Mark Latham Commodity Equity Intelligence Service

Friday 13th November 2015
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    Oil and Gas


    Platgold goes pear shaped too.

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    Mining rights in space?? Who are you kidding?

    On Tuesday evening Congress took a key step toward encouraging the development of this industry when the Senate passed H.R. 2262the US Commercial Space Launch Competitiveness Act, with bipartisan support. The legislation provides a number of pro-business measures, such as establishing legal rights for US citizens to own resources in outer space as well as extending indemnification for commercial launches through 2025.

    "This bill provides the boost America’s private space partners need as they lead the world into the future," said Lamar Smith, a Texas Republican who chairs the House Science, Space, and Technology Committee. "This bill will keep America at the forefront of aerospace technology, create jobs, reduce red tape, promote safety, and inspire the next generation of explorers."

    Space mining advocates, including Planetary Resources, praised the new law. “Many years from now, we will view this pivotal moment in time as a major step toward humanity becoming a multi-planetary species," said Eric Anderson, co-founder and co-chairman of the asteroid mining company—which is backed by several Google founders. "This legislation establishes the same supportive framework that created the great economies of history, and it will foster the sustained development of space."

    In addition to mineral rights and indemnification, the new law also extends the so-called "learning period," which protects space tourism companies by requiring paying customers to fly at their own risk and prevents the FAA from stepping in unless there is a major accident. The bill also extends the lifetime of the International Space Station through 2024, ensuring viability of commercial projects on board the orbiting laboratory.

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    China allows biggest corporate bond default yet in step toward reforming financial markets

    Communist leaders allowed China's biggest corporate bond default yet on Thursday in a fresh sign of wrenching economic change as growth slows and Beijing gives market forces a bigger role in its financial system.

    The default by China Shanshui Cement Group, a major cement producer, highlights the decline of once-dominant heavy industry as Beijing tries to shift from growth based on trade and investment to a consumer-driven economy.

    Shanshui, headquartered in the eastern city of Jinan, cannot repay any of a 2 billion yuan ($315 million) note due Thursday, said a man who answered the phone in its investor relations department.

    "The company has no money to pay investors," said the man, who refused to give his name.

    On Wednesday, Shanshui asked a court in the Cayman Islands, where it is incorporated, to appoint a liquidator to wind down its operations.

    Until last year, Beijing bailed out troubled borrowers to preserve investor confidence. But the ruling Communist Party allowed its first bond default last year as part of efforts to make its financial system more market-oriented.

    That shift in attitude "will obviously lead to more default cases," said Ivan Chung, who is in charge of Greater China credit research for Moody's Investors Service.

    Earlier official efforts to stave off defaults by other borrowers with loans from state banks or other aid prompted complaints Chinese authorities were wasting money. The implicit guarantee meant interest rates failed to reflect default risks, a key function of bond markets.

    The most vulnerable companies are in steel, mining, solar equipment and other sectors where debts are high and supply exceeds demand, Chung said.

    "Private enterprises with poor corporate governance will be vulnerable too because it will be difficult to hide their weaknesses and problems in a down cycle," he said.

    Until now, real estate developers and other private companies have been able to issue debt at interest rates almost as low as that paid by government-linked entities that face little likelihood of default.

    "The market appears to be grossly mispricing risks," Bank of American Merrill Lynch analysts said in a report last month.

    SinoSteel Corp., a steel producer that is part of the top tier of state companies owned by the central government, was due to miss a Sept. 22 interest payment on 2 billion yuan ($315 million) in debt. Hong Kong news reports said the Cabinet's planning agency intervened and told investors to wait until Nov. 16 to be repaid.

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    BHP Billiton shares fall as doubts grow over dividend policy

    BHP Billiton shares struck a seven-year low on Friday, their weakest since the global financial crisis, on mounting concerns it may ditch a policy of paying ever higher dividends.

    The world's biggest mining company has been hammered by sinking commodity prices, a situation made worse by last week's Samarco mine tragedy in Brazil, where millions of dollars in fines and penalties are beginning to emerge.

    BHP stock tumbled more than 3 percent to A$19.81 in early trading, more than double the fall in the broader S&P/ASX 200 , and was on track to fall more than 11 percent for the week, it's biggest weekly fall since 2008.

    BHP has been upping its dividend payout annually under a "progressive" dividend policy that's endeared the company to investors.

    However, mining analysts are speculating this could soon come to an end as market forces and unexpected costs start to overwhelm the balance sheet.

    "We've been bemused for some time at the lack of share price depreciation in light of the deteriorating earnings profile for the group and we've been skeptical for many months about the dividend policy of the company, " said Ben Lyons, a portfolio manager at ATI Asset Management.

    "It's interesting to see how things have played out reasonably rapidly. Brazil was certainly one of the major catalysts," said Lyons, whose firm holds an underweight position in BHP shares.

    Goldman Sachs this week said BHP needed to cut its dividend in half to get it down to a sustainable level.

    UBS is forecasting a near 50 percent fall in BHP's fiscal 2016 net earnings to $3.3 billion, about half the $6.49 billion the company paid out last year on dividends.

    The progressive dividend policy is expected to be a key topic at the company's annual general meeting in Perth, Australia on Nov. 19.

    A legacy of Australia's now-busted mining boom, it has raised the risk that future dividends will need to be funded by debt.

    "That's certainly possible in the short term but it's not a sustainable policy for any company to pursue, particularly one that's exposed to cyclical commodity prices," said Lyons.

    Read more at Reuters

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    Rolls Royce Plunges On Bombshell Profit Warning, Dividend Review

    You’d think that with balance sheets full of cash, record high stock prices, and a record low cost of capital, corporate management teams and their newly-minted billionaire executives could afford to splurge on a private jet or two, but apparently, the outlook isn’t looking good for 2016.

    On Thursday, Rolls Royce delivered a stunner of a profit warning as new CEO Warren East said the company will take a hit of some $990 million on expected “sharply lower” sales of corporate jets along with headwinds facing the offshore oil market where the company’s customers use vessels powered by Rolls Royce engines.

    “The magnitude of change in some of our markets, which have historically performed well, has been significant and shows how sensitive parts of our business are to market conditions in the short term,” East noted, adding that “the fixed costs in this business are simply too high, so that small, relatively modest changes in the top line driven by market conditions just make too big an impact on our profit.”

    Here are some other highlights from East's "review" (available here):

    Although many Land & Sea businesses had good order intake in the quarter, the offshore business intake was very weak. New contracts included MT30 gas turbines for the Royal Navy’s Type 26 Global Combat Ship, MTU diesel engines for the refit of the Royal Navy’s fleet of Type 23 Frigates and a new agreement for the supply of engines for a range of Sunseeker luxury yachts.
    Compared to the expected outturn in 2015, the key areas of demand weakness are affecting selected aerospace and offshore marine markets. In aerospace, these mainly relate to the themes emerging in the third quarter, including sharply lower volumes of corporate jets powered by Rolls-Royce engines, further weakness in demand for corporate jet aftermarket services, further significant declines in aftermarket service demand for our engines on 50-70 seat regional jets and more conservative assumptions on demand reductions for some legacy programmes. Together, these impacts on our corporate and regional business account for roughly £100m of our incremental profit headwind.
    We have begun to see reduced utilisation by some specific operators of older wide-bodied engines. This management of short-term excess capacity, as the market takes delivery of newer, more fuel efficient airplanes, is already starting to impact aftermarket revenue and profit.Together with other changes, the incremental profit headwinds for our wide-bodied engine business are expected to be roughly £100-150m.

    And then there was this: "Shareholder payments policy will be reviewed by the Board and changes, if any, will be announced in due course."

    Right, so Rolls is may cut the dividend "in due course."

    Needless to say, the market is not happy as shares plunged as much as 22% and CDS spiked.

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    Noble Group Q3 profit slumps 84 pct, CFO stepping down

    Noble Group Q3 profit slumps 84 pct, CFO stepping down

    Singapore-listed Noble Group posted a sharp fall in quarterly profit, battered by losses in its shrinking metals division and its agricultural arm and announced the departure of its chief financial officer.

    Asia's biggest commodity company, which is trying to repair investor confidence after a bruising accounting dispute, said it was on track to slash capital expenditure and cut costs.

    Already grappling with a commodity price rout, Noble's shares have lost nearly 60 percent since mid-February when blogger Iceberg Research alleged it was inflating its assets by billions of dollars. Noble rejected the claims and board-appointed consultant PricewaterhouseCoopers found no wrongdoing in a report published in August.

    With revenues of $86 billion last year, Noble is one of Asia's largest companies to find itself in a reputational battle over accounts.

    "Our year end target of positive cash flow has been achieved early with net cash flow generated by operations in the three months ended 30 September 2015 of $318 million, and net debt fell by $155 million in the same period," CEO Yusuf Alireza said in a statement on Thursday.

    Noble said group net profit for the nine months to Sept 30 fell to $194 million from $372 million in the same period a year ago.

    Noble said it had appointed Paul Jackaman, the company's Asia CFO, as acting group CFO. Robert van der Zalm, group CFO, has decided to step down from his position due to family reasons, the company said.

    Founder and Chairman Richard Elman owns about a fifth of Noble's shares, while sovereign wealth fund China Investment Corp owns about 9 percent.

    Singapore-listed Noble Group flagged plans to raise $500 million as it reported a sharp fall in third-quarter profit on Thursday, battered by losses in its metals division and its agricultural arm.

    Asia's biggest commodity trader, trying to repair investor confidence after a bruising accounting dispute, said it would take steps to retain its investment grade credit rating, crucial for firms relying heavily on bank financing for day-to-day operations.

    "I'm committing to an additional support of our balance sheet of an additional $500 million," CEO Yusuf Alireza told investors after Noble reported results, though he declined to give a time frame for the fund raising.

    Read more at Reuters
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    EU's free carbon permit allocation too generous-court adviser

    An adviser to Europe's highest court said on Thursday the European Commission's calculations meant it had handed out too many free carbon permits to some industries, raising the prospect of higher costs for big energy users.

    Opinions from advisers to the European Court of Justice in Luxembourg in most cases determine the final ruling, which is likely in the coming months.

    In a statement on Thursday, a court adviser said "the ceiling was too high", when a calculation known as the correction factor was used to distribute free allowances that shelter industry from added energy costs they say could drive them out of Europe.

    The legal challenge was brought by a group of refiners and chemical companies including OMV Refining & Marketing, Esso Italiana, Api Raffineria di Ancona, DOW Benelux and Borealis Polyolefine.

    The companies argued they had received a smaller number of emission allowances than they believed they were entitled to.

    EU sources, speaking on condition of anonymity, had previously said that even if the court agreed the correction factor was flawed, energy intensive industry would not necessarily receive more carbon allowances.

    Benchmark EU Allowances (EUAs) - the currency used in the EU Emissions Trading System (ETS) - were trading at around 8.40 euros per tonne on Thursday, down 3 cents on Wednesday's settlement but up from the mornings low of 8.35 euros.

    Scrapping the correction factor would not change the overall number of allowances on the market, just the way they are handed out.

    Thomson Reuters Point Carbon, however, said the prospect of fewer allowances could lead industry to hoard permits, providing a boost for the market.

    "Should industrials for instance fear that they will receive fewer allowances for free in the future, their intent will likely be to hold on to their current EUAs which I would see as supportive for prices," Thomson Reuters Point Carbon analyst Marcus Ferdinand said.

    Read more at Reuters
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    Commodity Flows Contracting?

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    China warns WTO its cheap exports will soon be harder to resist

    China has served notice to World Trade Organization members including the European Union and United States that complaints about its cheap exports will need to meet a higher standard from December 2016, a Beijing envoy said at a WTO meeting.

    Ever since it joined the WTO in 2001, China has frequently attracted complaints that its exports are being "dumped", or sold at unfairly cheap prices on foreign markets. Under world trade rules, importing countries can slap punitive tariffs on goods that are suspected of being dumped.

    Normally such claims are based on a comparison with domestic prices in the exporting country.

    But the terms of China's membership stated that -- because it was not a "market economy" -- other countries did not need to use China's domestic prices to justify their accusations of Chinese dumping, but could use other arguments.

    China's representative at a WTO meeting on Tuesday said the practice was "outdated, unfair and discriminatory" and under its membership terms, it would automatically be treated as a "market economy" after 15 years, which meant Dec. 11, 2016.

    All WTO members would have to stop using their own calculations from that date, said the Chinese envoy, whose name was not given by a WTO official who spoke to reporters about the meeting.

    Dumping complaints are a frequent cause of trade disputes at the WTO, and dumping duties are even more frequently levied on Chinese products.

    In September alone, the WTO said it had been notified of EU anti-dumping actions on 22 categories of Chinese exports, from solar power components to various types of steel products and metals, as well as food ingredients such as aspartame, citric acid and monosodium glutamate. The EU was also slapping duties on Chinese bicycles, ring binder mechanisms and rainbow trout.

    From the end of next year, such lists would need to be based on China's domestic prices "to avoid any unnecessary WTO disputes", the Chinese representative said.

    More than 20 percent of the 500 disputes brought to the WTO in its 20 year history have involved dumping, including several between China and the EU or the United States in the last few years.

    Read more at Reuters

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    An Almost Perfect Storm Of Incompetence And Felony

    “Misdeeds, once exposed, have no refuge but in audacity. And they have accomplices in those who are fearful in their complicity.”

    Tacitus, Annals

    We just saw a very historically significant decline in the precious metals in terms of days lower without relief. And we have seen a remarkable rise in the US dollar index against the Euro and the Swiss franc that cannot possibly be good for the real economy of the US, when every other developed nation is trying to devalue their currencies to stimulate their exports and inhibit imports.

    I believe that a portion of the gold selling in particular is an effort to knock down the open interest in gold for December. If there was any serious attempt for holders of those contracts to stand for delivery, even JPM, which has been obviously building up its stores of gold to act as the 'fixer' in that market, would not be able to cover the demand.

    JPM was consistently taking delivery for their house account in gold, and just transferred 70,000+ ounces over from Nova Scotia's warehouse, from whom they had been taking delivery.

    As we know, in the last big delivery month, JPM stepped up with an enormous amount of their gold, 400,000+ ounces, to provide enough real bullion to satisfy the contracts standing for delivery. Even now their inventories remain somewhat depleted.

    The dollar has also been soaring, because the Fed is trying to pretend that the US is recovering so that they can raise rates.  A strong dollar and higher rates are very harmful to what is almost undoubtedly a fragile economic recovery in the US.

    And it is fantasy to think that the US can somehow go it alone, and continue to improve while the rest of the world is cutting rates because their economies are slowing.

    The Fed wants to raise rates for their own policy purposes, so they can cut them, without going overtly negative, when their latest financial bubble starts to collapse, which it may already be doing.They cannot really raise rates in a Presidential election year past June, so they will push ahead, to serve their own purposes, even as they harm the real economy.

    There will be another financial crisis as the IMF warned today. There will be a serious dislocation in several financial markets, including the precious metals and the bonds at some point, that will rock the current system to its foundations.

    It is a portion of the credibility trap which inhibits any meaningful remedy and reform.

    It is an almost perfect storm of incompetence and felony.
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    China Oct economic activity shows downward pressures persist

    China's factory output growth hit a 7-month low in October while investment expansion slipped to its weakest pace since 2000, signs that further government policy support may be needed to shore up slowing demand in the world's second biggest economy.

    The one bright spot in tepid October data released Wednesday was an improvement in retail sales, which appear to be keeping the growth rate of the world's second-largest economy from sliding.

    Chinese leaders have embarked on the most aggressive policy easing since the 2008/09 global financial crisis, but the October numbers highlight persistent headwinds from weak global demand, a cooling domestic property sector and excess factory capacity.

    "Fiscal policy is likely to become more expansionary next year," said Lin Hu, an economist at Guosen Securities in Beijing. "There will be more interest rate and RRR (reserve requirement ratio) cuts and we cannot rule out the possibility of such cuts within the year."

    Factory output grew slower-than-expected at an annual 5.6 percent in October, the weakest in seven months, National Bureau of Statistics data showed. That was below a Reuters forecast of 5.8 percent and down on September's 5.7 percent.

    Fixed asset investment rose 10.2 percent in the first 10 months, in line with expectations but the weakest pace since 2000 and easing from a 10.3 percent gain in the January-September period.

    The cooling real estate sector remained a drag on investment, with property investment growth slowing to 2.0 percent in January-October from 2.6 percent in the first nine months.

    Retail sales growth continued to pick up, expanding at an annual 11.0 percent in October, compared with 10.9 percent in September. Analysts had forecast 10.9 percent growth in October.

    Helping lift retail sales were buoyant vehicle purchases, which rose 11.8 percent from a year earlier in October, the biggest on-year gain since December, according to the China Association of Automobile Manufacturers.

    Last week, General Motors Co. said China vehicle sales rose 15 percent to a record high in October.

    And on Wednesday, e-commerce giant Alibaba reported sales from the Singles' Day online shopping extravaganza had already surpassed last year's total of $9.3 billion, a sign consumer sentiment remains firm in the fourth quarter.

    Most analysts put more weight on indicators showing persistent problems than on green-shoots.

    Zhou Hao, senior emerging markets economist at Commerzbank in Singapore, said the data is not encouraging, despite some stabilisation, with manufacturing slowing and demand sluggish.

    "Property investment remained low, which has failed to turn around the momentum of overall investment," Zhou said.

    "While consumption outperformed somewhat, the overall growth profile still remains weak."

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    Eon reports record loss of €7.25bn as it writes down power assets

    Eon, Germany’s largest utility by market value, posted its biggest ever quarterly net loss as it took billions of euros in writedowns on the value of its power generation assets.

    Losses stood at €7.25bn for the three months to September 30, compared with a loss of €835m the previous year. The company reported impairments of €8.3bn in the third quarter.

    Eon said the writedown, which it had flagged in September, was triggered by the “significant decline in commodity and energy prices, which is mainly a result of structural change on global energy markets and on the regulatory framework”.

    The company has been hit hard by the “energiewende”, Germany’s radical shift towards clean energy sources, which has depressed the country’s wholesale electricity prices and badly hurt the profits of conventional utilities.

    In a statement, Eon’s chief financial officer, Michael Sen, said the operating environment “remains very difficult”.

    Eon reported earnings before interest, taxes, depreciation and amortisation of €5.4bn for the first nine months of 2015, down 18 per cent from the previous year, and underlying net income of €962m, a fall of 30 per cent on 2014.

    The company said it continued to expect ebitda for full-year 2015 to be between €7bn and €7.6bn, with underlying net income of between €1.4bn and €1.8bn.

    The company’s shares were trading up 5.4 per cent at €9.5 by midday in Frankfurt.

    Vincent Gilles, an analyst at Credit Suisse, said the results were “another confirmation that the economic environment is absolutely terrible for Eon, with commodity prices lower and the price of power down 50 per cent in the last four years”.

    Eon is pursuing plans to spin off parts of its conventional power generation business into a separate company called Uniper in order to focus on renewables. In a statement, chief executive Johannes Teyssen said the spin-off was on schedule and “entering the final phase”.

    In September, Eon cancelled plans to hive off its German nuclear power plants after the German government proposed a law that would make companies permanently liable for the costs of dismantling nuclear reactors.

    Eon operates three nuclear power plants in Germany and has minority stakes in three others. Berlin is phasing out nuclear power by 2022.

    Mr Gilles said that in announcing the €8.3bn impairment, Eon was “preparing the balance sheet for the demerger, and in doing so, goes much further than most of its peers”.

    “I have a lot of respect for a company that’s adjusting its balance sheet to the realities of the market,” he said.
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    China Oct thermal power output down 6.6pct on year

    Electricity output from China’s thermal power plants – mainly coal-fired – stood at 310.7 TWh in October, falling 6.6% year on year and down 1.24% month on month, showed data from the National Bureau of Statistics (NBS) on November 11.

    It hit the new low in monthly thermal generation since February this year when the country celebrated its traditional Spring Festival with factories shutting operation for a week-long holiday.

    The slide in thermal power generation was mainly due to the falling residential electricity consumption amid cooler weather as well as the closure of many small thermal plants.

    By contrast, China’s hydropower output decreased 7.44% on month but up 2.1% on year to 99.5 TWh in October.

    Total electricity output in China reached 445.4 TWh in October, dropping 3.2% from a year ago and down 2.07% on month, the NBS data showed. That equated to daily power output of 14.37TWh on average, falling 3.2% on year and down 5.21% from September.

    Over January-October, China produced a total 4,651.1 TWh of electricity, edging down 0.1% year on year, with thermal power dropping 2.6% on year to 3,466.2 TWh while hydropower output increasing 3.4% to 847.4 TWh.

    Over January-October, the share of thermal power generation from the total power generation fell from 75.09% in the first three quarters to 74.52%; while hydropower rose from 17.79% in the past nine months to 18.22%.

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    China Graft Crackdown Nets Top Beijing, Shanghai Officials

    China’s ongoing anti-corruption campaign has for the first time brought down senior officials in the country’s two biggest cities, Beijing and Shanghai, in what analysts say is a further sign of the deepening of the crackdown. Shanghai Vice Mayor Ai Baojun and Beijing Municipal Deputy Party Secretary Lu Xiwen were detained on suspicion of serious violations of discipline, a party code word for corruption, state media said Wednesday.

    Few details were given about the case of Lu, who had previously called on officials to stay close to the grassroots, and was recently elected as president of the Beijing Volunteer Service Federation. Ai, however, was a high-profile Shanghai official who was head of the management committee of the city’s pilot Free Trade Zone, where a number of China's proposed financial reforms are being piloted. He was also a director of a tourism zone which includes the city’s new Disneyland resort, due to open next year -- and was seen in public as recently as last Friday at an Industrial Fair.

    No details of Ai's alleged misdemeanors were given, but his detention may be linked to corruption during his previous spell at Shanghai-based Baosteel Corporation, one of China’s largest state-owned steel makers, the South China Morning Post reported, quoting a local government source.

    His detention follows speculation that Shanghai officials could be caught up in the anti-graft campaign -- which until now had spared top leaders in China's financial capital -- after an investigation into corruption in the city by central officials last year.

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    Radar shares surge as company changes direction

    Radar shares surge as company changes direction 

    The share price of ASX-listed junior Radar Iron jumped nearly 83% on Wednesday after the company announced a change of pace. Radar on Wednesday said it had entered into a binding heads of agreement to acquire Israel-based technology company Weebit-Nano, which is one of the world’s foremost developers of silicon oxide resistive random access memory technology. 

    Radar Iron would pay A$75 000 for an exclusive 28-day option, and a further A$75 000 on the completion of a due diligence and Weebit’s majority shareholding passing a resolution to approve the transaction. In exchange for the technology company, Radar Iron would issue 750-million of its own shares to Weebit shareholders, subject to ASX escrow provisions. 

    The transaction had a number of conditions, including Radar Iron undertaking a capital raising of at least A$5-million, as well as all necessary shareholder and regulatory approvals. 

