth richest businessman, according to the Russian edition of Forbes magazine, which estimates his wealth at $12.5 billion. His portfolio includes a half of Russia’s biggest iron producer, Metalloinvest , as well as telecoms and internet assets.
Global miner BHP has agreed a $35.2 million deal for a 6.1 percent stake in SolGold PLC (SOLG.L), giving it a share in the promising Cascabel copper-gold project in Ecuador after missing out in an earlier attempt.
BHP Chief Executive Andrew Mackenzie said the investment would give the miner exposure to a high quality copper exploration project in Ecuador, a “highly prospective” location for the company.
BHP has spent the last several years paying down debt and like many other miners is on the hunt to grow its asset base by finding and developing copper projects. Copper is seen as a growth market due to its use in renewable energy, but major projects are notoriously thin on the ground.
The deal sets the stage for a potential showdown with Australian gold miner Newcrest Mining Ltd, the top shareholder in SolGold, Cascabel’s majority owner and operator, with a 14.54 percent stake.
“It’s a pretty attractive asset. It’s early stage but the geology looks prospective,” said a Melbourne-based analyst for a fund manager, who declined to be named because of company policy.
“This basically means that Newcrest isn’t going to have it all to themselves. I think if I was Newcrest or SolGold management, I would be a bit nervous about BHP being in there.”
SolGold rejected an offer by BHP to take a 10 percent stake in the firm in October, 2016, with current Chief Executive Nick Mather terming the proposed deal by BHP at the time as “very inadequate”.
SolGold may have greater synergies with Newcrest, given the major deposit is a copper gold porphyry system that could be best mined by using a block cave method, the analyst said.
Block caving is a type of underground mining that involves hollowing out an ore body and allowing it to collapse under its own weight. It has a smaller environmental footprint than open pit mining. Newcrest is one of just a handful of miners that has block cave experience, at its Cadia gold mine in Australia’s state of New South Wales.
BHP will buy the stake of 103.1 million shares in SolGold from Guyana Goldfields Inc (GUY.TO) for about 27.4 million pounds ($35.2 million).
An oversupply of Norilsk materials and shortage of Jinchuan materials expanded the price spread between Jinchuan and Norilsk nickel to its largest in close to three years on Wednesday September 5, SMM research found.
Relative to the Wuxi Stainless Steel Exchange September contract, premiums of Norilsk nickel were heard at 100 yuan/mt in the Shanghai market while premiums of Jinchuan resources were heard at 5,700 yuan/mt. The producer of Jinchuan materials offered at 108,300 yuan/mt.
Supplies exceeded demand as large amounts of Norilsk materials entered the domestic market. Meanwhile, limited supplies and weaker prices of futures buoyed premiums of Jinchuan materials.
Shanghai saw quiet trades on Tuesday and Wednesday after downstream consumers made purchases on Monday. Most transactions were heard at 102,350-108,250 yuan/mt on Wednesday.
The price spread of primary aluminium between Henan province and Shanghai narrowed to some 90 yuan/mt as of Wednesday September 5, from 140 yuan/mt at the end of August.
This followed after aluminium processing plants in Gongyi, Henan resumed production from environmental curbs during July-August. This higher demand bolstered aluminium prices in the province.
Price of A00 aluminium ingot grew over 100 yuan/mt from late August to 14,590-14,610 yuan/mt as of September 5. This compared to a low of 13,760 yuan/mt in mid-July, SMM assessed.
Orders for September fell year on year across most aluminium processors even as environmental restrictions eased. Downstream demand may underperform relative to expectations in the traditional high season of September-October, SMM believes.
China produced 3.11 million mt of primary aluminium in August, up 1.5% year on year. This brought the overall output in January-August down 1.8% from the corresponding period last year, stand at 24.05 million mt, SMM data showed.
There is about 37.36 million mt of primary aluminium capacity in operation across the country as of the end of August and about 4.54 million mt of idle capacity. Operating rates in August came in at 89.2%, down 0.3 percentage point from July as costs and losses grew.
Some capacities with high costs in Gansu, Shaanxi and Henan provinces were shut permanently and this shrank operating volumes.
Commissioning of new capacities is likely to remain slow in the short term. Most of the new capacities are located in Inner Mongolia and Guangxi. Newly-commissioned capacities are unlikely to exceed 200,000 mt across the country in September, SMM expects.
SMM estimates September’s output to come in at 3.03 million mt, up 3.8% from the same period last year. While the small output in September 2017 would support annual growth into positive territory, the annual change for the January-September period is likely to be in a contraction, of 1.2%.
Zambia plans to trim its fiscal deficit next year even as Africa’s second-biggest copper producer boosts spending. It may be considering raising mine taxes to achieve that, according to analysts.
The Finance Ministry is targeting a budget shortfall of 6.5% of gross domestic product next year, compared to 7.4% this year, according to a medium-term expenditure plan that sets its fiscal course until 2021. At the same time, it forecasts mineral-royalty and mine-profit tax revenue increasing by about a quarter, as copper output grows 3.7% and prices remain flat.
That suggests an increase in rates for both profit tax and royalties for companies including Glencore, First Quantum Minerals and Barrick Gold, said Mark Bohlund, an Africaeconomist with Bloomberg.
“The sharp increase in mining royalties and mining corporation income tax appear to be based on a change in the taxation regime,” he said in reply to emailed questions. A Finance Ministry spokesman didn’t immediately respond to a request for comment.
Finance Minister Margaret Mwanakatwe is due to present the 2019 budget to lawmakers this month. She’s trying to allay fears around Zambia’s external debt that grew to $9.4-billion at the end of June, almost double the amount at the end of 2014, and get the International Monetary Fundto resume talks over a potential $1.3-billion bailout.
DISTRESS RISK
Last year, the IMF classified the country as being at high risk of external debt distress. Standard & Poor’s and Moody’s Investors Service both cut their credit ratings further into junk territory in August, and the southern African nation’s Eurobonds have been the world’s worst performers this year. Yields on its $1-billion bond due 2024 rose to a record 16.4% on Wednesday.
The MTEF forecasts total revenue will increase by 14% next year from a 2018 target of 49-billion kwacha ($4.8-billion). Income from mineral royalties is seen growing 23% to 4.4-billion kwacha, with receipts from mining-profit tax climbing 27% to 2.5-billion kwacha.
The estimates suggest the government may be considering higher royalty rates, said Renaissance Capital Fixed Income Strategist Gregory Smith. The levies are currently at 6% when the copper price is above $6000 per metric ton, and 5% if below that level, but higher than $4 500.
‘OPTIMISTIC’ FORECASTS
“Without an increase in royalty rates the 23% growth appears optimistic,” Smith said in emailed comments.
Zambian mining companies have enjoyed a period of “relative stability” in the taxation regime after upheaval in 2014 and 2015 that saw some operators threatening to close, the country’s mines lobby group said.
“It would be an unfortunate travesty if the government were to consider a short-term revenue grab in the middle of such a positive environment between government and industry,” Zambia Chamber of Mines President Nathan Chishimba said in emailed comments. “We hope sanity will prevail.”
The Finance Ministry reiterated plans to slow debt accumulation in the expenditure plan.
“Projects that are at least 80% complete will be prioritized for financing,” it said. “In addition, contraction of commercial foreign debt to finance new projects will be postponed until the debt situation is reduced to moderate risk. Some of the negotiated loans that are yet to be disbursed will be canceled.”
SINKING FUND
The government plans to set aside 4.4-billion kwacha for a sinking fund, meant to enable it to meet its future debt obligations, it said.
Other key points in the medium-term expenditure framework:
2019 economic growth seen at 4.3% from 4% this year
2019 copper production to rise to 924 510 t from 891 203 t this year
Inflation target band remains 6% to 8% up to 2021
Mineral royalty revenue seen rising 23% in 2019 to 4.4-billion kwacha
Mining profit tax revenue to climb 27% next year to 2.5-billion kwacha
Value-added tax revenue seen jumping 27% in 2019 to 15.7-billion kwacha
The government’s targets may not be sufficient, according to Smith.
“The fiscal deficit target of 5.1% of GDP in 2021 and the gradual pace of getting there might not be enough for the IMF to rekindle discussions on a possible program,” he said.
Bohlund was skeptical of the targets in the spending plan, saying the document “can be viewed as pure fiction as it has little basis on real-life economic conditions".
Norsk Hydro is working to convince Brazilian authorities to allow it to resume full output at its Alunorte plant, the world's biggest alumina refinery, following two deals pledging social and environmental action, a top executive said.
The deals, signed late on Wednesday in Brazil, were "an important step" but not a guarantee it would be allowed to resume full production at Alunorte, John Thuestad, Norsk Hydro's executive vice-president for bauxite and alumina, told Reuters.
"We see this as an important step, but for us, it is not a guarantee of getting the embargo lifted," Thuestad, who led the negotiations with Brazilian authorities, said in a telephone interview on Thursday.
The deals signed Wednesday include payments for food cards for nearby families and investments for the social development of local communities, as well as technical improvements.
Signed with federal and state prosecutors as well as the state government and environmental authorities, they do not include a timeline for resumption of production at full capacity.
Hydro was technically ready to restart the closed capacity, Thuestad said, and would now concentrate on convincing the relevant Brazilian judge.
"It's the right decision to reopen the facility," especially given the tightness of the world's alumina market, he said.
Hydro was ordered by Brazilian regulators in February to slash output by half at Alunorte after the company admitted to making unlicensed emissions of untreated water during severe rains.
Thuestad said more than 90 inspections had established Hydro did not cause any harmful pollution. The company has denied many of the prosecutors' allegations and said there was no evidence of a lasting environmental effect.
However, Thuestad said the lesson Hydro was drawing from the incident was that it needed to improve its relations with local Brazilian communities and with authorities in the country.
A unit of Chinese state-run conglomerate CITIC will become this month Canada's Ivanhoe Mines’ biggest shareholder following billionaire Robert Friedland’s company’s decision to sell a 20% stake for about $548 million (C$723m).
The deal, announced in June, has received all necessary approvals from China’s regulatory agencies, so it’s expected to close on Sep. 19, the companies said in a statement.
As part of the transaction, CITIC Metal has already loaned $100 million to Ivanhoe Mines, which is using the funds advance projects in southern Africa, including its flagship Kamoa-Kakula project in the Democratic Republic of Congo – considered the most significant copper discovery in decades.
Another Chinese firm, Zijin Mining Group — which acquired a stake in Ivanhoe Mines in 2015 through a wholly-owned subsidiary — has exercised its existing anti-dilution rights through a concurrent private placement. This means that Zijin owns now 9.7% of Ivanhoe Mines.
Ivanhoe Mines estimates the asset, discovered in 2007, holds the equivalent of at least 45 million tonnes of pure copper. The company aims to extract 300,000 tonnes per year once the mine is operating at full tilt.
http://www.mining.com/chinas-citic-ivanhoe-mines-top-shareholder-548m-deal/
Russian aluminium producer Rusal, under US sanctions since April, increased its aluminium exports by 7% in August compared to the previous month, Interfax news agency said.
Rusal, the world's second-largest aluminium producer, saw its exports and supply chain crippled after Washington put the company and co-owner Oleg Deripaska on a blacklist, seeking to punish Russia for alleged meddling in US elections.
US customers must wind down business with the company by October 23, according to the sanctions.