    Radar Iron’s foray into the technology sector comes after the company abandoned its Brazilian iron-ore exploration work in April and as the junior worked to minimise costs and retain cash. The company also surrendered four of its tenements in the Johnston Range, in Western Australia. Radar Iron was trading at a high of 11c a share on Wednesday, up from a low of 8c a share.
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    Chinese industrial output hits 6-month low

    Growth in China's industrial production, a measure of output at factories, workshops and mines, fell to a six-month low in October, official data shows, suggesting sustained weakness in the world's second-largest economy.

    Industrial output increased 5.6 per cent last month from a year ago, the National Bureau of Statistics (NBS) said, the lowest reading since March's identical figure and edging down from a 5.7 per cent rise in September.

    It was also below the median forecast of a 5.8 per cent increase in a survey of economists by Bloomberg News.

    The figures come as the world worries about growth in China, a leading driver of the global economy.

    Fixed asset investment, a measure of spending on infrastructure, expanded 10.2 per cent year-on-year in the January-October period, the NBS said.

    But retail sales, a key indicator of consumer spending, held up well for the month, growing 11.0 per cent from a year earlier - the fastest increase since a rise of 11.9 per cent in December last year, according to the NBS.

    It was also slightly better than the median estimate of a 10.9 per cent expansion in the Bloomberg poll.

    "The marginal fall in October's industrial production growth showed support from the rapid development of new industries was still insufficient while traditional industries were having deep corrections," the NBS said in a statement.

    "The industrial economy is still facing downward pressures looking forward," it said.

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    China power output falls for second month in Oct - stats bureau

    China's power output fell for a second month in a row in October, slipping 3.2 percent on a year ago to 445.4 billion kilowatt-hours (kWh), data showed on Wednesday, reflecting a slowdown in industrial demand.

    Slowing economic growth has hurt demand in downstream industries like steel, with power generation in the first 10 months of the year easing 0.1 percent to 4.651 trillion kWh, according to data from the National Bureau of Statistics.

    October's decline followed a 3.1 percent drop in September.

    Stagnant demand has allowed grid firms to reduce the amount of power taken from thermal power plants, which account for about 75 percent of China's generating capacity, as the country tries to ease its dependence on fossil fuels.

    Thermal power production, predominantly fueled by coal, fell 6.6 percent on a year earlier to 310.7 billion kWh in October. Output was down 2.6 percent for the first 10 months to 3.466 trillion kWh.

    Hydropower output rose 2.1 percent in October to 99.5 billion kWh, and was up 3.4 percent over the first 10 months at 847.4 billion kWh.

    Despite a supply glut, China has given environmental approval for the construction of another 155 coal-fired power plants in the first three quarters of this year, according to research from environmental group Greenpeace.

    "With power generation from coal falling, and an already severe overcapacity problem, the coal fired power plants will do nothing but add debt burden and idle capacity," Greenpeace said in a statement.

    Weaker demand growth this year has undermined the efficiency of China's coal-fired plants, with utilisation rates falling by 265 hours or 7.5 percent in the first three quarters, according to National Energy Administration data.

    Read more at Reuters

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    China Shanshui Cement to apply for liquidation as debt default certain

    China Shanshui Cement said it has decided to apply for provisional liquidation after determining that it will default on onshore debt payments due Thursday, a sign that Chinese authorities have become willing to allow weak firms to fail.

    The privately owned company had been struggling to raise funds as its operations have been hit by overcapacity in the sector.

    "It's a sign that bailouts are not for everybody and that the slowing economy is taking its toll on the non-investment grade sector," said Warut Promboon, chief rating officer at Dagong Global Credit Rating.

    Analysts say authorities are keen to see better pricing of credit risk to check surplus industrial capacity and are likely increasingly distinguish between stronger firms and weaker firms.

    "The strong names will get the benefit of cheap funding because the central bank will keep monetary conditions easy while the riskier credits will have a hard time refinancing because of weakening metrics," said Promboon.

    Shanshui Cement said in a stock exchange filing on Wednesday that the petition to wind up the company will constitute an event of default for $500 million in bonds due 2020 and trigger an accelerated repayment clause .

    The bonds, which were trading at around 80 cents on the dollar overnight, plunged to 50 cents on Wednesday after the announcement.

    Its shares have been suspended from trade since April.

    Earlier this year Shanshui reported a 31 percent decline in first-half sales revenue and a net loss, citing declining cement prices in key regions.

    In June, Standard & Poor's cut Shanshui's bond rating to CCC from B-plus and warned of heightened repayment risk to its financial obligations coming due over the next 12 months.

    Read more at Reuters

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    CRB Lurches to the downside

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    Quarterly is not pretty.

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    China Oct PPI down 5.9pct on year

    China's Producer Price Index (PPI), which measures inflation at wholesale level, dropped 5.9% year on year and down 0.4% month on month in October, the National Bureau of Statistics (NBS) said on November 10.

    It was the 44rd straight year-on-year decline, due to subduing demand from downstream sectors.

    Factory prices of production materials declined 7.6% year on year and down 0.5% from September, the NBS said.

    The price of coal mining and washing industry fell 15.8% on year and down 0.9% on month, while the price of oil and natural gas mining industry decreased 39.9% on year and down 2.7% on month, it said.

    Besides, prices of ferrous metal industry dropped 18.5% from the previous year and down 0.7% from September, data showed.
    Over January-October, PPI dropped 5.1% on average from the previous year, and factory prices of production materials decreased 6.6% on year.

    Of this, the average price of coal mining and washing industry fell 14.3% on year; while the price of oil and natural gas mining industry decreased 37.4% on year; price of ferrous metal industry dropped 20.8% from the previous year, data showed.

    The data came along with the release of the Consumer Price Index (CPI), which rose 1.3% from the year prior but down 0.3% from the month before in October.
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    Volkswagen moves to appease angry US customers, workers

    Volkswagen AG took new steps on Monday to appease U.S. customers and German union leaders unhappy with the company's response to a sweeping emissions cheating scandal that claimed another high-profile executive.

    Volkswagen is offering a $1,000 credit, of which half is to be spent at VW and Audi dealerships, to U.S. owners of certain diesel models that do not comply with government emissions standards, VW's U.S. subsidiary said.

    The automaker said eligible U.S. owners of nearly 500,000 VW and Audi models equipped with 2.0 liter TDI diesel engines can apply to receive a $500 prepaid Visa card and a $500 dealership card, and three years of free roadside assistance services.

    The move was latest attempt to pacify owners who have been frustrated by how the German automaker plans to fix affected models. The company has warned it could rack up multi-billion-euro costs to remedy the issue and repair the damage to its reputation.

    "I guess it's a very small step in the right direction. But far from what I'd like to see in terms of being compensated," said Jeff Slagle, a diesel Golf owner in Wilton, Connecticut.

    The scandal erupted in September when VW admitted it had rigged U.S. tests for nitrogen oxide emissions. The crisis deepened last week when it said it had understated the carbon dioxide emissions and fuel consumption of vehicles in Europe.

    VW said on Monday it continues to discuss potential remedies with U.S. and California emissions regulators, including the possibility that some of the affected cars could be bought back from customers.

    In Washington, Democratic Senators Richard Blumenthal and Edward Markey on Monday decried VW's consumer program as "insultingly inadequate" and "a fig leaf attempting to hide the true depths of Volkswagen's deception."

    The senators said VW "should offer every owner a buy-back option" and "should state clearly and unequivocally that every owner has the right to sue."

    Late Monday, attorneys general from 47 states and the District of Columbia issued a statement saying the automaker's offer to consumers "in no way diminishes the seriousness of the deceptive practices and environmental harms" being investigated by the states.

    In Germany, the financial impact of the scandal has exacerbated tensions between Volkswagen management and labor leaders over plans to cut spending by about 1 billion euros ($1.08 billion) per year through 2019 at its core Volkswagen brand operations.

    Read more at Reuters

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    World flirts with global recession as trade growth slows, warns OECD

    Organisation for Economic Co-operation and Development trims global growth forecasts amid a "deeply concerning" slowdown in global trade and slower growth in emerging markets "The growth rates of global trade observed so far in 2015 have, in the past, been associated with global recession." Catherine Mann

    It came as the Paris-based think-tank trimmed its forecast for global growth to 2.9pc this year.

    This represents the slowest pace of expansion since 2009 and is down from its previous projection of 3pc.

    Growth in 2016 is expected to rise to 3.3pc, although this is weaker than the 3.6pc growth the OECD predicted just two months ago. Trade growth was expected to reach just 2pc this year, with China's slowdown "at the heart" of subdued forecasts.

    Catherine Mann, the OECD's chief economist, said the weakening in global trade was "deeply concerning".

    Ms Mann highlighted that there had been just five years in the past 50 in which global trade grew by 2pc or less.

    "These rates, have, in the past, been associated with global recession," she said.

    Angel Gurria, the OECD's secretary general, said its global growth projection of 3.6pc in 2017 was disappointing by historical standards.

    "By 2017 - ten years after the onset of the crisis - we still would not have achieved the global rate of growth enjoyed before the crisis," he said.

    "Even this improvement hinges on supportive macroeconomic policies, investment, continued low commodity prices for advanced economies and a steady improvement in the labour market."

    The think-tank also warned that high levels of underemployment in the eurozone and even the US, which is expected to raise interest rates next month, would dampen wage growth "for some time to come".

    China's performance key to global growth

    China was one of the few countries to receive a growth upgrade from the OECD.

    The think-tank raised its 2015 forecast to 6.8pc, from 6.7pc. Growth is expected to remain unchanged at 6.5pc in 2016 and slow to 6.2pc in the following year.

    However, the OECD warned that a sharper slowdown in China could knock up to a percentage point off world output, with the biggest impact on countries such as Russia and Japan.

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    What An Industrial Depression Looks Like

    Two weeks ago, when looking at the latest Caterpillar retail sales data...

    Image title... we said that "If Caterpillar's Data Is Right, This Is A Global Industrial Depression."

    Today we get visual evidence of this, courtesy of an Australian heavy industrial equipment auction where machines such as a Caterpillar 992C wheel loader, which normally costs $2.9 million, can now be bought for just $15,000, a 99% discount!

    As Australia's ABC reports, now that the commodity bubble has burst for good, auctioneers are hard at work selling tens of millions of dollars of suddenly useless coal mining machinery for just a fraction of its original market value.

    The reason is known: the severe downturn in the Australian resources sector (courtesy of China's whose commodity imports are declining with every passing month) has led to a massive oversupply of equipment, and much of it is unsuitable for use in any other industry. This means unwanted excavators, trucks and sundry heavy machinery will end up as scrap, if not sold at auction.

    ABC's reporter visited just one such auction in New South Wales, which was owned by Big Rim, a mining services contractor which also collapsed after the miners it serviced also closed. What he saw was stunning:

    "We had 20 trucks in the Hunter Valley recently that 18 months ago were probably worth $600,000 each. We've just cut 'em up, returned about $40,000." And this is what an industrial depression looks like in numbers:

    Was: $2.9m | Now: $15,000: Caterpillar 992C wheel loader

    Was: $1.4m | Now: $50,000: Hitachi EX1200 hydraulic excavator

    Was: $2.7m | Now: $46,000: Caterpillar D11N crawler tractor

    Was: $900,000 | Now: $47,500: Caterpillar 775D rear dump truck

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    BRIC Fund at GS closes.

    The BRIC era is coming to an end at Goldman Sachs Group Inc.

    The bank’s asset-management unit folded its money-losing BRIC fund, which invests in Brazil, Russia, India and China, and merged it last month with a broader emerging-market fund. Goldman Sachs pulled the plug on the nine-year-old product because it doesn’t expect “significant asset growth in the
    foreseeable future,” according to a filing to the U.S. Securities and Exchange Commission.

    Fourteen years after former Goldman Sachs economist Jim O’Neill coined the acronym that ushered in an unprecedented investment boom, the biggest emerging markets are now sputtering. Russia and Brazil have fallen into recessions. China, long an engine of the world’s growth, is poised for its
    weakest expansion since 1990.

    The downfall of the BRIC fund, which had lost 88 percent of its assets since a 2010 peak, also underscores how the strategy of bundling disparate countries into a single investment theme is losing its appeal among investors.

    “The promise of BRIC’s rapid and sustainable growth has been challenged very much for the last five years or so,” said Jorge Mariscal, the chief investment officer of emerging markets at UBS Wealth Management, which oversees about $1 trillion. “The BRIC concept was popular. But nothing is eternal.”

    The BRIC fund is being swallowed up by the Emerging Markets Equity Fund as part of Goldman Sachs’s efforts to “optimize” its assets and “eliminate overlapping products,” the New York-based bank said in the Sept. 17 filing.

    Instead of liquidating the fund, Goldman Sachs opted for the merger because it will give investors access to “a more diversified universe” of developing nations. The bank pointed out that the emerging-market fund has outperformed in the one-, three- and five-year periods.

    The BRIC fund lost 21 percent in the five years through Oct. 23, the last trading day before the merger. Its assets declined to $98 million at the end of September after peaking at $842 million in 2010, according to data compiled by Bloomberg.

    "Over the last decade emerging market investing has evolved from being tactical and opportunistic to being a strategic part of most asset allocations," said Andrew Williams, a spokesman for Goldman Sachs. "We continue to recommend that our clients have exposure to emerging markets across asset classes as part of their strategic asset allocation."

    O’Neill, who stepped down as the chairman of Goldman Sachs Asset Management in 2013 and became commercial secretary to the U.K. Treasury in May, declined to comment.

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    The 'Teenager' Speaks on Oil: Abdul Aziz bi Salman

    The oil and gas industry has cut $200 billion from investments this year as low prices discourage new projects, leading to cuts in crude supplies equal to half the daily output of Saudi Arabia, according to the kingdom’s Prince Abdul Aziz bin Salman.

    Nearly 5 million barrels a day of projects have been deferred or cancelled, Bin Salman, who is also vice oil minister for Saudi Arabia, said in prepared remarks set to be delivered to energy ministers meeting in Doha Monday. Saudi Arabia pumped 10.38 million barrels a day in October, according to data compiled by Bloomberg.

    Oil prices have dropped 42 percent in the past year as Saudi Arabia led the Organization of Petroleum Exporting Countries in maintaining production in the face of a global glut rather than make way for booming U.S. output. Supply from outside the 12-member group will start to decline next year,
    after oil prices near $150 a barrel in 2008 proved unsustainable, Bin Salman said, according to the prepared remarks.

    “A prolonged period of low oil prices is also unsustainable, as it will induce large investment cuts and
    reduce the resilience of the oil industry, undermining the future security of supply and setting the scene for another sharp price rise,” Bin Salman said in the remarks. “As a responsible and reliable producer with long-term horizon, the kingdom is committed to continue to invest in its oil and gas sector, despite the drop in the oil price.”

    Energy companies will probably reduce investments another 3 to 8 percent next year, making it the first time since the mid-1980s that the industry cut spending for two consecutive years, he said. The vice oil minister said the impact of the current price instability is not just confined to the oil sector as "the
    spillovers are being strongly felt in other parts of the energy complex, such as renewables and natural gas," according to the prepared remarks.

    The drop in non-OPEC supply will probably accelerate “beyond 2016,” he said in the remarks.

                             Spare Capacity

    Oil demand is expected to be 94 million barrels a day this year, rising 1.5 percent from last year, with about 2 million barrels a day of spare capacity, mainly held in Saudi Arabia, he said in the prepared remarks. Growth in Asia’s demand may slow “by efforts to efficiency enhancement and oil substitution,” he said in the remarks.

    "But the petroleum industry should not lose sight of the fact that scale matters," with billions of people moving up into the middle class, the prince said in the remarks. The size of the world’s middle class will expand from 1.8 billion to 3.2 billion in 2020, and to 4.9 billion in 2030, with the bulk of this expansion occurring in Asia, he said in the remarks.

    “Rather than being a commodity in decline, as some would like to portray, supply and demand patterns indicate that the long-term fundamentals of the oil complex remain robust.”

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    VW Emissions Scandal Leads To Suspension Of U.S., Canadian Sales

    In a turnaround, Volkswagen Group suspended sales of additional diesel-powered vehicles in North America as the scandal widens over the automaker’s use of software designed to deceive emissions tests.

    The company told dealers in the United States and Canada on Nov. 4 to stop selling cars from the 2013-2016 model years of VW and Audi with 3.0-liter engines. They include the 2013 Audi Q7, the 2014-2015 Audi A6, A7, A8, Q5 and Q7 and the 2013-2016 Volkswagen Touareg. The day before, VW-run Porsche had suspended sales of its Cayenne SUV for the model years 2014-2016.

    The U.S. Environmental Protection Agency (EPA) said on Nov. 2 that some 10,000 VW, Audi and Porsche vehicles powered by 3.0-liter diesel engines had been equipped with software that under-reports the vehicles’ emissions of toxic nitrogen oxide during testing.
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    Early Look: China’s Economy Likely Stabilized in October, But Growth Remained Subdued

    China’s economy may have stabilized in October after a slew of government stimulus measures, but growth momentum remained subdued amid sluggish demand both at home and abroad.

    The world’s second-largest economy likely heaped a widening trade surplus in October, mainly boosted by a sharper decrease in imports, instead of robust export growth like it recorded in previous years. China’s exports likely fell 4.1% in October from a year earlier, following an on-year drop of 3.7% in September, according to a median forecast of 11 economists polled by The Wall Street Journal. The nation’s imports in October likely declined 15.0% from a year earlier, compared with a 20.4% fall in September. That will take the trade surplus last month to $62.2 billion, compared with $60.3 billion recorded in September.

    China’s Ministry of Commerce said on Thursday that the nation’s exports for the full year of 2015 are expected to be little increased from a year earlier, while imports will likely report a “relatively big” decline. China set a 6% trade growth target for 2015 that it looks very likely to miss. China’s foreign trade in the first nine months of the year fell 8.1% from a year earlier, as exports declined by 1.9% and imports plunged 15.3%.
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    Maersk profit halves, cuts global sea trade forecast

    Shipping and oil conglomerate A.P. Moller-Maersk said on Friday third-quarter profit almost halved and global demand for container transportation this year would grow at a slower pace than previously expected.

    The Danish company, which operates the largest container shipping business
     in the world, kept a reduced forecast made two weeks ago for a 2015 underlying profit of $3.4 billion, down from the $4.0 billion previously expected.

    Maersk has taken a double hit to its businesses -- its oil units have floundered as crude prices halved since last year, while low trade volumes and an overcapacity of vessels have weighed on Maersk Line, the container shipping business.

    The earnings report, which showed third-quarter net profit almost halved to $778 million from $1.5 billion a year ago, comes two days after Maersk Line said it would slash costs, cut staff by almost a fifth and pull out of some vessel orders.

    On Friday, the company said it now expected demand for seaborne container transportation around the world to grow 1-3 percent this year, lower than its previous view of 2-4 percent.

    Growth in demand for shipping, at 1 percent in the third quarter, is the lowest since the 2008 financial crisis that hit the industry particularly hard. Maersk made an annual loss in 2009, the only year it has lost money in its 111-year history.

    Though the global economy has recovered since, trade volumes have risen at a slower pace than in the past and economists are increasingly concerned about flagging growth in China.

    Overcapacity has exacerbated that situation - in 2015, Maersk expects a 9 percent growth in container shipping capacity, outstripping the around 1-3 percent growth in trade.

    Read more at Reuters

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    China: Reform and Transition

    Image titleComplex Mechanism.

    Image titleNo more local debt issuance! It failed! 

    Barry Naughton
    Sokwanlok Chair of Chinese International Affairs
    School of Global Policy and Strategy
    University of California, San Diego

    Orbiting President Xi Jinping

    The Chinese president keeps a tight grip on his power and does not permit others to speak for him. Foreign officials and scholars have found it difficult to penetrate President Xi’s inner circle and get to know the men who advise him on policy and matters of state. Based on research and interviews by The New York Times, here are some facts about five men who, to varying degrees, give advice to Mr. Xi and are trusted by him — for now.

    • Wang Qishan, 67, head of the Communist Party’s Central Commission for Discipline Inspection, Politburo Standing Committee member

      A fan of “House of Cards,” he has told people that he pays special attention to the role of party whip, according to a Hong Kong magazine. That’s the job of the devious and menacing Frank Underwood character at the start of the show.

      As a former finance official, he met often with Henry M. Paulson Jr., the Goldman Sachs chief executive who later became United States Treasury secretary under President George W. Bush. Mr. Paulson wrote that during the 2008 financial crisis, Mr. Wang said: “We aren’t sure we should be learning from you anymore.”

      He is married to the daughter of Yao Yilin, a former vice-premier, but does not have children, which some political insiders say gives him fewer vested interests and makes him more immune to corruption.

    • Li Zhanshu, 65, head of the General Office of the Communist Party’s Central Committee, Politburo member

      He drank socially with Xi Jinping when the two were county-level party chiefs in Hebei Province in the 1980s.

      He once said in an interview that he abides by a Three-No’s Principle: “No screwing other people, no playing games, no loafing on the job.”

      An uncle, Li Zhengtong, died in 1949 fighting as a Communist soldier against the Kuomintang. That took place less a month after the uncle had gotten married. Mr. Li has described his father bringing the uncle’s body back to their village on a cart. In a 2005 essay memorializing his uncle, Mr. Li wrote: “There is an endless yearning that dwells deep in my heart. No matter how time flies, my thoughts for him linger.”

    • Liu He, 63, head of the Communist Party’s Central Leading Group for Financial and Economic Affairs, Central Committee member

      A fluent English speaker, he has an M.B.A. from Seton Hall University and an M.P.A. from the John F. Kennedy School of Government at Harvard University.

      He was awarded a top economics prize in China for writing a paper in 2012 that compared the 2008 global financial crisis with the Great Depression of the 1930s. He concluded with three lessons for China, including, “Have contingency plans for the worst-case scenarios.”

      This summer, as foreign analysts were questioning the stability of China’s economy and its stock market, he told a Hong Kong television station, “There’s no problem; rest assured,” and, “There’s no problem with the stock market, either.”

    • Wang Huning, 59, head of the Communist Party’s Central Policy Research Office, Politburo member

      He spent most of his academic career as a professor in the department of international politics at Fudan University in Shanghai and has been a policy adviser to Presidents Jiang Zemin, Hu Jintao and Xi Jinping.

      After a six-month visit to the United States in 1988, he wrote a book, “America Opposes America.” His purpose on the visit was to observe up close the “biggest capitalist country,” he wrote. “People wonder how this nation, with a short history of only 200 years, could become the most developed country in the world.”

      Wei Chengsi, a former Shanghai official, wrote that he once asked Mr. Wang why he did not describe himself, a known proponent of strong centralized leadership, as a subscriber to “neo-authoritarianism.” Mr. Wang replied: “Because the Communist Party can only publicly accept one doctrine, and that’s Marxism-Leninism."