But aluminium shipments continue in the meantime and Rusal exported 281 000 t last month, Interfax said, citing data from Russian Railways, the state company that operates Russia's vast railway network.
Between January and August, Rusal's aluminium exports totalled 1.81-million tonnes, up 18% compared to the same period the previous year, Interfax said, citing the data.
Rusal contested the numbers.
"These figures cannot be considered correct as this is unofficial information from Russian Railways, which does not take into account real sales and a range of other factors," the company said.
Rusal declined to provide its own figures on aluminium exports for August.
Interfax gave no further details about its data. The data probably refers to deliveries of aluminium from Rusal's plants by rail to port stations, a source close to Rusal said earlier, indicating that the figures do not explain whether the aluminium subsequently crossed the border or was stockpiled near it.
Last year, Rusal, in which Deripaska's En+ is a controlling shareholder, sold 3.95-million tonnes of aluminium, of which 42% was shipped to Europe.
http://www.miningweekly.com/article/rusals-august-aluminium-exports-up-7-from-july---ifax-2018-09-06
Workers at Alcoa’s alumina and bauxite operations in Western Australia have voted to reject a proposed workplace agreement and will continue industrial action, the Australian Workers Union (AWU) said on Friday.
Around 1,500 workers at three alumina refineries and two bauxite mines walked out on Aug. 8 over a new workplace agreement that they say does not offer sufficient job security.
Alcoa, which has continued to run the operations, said in a statement it would monitor the situation and would welcome an alternative proposal from union workers.
Production of alumina, a white powder used to make aluminium, had been cut by about 15,000 tonnes since the industrial action began, it said. The operations normally produce about 9 million tonnes a year.
Alumina is currently in tight supply after Brazilian regulators ordered the world’s largest alumina refinery owned by Norsk Hydro to slash output by half in February over pollution concerns and the United States put sanctions on global aluminium maker Rusal
The AWU said 80 percent of workers voted to reject the proposal.
“This decisive vote should provide Alcoa management with the impetus to come back to the table with job security assurances,” AWU National Secretary Daniel Walton said in a statement.
Iron ore stocks across 35 Chinese ports fell for four consecutive weeks and came in at 135.32 million mt as of Friday Aug 31
India produced 101.4 million mt of crude steel in 2017, making it easily the third-largest steel producer in the world, and the country is on track to overtake second-placed Japan this year. Indian steel production over January-June rose 5.1% year on year to 52.8 million mt, according to Joint Plant Committee data. Only China among the major producing countries has seen greater output growth, at 6%, this year. Japan’s steel production has been fairly stagnant for almost a decade.
More importantly, India has a very long way still to run – both in economic and steelmaking terms. Under India’s National Steel Policy, the Indian government has set a target of reaching 300 million mt/year of crude steel capacity by 2030, driven by per capita steel consumption rising to 158 kg from around 61 kg currently. New Delhi wants Indian steel to supply the ‘Make in India’ program and plans to lift manufacturing’s share of GDP to 25% by 2022.
INDIA’S STEEL EXPANSIONS
Utilizing S&P Global subsidiary CRISIL’s steel mill data, the map produced here covers all steel mills in India with a capacity of at least 500,000 mt/year. At present, the data captures 125 Indian steel mills with an estimated total capacity of 106 million mt/year, which is approximately 81% of the official Indian crude steel capacity reported for 2017. Based on current capacity utilization, along with individual expansion/closure plans outlined in company reports, we estimate average annual production growth of 7%-8% over 2018-2020. By 2020, we expect India will reach consistent utilization rates of around 80%, up from levels in the mid-70s earlier.
A LOOK AHEAD: INDIA’S METALLURGICAL COAL DEMAND IN 2020
Despite some macro uncertainties post India’s election in 2019, we believe India’s met coal demand will continue to increase to meet the needs of a fast-growing steel sector. Recent consolidation in India’s steel sector, and greater international participation, should help ensure the industry is on a surer footing going into its next growth phase.
Platts forecasts India’s crude steel production will trend towards 125 million mt by 2020, a 21% increase from 2017. Pig iron output could increase to 81 million mt, from 66 million mt reported for 2017. Based on the “rule of thumb” for India that 1 mt of pig iron requires 1.6 mt of iron ore and 0.85 mt of coking coal, we estimate iron ore and coking coal demand at 130 million mt and 70 million mt, respectively, by 2020. This would mark a 25% increase, or an increment of 5 million mt/year, in metallurgical demand from 2017 levels. Monthly metallurgical coal demand is therefore forecast to trend higher towards 6 million mt at the end of 2020.
One of the key market implications could be the mining majors potentially benefiting from India’s growing appetite for metallurgical coal. Since the start of 2017, major Indian steelmakers have been seeking to secure long-term contracts with miners, ensuring reliable supply. This comes at a time when large steelmakers are looking to boost efficiencies and lift capacity utilization rates after acquiring distressed steel assets that were operating well below capacity.
Indian steelmakers are typically favor importing high fluidity and high vitrinite type coking coals. Fluidity is measured by the difference between melting and solidifying temperatures of coal. High fluidity gives higher “bendability” of coals and optimizes the coke input into a blast furnace. Vitrinite indicates the heat tolerance of each coal, reflecting better performance in the blast furnace when higher. With the estimated ramp-up of India’s met coal demand by 5 million mt/year through 2020, implied demand for the preferred likes of Premium Mid-Vol such as BHP-Mitsubishi Alliance’s (BMA) Goonyella, Peak Downs North and semi-hard coals like Kestrel, in eastern Australia’s Queensland, will grow for the foreseeable future.