    • Gen. Liu Yuan, 64, political commissar of the Logistics Department of the People’s Liberation Army, Central Committee member

      He is the son of Liu Shaoqi, the president of China from 1959 to 1968, who was purged by Mao during the Cultural Revolution and died in 1969 after months of being beaten and tortured.

      He had an early career as a civilian official in Henan Province, rising to the post of vice governor, before being transferred to the People’s Liberation Army with the rank of major general.

      The most vocal critic of corruption in the military, he was the first to challenge Gen. Gu Junshan and Gen. Xu Caihou, that latter of whom was a vice chairman of the Central Military Commission, which oversees the military. Those two generals were later purged by Mr. Xi for corruption.


    Mia Li and Yufan Huang contributed research.

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    Google Ad Prices falling too.

    Image title
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    Oil and Gas

    Iraq oil overtakes Saudi in Europe as OPEC battles rage on - IEA

    Iraq oil overtakes Saudi in Europe as OPEC battles rage on - IEA

    A market share battle between Russia and OPEC oil producers in Europe is intensifying as Iraq has overtaken Saudi Arabia as the second largest seller there and Iran has already lined up buyers for its crude for when sanctions are lifted.

    The International Energy Agency cited market sources on Friday as saying Tehran would be able to sell at least an extra 400,000 barrels per day (bpd) to buyers in Asia and Europe when the sanctions are lifted. Customers would include refiners in Italy, Greece and Spain who prefer to use Iranian crude as their baseload feedstock.

    "For this reason, producers are likely to grow still more competitive on pricing," the IEA said.

    Russia has gained market share from OPEC in many Asian markets thanks to a pipeline to the Pacific and China.

    The shift opened opportunities for rivals in the European markets, traditionally dominated by Russia, and Saudi Arabia has this year sold crude to Polish and Swedish refiners

    "While the headlines focus on Russia and Saudi Arabia jostling for position on the continent, it is Iraq that has stolen a march on its regional rivals," the IEA said.

    Europe imports over 9 million bpd of crude from outside the region, and sour grades account for more than 6 million.

    Although Russian Urals continues to dominate with around 55 percent, Iraq has gained substantial market share since 2012 after sanctions were tightened on Iran, the IEA said.

    Before Tehran was banned from selling oil to Europe in 2012, it was delivering about 1 million bpd of high-sulphur sour crude.

    Since mid-2014, Iraq's overall exports have risen by about 40 percent to above 3 million bpd and deliveries of 1 million bpd to Europe during July and August raised Iraq's market share to 17 percent - allowing it to overtake Saudi Arabia, according to the IEA.

    As a result of market share battles, the oil glut in Europe is aggravating further.

    "Sour crude markets appear especially over supplied with discounts versus sweet grades widening. Europe is awash with competing sour crudes from the FSU and Middle East and U.S. sour crudes remained depressed by refinery maintenance," the IEA said.

    Read more at Reuters

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    Statoil Tops $969 Million of Bids Pledged for Canada Offshore

    Statoil ASA was the most active bidder for exploration licenses off Canada’s Atlantic Coast awarded Thursday as some of the world’s largest producers committed to spend about C$1.29 billion ($969 million) for the prospect of long-term growth.

    The Norwegian company and its partners successfully bid for six blocks off Newfoundland and Labrador and Statoil picked up two on its own, off Nova Scotia. Chevron Corp., Exxon Mobil Corp., BP Plc, BG Group Plc and Cnooc Ltd.’s Nexen subsidiary were part of winning bids to drill off Newfoundland. Licenses to seven of 11 blocks on offer were sold in the province’s first-ever scheduled auction. Nova Scotia received bids for two of nine blocks offered.

    The producers are pledging future drilling even as they shelve near-term projects to weather a crude price slump that has extended 16 months. The Atlantic Canadian provinces have been seeking to spur investment to bolster government revenues during the downturn. Newfoundland released a study last month that said the area being licensed for exploration contains a resource potential of 12 billion barrels of oil and 113 trillion cubic feet of gas, in place.

    “These are the biggest of the biggest companies,” said Chris Cox, an analyst at Raymond James Ltd. in Calgary. “They’re commitments to spend in the future, not today, so they’re leaving the option open.”
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    Petrobras Hits the Road to Find `Strategic' Buyers in Sale Drive

    Petroleo Brasileiro SA will start a road show next week to talk to investors and find “strategic partners” for its Brazilian operations as part of an effort to reduce the biggest debt load in the oil industry, Chief Financial Officer Ivan Monteiro said Thursday.

    Executives will travel to countries including the U.S., China, Mexico, Canada and the U.K., and investors have already shown strong interest for a stake in Petrobras Distribuidora SA, Latin America’s largest petroleum products distributor, Monteiro said. Petrobras runs little risk of missing its target to raise more than $15 billion from divestments before the end of 2016, he said. The company also plans to tap international debt markets this year to secure its financial needs for 2016, he said.

    “There has been a lot, a lot of interest” in investments in the distribution unit, he told reporters at a third-quarter earnings news conference in Rio de Janeiro.

    Petrobras is looking to reduce indebtedness while it grapples with a collapse in commodity prices, a widening graft scandal that has resulted in some of its suppliers seeking bankruptcy protection, and oil unions that started striking on Nov. 1 to protest asset sales and spending cuts that threaten jobs. Shares have collapsed 24 percent this year.
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    Thailand's PTT posts huge Q3 loss, hit by weak oil prices

    PTT Pcl, Thailand's largest energy company, on Thursday reported another record net loss in the third quarter, mainly due to losses at its upstream and exploration subsidiary and a weak gas business.

    It posted a net loss of 26.6 billion baht ($741.4 million) for July-September, higher than the average forecast for a loss of 24 billion baht from eight analysts polled by Reuters. Its previous record loss was 26.6 billion baht in fourth quarter of 2014.

    Third-quarter sales fell 27 percent on the year, mainly due to lower prices of petroleum and petrochemical products, while the depreciation of the baht against the dollar led to a foreign exchange loss of 6.9 billion baht, it said in a statement.

    The third quarter is likely to be the weakest period for state-controlled PTT and earnings should recover in the fourth quarter when PTT will book gain from selling its 36 percent stake in refiner Star Petroleum Refining Pcl in an IPO later this month, analysts said.

    Analysts have cut earnings forecast for PTT by 30-60 percent to reflect weaker performance of its subsidiaries, which are affected by weakness of global oil prices.

    Read more at Reuters
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    Eclipse Resources 3Q15: Production Up 163%, Net Loss $81M

    Eclipse Resources, an exploration and production company focused solely on the Marcellus and Utica Shale region headquartered in State College, PA but focusing on Utica drilling, released its third quarter earnings and operational update.

    It was also just yesterday we told you about the rumor that Eclipse is shopping itself. What does the 3Q15 update show? Production averaged 225.2 million cubic feet equivalent per day (MMcfe/d), up 163% over 3Q14. Eclipse drilled 9 gross (4.8 net) wells, completed 15 gross (7.2 net) wells and turned 22 gross (6.4 net) wells to sales.

    Because of smart hedging, the company got $2.86 per thousand cubic feet (Mcf) in 3Q15–10 cents per Mcf more than what gas has been trading for at the Henry Hub. But even with pumping way more gas and getting favourable pricing, it still wasn’t enough to prevent an $81 million net loss for the quarter. Yes, some of that was a paper loss (depreciation/amortization stuff)–but not all of it. Some of it was actual money out of pocket loss...
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    Dire Straits: Magnum Hunter Tells SEC Heading for Bankruptcy

    Here’s one time when we wish we had been wrong. In October we warned you that Magnum Hunter Resources (MHR), a smaller but important driller in the Marcellus/Utica, was either heading for a sale or bankruptcy. Looks like it’s the later.

    The company filed its required quarterly form 10-Q with the Securities and Exchange Commission earlier this week (full copy of the 10-Q below). In the filing we get this statement: “As of September 30, 2015, the Company had $6.5 million in cash and a working capital deficit of $1,037.2 million, and the Company continues to incur significant losses from continuing operations.” Eeeks. They only have $6.5M in the bank to keep the lights on and make payroll, and they owe over $1 billion.

    Then we get this: “…these factors raise substantial doubt about the Company’s ability to continue as a going concern.” Near the end of the report, they spell it out in black and white: “We may seek the protection of the United States Bankruptcy Court (the “Bankruptcy Court”), which may harm our business and place equity holders at significant risk of losing all of their interests in the Company.” Translation: We’re going bankrupt.

    In addition, earlier this week the New York Stock Exchange made good on its previous threat and has begun the process of de-listing MHR’s stock–which caused a selloff of the stock. The stock price hit 15 cents per share, so the NYSE halted trading. Never rains but it pours…

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    Summary of Weekly Petroleum Data for the Week Ending November 6, 2015

    U.S. crude oil refinery inputs averaged over 15.9 million barrels per day during the week ending November 6, 2015, 302,000 barrels per day more than the previous week’s average. Refineries operated at 89.5% of their operable capacity last week. Gasoline production increased last week, averaging 9.7 million barrels per day. Distillate fuel production decreased slightly last week, averaging about 4.9 million barrels per day.

    U.S. crude oil imports averaged 7.4 million barrels per day last week, up by 434,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.2 million barrels per day, 2.5% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 353,000 barrels per day. Distillate fuel imports averaged 136,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.2 million barrels from the previous week. At 487.0 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 2.1 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.4 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.6 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 2.6 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.8 million barrels per day, up by 1.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.3 million barrels per day, up by 3.4% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the last four weeks, up by 8.3% from the same period last year. Jet fuel product supplied is up 4.0% compared to the same four-week period last year.


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    US domestic oil production sees small gain

                                                  Last Week   Week Before   Year Before

    Domestic Production '000......... 9,185           9,160             9,063

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    Encana to hike Permian basin spending

    Canadian natural gas producer Encana Corp reported a smaller-than-expected quarterly loss, helped by an increase in oil production, and said it is speeding up capital spending in the Permian basin in Texas.

    Encana said on Thursday it plans to spend $150-million in the Permian shale field in the current quarter that was originally earmarked for 2016.

    The company said it expects total capital spending of $2.2-billion this year, the upper end of its forecast.

    Encana said it now expects to cut net debt by $2.8-billion by the end of the year, lower than its target of $3-billion.

    Encana has been restructuring its portfolio to diversify production away from low-value natural gas towards oil, by acquiring new properties and selling some gas-producing assets.

    The company in August sold its Haynesville natural gas assets in northern Louisiana for $850-million and said in October it would sell its Denver Julesburg basin oil and gas assets in Colorado for $900-million.

    The Calgary-based company has booked impairment charges of $3.62-billion so far this year, including $1.07-billion in the latest third quarter, to write down the value of assets amid a prolonged slump in global crude and natural gas prices.

    Encana’s oil and gas-liquids production rose 35 per cent to average 140,400 barrels per day in the quarter ended Sept. 30. Natural gas output fell 30 per cent to 1.55 billion cubic feet per day.

    The company reported a net loss of $1.24-billion for the quarter, compared with a profit of $2.81-billion a year earlier.

    Encana’s operating loss, which excludes most one-time items, was $24-million, or 3 cents per share, compared with a profit of $281-million, or 38 cents per share, a year earlier.

    Analysts on average were expecting a loss of 4 cents per share, according to Thomson Reuters I/B/E/S.

    Encana’s cash flow, an indicator of its ability to pay for new assets and drilling, more than halved to $371-million.

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    Premier Oil cuts back on spending, beats production target

    Premier Oil has cut full-year capital expenditure as the oil producer deferred some project development and exploration spending into 2016, it said on Thursday.

    Like its peers, Premier Oil is having to reduce spending to cope with a halving in oil prices since a peak in June last year that has eaten into revenues.

    The group now expects to spend $1.05 billion this year on developing projects and exploration work, nearly $100 million lower than previously expected. It will move into 2016 some spending on projects such as its Sea Lion field in the Falkland Islands.

    Next year, its budget is estimated at $650 million, 38 percent lower than this year mainly due to project completions, Premier said.

    The energy company, whose operations stretch from Indonesia to the Falklands, said oil production so far this year had averaged 57,500 barrels per day (bpd), ahead of full-year guidance of 55,000 bpd, which it left unchanged.

    Analysts have been keeping a close eye on the start-up of Premier Oil's Solan project in the North Sea which will add cash flow to the company's coffers. Chief Executive Tony Durrant told Reuters first oil would flow from the field just before Christmas.

    Durrant also said he was in a good position to acquire further assets in the North Sea as many fields remained on sale in this mature basin.

    "The market really is moving in our favour. We are one of the obvious acquirers in the UK, there's lots to look at, so we can afford to be quite rigorous with our criteria," he said.

    In the context of weak oil prices, Premier Oil said it had reduced costs by over 25 percent compared with last year. Further savings of 5-10 percent could be made next year, it said.

    "Its high leverage to a sustained weak oil price means we still struggle to see a compelling valuation argument," David Round, analyst at BMO Capital Markets, said. He rates the stock as "underperform."

    Read more at Reuters
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    OPEC sees oil supply hole in 2016 as low prices curb rival output

    OPEC said its oil output fell in October and forecast supply from rival producers next year would decline for the first time since 2007 as low prices prompt investment cuts, reducing a global supply glut.

    In a monthly report, the Organization of the Petroleum Exporting Countries said it pumped 31.38 million barrels per day (bpd) last month, down 256,000 bpd from September.

    If realised, the forecast of a decline in supply outside OPEC would be a further indication the group's strategy is working. OPEC last year abandoned a longstanding policy of propping up prices and instead raised output, seeking to recover market share taken by higher-cost rival production.

    Oil is trading at just under $46 a barrel, more than 50 percent below its price in June 2014.

    "The recent decline in oil prices has encouraged additional oil demand," OPEC said in the report. "It has also provided a challenging market environment for some higher-cost crude oil production, which has already shown a slowdown."

    The group expects non-OPEC supply next year to fall by about 130,000 bpd, following growth of 720,000 bpd this year, "as nearly $200 billion of capex cutbacks this year and next create a gaping supply hole".

    OPEC production, which has surged since the policy shift of November 2014 led by record Saudi Arabian and Iraqi output, fell in October on export delays in Iraq and lower supply from Saudi Arabia and Kuwait, said the report, citing secondary sources.

    OPEC's report points to a 560,000-bpd supply surplus in the market next year if the group keeps pumping at October's rate, down from 750,000 bpd indicated in last month's report.

    In the third quarter of 2016, demand for OPEC crude will rise to an average of 31.51 million bpd, OPEC predicted - above current output for the first time in months.

    OPEC in the report left its 2016 oil demand forecasts unchanged, predicting the world would need 30.82 million bpd of OPEC crude and that global demand would grow by 1.25 million bpd.

    Read more at Reuters

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    Oil Tanker Storage: Replaces rig count on traders radar.

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    Tankers off Galveston, Houston.

    Oil Tankers Are Filling Up As Global Storage Space Runs Low

    The rebound in oil prices is still not here, and new data suggests that it will take some more time before the markets start to balance out.

    Global supplies are still too large to justify a significant rally in oil prices. The latest indicator that the glut of oil has yet to ease comes from the FT, which concludes that there is 100 million barrels of oil sitting in oil tankers. Oil has piled up in tankers that are floating at sea, as onshore storage space begins to dwindle.

    The level of crude oil stashed at sea is nearly double what it was earlier in 2015. “Onshore storage is not quite full but it is at historically high levels globally,” David Wech of JBC Energy told the FT. “As we move closer to capacity that is creating more infrastructure hiccups and delays in the oil market, leading to more oil being backed out on to the water.”

    Rising levels of crude stored at sea has more to do with shrinking capacity onshore, rather than traders stockpiling volumes in order to profit from an eventual rebound in prices. Oil tanker rates have surged this year, so it doesn’t exactly make sense to store oil at sea strictly for a trading opportunity. Daily ratesfor very large crude carriers (VLCCs) are around $60,000 per day, although down from a peak of $111,000 per day hit on October 8. 

    Off Indonesia, Malaysia and Singapore, Asia’s main oil hub, around 35m barrels of crude and shipping fuel are being stored on 14 VLCCs.
    “A lot of the storage off Singapore is fuel oil as the contango is stronger,” said Petromatrix analyst Olivier Jakob. Fuel oil is mainly used in shipping and power generation.
    Off China, which is on course to overtake the US as the world’s largest crude importer, five heavily laden VLCCs— each capable of carrying more than 2m barrels of oil — are parked near the ports of Qingdao, Dalian and Tianjin.
    In Europe, a number of smaller tankers are facing short-term delays at Rotterdam and in the North Sea, where output is near a two-year high. In the Mediterranean a VLCC has been parked off Malta since September.
    On the US Gulf Coast, tankers carrying around 20m barrels of oil are waiting to unload, Reuters reported. Crude inventories on the US Gulf Coast are at record levels.

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    OPEC says global Oil inventories at five year high.

    OPEC Says Oil-Inventory Glut Is Biggest in at Least a Decade (1)
    Surplus in developed economies exceeds level of 2009 crisis
    Slowing non-OPEC supply may help `alleviate the overhang'
    (Updates with analyst comment in sixth paragraph.)

    By Grant Smith
    (Bloomberg) -- 
    Surplus oil inventories are at the highest level in at least a decade because of increased global production, according to the Organization of Petroleum Exporting Countries.

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    Stockpiles in developed economies are 210 million barrels higher than their five-year average, exceeding the glut that accumulated in early 2009 after the financial crisis, the organization said in a report. Slowing non-OPEC supply and rising demand for winter fuels could “help alleviate the current overhang,” enabling a recovery in prices, it said. The group’s own production slipped last month because of lower output in Iraq.

    “The build in global inventories is mainly the result of the increase in total supply outpacing growth in world oil demand,” OPEC’s Vienna-based research department said in its monthly market report.

    Oil prices have lost about 40 percent in the past year as several OPEC members pump near record levels to defend their market share against rivals such as the U.S. shale industry. While inventories peaked in early 2009 before OPEC implemented record production cuts, this time the group has signaled it won’t pare supplies to balance global markets and U.S. output is buckling only gradually in response to the price rout.

    The current excess is bigger than the surplus of 180 million barrels to the five-year seasonal average that developed in the first quarter of 2009, according to the report. The 2009 glut was the only other occasion in the past 10 years when the oversupply has topped 150 million barrels, it said.

    “The massive stockpile overhang is one more indicator, along with the ongoing slump in prices, that Saudi Arabia’s oil strategy isn’t working so far,” said Seth Kleinman, head of energy strategy at Citigroup Inc. in London. “The physical oil market is falling apart just as we are hitting the winter, when it’s all supposed to be getting better.”

    Oil futures extended losses after the report, falling 96 cents, or 2.2 percent, to $41.97 a barrel in New York as of 9:38 a.m. local time.

    OPEC ministers will meet on Dec. 4 in Vienna to review their current policy. While some members such as Venezuela have recommended changing strategy to support prices, OPEC Secretary-General Abdalla El-Badri said Nov. 9 that supply and demand are on course to rebalance next year.

    Output Drops

    Production from OPEC’s 12 members slipped by 256,500 barrels a day to 31.38 million a day in October, according to a number of “secondary sources” compiled in the report. The biggest drop was in Iraq, where output fell by 195,400 barrels a day to 4.01 million. While the report didn’t specify a reason for Iraq’s decline, storms have disrupted loading at Basra oil terminal in the south of the country and sabotage attacks have reduced flows through the Kurds’ export pipeline in the north.

    Production in Saudi Arabia, the group’s biggest member, fell by 72,200 barrels a day to 10.125 million in October, according to the data from secondary sources. The kingdom’s output often declines after summer as domestic fuel demand for power generation eases. Saudi Arabia’s own reports to OPEC showed a production increase in October of 50,000 barrels a day to 10.276 million a day.

    OPEC kept unchanged its 2015 and 2016 forecasts for global oil demand, production outside the group, and the amount OPEC will need to pump.

    Non-OPEC supply will contract next year for the first time since 2007, decreasing by 130,000 barrels a day, as $200 billion in spending cuts takes its toll on the global industry, according to the report. Projects equivalent to 5 million barrels of daily output have been delayed or canceled, OPEC said.

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    TransCanada chosen to build $500m Mexican natural gas pipeline

    Canadian oil and gas infrastructure operator TransCanada has been awarded a $500-million contract to build, own and operate the Tuxpan–Tula pipeline, in Mexico. 

    Construction of the 36-inch-diameter pipeline was supported by a 25-year natural gas transportation service contract with the Comisión Federal de Electricidad (CFE), Mexico's State-owned power company. "The Tuxpan–Tula pipeline demonstrates our continued commitment to developing Mexico's energy infrastructure to meet the need for increased natural gas supply," TransCanada president and CEO Russ Girling stated. 

    Construction was expected to start in 2016 and TransCanada expected the pipeline to be in service by the fourth quarter of 2017. The pipeline would be about 250 km long and have a contracted capacity of 886-million cubic feet a day. 

    The pipeline will start in Tuxpan, in the state of Veracruz, and extend through the states of Puebla and Hidalgo, supplying natural gas to CFE's combined-cycle power generating facilities in each of those jurisdictions, as well as to the central and western regions of Mexico. The pipeline would serve new power generation facilities, as well as those currently operating with fuel oil, which would be converted to use natural gas as their base fuel. 

    The Tuxpan–Tula pipeline would complement TransCanada's business in Mexico, where it already owned and operated the Tamazunchale and Guadalajara pipeline systems and was completing construction of the Topolobampo and Mazatlan pipelines. By 2018, with the Tuxpan–Tula pipeline, TransCanada would have five major pipeline systems, with about $3-billion invested in Mexico.
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    Santos shares sink 27pc on shortfall in take-up of $2.5b rights issue

    A sharp drop in Santos shares after the first part of the gas player's underwritten $2.5 billion equity raising has caused some to question the board's decision to reject outright last month's $7.14 billion takeover approach from Middle East-backed Scepter Partners.

    The 27 per cent decline to $4.30, from the last close of $5.91 on Friday, came after the shares were halted all week since Santos on Monday announced a $3.5 billion package of measures to cut debt.

    The heavy reliance of the package on a dilutive equity raising disappointed some investors, who had expected more proceeds to flow from asset sales instead, although the appointment of former Clough boss Kevin Gallagher as the new chief executive has been welcomed.

    Significantly, the share price move on Thursday represented a 16.5 per cent fall from the $5.15 equivalent price of Santos stock that took into account the extra shares issued.

    However, while the shares were halted, crude oil prices have sunk almost 4 per cent and the market has also been affected by broader concerns that have softened the share prices of Santos peers such as Origin Energy, which is down 5.5 per cent this week.

    The softness in the share price still surprised some analysts, particularly as the take-up by institutional investors of the discounted share offer was a reasonable 86 per cent.

    Also, as already reported in Street Talk , the shortfall of entitlements cleared in a bookbuild on Wednesday at $4.60.

    It remains unclear whether the bookbuild price was supported by the participation of a strategic investor such as Santos' new cornerstone shareholder, private Chinese firm Hony Capital. That potentially won't be known until November 21, being the latest date to file a disclosure.