Besides relying on Australian coals, steelmakers in India were understood to be diversifying their coal blending by opting for other origin coals, including US material. They have also sought cheaper alternatives such as pulverized coal injection (PCI) and semi-soft. This was particularly the case when hard coking coal prices rose to $300/mt FOB Australia in recent years due to supply constraints in China and Australia. Indian mills are particularly susceptible to price spikes and in certain cases were forced to mothball some blast furnace operations until steel margins improved.
India has also been keen to develop Mozambique coking coal, with both Tata Steel and the state-owned consortium International Coal Ventures Limited (ICVL) investing in the east African country. However, Mozambique supply has not come to fruition as expected, with only Vale’s Moatize mine producing sizable volumes of met coal at around 7 million-8 million mt/year. As a result, it is Australian-based exporters that are best placed to benefit from India’s steel capacity expansion.
https://www.hellenicshippingnews.com/indias-metallurgical-coal-demand-through-2020-on-the-rise/
Daily output of crude steel at China's key steel mills slid 2.16% from ten days ago to 1.9 million tonnes in mid-August according to the CISA.
Member steel makers held steel stocks of 12.34 mln tonnes during the period up 3.32% from the earlier ten days
As part of air quality improvement efforts, the top Chinese steelmaking city of Tangshan in Hebei province extended summer production curbs on industrial enterprises to September. The government issued a statement on Monday September 3 to extend the cuts, which were slated to end on August 31.
Municipal authorities have to lay out detailed plans for production outside peak operating hours, by September 20. The plans will target steel, transportation and other key sectors. These plans would take effect from October 1.
SMM learned that some mills have received the notice. Mills that have recovered production were required to suspend or cut capacity of other facilities accordingly.
Contracts held by investors in China’s iron ore futures have fallen to the lowest in more than three years, and trading volumes have nearly halved since May, when foreign companies were first allowed to trade directly.
The slump in volumes in China’s second “internationalized” futures contract comes amid stagnant iron ore prices, and shows how the market remains in the hands of local speculators, who are quick to abandon slow-moving markets.
“The biggest players in the iron ore futures market are not the physical traders. They are people who would try any futures market where there’s opportunity to make money,” said a Shanghai-based trader.
The Dalian Commodity Exchange opened its iron ore derivative contract <0#DCIO:> to foreign investors to increase volumes and as part China’s bid to boost its clout over pricing of one of its major commodity imports, making it the second such contract after Shanghai oil futures.
However, open interest - the number of outstanding contracts held by traders and a gauge of liquidity - fell to 889,198 lots on Friday, the lowest since March 2015 and down from a May high of 2.4 million lots.
Monthly trading volumes at the world’s most traded iron ore contract fell to 34 million lots in August from 60.1 million lots in May.
“Iron ore prices have been really flat in recent months. Therefore industrial investors have less hedging demand, while speculators have less interest to invest,” Wang Bing, a spokesman for the Dalian exchange, told Reuters.
PRICES, INTEREST FLAT
Iron ore has missed out on the wild moves that pushed Chinese steel prices to seven-year peaks in August and coke prices to record highs, as Beijing clamps down on production as part of its war on smog.
Spot iron ore prices have been trapped between $63 and $70 a tonne since March amid plentiful supply and weaker demand for low-grade material.
“Investors cut their positions due to lower volatility, which means less chance to speculate,” said a manager for futures trading at Jiangsu Shagang Group [JSSGG.UL], the biggest private-owned steel mill in China and an active trader.
At the far smaller iron ore contract on the Singapore Exchange, which market participants say is mostly used for hedging, open interest held at around 1.2 million contracts in May, June and July. Trading volumes have slipped from above 1 million contracts in May to just below 1 million in June and July, exchange data showed.
Still, more than 50 foreign companies have started trading the Dalian iron ore futures contract, Wang Fenghai, exchange chief executive, told an industry conference last week.
And the proportion of institutional investors in open contracts has risen by 10 percentage points to 42.2 percent since May, said Wang, the exchange’s spokesman.
Other foreign companies are taking a wait and see attitude.
“We’re not decided yet. We need to watch the futures market and transaction volumes,” said Tatsushi Shigemori, manager of iron ore and steelmaking resources at the Beijing office of Japanese trading firm Itochu Corp.
A steelmaker in eastern China has been shut for a second time and local authorities reprimanded after the company resumed production without permission having been told to close due to environmental violations, Xinhua reported on Saturday.
An inspection team found round-the-clock steel production in late August at Huainan Hongtai Steel Co Ltd in Anhui province, with workers on 12-hour shifts, despite the company being ordered to halt in December, the official news agency said.
Since resuming production Huainan Hongtai had sold 288,000 tons of steel billets, Xinhua said.
The report said local authorities had been “negligent in their supervision” of the company.
The inspection team demanded the immediate closure of the plant and ordered local authorities to conduct a full review of the company’s environmental problems.
China has struggled to implement production curbs in heavy industry to cut emissions as part of the country’s intensified anti-pollution campaign.
South Korean steelmaker POSCO said on Monday that it plans to spend a total of 45 trillion won ($40.41 billion) by 2023 to strengthen its competitiveness.
Under the plan, POSCO will invest 26 trillion won in upgrading and adding steel facilities, another 10 trillion won in new business sectors including lithium batteries and the rest for its energy business, the company said in a statement.
In late August, POSCO sealed a deal to buy lithium mining rights in Argentina from Australian miner Galaxy Resources for $280 million.
Australia-listed miner South32 has started the sale process for its South Africa Energy Coal business, a spokesman for the company confirmed via email last Friday.
"We have now commenced a process to broaden South Africa Energy Coal's ownership, consistent with our commitment to further transform our South African operations," he said.
The company announced its intention to manage SAEC as a standalone business in November last year.
South32 had received several unsolicited expressions of interest and will now start to engage the parties that have shown an interest in SAEC, sources said.
Morgan Stanley and Macquarie are advising on the sale and the timing of the process is expected to be in the range of 18-24 months.
In fiscal 2017-2018 (July-June), South32's SAEC business saw total production of 27.27 million mt, against a guidance of 27.50 million mt, the company said earlier this year. This was down 6% on the year, it added.
Its sales in the domestic market stood at 15.40 million mt, down 9% year on year, while its exports were 12.52 million mt, up 6% from the year before, it said.
India's coal import rose 11.9% to 78.7 million tonnes in the first four months of the current fiscal.
The country had imported 70.3 million tonnes coal in April-July period of the last fiscal, said mjunction services, a joint venture between Tata Steel and SAIL.
"Overall, coal and coke imports during the first 4 months (April-July) of 2018-19 stood at 78.79 million tonnes, about 12% higher than 70.33 million tonnes recorded for the same period last year," it said.
The country's coal import in July increased by 42% to 20.79 million tonnes (provisional), over 14.64 million tonnes (revised) in the same month previous year.
The increase in coal and coke imports in July is mainly due to a 12.9% growth month on month in non-coking coal shipments, it said.
There was also a marginal growth in coking coal imports in July on a monthly basis, it added.
"Steam coal imports went up in July as the power plants continued to face shortage despite the best efforts by domestic miners to mitigate the gap. Also, there was a slight easing of prices in the international markets and expectation of further corrections, going forward, prompted the buyers to take fresh positions." mjunction CEO Vinaya Varma said.
The government earlier said that during FY2017-18 coal imports increased to 208.27 million tonnes due to increase in demand by consuming sectors.
The country's coal import fell from 217.7 million tonnes in FY2014-15 to 190.9 million tonnes in FY2016-17.
Tangshan municipal authorities postponed production curbs for September by temporarily withdrawing the statement issued on the morning of Monday September 3. There are more details to be determined in the fresh round of cuts, the authorities said.
The statement on Monday required all steel mills and other industrial enterprises to continue the previous round of month-long cuts into September. The previous cuts were slated to end on August 31.
SMM does not expect the limitations this month to ease from August. Major steel millsin Tangshan have returned to operation as of Tuesday September 4, SMM learned.
Jindal Steel & Power Ltd. is considering a breakup plan as part of a restructuring to help trim its 420 billion rupee ($6 billion) debt pile and boost investor confidence in a company that was once India’s biggest steelmaker by market value.
The New Delhi-based company is looking at splitting its steel, power and international businesses into three separate entities, Chairman Naveen Jindal said in an interview. Any such plan would need the approval of lenders, regulators and the board, he said.
The steel unit would include the coal mines, while the international business would include the Oman steel plant, he said.
Jindal Steel will seek to progressively sell about 30 percent of the Oman unit over two to three years, and this may partly be achieved through an initial public offer, the chairman said. The company will engage with potential buyers in December and hopes to conclude a deal by March, he added.
The outlook is brightening for the mill, which last month reported its first quarterly profit after notching up three-and-a-half years of losses. In the wake of a global steel industry revival, its shares have risen 55 percent in the past year, making it the best performer on the 10-member S&P BSE Metal Index.
“It is a kind of value unlocking,” said Goutam Chakraborty, a Mumbai-based analyst at Emkay Global Financial Services, by phone. “Breaking the company into three and distributing the debt accordingly is probably going to take the load away from the single company.”
While the company’s steel business is performing well with a rail order from the government and a buoyant market, its power business was hit by the cancellation of coal licenses by the government, Chakraborty said.
The steelmaker, which has come back from the brink of bankruptcy, wants to get its debt ratio down to two times pre-tax earnings, from about five times now, over the next four or five years, Jindal said in the Aug. 30 interview. This fiscal year the company wants to cut debt by 15 percent. “We are going to be really, really conservative. There is no question of taking more debt,” he said.
Jindal Steel’s coal mining operations in Australia may also be on the block — but there’s no hurry. “Coal prices are very good, so if we get a good price, we can look at that,” he said.
JSW Energy Ltd., run by his brother Sajjan Jindal, had paid an advance of about 4 billion rupees for a deal brokered in 2016 for Jindal Steel’s 1,000-megawatt power plant in central India. However, the period for completion of the deal has been extended by a year as some of the conditions for the sale remain unfulfilled.
“If we do not do the deal then we will pay it back to them,” Jindal said. Both are sons of billionaire Savitri Devi Jindal.
In the fiscal year ended March 31, 2012, Jindal’s company had a market value ahead of rival producers Tata Steel Ltd. and JSW Steel Ltd. — owned by Jindal’s brother — and Steel Authority of India Ltd.
Jindal’s group was among those that benefited when the government began awarding 218 coal mines to companies starting from 1993 on condition they invest in industrial projects and pay royalties. But in 2014, the Supreme Court canceled most of these permits, terming the allocations arbitrary and illegal, and ordered the producers to pay for the coal they had already extracted.
“We got into this situation because we had to borrow almost a billion dollars to pay the additional levy and then to complete the plant,” said Jindal. “When you have such things happening, you have no option but to carry on and find ways to survive without it and we have done that successfully.”
Risks still remain for the company. In addition to weak power demand and a struggle to get coal supplies, India’s Enforcement Directorate has filed a complaint against Jindal for alleged money laundering.
The cases are “completely frivolous and malicious,” said Jindal. “These are very unfortunate, but we have full faith in India’s judiciary and we know we are going to come out clean and strong from these cases and they do not deter us at all.”
https://www.hellenicshippingnews.com/steel-major-jindal-studies-breakup-as-6-billion-debt-weighs/
Coal prices in Europe are on track to surpass $100 a ton, the highest since 2013 as China’s demand for electricity draws in more cargoes of the dirtiest fossil fuel.