    Executive chairman Peter Coates still described the issue as a success and said it gave "a clear sign of confidence" in the measures to reduce debt. That package, which includes an asset sale, was the result of a strategic review process led by Mr Coates, which also elicited the $6.88 per share approach from Scepter.

    One analyst said that with the share price decline on Thursday, there was "a question a lot of shareholders would be asking" as to why the board hadn't sought to engage with Scepter on a better offer, although other sources pointed out the company's unknown background and opaque funding.

    The $1.35 billion retail part of the offer opens next week and Santos is aiming to drum up interest in a roadshow to take in Sydney, Melbourne and Adelaide. Entitlements not taken up will be offered for sale in another bookbuild on December 3.

    Fat Prophets has yet to advise its clients on whether to take up their entitlements, but analyst David Lennox said that typically if the share price was above the entitlement price, then "we would generally be comfortable" to recommend shareholders participate.

    Shareholders can buy one new share at $3.85 for every 1.7 shares they hold.

    Read more:
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    Japanese Refiners Agree to Merge as Fuel Consumption Shrinks

    Idemitsu Kosan Co. and Showa Shell Sekiyu KK signed a non-binding agreement to merge as Japan’s refiners consolidate amid declining domestic demand and a fuel glut.

    The two companies expect 50 billion yen ($407 million) of synergies by the fifth year after a deal, according to a filing on Thursday to the Tokyo Stock Exchange. The merger is expected to be completed between October 2016 and April 2017. A value for the transaction wasn’t provided.

    The memorandum of understanding isn’t binding and most details, including the method for merging, haven’t been decided. In July, Idemitsu agreed to purchase a 33.24 percent stake in Showa Shell from Royal Dutch Shell Plc for 169 billion yen. A full combination of the two would create a company with about a third of the domestic gasoline market.

    Oil demand in Japan has been declining as the nation’s population shrinks and as a shift to more energy-efficient cars prompts refiners to lower output. The government, a backer of industry consolidation, has asked for cuts in processing capacity as the U.S. boosts exports and new production redraws global gasoline and diesel trade flows.
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    Repsol Quarterly Earnings Miss Estimates After Oil Prices Tumble

    Repsol SA, Spain’s largest oil company, reported a 62 percent decline in third-quarter earnings as lower crude prices countered improved refining performance.

    Adjusted net income fell to 159 million euros ($171 million) from 415 million euros a year earlier, the Madrid-based producer said Thursday in a statement. That missed the average 201.6 million-euro estimate of 18 analysts surveyed by Bloomberg. It reported a net loss of 221 million euros after taking charges at units including gas and gas.

    Repsol last month unveiled a five-year plan to sell 6.2 billion euros of assets and cut investments by as much as 38 percent as it deals with the plunge in crude prices. The company is also integrating Talisman Energy Inc., the Canadian producer it acquired for $13 billion in May. Repsol announced more than $1 billion in asset sales in the third quarter, part of which was included in the five-year target.

    The price of Brent crude has declined more than 40 percent over the past year amid a global supply glut.

    Since the oil-market slump started in mid-2014, the lower cost of crude has boosted profits for refiners and helped companies including Repsol to buoy earnings. The company’s refining margin, a gauge of profitability, jumped to $8.80 a barrel in the third quarter from $3.90 a year earlier, according to an Oct. 14 company filing.
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    Russia's Oil Rivalry With Saudis Masks the Bigger Iranian Threat; and Ambrose, again.

    Competition is growing in Russia’s biggest oil market. While Saudi Arabia’s encroachment in Europe is getting all the attention, the biggest threat comes from another part of the Middle East -- Iran.

    The world’s largest oil exporter has started shipping crude to traditional Russian markets like Poland and Sweden, but Saudi supplies to Europe won’t increase by enough to reduce prices, said Texas-based consultant Stratfor. In contrast, a surge in Iranian exports after the lifting of sanctions could erode the value of Russian shipments to the region as soon as next year, according to KBC Advanced Technologies.

    Tougher competition in Europe, the destination for almost 70 percent of Russia’s oil exports, comes as the country is already battling recession. Oil and gas sales account for about half of government revenues and the commodity-price slump has amplified the economic blow from international sanctions over Ukraine. An increase in Iranian exports following a nuclear dealwith world powers could make matters worse.

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    “Eastern European refineries are geared to process Russian crude, the Urals blend, and the closest sort to it would be Iranian oil,” Michael Nayebi-Oskoui, senior energy analyst for Middle East and South Asia at Stratfor, said by phone. For Saudi shipments to push prices down “they would have to be significantly rerouted from Asia towards Europe, and we don’t see that happening,” he said.

    Iranian shipments to Europe came to around 600,000 barrels a day, or 17 percent of its production, before sanctions blocked imports in 2012. Once restrictions are lifted, Oil Minister Bijan Namdar Zanganeh has said the National Iranian Oil Co.’s priority will be to regain its “lost share” of the market, regardless of the impact on crude prices.

    “Iran is going to be looking at marketing fairly aggressively”, David Fyfe, head of market research and analysis at oil trader Gunvor Group Ltd., said by phone from Geneva. “They want to reclaim the foothold they previously had.”

    Former customers in southern Europe already have shown an interest in resuming purchases of Iranian oil. Hellenic Petroleum SA is “in the process of initiating a dialogue” with Iran’s national oil company, as are “most western companies,” Vasilis Tsaitas, a company spokesman, said by e-mail. Hellenic operates three of the five refineries in Greece with total capacity of 341,000 barrels a day, according to its website.

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    Core part of the Eagle Ford in the money even at the oil price below $40

    In light of the oil price drop in 2015, shale production proved to be resilient in two ways. First, operators were able to benefit from lower unit costs and higher efficiency. Second, each well's performance increased because of high grading and better completion techniques.

    Using the Eagle Ford Shale play as an example, Figure 1 shows the evolution of the average wellhead breakeven prices* from 2012 to 2015. The values are derived by studying every single well in terms of well performance, hydrocarbon content and drilling and completion cost. Back in 2012 and 2013, the average breakeven was ~$70/bbl. In 2014, the wellhead breakeven price dropped by ~10% reaching ~ $63/bbl. For 2015, the reduction is estimated to be around 25%.

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    To better understand the 2015 development of the wellhead breakeven prices, Figure 2 shows the breakdown of the price split between the two drivers, well performance and unit prices. The contribution from unit cost savings is calculated based on 2014 well parameters with 2015 cost levels. The well performance contribution is simply the difference between the breakeven price adjusted for unit cost savings and 2015's breakeven prices.

    Image titleNorth American shale plays are heterogeneous in nature, with the best areas dependent on the optimal combination of depth, thickness and thermal maturity. Therefore, the average breakeven price does not provide a good overview of the profitability of a play. In 2015, operators are focusing the development on the very core areas where breakeven prices are significantly below average. To illustrate the breakeven spreads, Figure 3 shows the wellhead breakeven oil prices for the wells put on production in 2014 and 2015 where the breakeven oil prices are calculated using the 2015 unit costs. According to the map, the best wells have breakeven prices lower than $40/bbl. The core counties include Karnes, DeWitt and part of Gonzales counties, where the main companies are ConocoPhillips, Marathon Oil, BHP Billiton and EOG Resources. ConocoPhillips is currently running three rigs in DeWitt County, where BHP Billiton has seven rigs. Marathon Oil also operates seven rigs in Karnes County. Wells located in Dimmitt and Webb counties are also considered core, where the main operators are Anadarko and Chesapeake.

    Image titleAs breakeven prices fall further in 2015, it is important to highlight that the core areas are still profitable at prices below $40/bbl. It is clear that in the Eagle Ford Shale play the high grading and unit cost savings are having a positive impact on the wellhead breakeven oil prices. The wellhead breakeven oil price has fallen around 25% in 2015 compared to 2014. This also explains why shale focused companies are more resilient towards the low oil price environment.

    * Required oil price to achieve a type-well NPV of 0. It is assumed that condensate price is the same as oil price, NGL price is constant at $36/boe and gas price is constant at $3/kcf.

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    Anadarko confirms Apache rejected all-stock buyout offer

    Anadarko confirms Apache rejected all-stock buyout offer

    Anadarko Petroleum Corp confirmed that it had offered to buy oil producer Apache Corp in an all-stock deal, but the offer had been rejected without discussions.

    Apache shares fell 6 percent in premarket trading on Wednesday, while Anadarko shares rose 2 pct.

    "We are unwilling to pursue the transaction without access to detailed non-public information, and based on our analysis, which shows that Apache appears to trade at or near full value currently, the offer was withdrawn," Anadarko Chief Executive Al Walker said in a statement.

    Media reported on Tuesday that Apache had rejected an offer from Anadarko.

    The offer, which included a "modest" premium, would have been "highly" accretive to Anadarko on a cash flow per-share basis even before synergies, Anadarko said on Wednesday.

    Some analysts expect a consolidation in the U.S. shale industry as companies struggle against a prolonged slump in crude prices.

    However, there have few major deals among exploration and production companies so far due to a big difference between what buyers are willing to pay and what sellers demand.

    Read more at Reuters
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    Kogas LNG imports down in Jan-Sep

    South Korea’s Kogas said its LNG imports dropped 14 percent in the first nine months of this year due to a decline in domestic sales.

    The worlds’ largest corporate buyer of LNG said in a report on Tuesday it imported 22.91 million mt of the chilled gas in January-September, compared to 26.61 million mt it imported last year.

    Domestic sales fell 7.6 percent to 23.19 million mt of LNG in the period, according to the report.

    Sales into the power sector were at 11.03 million mt, down 10.5 percent, while the company’s city gas sales dropped 4.8 percent on year to 12.14 million mt.

    Most of the LNG supply was imported under 16 long-term and 3 mid-term contracts from 10 countries around the world.

    The Korean company currently operates 64 storage tanks in 4 LNG receiving terminals.

    Kogas received the first cargo of LNG from the Santos-operated US$18.5 billion GLNG project in Australia on October 27.

    The MISC-operated 152,300 cbm Seri Bakti delivered the chilled gas to Kogas’ Pyeongtaek LNG import terminal.

    Kogas said in the report it is expecting  to receive 9 LNG cargoes from the Australian project this  year, and 78 cargoes in 2016.

    The company has a 15 percent stake in the LNG project located on Curtis island off Gladstone.

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    Rex Energy 3Q15: $95M Paper Loss, 1st Utica Well Online, Prod Up 15%

    Rex Energy and Eclipse Resources are really like two peas in a pod. The people who founded Eclipse, which is shopping itself, are former Rex Energy people.

    Both companies are pure play, concentrating on the Marcellus/Utica, and both companies are headquartered in State College, PA.

    On Monday Rex Energy issued its third quarter 2015 update. The company lost nearly $95 million for 3Q15–but the entire thing was a paper loss, writedowns for the value of their assets because the price of natural gas took a nosedive.

    Production for the company was up 15% in 3Q15 over the same period a year earlier. Some of the biggest news we spot in the update is that Rex has been able to squeeze the costs all the way down to $5.2 million per Marcellus well they drill.

    Also big news: Rex put into production their very first Utica Shale well, drilled in Lawrence County, PA.
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    Petronas Q3 earnings tumble 87% to RM1.4b

    It's a tough period for the oil and gas sector and Petroliam Nasional Bhd is feeling it for its third quarter results.

    Its president and CEO Datuk Wan Zulkiflee Wan Ariffin said on Wednesday: "Tough times are here to stay."

    "Moving forward, with the outlook on the oil and gas sector still uncertain, we must focus on adapting more prudent approaches to our cash management and materialising internal efficiency measures."

    Due to higher asset impairments and net foreign exchange loss on US dollar borrowing, its net profit plunged 87% to RM1.4bil for the third quarter ended Sept 30, 2015 from RM11.1bil in the previous quarter.

    During the quarter, Brent crude was trading at an average of US$50.26 per barrel, which shed about a-fifth from the previous quarter.

    Meanwhile, revenue slipped 2% to RM60.1bil from the previous quarter.

    Compared to the same quarter last year when Brent crude averaged at US$101.85 per barrel, revenue declined by a quarter from RM80.1bil while net profit loss 91% from RM15.1bil.

    Wan Zulkiflee said the company was going to focus more on its downstream businesses and projects that would provide cash flow in the near-term.

    In line with that, the company could be relocating its human resources to the downstream segment as activities in that area is expected to grow.

    He said the company was not right-sizing the number of its permanent staff despite the 200,000 job cuts announced in the industry globally.

    He added that the company remained committed to its capital expenditure projects including the Refinery and Petrochemical Integrated Development, the Pacific North West LNG project in Canada, the LNG Train 9 in Bintulu and the two Petronas floating LNG projects being constructed in Korea.

    The oil and gas giant allocates RM350bil for its capex in the next five years.

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    More Crude heading for Texas.

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    Argentine Court Orders YPF to Reveal Details of Chevron Pact

    YPF SA will have to fully disclose its pact with Chevron Corp. to develop shale oil in northwestern Patagonia, Argentina’s highest court ruled.

    By a 3-1 vote, court justices ruled Tuesday in favor of a request filed by Senator Ruben Giustiniani, who is seeking information on contractual clauses in the $16 billion joint venture, the largest shale investment outside the U.S. Giustanini, from the Socialist party, unsuccessfully tried to get the information from YPF.

    In July 2013, the world’s third-largest oil company signed an accord with Argentina’s state-controlled producer to invest an initial $1.6 billion in a pilot operation that a year later turned Chevron into the largest foreign producer of shale oil in the country. After drilling 170 wells in the Vaca Muerta formation, the world’s second-largest shale gas deposit and fourth-largest shale oil reservoir, both companies extended the venture under a 35-year concession. It’s producing about 50,000 barrels of oil equivalent a day.

    Details of the pact were never revealed despite requests from environmentalists who sought information on the impact of hydraulic fracturing in the area.

    The three concurring justices said they based their decision on the right to access information and the fact that YPF is majority owned by the government.

    YPF will comply with the ruling, the company said by e-mail. Isabel Ordonez, a Chevron spokeswoman, couldn’t immediately comment.

    "Environmental concerns while the shale play is still in its infancy in Argentina will slow development, preventing it from reaching the scale needed to develop more efficiencies," Gurpal Dosanjh, a Bloomberg Intelligence analyst, said in an e-mailed statement.
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    Colombia Oil Output Seen Slumping Below Target as Drilling Slows

    Colombia’s oil production is set to fall below 1 million barrels a day next year as exploration collapses and major fields age, the head of the country’s oil association said.

    Producers drilled 19 exploratory wells during the first nine months of 2015, down from 80 in the same period last year, said Francisco Lloreda, president of the association. The decline threatens a government target of 1 million barrels a day through 2022.

    “It will start to be below 1 million barrels” next year, Lloreda said in an interview in his Bogota office. “Exactly when, we can’t say.”

    Producers in Colombia including state-controlled Ecopetrol SA and Pacific Exploration & Production Corp. have cut exploratory spending this year amid the slump in global oil prices. The potential implications of reduced exploratory activity in Colombia are significant, given the Andean nation’s reserve life of 6.4 years at the end of 2014.

    “We have a larger challenge than other countries because we have limited reserves,” Lloreda said. “We need to incorporate more barrels and this is done with intelligent exploratory activity.”

    A series of government measures this year has helped companies overcome the initial impact of the fall in oil prices, although more will be needed if Colombia is to attract continued foreign investment, according to the association.

    “We believe that the government take is very high at the moment,” Lloreda said of the portion of oil revenue the government takes from concessions. “It isn’t that competitive compared to other countries. It’s a government take that varies between 70 and 75 percent, and it needs to be reduced.”

    The Colombian government will present a structural tax reform to Congress in March, Finance Minister Mauricio Cardenas said Monday.
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    U.S. Lowers 2016 Crude Output Forecast as Drillers Idle Rigs

    The Energy Information Administration cut its U.S. crude production outlook for next year as declining prices are prompting shale drillers to put rigs aside. Cheaper gasoline is expected to stoke demand for the motor fuel.

    The agency decreased its 2016 forecast by 1 percent to 8.77 million barrels a day, according to its monthly Short-Term Energy Outlook. It boosted its estimate for this year to 9.29 million barrels a day from the 9.25 million predicted last month.

    America’s oil drillers have sidelined more than half the country’s rigs since October as prices have tumbled. The number of active oil rigs in the U.S. has fallen by 103 in the past 11 weeks to 572, the least in five years, according to data compiled by Baker Hughes Inc.

    "Total oil production from non-OPEC countries is expected to decline next year for the first time since 2008, because of lower oil output in the United States," EIA Administrator Adam Sieminski said in an e-mailed statement.

    Brent crude, the benchmark for more than half the world’s oil, is projected to average $56.24 next year, down from the prior estimate of $58.57.

    Gasoline at U.S. pumps will average $2.43 a gallon in 2015, up from last month’s estimate of $2.42. Retail prices are projected to drop to $2.33 next year, down from last month’s projection of $2.46.

    Low prices that curb drilling are also bolstering U.S. fuel demand, according to the report. American gasoline use is projected to climb 2.1 percent to 9.11 million barrels a day this year. Consumption is projected to rise an additional 0.1 percent in 2016.

    "U.S. gasoline demand this year is on track to be the highest since record levels were set in 2007, due in large part to low pump prices and more people working," Sieminski said.

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    Anadarko, Apache shares fall amid takeover report

    Shares of Anadarko Petroleum fell on Tuesday after a report surfaced that the company had approached Apache about a possible takeover deal.

    Apache rejected the initial proposal, according to a Bloomberg report. It is working with Goldman Sachs on other options, according to unnamed sources in the report.

    According to Bloomberg, "the combination would be the largest deal for an independent oil and gas producer in the U.S. this year."

    Shares of Anadarko were down nearly 6 percent after being temporarily halted, while shares of Apache dropped more than 3 percent.
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    El Nino Will Keep Energy Stocks Cool This Winter

    The strongest El Nino weather system in almost two decades, combined with the warmest temperatures in four years, will mean a relatively warm winter in the Midwest and on the East Coast, keeping a lid on energy prices and potentially capping stock prices for companies that produce natural gas.

    This year's El Nino, which occurs when Pacific Ocean waters are unusually warm, will be the strongest since the winter of 1997-1998, says Matt Rogers, a meteorologist at Commodity Weather Group in Bethesda, Maryland. Temperatures are expected to be the warmest, on average, since the winter of 2011-2012, he said.

    While those who like outdoor activities should enjoy the warmer weather, it doesn't bode well for companies that provide natural gas, such as Chesapeake Energy Corp. (CHK) and Cabot Oil & Gas Corp. (COG), which already are facing near-record reserves.

    "There's no question the warmer weather is going to effect the energy sector," says Jason Wangler, a managing director at Wunderlich Securities in Houston. "It's another leg down for the space that comes at the worst time possible."
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    Monster Dry Gas Utica Wells Changing the Picture in the NE

    While Marcellus natural gas production will slide again for the third month in a row according to the latest EIA Drilling Productivity Report, Utica natural gas production continues to climb. 

    One important note: Utica production, while climbing month after month, is still just a fraction of Marcellus production (about 20% of Marcellus production). 

    The Utica may challenge the Marcellus as reigning champ of natgas production. Will/can the Utica actually produce as much or more natural gas as the Marcellus some day? It’s not out of the realm of possibility. How can that be? It all has to do with monster dry gas Utica wells…
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    EIA: Permian Basin output still growing, but other top shale plays to fall

    New federal data shows that the Energy Department expects drillers in the Permian Basin to push oil production in the shale play above 2 million barrels per day for the first time ever this November.

    The U.S. Energy Information Administration’s monthly Drilling Productivity Report released Monday, which covers seven of the biggest shale plays in the country, projects production in the Permian to jump by 17,000 bpd this month. That increase would bring the play above the 2 million bpd mark. In December, the EIA expects the play to grow again by 11,000 bpd.

    But the Permian is one of the outliers — the only other play expected to grow over the next two months is the Utica in the Appalachian region. Combined with the other five plays — the Eagle Ford, Bakken, Haynesville, Marcellus and Niobrara plays — oil output overall is projected to fall to 4.95 million bpd the end of the year. That would be a fall of nearly 560,000 bpd from an April 2015 peak of 5.51 million bpd.

    The Eagle Ford in South Texas has had the biggest impact on overall U.S. production growth. The EIA projects output in the Eagle Ford to fall 436,000 bpd by December from a peak of 1.71 million bpd in March.

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    Iran Plans Natural Gas Exports With First Working FLNG

    Crippling E.U. and U.S. export sanctions on Iran may be lifted next year in exchange for compliance with July's nuclear accord, and Iran is already making plans for exports of oil – and natural gas.

    “A memorandum of understanding has been signed with a respectable German company which possesses the technology to build LNG tankers. Preliminary accords have also reached with several South Korean and Chinese firms,” said Esmaeil Sadeqi, an Iranian project manager, speaking to a media source.

    Iran has existing shipyard facilities capable of handling large vessels, including two drydocks sized appropriately for VLCCs and VLNGs. Under the MOU, the technology transfer for sophisticated VLNG construction would come from foreign partner firms.

    Separately, Iranian media reported November 9 that Minister of Petroleum Bijan Zangeneh is in discussions with Belgian Secretary of State for Foreign Trade Pieter De Crem regarding a partnership with Belgium’s Exmar. Under the agreement, Exmar would supply Iran with what would be the world’s first functioning Floating Liquified Natural Gas (FLNG) barge.

    “If the two sides show flexibility and technical and economic negotiations bear results, [the Belgian side] will bring FLNG facilities to the Kharg region in not a distant time and Iran will begin producing LNG for the first time,” he said.

    Iranian oil output is already in the range of 2.8 million bpd, analysts say, with the possibility of more than a million more bpd by the end of 2016. Once the nation puts this output on the saturated global market, prices could fall still further below the current $50 Brent crude range. And now it appears set to do the same in the well-supplied LNG market as well.

    While rival gas exporter Qatar has already secured a lucrative market in Asia, Iran's LNG sales strategy is focused on Europe. The E.U. would benefit for both economic and strategic reasons; Europe gets the majority of its natural gas from Russia via pipeline, and Russia has been known to restrict supply as a way of exerting diplomatic pressure.

    Media reports indicate that Iran has preliminary agreements with Spain as its primary gateway to the European market. The peninsula has the largest LNG receiving terminal capacity in Europe, and is planning an expansion of its pipeline connections to the E.U. gas grid.

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    Rout-Proof Oil Dividends Under Scrutiny as Small Companies Crack

    Europe’s biggest energy companies are doing everything they can to keep paying dividends. If their smaller peers are anything to go by, they’re fighting a losing battle.

    Companies such as Royal Dutch Shell Plc, Total SA and BP Plc have reduced spending, sold assets and even issued scrip dividends in lieu of cash to keep shareholders happy in the midst of the worst oil rout in over a decade. While the larger operators have largely succeeded in keeping payouts intact, smaller players are starting to show the strain.

    Amec Foster Wheeler Plc and Prosafe SE were the latest of at least five energy companies to reduce or cut their dividends in the past month, spurring declines of at least 14 percent in their shares. Some investors worry bigger operators will be unable to avoid that fate unless oil prices recover.

    “Probably not every company will succeed,” said Dirk Thiels, head of investment management at KBC Asset Management in Brussels. “It has to be proven that they can keep their dividends so that’s still a concern to us.”

    Amec slumped by the most on record on Thursday after the oil-and-gas engineering company said it would halve its dividend as low oil prices erode earnings. The same day, Norwegian rig provider Prosafe suspended its payouts. Marathon Oil Corp. recently reduced its payout by 76 percent, while Noble Corp., an oil-drilling services provider, said it will cut as it seeks to free up cash. Husky Energy Inc.’s shares fell to the lowest in a decade Oct. 30, after the Canadian oil producer said it would start paying its dividend in stock.

    The biggest seven integrated oil companies in the Stoxx Europe 600 Index have reduced their total dividend payments by 12 percent this year to $33.4 billion, even as oil tumbled 18 percent, and are forecast to keep payouts unchanged in 2016, data compiled by Bloomberg show. Although they are now also conserving cash by giving shareholders the option of taking payment in stock, Shell and BP are still among the most generous to investors, paying out $12 billion and $7.3 billion, respectively.

    Generosity comes at a price. Energy companies including Total and BP have announced cutbacks of $180 billion this year, the most since the oil crash of 1986, according to Oslo-based energy consultant Rystad Energy AS. BP lowered its 2015 capital-spending forecast to about $19 billion from $23 billion in 2014, and plans to sell $10 billion of assets by year-end, all the while keeping dividends unchanged. Repsol SA, Spain’s largest oil company,plans to sell 6.2 billion euros ($6.7 billion) of assets and cut investments.

    “It’s ridiculous to protect dividends when oil is under siege and the bottom is not in sight,” said David Tawil, a co-founder of New York-based Maglan Capital LP. “In a time of industry flux, as an equity holder, I’d prefer to see my company preserving capital and finding great bargains in the forced sale of assets by distressed peers. That is likely to be a much better return-on-capital expenditure than an equity dividend.”

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    Brazil's Petrobras, union strike talks fail, risk of fuel shortage rises

    Brazil's Petrobras and unions failed to reach an agreement on Monday over worker demands that the state-run oil company reverse budget cuts and cancel assets sales aimed at trimming its massive debt, union and company officials said.

    The week-old strike, already the biggest in 20 years, now risks an impasse that could hurt domestic fuel supplies and further hobble a company already under financial pressure and the fallout from a corruption scandal.

    "Our demands are not for salaries, but in defense of national sovereignty and that the company goes back to being the impulse for development of the country," FUP, the country's main oil-union federation said late Monday.

    Combined with a growing truckers strike, the Petrobras walkout could further harm a Brazilian economy already struggling with its worst recession in decades.

    The two sides plan to meet again on Tuesday. A Petrobras official with direct knowledge of the talks told Reuters on Monday the company expects an agreement by the end of the week.

    "There is still no deal, but the unions better understand the company's economic situation," said the official, who asked not to be identified because the talks are private.

    While FUP is asking for an 18 percent salary increase, more than double the country's inflation rate, union officials say their demands to reverse nearly $100 billion in budget cuts and stop plans to sell oil fields and a stake in its distribution unit are more important.

    Without the sales and budget cuts Petrobras will have trouble paying its more than $130 billion of debt, the largest in the oil industry, the company says.

    Since the strike began, Petrobras said on Monday, it has held output cuts to about 115,000 barrels a day in Brazil, or about 5.5 percent of pre-strike production, thanks to management and contingency plans.

    FUP, though, says Petrobras' estimate is low and that as much as 400,000 barrels a day are affected. Companies, particularly on-shore independents, say Petrobras, one of the main buyers of non-Petrobras output in Brazil, has been unable to honor purchase contracts due to strike activity at terminals.

    FUP members and members of the rival FNP oil workers confederation are on strike at 12 of Petrobras' 13 Brazilian refineries. In the past Petrobras officials have said they can maintain refinery output for about 10 days without major output drops and the need to use up fuel stocks.

    Read more at Reuters

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    Oil tankers queueing in U.S. Gulf seen as new symbol of glut

    A traffic jam of oil tankers has emerged along the U.S. Texas coast this month, a snarl that some traders see as the latest sign of an unyielding global supply glut.

    More than 50 commercial vessels were anchored outside ports in the Houston area at the end of last week, of which 41 were tankers, according to the Houston Pilots, an organization that assists in the navigation of larger vessels in and around port areas. Normally there are between 30 to 40 vessels anchored offshore, of which two-thirds are tankers, according to the pilots.

    Although the channel has been shut intermittently due to fog or flooding in recent weeks, pilots said those issues were not significant enough to create the backlog.

    "It's not because of a lack of pilots or tug boats," according to JJ Plunkett, a Port Agent with the Houston Pilots.

    As of Nov. 6, more than 20 million barrels of crude were sitting in vessels anchored outside the U.S. Gulf Coast waiting to discharge, double the volume that typically discharges each week, according to Matt Smith, Director of Commodity Research at ClipperData.

    "We're seeing ships idling off the coast of China, Singapore, (the) Arab Gulf, and now the U.S. Gulf. It appears that the glut of supply in the global market is only getting worse," Smith said.

    Oil traders in the U.S. cash market pointed to everything from capacity constraints at Gulf Coast storage tanks to a lack of buyers for the imported barrels.

    While U.S. data show Gulf Coast inventories hit a record 251.7 million barrels just over a week ago, major facilities at Corpus Christi, Houston, the Beaumont-Nederland area, and St. James, Louisiana, were still barely two-thirds full at the end of October, according Genscape data.

    Several traders said some ships may have arrived without a buyer, which can be hard to find as ample supply and end-of-year taxes push refiners to draw down inventories.

    Read more at Reuters

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    Ineos signs ethane deal for Fife plant with Exxon Mobil and Shell

    Ineos has signed a deal with Exxon Mobil and Shell to secure ethane from US shale gas for the Fife Ethylene Plant (FEP) at Mossmorran.

    Under the agreement, the plant will receive ethane from Ineos' new import terminal in Grangemouth from mid-2017.

    Ineos said the new source of feedstock would complement supplies from North Sea natural gas fields and help secure skilled jobs "in the long run".

    FEP is owned and run by Exxon Mobil, while Shell has 50% capacity rights.

    The plant is one of Europe's largest ethylene facilities, with an annual capacity of 830,000 tonnes.

    'Landmark agreement'

    Ethane gas is vital in the production of ethylene, which is used to manufacture a broad range of products.

    Geir Tuft, business director at Ineos O&P UK, said: "This is a landmark agreement for everyone involved.

    "We know that ethane from US shale gas has transformed US manufacturing and we are now seeing this advantage being shared across Scotland."

    Elise Nowee, from Shell Chemicals, added: "This agreement gives FEP access to the new infrastructure developed by Ineos and in so doing brings US-advantaged ethane to FEP.

    "The agreement will help us to meet the long-term needs of our ethylene customers."
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    Qatar sells BG/Shell stake

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    UAE pressing ahead with oil expansion, betting on price recovery

    United Arab Emirates, one of the wealthiest Gulf states, is pushing ahead with large new energy projects, betting an oil price recovery will start as early as next year as demand begins to absorb the global glut.

    "These are times of some hesitancy, times of pain for some ... But pain is not new ... We will pass it stronger," energy minister Suhail Al Mazrouei told the UAE's biggest annual oil show in Abu Dhabi.

    "That (oil price drop) didn't change the vision of the UAE ... We are not cancelling projects," he added.

    Oil prices crashed after Saudi Arabia and Gulf allies the UAE, Kuwait and Qatar enforced a decision by the Organisation of Petroleum Exporting Countries (OPEC) to fight for market share with rival producers, abandoning a decade-old policy of cutting output to prop up prices.

    Prices have more than halved over the past 18 months, and OPEC itself sees the current oil glut persisting well into next year, prompting even the wealthiest OPEC members, like Saudi Arabia, to revise some field development plans.

    Low prices have also slowed some non-oil projects in the UAE, including the opening of a huge new Louvre museum, while others such as the Abu Dhabi film festival have been canceled.

    But officials insist that projects in key sectors such as energy, defence and infrastructure continue as planned.

    On the energy side, the country is pushing ahead with a plan to raise its oil production capacity to 3.5 million barrels per day from the current 3 million within the next two to three years, the head of the national company ADNOC Abdullah Nasser al-Suwaidi said. The UAE is currently producing 2.9 million bpd.

    Some $35 billion worth of investments will flow into offshore exploration after decades of investments into onshore, he said.

    The UAE is hoping the lion's share of its energy needs will be covered with rising gas production by 2021, while around a third of energy needs will be met with nuclear and solar projects, said Al Mazrouei.

    He added the UAE, as part of OPEC, could not afford losing market share by cutting back on supply, suggesting continued support for the OPEC strategy to fight for market share through higher output and lower prices.

    "I'm not regretting this decision. We like that decision," he said while declining to predict the outcome of the OPEC meeting in December.

    As the markets have began to rebalance, global oil prices will start an upward correction in 2016, Al Mazrouei said. "I wouldn't call it a crisis. I would call it a cycle ... I'm optimistic. Next year will be a year of correction".

    Read more at Reuters

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    Gulfport Energy 3Q15: Shuts-in 100 Mmcf/d of Production

    Gulfport Energy, a major Utica Shale driller, released their third quarter 2015 update last Thursday and held an analyst conference call on Friday. Among the things we learn from their public statements: in all categories (natural gas, oil, NGLs), Gulfport’s production was up dramatically from the same quarter a year ago.

    However, the price the company gets for those commodities is down rather dramatically. The company experienced a major paper loss for 3Q15 due to write-downs on the value of its assets (because of low prices).

    Gulfport announced it will “voluntarily curtail” 100 million cubic feet equivalent per day (MMcfe/d) of production beginning November 1, 2015 through early 2016, due to low prices. Better to wait and sell it later at a higher price. They’re also going to forgo a fifth drilling rig in the Utica, planned to start up in 2016.

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    Marathon Oil Signs Agreement for Divestiture of Gulf of Mexico Assets

    Marathon Oil Corporation announced today that the Company has signed an agreement for the sale of its operated producing properties in the greater Ewing Bank area and non-operated producing interests in the Petronius and Neptune fields in the Gulf of Mexico for $205 million.

    The buyer will assume all future abandonment obligations for the acquired assets. These assets represent a majority of the Company’s operated and non-operated producing properties in the Gulf of Mexico. The effective date of the transaction is Jan. 1, 2015. Closing is expected before year end.

    Marathon Oil will retain its interests in certain other producing assets and acreage in the Gulf of Mexico, as well as its interests in the Gunflint development and Shenandoah discovery.
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    Sanchez Energy reports 3Q loss

    Sanchez Energy Corp. on Monday reported a third-quarter loss of $416.9 million, after reporting a profit in the same period a year earlier.

    On a per-share basis, the Houston-based company said it had a loss of $7.33. Losses, adjusted for one-time gains and costs, came to 49 cents per share.

    The results exceeded Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for a loss of 61 cents per share.

    The independent oil and gas company posted revenue of $114.5 million in the period, missing Street forecasts. Four analysts surveyed by Zacks expected $135.3 million.

    Pro forma liquidity of approximately $842 million as of September 30, 2015, consisting of $197 million in cash and cash equivalents, approximately $345 million of cash proceeds from the Western Catarina Midstream Divestiture and an elected borrowing base commitment of $300 million
    Average drilling and completion costs (including facilities) at Catarina of $4.1 million per well during the third quarter 2015
    South-Central Catarina wells exceed expectations, with average 30-day rates of greater than 1,300 BOE/D and estimated ultimate recoveries tracking to nearly double the 600-700 MBOE Western Catarina type curve
    A total of 41 wells drilled toward the Company's 50 well annual drilling commitment at Catarina for the period July 2015 to June 2016, with the Company expecting to fulfill this commitment by year-end 2015
    Fourth quarter 2015 production guidance of 48,000 to 52,000 BOE/D, an increase of 2,000 BOE/D over the third quarter 2015 production guidance
    In 2016, Sanchez Energy will have 18,000 BBL/D of crude and 39 MMCF/D of natural gas hedged
    A borrowing base of $500 million recommended by the lead agent on the Company's bank credit facility, with final approval of that borrowing base anticipated in the next few weeks with no change expected to the elected commitment amount
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    Tanker ship futures market booms as rates rally

    The market for hedging oil tanker freight has revived sharply this year to a value of $4.5 billion after years of torpor, with ship owners looking to profit from a freight rally and more energy companies scramble to cover risk, industry sources say.

    Cheap oil bargain hunters after the price drop and refineries, which have been operating at unusually high levels to meet rising demand, have helped tanker markets experience their best earnings in years after a long period of losses.

    Rates for crude supertankers have soared in recent weeks to over $100,000 a day - their highest since 2008.

    In tandem, tanker freight forward agreements (FFAs), which allow a buyer to take a position on where freight rates will stand at a point in the future, have seen a surge in activity.

    "A lot of oil majors are under a lot of pressure," said Jay Lovell, chair of the FFA tanker brokers' association.

    "They have to be seen hedging any kind of assets that they have ... that is why you are seeing a lot more driven volumes coming through from oil majors these days," said Lovell, head of tanker FFA trading with leading broker Braemar ACM.

    In the year to date, the value of the FFA tanker market - which includes both crude and oil products segments - reached over $4.5 billion, versus $3.2 billion for 2014 and $3.2 billion in 2013, according to market estimates.

    Oil majors including BP, Phillips 66 and Statoil plus trade houses Glencore, Trafigura, Vitol and Gunvor are active in tanker FFAs.

    Traded volumes for crude tanker FFAs have doubled to 106,660 lots in the year to date from 51,257 lots in 2014 and 35,990 lots in 2013. Products tanker FFAs reached 132,761 lots so far this year versus 129,899 last year and 143,094 lots in 2013, Baltic Exchange data showed. The Baltic acts as a benchmark for the FFA tanker market.

    Lovell said in the past six months, 20 new participants had joined the FFA tanker market - some returning after being absent for years due to slower activity at that time.

    Lower oil prices have meant marine bunker fuel costs, that make up a large part of a ship's expenses, have dropped. That helps bottom lines and also adds to more speculative activity, brokers said.

    Glenn Huniche, FFA trader with Maersk Tankers and chair of the advisory FFA tanker users' group, said investments in shipping by private equity houses and hedge funds in recent years were adding to the flows, while tanker owners were also taking more punts.

    "That is something that is going to be game changing in the years to come," Huniche said, ahead of the annual FFA tanker forum in London this week.

    "With the upturn, conventional (tanker) owners are coming back with money in their pockets - and that can be used in instruments like this."

    Read more at Reuters

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    Pakistan says finalises 15-year, $16 bln LNG deal with Qatar

    Pakistan has finalised a 15-year, $16 billion liquefied natural gas (LNG) deal with supplier Qatar and shipments are expected to begin next month, Pakistani energy minister Shahid Khaqan Abbasi said on Monday.

    The amount is 1.5 million tonnes per year, the minister told Reuters on the sidelines of an Asian ministerial energy roundtable in the Qatari capital Doha.

    The two sides have agreed a price, he said without elaborating.

    "We have finalised the deal. The first shipment is expected in December," he said.

    "We are hopeful for similar deals in the future."

    Read more at Reuters
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    Maersk Oil says new African licences relatively resilient to low oil price

    Maersk Oil, a unit of shipping conglomerate A.P. Moller-Maersk, said its planned new investments in exploration in Africa are low cost and should make them relatively resilient to weak oil prices.

    The cash-rich Danish company said earlier on Monday it will pay $365 million upfront to buy 25 percent stakes in three licences owned by Africa Oil Corporation in Kenya as well as a 25 percent stake in an exploration licence in Ethiopia and a 15 percent stake in another Ethiopian licence.

    "(These licences) have potential for oil production with relatively low technical costs and (will be) resilient to low oil prices," Maersk Oil's Chief Executive Jakob Thomasen told Reuters.

    Shares in Toronto- and Stockholm-listed Africa Oil Corporation soared 33 percent on the news on Monday while shares in Tullow Oil, which operates and controls 50 percent of four of the licences, jumped 15 percent, indicating investors believe Maersk Oil has paid a high price.

    Maersk Oil has agreed to pay future contingent payments of up to $480 million to Africa Oil for the Lokichar Project in northern Kenya and southern Ethiopia, depending on the size of the resource after final appraisal and the agreed timetable for the first oil production.

    Thomasen said oil has been found in eight areas covered by the licences and production is expected to begin at the start of the next decade.

    Maersk Oil was also still looking for opportunities to buy more North Sea interests, he said.

    As the oil price has halved since the middle of last year, oil firms have shelved $200 billion worth of spending on new projects since mid-2014, according to oil consultancy Wood Mackenzie.

    Read more at Reuters
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    Canadian Natural Resources and PrairieSky Royalty Announce Combination of Royalty Businesses

     Pursuant to the Combination Agreement, Canadian Natural and PrairieSky have agreed that PrairieSky will acquire a substantial portion of Canadian Natural's royalty assets representing approximately 6,700 boe/d or 81%, of Canadian Natural's royalty volumes (the "Assets"), for an aggregate purchase price of $1.8 billion, consisting of $680 million in cash and the issuance of approximately 44.4 million PrairieSky common shares (the "Share Consideration"). The Assets consist of approximately 5.4 million acres of royalty lands throughout Western Canada, including 2.2 million acres of fee simple mineral title land. The effective date of the Transaction is October 1, 2015 with closing expected prior to year-end 2015.

    Under the terms of the Combination Agreement, Canadian Natural has agreed with PrairieSky to distribute to its shareholders, by no later than December 31, 2016, by way of a dividend or return of capital (subject to regulatory approval and securities and tax regulations) sufficient PrairieSky common shares so that Canadian Natural, after such distribution, owns less than 10% of the issued and outstanding shares of PrairieSky.

    Canadian Natural's current intention is to distribute to its shareholders, by way of a dividend or return of capital (subject to regulatory approval and securities and tax regulations), the majority of the Share Consideration, at or near its next Annual and Special Meeting of Shareholders in May 2016. This will provide Canadian Natural shareholders with the opportunity to participate directly and indirectly in the combined royalty business of PrairieSky.

    Canadian Natural will allocate $680 million from the purchase price to the balance sheet through the application of the proceeds to the reduction of bank credit facilities increasing its undrawn bank lines of credit from $3.4 billion to $4.1 billion and decreasing its debt to book capitalization from approximately 38% to approximately 36% (all figures pro forma September 30, 2015).

    Canadian Natural expects to record an after-tax gain on disposition of approximately $700 million, based upon preliminary value allocations. The final determination of the gain on disposition will depend upon the value of PrairieSky common shares at the time the Transaction closes.

    This Transaction does not impact previously released Canadian Natural production or cash tax guidance.

    In conjunction with the Transaction, PrairieSky has entered into binding commitments with certain investors for an aggregate $680 million non-brokered private placement subscription receipt financing (the "Private Placement"), which is described in further detail below. The Private Placement is subject to customary closing conditions including receipt of applicable regulatory approvals and is expected to close on or about December 2, 2015.
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    Obama ends seven-year saga: rejects TransCanada’s Keystone XL pipeline

    US President Barack Obama has rejected Canadian energy giant TransCanada’s application to build the Keystone XL pipeline, capping this way a seven-year saga that became one of the biggest environmental flashpoints of his presidency.

    The decision, announced in a media brief this morning, comes on the heels of the rejection ofTransCanada's request to pause the review of the proposed Keystone XL oil pipeline, a decision expected to lead to the project's rejection by the Obama administration.

    Addressing the media, Obama said the pipeline would not have made a meaningful longterm contribution to the US economy. He also said it would not have made any significant job contribution as their proponents claimed (fast-forward to minute 50):

    Obama also noted the pipeline would not lower gas prices for American consumers because gas prices have already been falling.

    America is now a global leader when it comes to taking serious action to fight climate change. Frankly, approving this project would have undercut that leadership

    The president spoke about the benefits of alternative energy sources: "America is now a global leader when it comes to taking serious action to fight climate change. Frankly, approving this project would have undercut that leadership…America has cut our total carbon pollution more than any other country on Earth."
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    Apache Said to Get Takeover Approach for $18 Billion Company

    Apache Corp., the oil and natural gas company worth more than $18 billion, has received an unsolicited takeover approach, according to people familiar with the matter.

    The Houston-based company rejected the initial offer and is working with financial adviser Goldman Sachs Group Inc. on defense, said the people, who asked not to be identified because deliberations are private. The potential buyer, who could not immediately be identified, sent a letter to Apache in the past few weeks and it’s unclear whether talks will resume, one of the people said.

    A spokesman for Apache couldn’t immediately be reached for comment outside of regular business hours. A representative for Goldman Sachs declined to comment.

    Apache on Nov. 5 reported a smaller-than-expected adjusted loss and boosted its 2015 production forecast. It’s one of the biggest leaseholders in the Permian Basin in western Texas, the largest U.S. shale play and the only one where oil output has continued to grow even as drillers slash spending and idle rigs. It also explores in Egypt, the Gulf of Mexico, Canada and the Eagle Ford and Woodford shale basins in the U.S.

    A deal for Apache would be the largest for an independent oil and gas producer in the U.S. this year. Noble Energy Inc. bought Texas shale driller Rosetta Resources Inc. for $3.9 billion, including assumed debt, in an all-stock transaction in July.

    Apache’s shares have fallen 54 percent from their 2014 peak as crude prices have crashed amid a global supply glut. It’s part of a larger sell-off in exploration and production companies, with an S&P index of 17 drillers down 28 percent in the past year. The shares closed at $47.67 on Friday in New York.

    A high-flying producer during the shale boom of the 2000s, it has chronically under-performed in recent years, largely due to bad bets on major projects in Argentina and Australia that didn’t pan out. Apache, which appointed a new chief executive in January, has been selling off lackluster properties in Texas and Australia.

    Apache had a net loss of about $5.7 million in the third quarter, compared with a net loss of about $1.3 million a year earlier, according to its latest earnings report. The company has cut it its 2015 capital budget by more than 60 percent from a year earlier, according to an investor presentation in September.
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    Santos Raising Takes Australian Oil Share Sales to 6-Year High

    In the Australian energy industry, selling billions of dollars of shares, even at a significant discount, beats accepting low-ball offers from predators.

    Australia’s oil producers and utilities are on track to sell almost $5 billion in new shares this year, the most in at least six years, as they seek to shore up balance sheets amid the rout in oil prices, according to data compiled by Bloomberg. Santos Ltd., which last month rejected a $5.2 billion takeover bid from Scepter Partners,said Monday that it plans to sell about A$3 billion ($2.1 billion) in stock.