Coal Nears $100 in Europe as China’s Power Demand Draws in Fuel
The gains have already pushed up electricity prices from Britain to Italy and, coupled with the highest prices in a decade for carbon emissions, have prompted utilities to burn more natural gas. China is the world’s biggest coal consuming nation. Its demand for the fuel and supply glitches at the main coal hubs across the Atlantic basin have driven up up prices since the end of March.
Coal’s strength in Europe is even more surprising given that governments across the continent are working to close power plants using the fuel, making good on commitments to rein in greenhouse gas pollution. German Chancellor Angela Merkel nominated a panel to advise her when the nation can close all its coal plants, and the U.K. plans to shut the last of its stations that use the fuel by 2025.
The cost of the commodity delivery in Europe in 2019 has risen as much as 10 percent this year and will break through its next psychological barrier of $100 with in a “few weeks,” according to Hans Gunnar Navik, a senior analyst at StormGeo AS. The commodity reached as much as $93.75 a ton on Aug. 30, and the quarterly contract went as high as $99.55 a ton the day before.
“Coal prices could rise on continued trends and support prices for longer,” Navik said. “The most decisive driver though, we find is China’s economic growth and policy on domestic coal production.”
Power demand in the Middle Kingdom may rise by as much as 7.6 percent this year, Bloomberg Intelligence said in a note on Aug. 28. While China is working to scale back the share coal has in its powered generation mix to 34 percent by 2050, its needs for the fuel have been strong in recent years to feed its booming economy.
Coal Nears $100 in Europe as China’s Power Demand Draws in Fuel
Coal isn’t alone in benefiting from China’s thirst for energy. The nation is also drawing in more cargoes of liquefied natural gas, diverting those ships away from Europe and raising prices for gas everywhere. That’s lifted the price of LNG in Singapore this summer past levels reached in the winter, when demand is strongest.
“Coal’s strength is driven by China,” said Elchin Mammadov a utilities analyst at Bloomberg Intelligence. “We expected that China would intervene in the market and lower prices, but that hasn’t happened.”
Coal Nears $100 in Europe as China’s Power Demand Draws in Fuel
The cost of fossil-fuel emissions also is rising, driven by a European Union effort to mop up surplus allowances that built up after the last recession. Carbon is now trading near its strongest in a decade after pushing through 20 euros a ton, continuing a yearlong rally that quintupled the value of the commodity. Higher carbon prices raise the cost of using fossil fuels, especially coal, which produces the most greenhouse gases.
https://www.hellenicshippingnews.com/coal-nears-100-in-europe-as-chinas-power-demand-draws-in-fuel/
Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced that its Board of Directors has authorized an additional share repurchase program of up to $750 million of the company's common stock. The authorization is effective immediately, and follows the completion of the company's October 2016 $450 million share repurchase authorization, which was finished in August 2018.
"This new authorization demonstrates the Board's and management's continued confidence in our ability to generate strong free cash flow in both weak and strong market environments," stated Mark D. Millett, President and Chief Executive Officer. "We are committed to delivering shareholder value creation through profitable organic and strategic growth opportunities, while also utilizing other available tools. We believe the strength of our operating model and capital structure provides us the unique ability to prudently grow, while also returning value to our shareholders through the use of this program, which complements our positive cash dividend profile."
Under the company's share repurchase program, purchases take place as and when determined by the company in open market or private transactions, including transactions that may be effected pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. Pursuant to this program, purchases of shares of the company's common stock, are made based upon the market price of the company's common stock, the nature of other investment and growth opportunities, expected free cash flow, and general economic conditions. The share repurchase program does not require the company to acquire any specific number of shares and may be modified, suspended, extended or terminated by the company at any time without prior notice.
Tangshan will extend previous production cuts, which were slated to end on August 31, to September. This is according to a statement by the municipal government on Wednesday September 5, after it withdrew the previous announcement on Tuesday to discuss further details.
The new statement includes some revisions to traffic restrictions.
All steel mills and other industrial enterprises will follow cut proportions similar to, or more than, cuts in August. Meanwhile, municipal authorities will detail plans for production outside peak operating hours, by September 20. The plans will target steel, transportation, and other key sectors, and will take effect from October 1.
Mills that recovered production are also required to suspend or cut capacity of other facilities accordingly, SMM learned.
The US raw steel weekly capability utilization rate nearly reached the 80% mark once again last week, climbing to 79.8%, according to data released Tuesday by the American Iron and Steel Institute.
US mills produced 1.87 million st of steel during the week that ended Saturday, up 0.6% from the previous week. The 79.8% utilization level is the highest seen since utilization reached that mark in the week that ended July 26, 2014.
Last week's production was up 6.3% from the same week a year ago when capacity utilization was 75.4% and production totaled 1.76 million st.
Adjusted year-to-date production was calculated by the AISI to be 63 million st at a capacity utilization rate of 77.3%. That is up 4% from the same period last year, when the capability utilization rate was 74.6% for 60.6 million st of production.
By district, last week's production totaled 215,000 st in the Northeast; 697,000 st in the Great Lakes region; 196,000 st in the Midwest; 680,000 st in the South, and 82,000 st in the West.
The weekly raw steel production volume provided by the AISI is estimated. The figures are compiled from weekly production data provided by 50% of the domestic producers combined with monthly production data for the remainder.
Labour contracts with U.S. Steel Corp. and ArcelorMittal expired Sept. 1, but workers remain on the job as negotiations over wage increases continue. On Tuesday, U.S. Steel posted on its website a proposed six-year contract, offering workers guaranteed annual wage increases and a $15,000 pre-tax cash payment, including a minimum profit-sharing of $6,000 for the balance of the year, regardless of the company performance.