    “If this was the bottom of cycle you would expect a lot more M&A, but what we’re seeing is more of these types of deals, companies raising equity,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said by phone. “There seems to be a big disconnect between what buyers are willing to pay and what sellers want to get.”

    Santos and Origin Energy Ltd. are starting two separate liquefied natural gas projects on Australia’s east coast at a time when oil -- and the companies’ share prices -- are sliding. Oil’s decline of more than 40 percent over the past year is cutting revenue for the gas-export projects whose contracts with Asian buyers are linked to the price of crude.

    The collapse in oil prices came just as $60 billion in new export projects were due to start up in Queensland. With much of the construction funded by debt, the balance sheets of Santos and Origin were doubly stretched. Santos’s net debt blew out to A$8.6 billion as of June 30 from A$616 million three years before, Origin’s climbed to A$11.6 billion from A$5.5 billion.

    Santos’s project started output in September. Origin said at the end of October it expected production to start within a month.

    A wave of new supply from Australia to the U.S. is deepening a glut of gas, raising the risk of losses for exporters and prompting some buyers to look at breaking contracts with suppliers, according to a report last week from Goldman Sachs Group Inc.

    Santos plans to sell A$2.5 billion in shares to existing holders at A$3.85 per share. That’s 35 percent less than its closing price of A$5.91 on Nov. 6. It’s also selling A$500 million in shares in a separate placement to Hony Capital, a China-based private equity firm.

    Origin announced at the end of September the sale of A$2.5 billion in shares at a similar discount in a bid to reduce debt. The new Origin shares were trading at about 35 percent more than the offer price of A$4 a piece as of Nov. 6.

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    U.S. Oil Drillers Idle 6 Rigs as Oil Cycle Hovers Near Lows

    U.S. crude explorers pulled back drilling rigs for a 10th straight week as conviction grows that the worst oil downturn in decades is nearing its bottom.

    Rigs targeting oil in the U.S. fell by 6 to 572, extending a five-year low after nearly 100 were idled since the start of September, Baker Hughes Inc. said on its website Friday. Natural gas rigs gained 2 to 199, bringing the total down by 4 to 771. The Eagle Ford Shale in south Texas, whose total rig count is down by 72 percent since the middle of 2012, was the only one of the four major U.S. basins to drop oil rigs this week. Three were let go there, bringing the active oil rig count down to 61.

    Despite more than two straight months of idling oil rigs, the small decline each week likely means more pain is ahead, said James Williams, president of WTRG Economics in London, Arkansas.

    "The fact that it was only six rigs might still be bearish for crude oil prices.," Williams said Friday in a phone interview. "Only six rigs doesn’t really indicate that you’ve had much of a drop in production."

    Oil is near a bottom and demand is poised to close the gap with global supplies as investments in new production decline and consumption grows, according to Pulitzer Prize-winning author Daniel Yergin. U.S. crude output, which surged to the most in more than three decades this year, deepening a collapse in prices, will retreat by about 10 percent in the 12-months ending in April, according to Yergin, vice chairman at IHS Inc.

    Recovery Ahead

    "We are in the bottom part of the cycle and a year from now the market will be looking different," Yergin said. "These prices are having such a big impact on investment."

    Despite the cutbacks, supplies haven’t yet followed suit as new techniques that increase efficiency keep production flowing. Output rose by 48,000 barrels a day last week to 9.2 million barrels, according to weekly Energy Information Administration data.

    The holiday season in the U.S. isn’t expected to be merry for the oil industry, Williams said.

    "Are we going to have Thankgiving layoffs?" Williams said. "Here’s the turkey and your pink slip."
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    Rice Energy 3Q15: $59M Profit, $750M LOC, Selling Gas Outside NE

    Rice Energy, a very young but important pure play driller in the Marcellus/Utica, released its third quarter update yesterday.

    Bucking the trend of other northeast drillers, Rice earned $119 million in profit before interest, taxes and all that jazz (called EBITDAX), and they earned $59 million after all that jazz.

    In the black. No paper loss. It’s all good. One of the secrets to Rice’s success is that they’re selling their gas for an average of $0.38 higher per Mcf than others because of deals with the REX and Texas Eastern pipelines that carry Rice’s gas to markets outside of Appalachia.

    Production was 609 million cubic feet equivalent per day (Mmcfe/d) in 3Q15. The company reports expanding their line of credit at the bank to $750 million and transferring ownership (called a “drop down”) of their water services business from Rice Energy the driller to Rice Midstream the subsidiary, netting Rice Energy a nifty $200 million on paper. In essence they transferred money from one pocket to another.
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    Magnum Hunter Refinances Again, Dodges a Bullet…Just Barely

    Magnum Hunter Resources (MHR) issued an interesting press release yesterday to notify investors that they dodged a bullet–for the moment–by refinancing certain loans and getting a new $60 million loan which will let them make their $29 million bond payment on Nov. 15.

    The statement also said in light of “ongoing discussions regarding its capital structure” they won’t issue a press release on third quarter financials, and they won’t hold a conference call with investors. Not a good sign. One analyst we read rhetorically asks,

    Does this mean they avoid bankruptcy? “The short answer is NO,” was his reply. He maintains “working on capital structure” means they are headed for a pre-packaged bankruptcy.

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    Rosneft Offers Japan Chance to Join East Siberia, Far East Project

    Russia's Rosneft, the world's top listed oil producer by output, has offered Japanese companies a chance to join projects in Russia's East Siberia and Far East, Chief Executive Igor Sechin said on Friday.

    There is a huge potential for cooperation between the two countries, he said, in offering Japanese firms the opportunity to participate in the Verkhnechonskoye, Srednebotuobinskoye, Tagulskoye and Russkoye projects, as well as in other developments already in operation or yet to be launched.

    "We proposed to our Japanese partners deals with total reserves of six billion barrels and with a resource base of 100 billion barrels," Sechin told an industry symposium in Tokyo.

    "We would like to work with Japan."

    Sechin said that with the introduction of improved technology from the Japanese partners, Rosneft has ample room to expand its oil and natural gas output.

    Japanese exploration companies had huge write-down over the last three years because of investments in hard-to-recover hydrocarbons in the United States and Canada, and unsuccessful projects in the North Sea among others, Sechin said.

    Instead, he has asked them to invest in Russian projects, whose profitability is well above the global average, Sechin said, although he did not name any of the companies contacted.

    Sechin said there is a potential for a joint development offshore Sakhalin island, participation in the Far-East Petrochemical Co refining and petrochemical project, the development of Zvezda shipyard, and a possible pipeline to supply natural gas to Japan from Sakhalin.

    Investments in any upstream projects would have to start now to be ready for commercial operations by the time oil prices return to higher levels within five to six years, Sechin said.

    - See more at:

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    Toshiba tries to sell down $7 billion U.S. gas commitment

    Japan's Toshiba, struggling with a major accounting scandal, is trying to sell down a $7.4 billion commitment to U.S. liquefied natural gas (LNG), which it signed two years ago as part of a plan to sweeten sales of turbines for power plants.

    A plunge in Asian gas prices means an expected U.S. export bonanza has fizzled out before it even started, and has left the giant conglomerate potentially exposed to LNG processing fees of up to $370 million a year.

    Toshiba confirmed in an interview that it is looking to cut its commitment in the early years of the 20-year contract, but declined to comment on cost.

    "We have to admit the competitiveness of (U.S.) LNG is getting weaker compared to JCC prices," said Akira Nakatani, a manager in Toshiba's LNG group, referring to the typical price mechanism for long-term supplies to Japan.

    In recent weeks, Toshiba has held talks with oil and gas majors, utilities, trading houses and other potential LNG buyers to try to offload its commitments, according to six industry sources. Nakatani declined to comment on the names of possible buyers.

    Other Asian buyers are also trying to reduce their exposure to long-term LNG import obligations, as their demand wanes along with stalling economic growth and as excess supplies become available cheaply on the spot market.

    Toshiba, which is due to report an operating loss on Saturday following a $1.3 billion accounting scandal, may find it difficult to exit its commitment, say industry experts.

    The issue stems from a 2013 decision to buy the right to liquefy 2.2 million tonnes of LNG annually from 2019 from the proposed Freeport LNG export plant in Texas.

    The purchase of the so-called tolling agreement by an electronics conglomerate that makes everything from computers to vacuum cleaners stunned the market.

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    Too many Utica and Marcellus shale pipelines?

    A common complaint among Utica and Marcellus shale drillers is the lack of pipelines and other infrastructure to take away the oil and gas coming from the area.

    Companies are trying to fix that problem by constructing a bunch of pipelines – but will there be too much capacity when all is said and done?

    Columbia Pipeline Group Inc. is still optimistic.

    "If anything, folks are looking for opportunities to get access to capacity as soon as they possibly can," President Glen Kettering said on the Houston company's third-quarter earnings call.

    Kettering doesn't think overbuilding is a risk. People who worry about it double-count some of the projects, he said, and some projects may not get built. Projected oil and gas production should match "reasonably well" with expected pipeline output by 2020, he said.

    "Could there be pockets, could there be time periods where you have a mismatch between capacity and the supply?" he said. "Obviously. But we don't regard that as being a systemic kind of the scenario that we’re likely to face."

    Columbia Pipeline Group has a number of Utica and Marcellus-area pipelines in the works, including the Mountaineer Xpress.
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    Baytex Reports Q3 2015 Results

     "During the third quarter, we continued to position our company to withstand the current low commodity price environment. Consistent with our revised plans for 2015, we moved forward with a slower pace of development in the Eagle Ford and suspended heavy oil drilling in Canada. We remained focused on cost reduction initiatives across all of our operations and maintaining strong levels of financial liquidity. We have built an exceptional asset base focused on crude oil and liquids with a significant inventory of development prospects. We are well positioned for success as oil prices improve," commented James Bowzer, President and Chief Executive Officer.


    Generated production of 82,170 boe/d (81% oil and NGL) in Q3/2015;
    Delivered funds from operations ("FFO") of $105.1 million ($0.51 per share) in Q3/2015;
    Realized an operating netback (sales price less royalties, production and operating expenses, and transportation expenses) in Q3/2015 of $15.57/boe ($18.90/boe including financial derivative gains);
    Produced approximately 39,000 boe/d in the Eagle Ford with 14 wells brought onstream during the quarter generating average 30-day initial production rates of approximately 1,350 boe/d;
    Realized drilling cost savings in the Eagle Ford of greater than 10% for the second consecutive quarter (an overall reduction of 27% compared to 2014); and
    Maintained strong levels of financial liquidity with the suspension of our dividend and approximately $1.05 billion in undrawn capacity on our credit facilities.

    Production in the Eagle Ford averaged 38,941 boe/d (78% oil and NGL) during Q3/2015, as compared to 39,548 boe/d in Q2/2015 and 41,076 boe/d in Q1/2015. Capital expenditures in the Eagle Ford in Q3/2015 totaled $93.3 million, down from $98.3 million in Q2/2015 and $126.2 million in Q1/2015. We continue to work with our partner on cost reductions. To-date, we have achieved an approximate 27% reduction in well costs - with wells now being drilled, completed and equipped for approximately US$6.0 million, as compared to US$8.2 million in 2014.

    Production in Canada averaged 43,229 boe/d (84% oil and NGL) during Q3/2015, as compared to 45,222 boe/d in Q2/2015. The reduced volumes in Canada are a result of lower drilling activity and uneconomic production that we have shut-in. At September 30, 2015, we had a total of approximately 2,400 boe/d of uneconomic production shut-in, including the Cliffdale Cyclical Steam Stimulation project, which was suspended late in the third quarter. Capital expenditures for our Canadian assets in Q3/2015 totaled $33.5 million, an increase from $7.7 million in Q2/2015.

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    Suncor Energy ramps up hostile $3.3billion bid for Canadian Oil Sands

    Suncor Energy Inc. is stepping up its hostile $3.3 billion bid for Canadian Oil Sands Ltd. by asking Alberta regulators to strike down the target’s new shareholder rights plan aimed at preventing its takeover.

    The Alberta Securities Commission will hold a hearing on Nov. 26 to consider the so-called poison pill adopted by the Canadian Oil Sands board last month, Suncor said in a statement Friday. The hearing follows Suncor’s application for an order to cease the new rights plan. Canadian Oil Sands vowed to protect its shareholders.

    The Canadian Oil Sands shareholder plan calls for 120 days to consider bids. Because Suncor’s offer is open for acceptance only until Dec. 4, unless extended or withdrawn by Suncor, it would not be a permitted bid under the new plan, Canadian Oil Sands said last month.

    “Suncor’s application is a smokescreen intended to obscure the weakness of its offer,” Canadian Oil Sands said in a statement. The company said it would “stand up for shareholders and vigorously oppose attempts by Suncor to remove the necessary protections of its shareholder rights plan.”

    Suncor, looking to bolster its status as Canada’s largest crude producer, last month renewed efforts to take over its partner and biggest shareholder in the Syncrude oil-sands joint venture after two friendly offers were rejected earlier this year. Canadian Oil Sands urged its shareholders to reject the bid and adopted the rights plan in response.

    Suncor has highlighted its oil-sands performance as further proof that its bid should be attractive to Canadian Oil Sands investors. Suncor’s upgrading operations that process oil-sands bitumen into light crude have run at more than 90 percent of capacity this year, compared with an average 70 percent for Syncrude, the company said last month. Suncor, which would boost its stake in the partnership to 49 percent from 12 percent with the takeover, made the comments as it announced a third-quarter loss.
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    Alternative Energy

    Mexico to award up to 2,500 MW in renewable energy contracts in March

    Mexico will start soliciting bids later this month in its first auction of renewable energy certificates, part of an electricity sector overhaul that ends the state-owned power company's monopoly, government officials said on Wednesday.

    Initial awards of the new certificates, which provide the right and impose the obligation to produce clean energy, are set for March, officials said.

    Up to 6 million of the certificates will be awarded in the first auction via 20-year contracts that seek to produce up to 2,500 megawatts of additional power generation from clean sources like wind or solar.

    National electricity company CFE will initially be the only buyer of the energy from companies that are awarded the certificates in the competitive tenders, but new wholesale power companies allowed by the energy overhaul will later be able to purchase it, too, said Energy Minister Pedro Joaquin Coldwell.

    "This blueprint guarantees that there will be demand for companies that generate electricity from clean sources," said Joaquin Coldwell.

    Mexico, a major crude oil producer and exporter, has for decades generated most of its power from fuel oil. Over the last several years, however, it has transitioned into cheaper and cleaner-burning natural gas as well as renewable sources.

    The new contracts will also help CFE meet a mandate to generate at least 5 percent of its power from cleaner sources by 2018.

    Read more at Reuters
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    Sunverge Is On A Mission To Marry Solar Power And Energy Storage

    At the Energy Storage North America conference in San Diego last month, the floor was packed with vendors. One of them was Sunverge, and they were interesting because they were focused not only on the issue of on-premise storage, but specifically how to combine solar power and storage together. Sunverge currently manages 5.3 megawatt-hours (MWh) of distributed storage, combined with 1.9 MW of solar.

    This solar/storage hybrid is a theme that is getting a lot more play around the world these days, as regulatory environments change for solar while the costs of both solar and storage continue to decline (having entered later in the game, storage costs have a lot further to go, but they are following a similar trajectory to that of solar).

    That regulatory environment will likely be a critical driver of storage adoption rates. As solar penetration rates increase, rules related to solar feed-in tariffs or net metering will continue to change. Countries such as Germany are reducing feed-in tariffs that once paid individuals a handsome price for all of the power produced on a rooftop. Now, with the delta between the price paid for electricity from the grid and the price received for exporting surplus solar power to the grid, it starts to make more sense to store energy on site, for deferred consumption at a later time when the solar panels are not producing.

    In Australia, for example, it is estimated that buying power from the grid can be three to times more expensive than the value of locally generated solar power exported to the grid. With those kind of economics, storage and self-consumption (what Rocky Mountain Institute refers to as ‘load defection’) makes economic sense.

    Meanwhile, in the U.S., Hawaii’s Public Utility Commission recently enacted an order eliminating the net metering option (under which the solar producer is credited the retail rate for each kilowatt-hour of surplus exported to the grid). With the new ruling, the exported solar is valued at approximately half the retail rate. This change hurts the economics of solar energy, but boosts the potential value of storage, since one can effectively double the value of every kilowatt-hour of solar power stored and consumed on site (compared with selling it back into the grid).

    Of course the economics ultimately depend upon a variety of factors, including costs of installed systems, retail rates, and the amount of energy that can be stored. But the trends are moving in favor of ever more solar and storage combinations, especially at the residential and SME (Small and Medium Enterprises) level, which is where Sunverge has staked its claim.
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    Vattenfall focuses on large-scale wind power in Denmark

    The sale of a number of smaller wind farms on Jutland will allow Vattenfall, Denmark's largest operator and owner of onshore wind farms, to focus specifically on large onshore and offshore wind power projects.

    A total of 88 older turbines from 19 wind farms on Jutland with a total capacity of 65 MW have been sold to Green Power Partners K/S. The sum is not made public.

    'The size of these wind farms does not match Vattenfall's strategic direction, which is why we decided to sell them. We can now concentrate on further developing and strengthening our position in Denmark in the sector of large-scale onshore and offshore wind power,' says Martin Reinholdsson, Vice President of Vattenfall Generation.

    Vattenfall is investing in both onshore and offshore wind power in Denmark. The construction of the Klim wind farm in North-West Jutland is almost complete. Here, 35 older turbines have been replaced by 22 new and much more efficient ones, making it Denmark's largest onshore wind farm in terms of output. At the same time, project planning is underway for the 400 MW Horns Rev 3 wind farm off the west coast of Jutland.

    On 29 October, the Danish Energy Agency presented the candidates who are pre-qualified to bid for Kriegers Flak, Denmark's largest offshore wind power project with an output of 600 MW. Vattenfall is one of seven candidates.

    Yesterday's announcement marks the official start of the tender process which will end in November 2016. The winner will be those can offer the lowest price in öre per kWh for the first 50,000 full-load hours. In comparison, Vattenfall won the Horns Rev 3 concession with a price of 77 öre per kWh.

    - See more at:

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    Leaked letter reveals UK will miss green target

    The UK will miss a major legally-binding renewable target, Energy Secretary Amber Rudd has admitted in a leaked letter.

    In a candid private message to other cabinet ministers, she reveals the country is predicted to fall short of its EU obligations of generating 15% of its energy from green sources by 2020.

    The letter, which was obtained by the Ecologist magazine, says there will be a “shortfall against the target in 2020 of around 50TWh (with a range of 32-67TWh) or 3.5% points (with a range of 2.1-4.5% points) in our internal central forecasts (which are not public)”,

    However it adds: “Publicly we are clear that the UK continues to make progress to meet the target.”

    If the UK does miss its target, it could be liable to fines from the European Court of Justice. The news comes as the government has cut subsidies for solarand wind power.

    The letter also states some other major Member States “are in a similar position to the UK”.

    “As the Secretary of State has set out clearly in the House, renewables made up almost 20% of our electricity generation in 2014 and there is a strong pipeline to deliver our ambition of reaching 30% by 2020. We continue to make progress to meet our overall renewable energy target.”

    The letter was sent to Foreign Secretary Philip Hammond, Oliver Letwin from the Cabinet Office, Chief Secretary to the Treasury Greg Hands and Transport Secretary Patrick McLoughlin.

    Environmental group Greenpeace said the letter “shows us the dark side of the government’s incoherent energy policy in full technicolour”.

    Head of Energy Daisy Sands added: “For the first time, we learn that the government is expecting to miss the EU’s legally binding renewables target. This is hugely shocking. But more deplorably, it is wilfully hiding this from public scrutiny.

    “The government is planning on cutting support for the solar and wind subsidies in the name of affordability. But perversely, we see that the government believes investing in renewable energy projects involving buying power from abroad is more desirable than supporting home grown renewable energy industries. Even more worryingly, it seems the government is seeking to haggle with the EU to revise down our legal commitments.”
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    SunEdison to slash asset sale to yieldcos, may scrap buyout plans

    U.S. solar company SunEdison Inc said it would reduce sales of renewable energy assets to its "yieldcos" until market conditions improved.

    The company has been selling some power plants to yieldcos that earn stable income through long-term contracts with utilities. However, the strategy has become less attractive due to weak oil prices.

    SunEdison, facing investor concerns about its liquidity and yieldco model, said on Monday it might renegotiate or terminate existing acquisition deals. (

    However, the company said it has "adequate funding or financing commitments in place" to fund its acquisitions.

    SunEdison, which spent more than $6 billion on acquisitions in the past year, said last month it would cut 15 percent of its workforce to reign in costs.

    The company became the first solar company to launch an yieldco in July last year. It operates TerraForm Global Inc and TerraForm Power Inc that manage renewable energy assets.

    SunEdison said it needs about $6.5 billion-$8.8 billion to fund the construction of renewable energy assets through 2016. The company said there were "no assurances" it would raise the money.

    SunEdison said recent market conditions, including falling share prices of the yieldcos along with higher yields on debt financing, have limited the availability and raised the costs of capital available to the yieldcos.

    Shares of TerraForm Global had fallen 50 percent since its IPO on July 31, while the TerraForm Power stock had fallen 27 percent since its IPO in July 2014.

    SunEdison, which expected the yieldco model to lower its dependence on the highly competitive solar panel market, has said it was doing more third-party sales, compared with its base plan of 5-10 percent.

    SunEdison posted a loss of 91 cents per share for the third quarter ended Sept. 30.

    Analysts on average had estimated a loss of 70 cents per share, according to Thomson Reuters I/B/E/S.

    Read more at Reuters
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    Trina sets world record of 21.25% efficiency with multicrystalline silicon

    This new world record for a multi c-Si cell beats Trina’s previous record of 20.78%. Trina says that the processes used can be easily integrated into mass production.

    Trina says that the techniques used to make the cell are suitable for high-volume production

    Trina Solar continues to push the abilities of multicrystalline silicon, today announcing the first multi c-Si solar PV cell with an efficiency of over 21%.

    The company’s State Key Laboratory of PV Science and Technology of China has produced a new world record 21.25% efficient PV cell, as verified by Fraunhofer ISE.

    The 156 square millimeter cell was fabricated on a p-type multicrystalline substrate, and integrates Trina’s Honey Plus technologies including back surface passivation and local back surface field.

    This beats the previous record of 20.76%, which Trina set in late 2014. The company says that only low-cost industrial processes which can easily be integrated into high-volume production were used to fabricate the cell.
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    CO2 levels hit record high for 30th year in a row -WMO

    Greenhouse gas levels in the atmosphere reached a record high in 2014 as the relentless fuelling of climate change makes the planet more dangerous for future generations, the World Meteorological Organization said on Monday.

    "Every year we say that time is running out. We have to act NOW to slash greenhouse gas emissions if we are to have a chance to keep the increase in temperatures to manageable levels," WMO Secretary-General Michel Jarraud said in a statement.

    Graphs issued by the United Nations agency showed levels of carbon dioxide, the main greenhouse gas, climbing steadily towards the 400 parts per million (ppm) level, having hit a new record every year since reliable records began in 1984.

    Carbon dioxide levels averaged 397.7 ppm in 2014 but briefly breached the 400 ppm barrier in the northern hemisphere in early 2014, and again globally in early 2015.

    Soon 400 ppm will be a permanent reality, Jarraud said.

    "It means hotter global temperatures, more extreme weather events like heatwaves and floods, melting ice, rising sea levels and increased acidity of the oceans. This is happening now and we are moving into uncharted territory at a frightening speed."

    The rise in carbon dioxide levels was being amplified by higher levels of water vapour, which were in turn rising because of carbon dioxide emissions, the WMO said.

    Levels of the other two major man-made greenhouse gases, methane and nitrous oxide, also continued their relentless annual rise in 2014, reaching 1,833 parts per billion (ppb) and 327.1 ppb, respectively. Both increased at the fastest rate for a decade.

    The U.N. panel of climate scientists estimates that concentrations of carbon dioxide, methane and nitrous oxide are at their highest in at least 800,000 years.

    Jarraud's annual plea for the world to do whatever it can to cut greenhouse gas emissions comes weeks before negotiators from more than 190 countries are due to meet in Paris to try to agree a new U.N. climate deal.

    More than 150 countries, led by top greenhouse gas emitters China and the United States, have issued plans to limit greenhouse gas emissions beyond 2020. But the plans revealed so far will not curb emissions enough to meet a target agreed in 2010, to limit global warming to within 2° Celsius (3.6 Fahrenheit) of pre-industrial levels.

    Read more at Reuters
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    Showa Shell's 49 MW Biomass Power Plant Starts Operations

     Showa Shell Sekiyu K.K., a Japanese refiner, said it has completed a 49-megawatt biomass power plant south of Tokyo.

    The plant in Kanagawa prefecture began commercial operations earlier this month, the company said in a statement Monday. It’s Showa Shell’s first biomass power project.

    The station, built on the site of the company’s former refinery, uses wood pellets and palm kernel shells as fuel and will generate enough electricity for about 83,000 homes, according to the statement.
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    Oil major Total to step up solar power play, says CEO

    Solar energy could account for up to 15 percent of French oil major Total's assets by 2030, Chief Executive Patrick Pouyanne told French daily Le Monde on Friday.

    Pouyanne, who was appointed CEO a little more than a year ago, said that Total had invested $3 billion in solar, which now accounts for 3 percent of the group's assets.

    "We believe this is a growing market and that, in about 15 years, it will no longer 3 percent of our portfolio, but about 10 to 15 percent," he was quoted as saying.

    Total, which has a market capitalisation of 112 billion euros ($120 billion), entered the solar  business with a $1.3 billion 2011 takeover of U.S. company SunPower Corp in one of the biggest moves by an oil and gas major into the renewable energy industry.

    While Pouyanne acknowledged that oil and gas still account for about 40 percent of the world's CO2 emissions, he said that coal is by far the bigger polluter and that gas-generated electricity emits half as much CO2 as coal-generated power.

    "Coal is the number one troublemaker, the enemy, so to speak," he said, adding that Total is becoming more and more focused on gas.

    He also said that Total tests the profitability of all its investment projects by integrating a CO2 cost of 25 euros per tonne.

    Pouyanne added that he did not believe there should be a global CO2 price but said that there should be a carbon-pricing mechanism in as many regions of the world as possible.

    Read more at Reuters
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    Syngenta rejects ChemChina's $42 bln takeover offer

    China National Chemical Corp is in talks to buy Switzerland's Syngenta AG but its initial offer of nearly $42 billion for the world's largest agrichemical company was rejected, Bloomberg said on Thursday.

    State-owned ChemChina's first offer valued the agricultural chemicals group at 449 Swiss francs per share, or 41.7 billion Swiss francs ($41.72 billion), according to Bloomberg.

    Citing unidentified sources, it said the rejection stemmed from regulatory concerns. 

    The two companies have not broken off talks and an agreement could still be reached in the next few weeks, Bloomberg said.

    Syngenta, under pressure to offer value to shareholders after turning down a big offer from Monsanto Co earlier this year, is also talking to other potential suitors, according to Bloomberg.

    U.S.-listed shares of Syngenta were up 14 percent at $79.22 in extended trading on Thursday.

    Syngenta and ChemChina could not immediately be reached for comment.

    Syngenta rejected Monsanto's cash plus stock offer in August. The offer was worth about $47 billion and Syngenta said it "significantly undervalued the company."

    At the time, some shareholders expressed disappointment over the spurned deal and questioned the company's ability to improve its financial fortunes in a slumping commodity market.

    To appease shareholders, Syngenta announced plans in September to buy back more than $2 billion of stock, funding the measure by selling its vegetable seeds business.

    Read more at Reuters
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    U.S. forecaster sees El Nino peaking in Northern Hemisphere winter

    A U.S. government weather forecaster on Thursday said El Nino conditions would peak during the Northern Hemisphere 2015-16 and taper off to neutral in late spring or early summer 2016.

    The Climate Prediction Center (CPC), an agency of the National Weather Service, in its monthly forecast broadly maintained its outlook for strong El Nino conditions likely to persist through the winter.

    El Niño is a warming of ocean surface temperatures in the eastern and central Pacific that occurs every few years, triggering heavy rains and floods in South America and scorching weather in Asia and as far away as east Africa.

    Read more at Reuters
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    European scientific advisers say glyphosate unlikely to cause cancer

    The European Food Safety Authority (EFSA) on Thursday said glyphosate, the active ingredient in Monsanto weedkiller Roundup, was unlikely to cause cancer in humans, but it proposed new controls on any residues in food.

    EFSA advises EU policymakers and its conclusion will be used by the European Commission to decide whether to extend the current approval period for glyphosate, which ends on Dec. 31.

    Environmental groups have been calling for a ban after the International Agency for Research on Cancer (IARC), part of the World Health Organization, said in March that glyphosate was "probably carcinogenic to humans".

    Some businesses and authorities have sought to limit glyphosate use.

    "This has been an exhaustive process - a full assessment that has taken into account a wealth of new studies and data," Jose Tarazona, head of the pesticides unit at Parma, Italy-based EFSA, said in a statement.

    "Regarding carcinogenicity, it is unlikely that this substance is carcinogenic."

    EFSA scientists, who worked with experts from EU member states, said their study differed from IARC's in that it considered only glyphosate, whereas IARC had assessed groups of related chemicals. They said the toxic effects could be related to reactions with "other constituents or 'co-formulants'".

    However, they are for the first time proposing a limit on the maximum safe daily dose, of 0.5 milligrams per kilogram of body weight.

    That means an 80-kg person could eat food containing 40 milligrams of glyphosate per day for the rest of their life.

    Read more at Reuters
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    Uralkali says may cut Q4 potash sales target by 300,000 T

    Russia's Uralkali, the world's largest potash producer, said it may cut its fourth-quarter sales target by 300,000 tonnes to support demand.

    Global producers of potash, a crop nutrient, have been hit by weak demand this year due to lower grain prices and the weakening of major clients' local currencies.

    Uralkali is currently monitoring the market closely, the company said in an emailed statement on Monday evening, citing Vladislav Lyan, who was appointed the head of Uralkali's export sales from Nov. 1.

    The company, whose sales have been matching output in recent years, narrowed its 2015 production forecast in August to 10.8 million tonnes from a previous estimate of 10.4-10.8 million tonnes.

    It produced 8.7 million tonnes in January-September 2015, but in its statement on Monday it did not disclose its new production and sales forecast for this year.

    Uralkali's former trading partner, Belarus Potash Company, also said in September it would cut exports by 0.5 million tonnes this year from 9 million tonnes a year earlier to support the market.

    Uralkali's decision to quit its trading partnership with Belarus in 2013 boosted global competition in the sector and triggered a price slump.

    Uralkali added that it expected the global potash market to partially recover in 2016, when global demand would reach between 60 million and 61 million tonnes.

    In August, it estimated 2015 global potash demand at 58 million tonnes, down from 63 million tonnes in 2014.

    Read more at Reuters

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    Precious Metals

    Barrick Gold sells four US mines for $720 million

    Canada’s Barrick Gold, the world's biggest gold producer, is unloading four of its non-core Nevada mines for US$720 million in cash, and said Thursday it expects to sign at least one of the deal before year-end.

    The move would help the Toronto-based miner to meet its ambitious target for reducing its $13 billion debt by $3 billion this year.

    “As we move into 2016 and beyond, we will continue to take steps to strengthen our balance sheet,” Barrick President Kelvin Dushnisky said in a statement. “But we will balance debt repayments with investments to drive future growth in free cash flow and Ebitda.”

    The assets to be sold are Bald Mountain and Ruby Hill mine, as well as its 50% stake in the Round Mountain mine and a 70% interest in the Spring Valley project.

    Fellow Canadian miner Kinross Gold is acquiring the stake in Round Mountain mine and all of the Bald Mountain mine, where the two gold producers are forming a 50-50 exploration joint venture. In total, Kinross is paying Barrick $610 million.

    In addition, units of Waterton Precious Metals Fund II Cayman LP have agreed to buy Barrick’s interest in Spring Valley and all of Ruby Hill mine for $110 million.

    In May, the company sold half of its Porgera mine in Papua New Guinea to Zijin Mining Group in a $298 million cash deal.

    And in July, Barrick sold a 50% stake in its Zaldívar copper mine in Chile to Antofagasta Plc for $1 billion.

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    Kinross widens Q3 loss as margins tumble

    Canadian miner Kinross Gold has widened its net loss for the three months ended September 30, as lower prices and higher costs chipped 20% off its profit. 

    The TSX- and NYSE-listed miner, which owned mines and projects in the US, Brazil, Russia, Mauritania, Chile and Ghana, reported a net loss of $52.7-million, or $0.05 a share, compared with a net loss of $4.3-million, or nil per share, in the comparable period a year earlier. The loss was mainly attributable to lower margins as a result of a lower average gold price. 

    Excluding special items, Kinross reported an adjusted net loss of $23.9-million, or $0.02 a share, compared with adjusted net earnings of $70.1-million, or $0.06 a share, in the third quarter of 2014. Revenue fell 14% year-on-year to $809.4-million, owing to a lower average realised gold price and lower gold-equivalent ounces (GEOs) sold. 

    The average realised gold price declined 12% to $1 122/oz, compared with $1 268/oz in the third quarter of 2014. Kinross’s attributable margin per GEO sold was $454, compared with $570 per GEO sold a year earlier. Kinross produced 680 679 attributable GEOs in the third quarter, a slight decrease compared with the third quarter last year, mainly owing to lower output at Maricunga mine, in Chile, as a result of heavy rains in March, which impacted the tonnes of ore placed on the heap leach pads, and at Chirano mine, in Ghana, and Kettle River-Buckhorn mine, in Washington, owing to expected declines in grades.

    The decrease was partially offset by higher output at Fort Knox, in Alaska, and the combined Kupol-Dvoinoye operation, in Russia, owing to higher mill grades, and at Round Mountain, in Nevada, owing to an improved heap leach performance and higher mill recoveries. 

    All-in sustaining costs (AISC) per GEO sold was $941 in the third quarter, compared with $919/oz a year earlier, mainly owing to higher capital expenditures and fewer attributable gold ounces sold, partially offset by lower energy costs and favourable foreign exchange rates. 

    As of September 30, Kinross had cash and cash equivalents of $1.02-billion, excluding restricted cash, an increase of $41.3-million since December 31, 2014. The company had available credit of $1.51-billion. 

    In the quarter, Kinross repaid the remaining $50-million balance on the Kupol loan and as of quarter-end, Kinross’s net debt was $949.2-million, a reduction of $11-million during the quarter and $84.1-million since the end of last year. Other than $250-million in senior notes, which were scheduled to be repaid by September 2016, Kinross had no debt maturities until 2019. 

    As part of the company’s cost reduction efforts, Kinross had reduced its corporate headcount costs by 23% and was closing its Denver office. It had also laid off 222 Tasiast employees in September, for combined savings of about $30-million this year. Kinross expected to be within the full-year guidance range of 2.5-million to 2.6-million GEOs, at an AISC of between $975 to $1 025 per GEO. Kinross’s NYSE-listed stock had lost 37% in value since the start of the year, and on Tuesday closed 3.3% lower at $1.77 apiece.
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    Lonmin offers 94% discount on rights issue

    Investors will have to subscribe for 46 new shares for every 1 owned.

    The potential dilution is terrifying, and much worse than anyone envisaged. The company announced plans to raise a gross amount of $407m by way of a rights issue that will see 26.99bn new shares issued at a price of 21,4 cents per share. The offer has been underwritten.

    This means that if you are an existing Lonmin shareholder, you will have to invest a further R9.84 for every Lonmin share owned in order to prevent being diluted.  After fees, the company will have $369m to be used at its disposal.
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    Base Metals

    Rusal Q3 earnings drop, sees bigger aluminium surplus

    Russian aluminium giant Rusal reported an 11 percent fall in third-quarter core earnings from a year earlier, in line with expectations, as aluminium prices dropped, and warned the market remained "highly challenging".

    The world's top aluminium producer "confirmed the potential closure of up to 200,000 tonnes of production this year," which it flagged it was considering earlier this year, but did not specify when or where it might cut output.

    "During the third quarter of 2015, the aluminium industry was under significant pressure from sliding prices and premiums due to a higher than expected market surplus," Chief Executive Vladislav Soloviev said in a statement.

    Pointing to weaker demand in some emerging markets and supply growth in the Middle East, India and China, Rusal trimmed its forecast for global aluminium demand growth in 2015 to 5.6 percent and raised its forecast for a global aluminium surplus this year by a third to 373,000 tonnes.

    It said aluminium capacity closures in China had been slow despite very low domestic aluminium prices as regional authorities subsidised loss-making production, but expected that to change next year.

    "We expect rapid closures early in 2016 with the onset of a new five-year development plan," the company said.

    Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell to $420 million in the September quarter from $470 million in the same period last year, slightly better than seven analysts' forecasts around $418 million.

    It cut its cash costs by 17 percent to a multi-year low of $1,440 a tonne in the quarter, helped by a weaker rouble, while its average sales price fell 20 percent to $1,843 a tonne from a year earlier.

    Selling prices were hit by a double whammy of falling prices on the London Metal Exchange as well as a 51 percent slump in the premiums paid over LME prices for immediate delivery. Rusal said premiums bottomed in the third quarter.

    "As expected, premiums should rebound in line with continued tightness in key consumption markets," it said.

    Recurring net profit, which is adjusted net profit plus Rusal's share of Norilsk Nickel's earnings, rose 15 percent to $287 million.

    Rusal last month declared its first dividend since going public in 2010, paying out a total of $250 million, or $0.016 a share, for the first half of this year.

    Read more at Reuters
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    Glencore Shares Drop Below a Pound for First Time in a Month

    Glencore Plc dropped below a pound for the first time in a month as a six-day selloff in the stock accelerated and metal prices showed no signs of recovery.

    Copper traded near a six-year low. Glencore is the worst performer in the U.K.’s FTSE 100 Index with a 68 percent drop this year after a rout in commodity prices cut profits and focused investor attention on its ability to pay down $30 billion in debt.

    “It’s very geared into the copper price,” said Richard Knights, a mining analyst at Liberum Capital Ltd. that recommends holding the shares. “Prices are obviously taking a hit on the back of U.S. dollar strength and the Fed’s clear intention to raise rates before the end of the year.”

    The renewed downturn in industrial metals heightens the pressure on Glencore Chief Executive Officer Ivan Glasenberg to deliver on a $10 billion debt reduction plan announced in September. Glencore has completed about 75 percent of the targeted reduction in borrowing and is likely to lower its debt by more than $10 billion, according to a Nov. 4 report from Deutsche Bank AG analyst Robert Clifford.

    Industrial metals continued to retreat on Thursday on concerns over demand in China, the world’s biggest consumer. Data earlier this week showed the country’s industrial output matching the weakest reading since 2008. Monetary and fiscal easing in China has yet to spur an economic rebound and the country’s economy is expanding at the slowest pace in a quarter of a century.

    Glencore has raised funds over the past two months by scrapping its dividend, selling assets and raising $2.5 billion through a share sale. The stock plunged 29 percent on Sept. 28 after analysts at Investec Plc said the company’s equity value may “evaporate” if a rout in commodities was sustained and the company didn’t restructure.

    “The impetus was clearly already there for them to try and deleverage as quickly as possible,” Liberum’s Knights said of Glencore’s debt-reduction. “Their mindset has probably changed a little bit from $2 a pound copper being a fantasy number to $2 a pound copper potentially being a realistic number.”
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    Copper sell-off gears-up as key support wiped out

    Copper fell to just $4,800 per tonne the lowest level since July 2009.
    Poor demand from either funds or physical players has weighed while there remains an abundance of material available should you need it.
    Add to this negative data out of China this week and a stronger dollar and there is nothing for the market to make it change its bearish stance.
    Aluminium was back under $1,500, while zinc is back to its softest since 2010 and nickel is in under $9,500.

    - See more at:
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    China's cashed-up Jinchuan unit seeks copper, nickel assets

    A Hong Kong-based unit of China's Jinchuan Group is hunting globally for quality copper and nickel assets, leveraging its access to capital at a time when Western rivals are finding it hard to secure finance, its chief executive said.

    "People are running out of money. Whether it's their balance sheets or they just can't fund their operations, or their projects," Peter Albert, CEO of Jinchuan Group International Resources, told Reuters on Thursday.

    "Companies like ours, who do have access to capital, it's an opportunity for us."

    Jinchuan International (JCI) is a unit of state-owned Jinchuan Resources, China's biggest nickel producer and a major copper producer. China has urged its huge SOES to expand overseas for growth to combat struggling activity at home.

    "Because it's China Inc, financing is available. And it is available on competitive, if I might say, attractive terms for the right projects," Albert, who was appointed CEO in July, said on the sidelines of a mining conference.

    "It puts us in a very competitive position."

    JCI already operates two mines in the central African copperbelt, the Ruashi copper and cobalt mine in the Democratic Republic of Congo (DRC) and the Chibuluma copper mine in Zambia. Its Kisenda copper mine is still under construction.

    In Africa, it has its eyes on Botswana, because of the potential of the Kalahari copper belt and the country's strong governance. It's also looking to expand its footprint in DRC and Zambia.

    "We have identified a couple of opportunites there (Botswana). We know it is good place to work and the policy and licensing is straight forward," Albert said.

    "Our focus is in the industrial base metals space, especially in copper and nickel."

    Rather than greenfields or exploration plays, JCI is eyeing early stage projects that have finished feasibility and may be in the initial stages of construction, or high value projects already in production with good asset grades.

    In Asia, Albert said Indonesia and Papua New Guinea offered the most potential based on geology and working with government.

    The prolonged downturn in copper and nickel prices had pushed JCI to seek efficiencies, he said, but the company's focus was on securing raw materials to support China's long-term urbanisation.

    "We're looking and we're interested. We're being careful, but there is an opportunity in the marketplace today and probably for 18-24 months from now."

    Read more at Reuters
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    Vedanta’s Zambian unit says copper mine ‘unsustainable’

    Vedanta’s Zambian unit says copper mine ‘unsustainable’

    Zambia’s Konkola Copper Mines, owned by Vedanta Resources, said on Wednesday that its Nchanga mine is making “unsustainable losses”, responding to reports that the miner was set to close the operation.

    According to Zambia’s The Post newspaper, Konkola sent stakeholders a shutdown notice on November 4, which said 2 500 contractors would lose their jobs when the Nchanga operation was closed. But Konkola said in a statement in response to the story that it had agreed not to take any steps until it received feedback from unions.
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    Zijin plans $1.4 BIL share placement to fund copper, gold projects

    Chinese gold and copper miner Zijin Mining plans to raise Yuan 9 billion ($1.4 billion) through private share placements in the Shanghai stock market to fund buying of assets in Congo and Papua New Guinea and for a mine development project in China, the company said late Wednesday.

    The miner told the Shanghai and Hong Kong stock exchanges that its board had approved a revised plan which would see the company issue and allot a maximum 2.66 billion A shares at a minimum Yuan 3.38/share to a few specific independent investors.

    Of the total proceeds raised, Yuan 3.22 billion will be allocated to the development of the Kolwezi copper mine in Congo, central Africa, and loans provision to a Sino-Congolese joint venture company which owns the project.

    Zijin has 51% in the joint venture company, called La Compagnie Miniere de Musonoie Global, through its subsidiary Jin Cheng Mining. Other partners in the joint venture are Congo's state mining company La Generale des Carrieres et des Mines (28%) and China's Zhejiang Huayou Cobalt (21%).

    Zijin also plans to fund the Yuan 2.52 billion Kamoa copper project in Congo.

    The miner agreed in May this year to pay Vancouver-based Ivanhoe Mines $412 million for a 47.025% stake in the Kamoa project, of which the Chinese miner already has a 9.9% control.

    Another Yuan 1.82 billion of the share placement's proceeds has been earmarked for the Porgera gold mine development in Papua New Guinea.

    Fujian-based Zijin reached a $298 million deal with Canadian gold producer Barrick Gold in May for a 47.5% interest in the Porgera project.

    Zijin still needs to seek approval from its shareholder and securities watchdog China Securities Regulatory Commission on its revised private share placement proposal. The proposal has a 12-month validity period.
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    3D Printing spurs TiOs usage?

    3D printing

    A lens on the German company Botspot’s Botscan3D—which scans objects placed on the stand in the center—gets an adjustment at a trade fair in Erfurt, Germany, in June.Dutch fashion designer Iris van Herpen uses 3D-printing, computer modeling and engraving to create her outfits—such as this one on display at an Atlanta art museum this month—in collaboration with architects, engineers and digital-design specialists.Some of Ms. van Herpen’s 3-D-printed shoes; she’s know for creating high-tech fabrics and fashions that combine materials like steel and silk with objects like magnets and umbrella parts.Australian researchers created the world’s first 3-D-printed jet engine, on display at the Avalon International Air Show in February. They said they planned to use printed components in flight tests within a year.New Zealand space technology company RocketLab looks to cut millions of dollars from the cost of satellite launches with its battery-powered Rutherford rocket engine, made from 3-D-printed parts.A young French boy born with a right-hand malformation trying on his new 3-D-printed prosthesis—in his chosen superhero colors—in August. Worn like a glove, it allows him to grasp objects and costs just $55 to make.A chocolate bear produced by a 3-D food printer on display at a Berlin electronics show in September.A mobility cart produced by 3-D printing allows TurboRoo, a Chihuahua born with only two legs, to take a walk in Indianapolis.French engineer and professional violinist Laurent Bernadac playing the ’3Dvarius,’ 3-D-printed from transparent resin, in Paris in September. 1 of 9fullscreen

    A lens on the German company Botspot’s Botscan3D—which scans objects placed on the stand in the center—gets an adjustment at a trade fair in Erfurt, Germany, in June. 