“The company’s proposal is far from fair, and it’s public characterization of that proposal is far from factual,” United Steelworkers, known as USW, said in a statement emailed after U.S. Steel publicly announced its offer. “They’re trying to buy a long-term, very cheap deal with some up-front money to distract workers from the long-term costs.”
Workers are insisting on their share of the windfall from the 36 percent increase in the benchmark hot-rolled coil price this year after President Donald Trump imposed a 25 percent tariffs on steel imports. While companies have reported that demand will remain strong through the rest of 2018, U.S. Steel’s share price has declined 17 percent this year amid analyst downgrades and concerns about long-term pricing.
Workers have gone without a wage increase in the past three years, USW said in a statement. Negotiations with U.S. Steel cover more than 16,000 workers in 24 local unions, while those with ArcelorMittal involve about 15,000 workers from 13 localities.
Since the current labor contract includes profit-sharing, it’s unlikely that a strike will occur, KeyBanc Capital Markets research analyst Phil Gibbs said in a telephone interview before U.S. Steel announced its offer to its workers.
“USW members at USS locations this week will be conducting informational meetings prior to taking strike authorization votes,” Wayne Ranick, a union spokesman, said in an email Tuesday, prior to the announcement from Pittsburgh-based U.S. Steel.
“The USW committee will meet with our ArcelorMittal membership at all locations to discuss the next steps,” he said. “If the committee determines that strike authorization is needed to achieve a fair contract, the members will vote after they have been given a chance to ask questions and review information with their elected local and international leaders.”
ArcelorMittal spokesman Bill Steers said the company doesn’t comment on contract negotiations with the workers. The Luxembourg-based company has six steelmaking locations in the U.S., according to its website.
Keybanc estimates that the average U.S. Steel union worker is making about $6,000 more this year than last year because of profit-sharing, helping them gain from the price boom. Gibbs said workers could earn between 10 percent to 15 percent more by the end of 2018.
U.S. Steel may take a hit, should it agree to “stronger base pay increases,” after salaries remained unchanged over the last three years, Gibbs said.
“There were some profit-sharing metrics that got kicked in based on hot-rolled coil prices, which the union guys are seeing now,” Gibbs said in a telephone interview. “Any time you’re shipping now, you’re profitable, so you can’t afford to take any down time.”
https://www.hellenicshippingnews.com/u-s-steel-workers-seek-payout-from-trade-war-as-prices-rise/
One of the standout commodity performers this year has been thermal coal, but not all coal is created equal and disparities in pricing may help explain why India’s imports have stayed strong despite the higher costs.
The main benchmark for thermal coal in Asia is priced at Australia’s Newcastle Port, the world’s largest coal-export harbour.
The price has gained 11.8 percent so far this year, to close at $114.66 a tonne in the week to Sept. 2, according to assessments by Argus Media.
This isn’t far off the 6-1/2 year high of nearly $120 a tonne hit in July, with the price surge this year largely coming on the back of increased Chinese demand for coal to be burned in power stations.
What has been somewhat surprising is that India, the world’s second-largest coal importer behind China, has defied its prior history of being a price-sensitive buyer and boosted its imports this year.
But delving into the detail offers an explanation as to why this is the case, the price of the bulk of the coal India imports has been declining, especially in recent months.
India imported 128.7 million tonnes of coal in the first eight months of the year, up 10.6 percent on the same period last year, according to vessel-tracking and port data compiled by Thomson Reuters.
Of this, 50.4 million tonnes came from Indonesia, making the Southeast Asian nation India’s top supplier.
India tends to import lower quality coal from Indonesia, with a typical grade being fuel with an energy rating of 4,200 kilocalories per kilogram (kcal/kg).
The price for this type of coal, as assessed by Argus Media, has been declining since late June, dropping to $37.72 a tonne in the week ended Aug. 31.
It has fallen 22.5 percent since June 22 and is now down 19.4 percent so far this year.
The gap between Newcastle coal with an energy content of 6,000 kcal/kg and Indonesian 4,200 kcal/kg is now at its widest since early 2011.
INDIA BUYS MORE INDONESIAN COAL, CHINA DOESN’T
This appears to have shored up Indian buying of Indonesian coal, with imports rising in August to 6.97 million tonnes, up from 5.5 million in July, according to the vessel-tracking data.
Given the recent difficulties state-controlled Coal India has experienced in meeting domestic requirements, it’s little surprise that Indian buyers have ramped up purchases from Indonesia.
It’s also worth noting that India hasn’t increased the amount of coal it buys from other top suppliers.
Australia is India’s second-largest supplier, but it ships almost exclusively coking coal used in steelmaking, and is thus not a competitor with Indonesia.
However, South Africa exports thermal coal, which is similar in quality and pricing to Australia’s Newcastle benchmark.
India imported 3 million tonnes from South Africa in August, down from 3.2 million in July, perhaps indicating less of an appetite for the more expensive, but higher quality fuel.
One question that remains to be answered is: why is the price of Indonesian low-grade coal falling while higher grades are still either rising or staying close to multi-year highs?
While it’s too early to provide a definitive answer, it appears that China may be buying less Indonesian coal, with imports dropping to 9.42 million tonnes in August from 10.3 million tonnes in both July and June, according to vessel-tracking data.
China has also struggled with domestic coal availability, mainly as a result of self-imposed output restrictions as part of efforts to combat air pollution.
This has boosted demand for imports, but it seems Chinese buyers are preferring higher energy content Australian coal over Indonesian grades.
Much of the coal China buys from Indonesia is used as a blending feedstock with domestic supplies, in a compromise that sees a drop in overall energy content but also a drop in sulphur and ash, given Indonesian coal is low in these pollutants.
Steel giant ArcelorMittal reached a deal on Thursday with trades’ unions over its planned purchase of Ilva, opening the way for the contested takeover just days before the Italian steelmaker runs out of cash.
ArcelorMittal signed a preliminary agreement last year to buy Ilva, which has the largest steel-producing capacity in Europe, but Italy’s new government questioned the validity of the contract after it took office in June.
However, with funds set to run dry later this month and thousands of jobs on the line, Deputy Prime Minister Luigi Di Maio said on Thursday he would no longer oppose the takeover following the union accord.
“The deal means that public interest will not be served by annulling the tender,” said Di Maio, whose party, the 5-Star Movement, had previously called for the closure of Ilva’s main polluting plant in the southern Italian city of Taranto.
Under the deal, ArcelorMittal agreed to take on 10,700 of the current 13,500 workforce at Ilva, some 500 more than it had originally proposed.
The firm also promised a 250-million-euro ($290-million) fund to offer layoff incentives to workers.
ArcelorMittal, the world’s biggest steelmaker, has also pledged to improve its plan to curb pollution at Taranto, which has been blamed for hundreds of cancer-related deaths.
Ilva took root in the heel of Italy’s boot in the 1960s as part of a drive to industrialize the impoverished south.
At its peak, the plant produced more than 10 million tonnes of steel a year, but magistrates intervened in 2012 and said it had to be cleaned up or shut down. Ilva was placed under state-supervised special administration in 2015.
With a cap imposed to limit harmful emissions, output has fallen to under five million tonnes a year and the company is losing some 30 million euros a month.
ArcelorMittal says that with its know-how, it can turn the business around. Besides the 1.8 billion euro cost of acquisition, it says it will invest 1.2 billion to boost productivity and 1.1 billion to curb pollution.
Ilva’s state-appointed commissioners told parliament in August they only had enough money to keep on running the business until September, after which it would either need fresh government funds or to be shuttered.
Poland’s JSW is considering a bid for control of Prairie Mining to tighten its grip as the EU’s biggest coking coal miner, two sources familiar with the situation said.
Coking coal is on the European Commission’s list of critical raw materials of economic importance with the price of Chinese coking coal futures tripling since 2015.
State-run JSW and Australia’s Prairie, which is developing mines in Poland, have been in cooperation talks for much of this year but JSW wants control, according to the sources.
“JSW is considering a takeover of Prairie,” a source familiar with the situation told Reuters on condition of anonymity. Another person, who also could not be identified, also said he expected a takeover bid.
Poland’s prime minister and energy ministry have provisionally approved the plan, one source said.
The state-run company’s plan comes as the country faces nationwide local elections in October and reflects the ruling Law and Justice (PiS) party’s pledge to create jobs. The party also wants strategic assets returned to state ownership.
Prairie Mining has been developing coking coal at the Jan Karski mine in southeast Poland and the Debiensko mine in Silesia, Poland’s industrial heartland in the south.
A JSW spokeswoman declined to comment on the takeover plan but said the miner was assessing Prairie’s projects and may release more information by mid-September.
Prairie Mining declined to comment.
Highly polluting thermal coal, used to generate power, is increasingly difficult to mine in Europe as banks refuse to fund it. Coking coal, used in steel-making, is considered to have a better future.
“If Poland develops quickly, then we will need more steel and coking coal. In the case of JSW, it is obvious that the company is looking for more deposits,” Energy Minister Krzysztof Tchorzewski said this week.
The energy ministry was not available for immediate comment on the JSW takeover plan.
A handful of foreign investors are keen on mining Poland’s coking coal.
The sources said they expected the Polish government to reject a project by private British firm Tamar Resources, which wants to mine coking coal at a Silesian mine previously operated by JSW as a thermal coal mine.
Tamar CEO George Rogers told Reuters he will keep fighting to run the project, which he said would provide at least 2,000 jobs.
The Solidarity trade union has asked the government to hold a tender seeking an investor to revive the mine and the union will back whoever wins, said Dominik Kolorz, head of the union’s Silesian branch.
“If Tamar wins, we would back Tamar,” he said, adding the ministry had yet to reply to the request for a tender.
Chinese coking coal futures rose their most in a month on Thursday, buoyed by firm physical prices as environmental inspections in major coal mining hubs of Shanxi and Shaanxi province increased concerns about falling output.
The coking coal contract for January delivery on the Dalian Commodity Exchange jumped as much as 4 percent to 1,286.5 yuan ($188.30) a tonne, before closing at 1,283.5 yuan, still up 3.7 percent.
Dalian’s most-active iron ore contract closed up 3.3 percent at 502.5 yuan per tonne, its highest since Aug. 21. Prices for the steel raw material remained strong even after China’s top steelmaking city extended output curbs on heavy industry for another month.
The city of Tangshan said on Wednesday it will continue to carry out anti-pollution measures in September by ordering steel mills, coke producers and power generators to shut part of their production.
The city had earlier imposed a six-week drive between July 20 and Aug. 31 to almost halve the production capacity on some sintering machines and blast furnaces.
“The rally on iron ore prices is supported by higher steel prices. The market is expected to see even fatter profit margins at mills amid stepped-up environmental measures. Therefore, steel mills would be willing to pay more for raw materials,” said a Shanghai-based iron ore trader.
The average profit margins at Chinese steel mills have been hovering at about 1,000 yuan a tonne over the past four months, according to Huatai Futures.
Stockpiles of the imported steelmaking ingredient iron ore at Chinese ports dropped to 149.2 million tonnes last week, the lowest level in eight months, data compiled by SteelHome showed.
“With falling inventory, traders are not in rush to sell iron ore at this moment,” said the Shanghai-based trader.
Coke prices rose 0.81 percent to close at 2,412 yuan a tonne.
Benchmark Shanghai rebar futures climbed 1.5 percent to 4,148 yuan a tonne.