    JENS MEYER/ASSOCIATED PRESS Dutch fashion designer Iris van Herpen uses 3D-printing, computer modeling and engraving to create her outfits—such as this ... Some of Ms. van Herpen’s 3-D-printed shoes; she’s know for creating high-tech fabrics and fashions that combine materials like steel and silk with objects like magnets and umbrella parts. 

    BRANDEN CAMP/ASSOCIATED PRESS Australian researchers created the world’s first 3-D-printed jet engine, on display at the Avalon International Air Show in February. They said they planned to use printed components in flight tests within a year.

    REUTERS New Zealand space technology company RocketLab looks to cut millions of dollars from the cost of satellite launches with its battery-powered Rutherford rocket engine, made from 3-D-printed parts. 

    PHIL WALTER/GETTY IMAGES A young French boy born with a right-hand malformation trying on his new 3-D-printed prosthesis—in his chosen superhero colors—in August. Worn like a glove, it allows him to grasp objects and costs just $55 to make. 

    JEFF PACHOUD/AGENCE FRANCE-PRESSE/GETTY IMAGES A chocolate bear produced by a 3-D food printer on display at a Berlin electronics show in September. AXEL SCHMIDT/REUTERS A mobility cart produced by 3-D printing allows TurboRoo, a Chihuahua born with only two legs, to take a walk in Indianapolis. 

    KELLY WILKINSON/ASSOCIATED PRESS French engineer and professional violinist Laurent Bernadac playing the ’3Dvarius,’ 3-D-printed from transparent resin, in Paris in September.

    SYDNEY—Global miners including Rio Tinto PLC and Iluka Resources Ltd. have long made a pile of profit from digging up a sludgy commodity known as mineral sands, then shipping it to countries such as China where it is used to whiten bathroom tiles or in household paints.

    Now, these miners are shooting to be at the forefront of technological change—supplying the same commodity for use in 3-D printing. They are working on ways to cut the cost of producing titanium dioxide, the compound commonly produced from mineral sands, and investing in technologies that will make it more attractive for the 3-D printing industry.

    In doing so, they hope to protect profits from future swings in demand for titanium dioxide. Prices of the mineral sand rutile have fallen more than two-thirds from their peak in 2012, amid a slowdown in the pace of demand from traditional users. That has forced miners to slash output: Iluka—the world’s second-biggest producer of titanium dioxide, with mining facilities in the U.S. and Australia—dug up 23% less raw rutile in the first nine months of 2015 versus a year earlier. Rio Tinto, the No. 1 producer, has closed furnaces in Canada and South Africa and says its global operations are running at about 60% of their capacity.

    3-D printing—also called additive manufacturing—offers great potential to diversify the market for mineral sands. The technology has transformed within a decade from a niche industry making models, prototypes and smaller items such as hearing aids to one that has attracted investments from companies including jet-engine maker General Electric Co. and appliance giant Whirlpool Corp.These manufacturers want stronger, more lightweight materials that don’t cost more than the ones that they currently use.

    3-D printing involves slicing a digital image of an object into thousands of layers, which printers then recreate one at a time in plastic, metal or other materials. A powdered form of the chosen material, such as titanium dioxide, is used to create the three-dimensional object from a computer design. In the case of titanium, the powder is melted layer by layer with a laser to create the item.


    While high costs to slow print speeds have constrained the 3-D printing industry, there are signs of more rapid growth. Consultancy Wohlers Associates Inc., based in Fort Collins, Co., predicts it to be worth US$21.2 billion in 2020, up from US$4.1 billion last year.

    “It is potentially a turbocharger over time on demand for titanium dioxide,” said David Robb, Iluka Resources’s managing director.


    The size of the market for 3-D printing powder—which includes forms of titanium, as well as steel, cobalt and other raw materials—is set to increase at a compound rate of 24% each year through 2020 to be worth US$500 million, according to MicroMarket Monitor, an India-based research company. It foresees 3-D printing being increasingly adopted in the manufacturing of some components used in the automobile and aerospace industries.

    To be sure, 3-D printing currently accounts for a small segment of the titanium-dioxide market and miners say it may be years before it contributes to their profits in a big way. Nearly 90% of titanium dioxide produced goes into pigments for paints, paper and plastics.

    While mineral sands account for only a fraction of Rio Tinto’s profits compared with iron-ore sales, they are the main business of the world’s other top two suppliers, Iluka and Stamford, CT.-based Tronox Ltd.

    Iluka is diverting a portion of its mineral-sands output to an industrial unit in Rotherham, a former steelmaking center in northern England. There, scientists for closely held Metalysis are testing a technology that they hope will simplify and dramatically reduce the cost of producing titanium powder. Iluka, owns 18% of Metalysis.

    Rio Tinto is also “positioning ourselves on a technical side and a production side” for a potential spurt in demand for 3-D printing powder, said diamonds and minerals chief executive Alan Davies.

    The mining giant has teamed up with The Natural Sciences and Engineering Research Council of Canada and École de Technologie Supérieure, an engineering school in Montreal, and is supporting four other academic projects assessing the production of titanium metal powders that could be used in 3-D printing, Mr. Davies said.

    Boeing Co., which already makes several hundred types of aircraft parts using 3-D printing, including air duct components, has been investigating a process called electron-beam melting, as it works well with titanium.

    Boeing said it is continuously reviewing 3-D printing methods, believing the technology offers “the potential for widespread use” to create titanium parts for its aircraft.

    However, Boeing said titanium powder is currently much more expensive than aluminum and steel, so there needs to be a strong business case for it to replace those materials.

    Still, Iluka says new planes tend to contain about three times the titanium of older models.

    “If you have a process that systematically changes out some of the componentry or engines with a lighter and equally strong metal, it is really a compelling case,” said Rio Tinto’s Mr. Davies.

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    Sapa says U.S. investigates aluminium product test manipulation

    Norwegian aluminium products maker Sapa said on Tuesday that some employees at its plant in Portland had falsified test records and that the U.S. authorities were investigating the company.

    Sapa a joint venture between Orkla and Norsk Hydro , two of Norway's biggest industrial firms, said it had been temporarily suspended as a U.S. federal government contractor since the end of September.

    A handful of employees had been fired and the misconduct had now stopped, said company spokeswoman Erika Ahlqvist.

    Sapa makes extruded aluminium which is used in a wide range of products, such as car parts, bench seating in sport stadiums and supermarket shelves.

    The tests were used to measure the strength of the aluminium profiles and test how much force it could stand before breaking.

    "Specifically, we have learned that some test results for mechanical properties -- ultimate tensile strength, yield strength, and elongation -- have been altered to change failing test results to passing test results between 1996 and 2015," Sapa said in a statement.

    The firm said the U.S. Department of Justice's (DOJ) civil and criminal divisions were investigating the case.

    Sapa said it was too early to say what the financial impact would be.

    "But the Portland plant is only one out of 22 locations in North America and the share of the total volume from Portland which goes to government customers is less than a half percent," spokeswoman Ahlqvist told Reuters.

    "We are conducting audits now throughout our North American organisation, so all our plants will be audited by external auditors and any findings from those audits will be communicated to our costumers," she said.

    Sapa was originally a Swedish aluminium producer which Orkla bought in 2005. It was merged with a similar unit at Norsk Hydro to create the current joint venture under the name Sapa in 2013.

    Read more at Reuters

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    Sumitomo Metal sees Sierra Gorda 2015 copper output at 100 000 t, below target

    Japan's Sumitomo Metal Mining said on Tuesday that it expects copper output of the Sierra Gorda mine in Chile this year to come in at 100,000 tonnes, below a previous target of 123 000 t, due to a delayed ramp-up in production. 

    The Sierra Gorda mine, which it owns jointly with Polish producer KGHM Polska Miedz, began commercial production at the end of June and initial plans called for it to reach full capacity utilisation in December. But the timing of full operation may be delayed until the first quarter of 2016 due to a technical problem that has been found recently, Masahiro Morimoto, director at Sumitomo Metal Mining, told a news conference.

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    First Quantum Minerals Reports Third Quarter 2015 Results

    First Quantum Minerals Ltd. today announced comparative earnings of $70 million and cash flows from operations, before changes in working capital and tax paid, of $263 million for the three months ended September 30, 2015. On a per share basis, these equate to $0.10 and $0.382, respectively using the weighted average shares outstanding of 684.5 million for the quarter. The weighted average shares outstanding for the prior year quarter was 591.2 million.


    The first full quarter of commercial operations for the Kansanshi smelter:

    Concentrate processed of 254,709 tonnes, average copper recovery above design at 97.8%, production totaled 57,085 tonnes of copper anode and 229,000 tonnes of sulphuric acid

    Copper production, sales and C12 cash cost better than both comparative 2014 quarter and Q2 2015:

    Results reflect mainly the ramp-up of Sentinel, benefits of the Kansanshi smelter, the company-wide cost improvement program and lower fuel cost
    Production - 107,485 tonnes, sales - 104,613 tonnes, C12 cash cost - $1.18 per pound

    Best quarterly nickel production since Q3 2014 on higher output at Kevitsa and the steady improvement at Ravensthorpe:

    Production - 9,955 tonnes, sales - 10,733 tonnes, C12 cash cost - $4.56 per pound

    Realized per pound prices for copper $2.28 and nickel $4.81 below comparative 2014 quarter and Q2 2015:

    Q3 2014 = copper $3.11, nickel $8.47; Q2 2015 = copper $2.65, nickel $5.98

    Changes to the Zambian taxation regime effective July 1, 2015 whereby mineral royalties were lowered from 20% to 9% for open pit mines and corporate tax of 30% and variable profits tax of up to 15% were reinstated.

    Net loss attributable to shareholders of the Company of $427 million includes a $471 million deferred income tax charge triggered by the reinstatement of corporate tax in Zambia effective July 1, 2015 and an unrealized foreign exchange loss of $94 million on the revaluation of the Zambian Value Added Tax receivable due to the depreciation of the kwacha against the US dollar in the quarter.

    Updated full year Guidance:

    Production: 2015 guidance for copper and gold lowered while nickel remains within previous guidance range.
    C12 cash cost: 2015 guidance lowered to between $1.20 and $1.35 per pound copper and between $4.40 and $4.70 per pound for nickel.
    Capital expenditures: 2015 estimate unchanged at $1.4 billion inclusive of approximately $600 million for Cobre Panama (First Quantum's share $360 million), $230 million for capitalized stripping and $200 million for each of Sentinel and sustaining capital.
    2016 estimated at $1.2 billion inclusive of $880 million for Cobre Panama (First Quantum's share $528 million), $200 million for capitalized stripping and $100 million for sustaining capital.
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    World’s biggest zinc producer exploring total exit from mining

    The company has already suspended operations at its Mexico’s Campo Morado and Canada’s Myra Falls mines.

    Debt-laden European zinc producer Nyrstar said Monday it plans to raise up to $296 million (€275m) through a share offering to pay down debt and has appointed bankers to explore a total exit from mining.

    The Belgian company, which is the world's No.1 zinc producer, laid out a package of measures it is putting in place to try repaying a $447 million bond that matures in 2016 and also address ongoing problems with it mining division.

    Nyrstar also announced a number of commercial supply agreements with Trafigura, the world’s second-largest metals trader and its main shareholder.

    Nyrstar also announced a number of commercial supply agreements with Trafigura, the world’s second-largest metals trader and its main shareholder.

    The commodity trader has agreed to buy as much as $135 million (€125m) of shares in a first-quarter rights offer totalling $270m to $296m. As part of the deal, Trafigura won’t raise its stake to more than 49% from over 20%, according to Nyrstar. Should the rights offer boost Trafigura’s holding above 30%, it won’t be obliged to make an offer for the rest of the stock, the company added.

    Nyrstar shares jumped up as much as 9.4% in Brussels on the news and were trading 5.5% higher at €1.62 mid-afternoon.

    They took a huge dip on Oct. 22, falling 27% in a matter of hours, after new chief executive Bill Scotting said the company was considering selling stock to meet its debt obligations.

    On Monday, Scotting noted Trafigura’s involvement in the refinancing was not a “takeover by stealth”.

    Nyrstar has been hit quite hard by the rout in commodities, with zinc down 24% this year on declining demand from top consumer China. The company said it’s mulling reducing zinc production from its mines by as much as 400,000 metric tons if prices stay depressed. That would almost match the 500,000 tonnes that Glencore, another leading zinc producer, recently cut.

    The company has already suspended operations at its Mexico’s Campo Morado and Canada’s Myra Falls mines.
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    Indonesia warns Freeport McMoRan about divestment obligations

    Indonesia has warned Freeport-McMoRan the company must soon propose a price for divesting part of its Indonesian operations or be considered in default of its obligations, a senior mines official said on Sunday.

    Freeport Indonesia must sell the government a greater share of its huge copper and gold mine in Papua as part of an extension the company's contract beyond 2021.

    Freeport had until Oct. 14 to submit a proposal on how much the 10.6 percent stake in the company was worth. The government would then have 90 days to respond.

    Mr Bambang Gatot, director general of coal and minerals at the mining ministry, told reporters "Because it has not offered this yet, we have a sent a warning letter. Further delays may lead the government to declare Freeport in default of its obligations.”

    Mr Gatot declined to specify how long the US company had to respond to the letter, which was sent last week.

    A Freeport spokesman last month said the company had no issues relating to the divestment as long as it had a "legal basis and a clear mechanism". He said the company would prefer to make the divestment through an initial public offering.

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    Steel, Iron Ore and Coal

    China apparent steel consumption falls 5.7 pct from Jan-Oct -CISA

    Apparent steel consumption in China, the world's biggest producer and consumer, fell 5.7 percent to 590.47 million tonnes in the first 10 months of the year, the China Iron and Steel Association (CISA) said on Friday.

    China's massive steel industry has been hit by weakening demand and a huge 400 million tonne per annum capacity surplus that has sapped prices.

    "The market will only achieve balance if uncompetitive enterprises with no market demand are allowed to die," CISA vice-secretary general Wang Yingsheng told a conference.

    Zhang Dianbo, vice-president of the Baoshan Iron and Steel Corp (Baosteel) told the conference that the capacity utilisation rate of China's steel industry now stood at 69.3 percent, down from 70.69 percent in 2014, despite efforts to restrict new projects and close old and polluting mills.

    China aims to raise the rate to more than 80 percent by 2017, according to a policy document published by the industry ministry earlier this year.

    "It is hard to answer how long it will take for China to reduce capacity, but we believe it won't be completed in a short time," said Zhang.

    China said earlier in the year that it will aim to cut as much as 80 million tonnes of excess steel capacity in the next three years.
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    Brazil levies initial fines of $66 mln against mine for burst dams

    Brazil's president slapped preliminary fines of 250 million reais ($66.2 million) against a mine in the country's southeast where two dams burst, killing nine people and coating a two-state area with mud and mine waste.

    The fines, announced after President Dilma Rousseff flew over the affected area, come as federal prosecutors announced plans to work with state prosecutors to investigate possible crimes that could have contributed to the disaster at the mine, jointly owned by two of the world's biggest mining companies, BHP Billiton Ltd and Vale SA.

    Rousseff said the fines, imposed by Brazil's environmental regulator IBAMA for violations that include river pollution and damages to urban areas where water service has been suspended, could be followed by penalties from other federal or state agencies.

    The top government lawyer is working with IBAMA to sue the mine owners for up to $1 billion in environmental damages in civil court, a senior administration official told Reuters.

    "We are determined to hold responsible those who are responsible for this," Rousseff told reporters, citing the two multinationals by name, as well as their joint venture, Samarco Mineração SA.

    The moves by federal officials toughen the response of a national government, now faced with a disaster affecting two states, that until recently had left much of the official reaction in the hands of the state government of Minas Gerais, a global mining hub and site of the dams.

    Earlier on Thursday, the country's mining minister said the government would conduct an audit of other dams in the sector.

    On Wednesday, Rousseff, a native of Minas Gerais, spoke with the chief executives of BHP and Vale, who held a press conference earlier that day to apologize for the disaster and promised to meet their obligations as the mine's owners.

    During the conversation, Rousseff told them Brazil's government expected the companies to pay for rescue and cleanup efforts, as well compensation for more than 500 people who were displaced as their homes were destroyed.

    Earlier Wednesday, a top federal prosecutor said the federal government would form a task force with Minas Gerais prosecutors to see if federal crimes may have been committed in addition to violations found by the state, responsible for the environmental licensing.

    "Vale and BHP were completely careless in terms of prevention," said Sandra Cureau, an assistant prosecutor general in Brasilia, Brazil's capital. "There has been a total lack of concern with the victims."

    So far there have been nine deaths, BHP said on Friday, citing Samarco, the joint venture company that runs the mine.

    State authorities said 19 people were still missing and most were likely buried in the heavy trail of sediment that was disgorged when the dams burst last Thursday.

    Contaminated waste from so-called tailing ponds, mineral waste stored in reservoirs contained by the dams, was flowing through two states, cutting water supply to hundreds of thousands of people and raising concerns about the potential impact of the waste on residents' health, farms and the region's ecology.

    While Samarco maintained the tailings contained no toxins, dead fish have appeared in the River Doce.

    "Samarco is working with relevant authorities to manage river water quality and ensure availability of potable water," BHP said in a statement on Friday.

    Fisherman in Espírito Santo state planned to collect fish species downstream before the mud and mineral waste arrived put them in a nearby lake in what local authorities called Operation Noah's Ark.

    The mine employs about 1800 people, 13 of whom are among the believed victims, and makes up about 10 percent of Brazil's iron ore exports.

    The federal government has authorized an additional 9 million reais ($2.36 million) to the mines ministry for an audit of dams in the so-called iron quadrangle, the heavily mined region in Minas Gerais where the Samarco mine operates.

    Read more at Reuters
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    Iron ore cash curves force our forecast lower.

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    Met coal prices seen steady at record low into 2016

    Asian buyers will probably pay $89/t for hard coking coal, used to make steel, in the three-month period starting January 1, according to the median estimate of nine analysts surveyed by Bloomberg.

    That matches the price for this quarter, which is at a record low for quarterly prices and the smallest for any long-term contract since at least 2004, when deals were agreed on a yearly basis.

    The pain may not let up next year for metallurgical coal producers from Australia to the US as quarterly contract prices are forecast to remain at a record low amid slowing Chinese demand.

    Coal prices have suffered along with other raw materials while demand from China weakens as its economy shifts away from heavy investment and grows at the slowest pace in a generation. Producers from Teck Resources to Vale have cut output and shut mines as metallurgical prices slumped.

    "Demand growth has been moderating for most of the past two years as China withdraws," said Daniel Morgan, an analyst at UBS Group in Sydney. "Much of the met coal industry is loss-making and some of the market leaders are only breaking even."

    Australia, the world's biggest shipper of coking coal, has sustained output despite the price slide, with exports during the first nine months of this year marginally higher than the same period in 2014, government data shows.

    Australia exported 139.2 million tonnes of metallurgical coal during the nine months through September, compared with 137.1 million during the same period last year, according to data from the Australian Bureau of Statistics. Producers have cut 34 million tonnes from the market, equivalent to about 12% of last year's seaborne supply, Royal Bank of Canada estimates.

    Chinese imports slipped 17% to 62.4 million tonnes in 2014, from a peak 75.4 million in 2013, according to estimates from Morgan Stanley. The bank predicts they will fall further this year to 48.7 million.
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    China Oct coke output down 9.4pct on year

    China produced 37.17 million tonnes of coke in October, decreasing 9.4% from a year ago but up 1.2% from September, showed data from the National Bureau of Statistics (NBS) on November 11.

    That was the first rebound after a three consecutive monthly drop, as coke producers returned to normal work after the Beijing military parade in September and slowed down production cut amid loan payment pressure.

    Over January-October, total coke output of China reached 375.66 million tonnes, down 5.1% year on year, the NBS data showed.
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    China Jan-Oct coal industry FAI down 16.5pct on year

    China’s fixed-asset investment (FAI) in coal mining and washing industry stood at 330.1 billion yuan ($51.6 billion) over January-October, down 16.5% year on year, showed data from the National Bureau of Statistics (NBS) on November 11.

    Private investment in the sector contributed 186.4 billion yuan of the total, falling 15.7% from the previous year, compared to a 16.8% decline over January-September.

    Meanwhile, fixed-asset investment in all mining industries across the country posted a year-on-year drop of 8.5% to 1,051.6 billion yuan over January-October. Of this, private investment in mining industries contributed 594.4 billion yuan during the same period, falling 12%.

    The NBS data showed a total 118.6 billion yuan was spent on fixed assets in ferrous mining industry during the same period, down 20.2% from the previous year; while investment in oil and natural gas industry rose 1.7% on year to 255.8 billion yuan.

    The fixed-asset investment in non-ferrous mining industry witnessed a year-on-year decline of 4.7% to 175.1 billion yuan during the same period, data showed.
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    Vale, BHP to create fund for Brazil dam burst recovery, may be fined

    Mining companies Vale SA and BHP Billiton Ltd plan to create a fund for rebuilding efforts after two dams burst at their iron ore venture in Brazil, their chief executives said in a visit to the site on Wednesday.

    Vale CEO Murilo Ferreira said Samarco, the joint venture operating the Germano mine complex, had shown it was able to deal with the disaster last Thursday that left at least six people dead and another 22 still missing.

    Read more at Reuters

    The Brazilian government on Wednesday said it may fine mining giants BHP Billiton Ltd and Vale SA for the "environmental catastrophe" caused by ruptured dams at an iron ore mine jointly owned by the companies in a southeastern state.

    The government is increasingly concerned over the rising death toll and contaminated mud flowing through two states as a result of the disaster. It is studying the mine's permits and will ensure the owners pay for cleanup costs, Environment Minister Izabella Teixeira told reporters in Brasília, the capital.

    "If federal fines are applicable, we will apply them," Teixeira said. "There will be punishment, and under Brazilian law the environment has to be repaired."

    Her remarks are the strongest yet from Brazilian government officials, who have been caught off-guard by a disaster that killed at least eight people and left another 21 missing in the mineral-rich state of Minas Gerais nearly a week ago.

    The warning also came as the chief executives of Australia-based BHP , the world's largest mining company, and Brazil's Vale , the world's biggest iron ore miner, scrambled to publicly take responsibility for the disaster.

    After surveying the devastated area together, BHP CEO Andrew Mackenzie and Vale CEO Murilo Ferreira told a press conference they would fulfill all their obligations as joint owners of the mine, which is formally run by Samarco Mineração.

    The two men said the mining giants would create a joint fund for the recovery costs, but added that it was too soon to calculate how much would be needed. They also reaffirmed the companies' commitment to the joint venture over the long term.

    Read more at Reuters

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    Beijing to phase out coal-fired heating in core areas

    Beijing's central Xicheng District and Dongcheng District will bid farewell to smokey coal-fueled stoves by the end of the year, Beijing Municipal Environmental Protection Bureau said on November 10.

    A total of 23,800 households from the two downtown districts will not use coal as their primary source of heat this winter. The last nine coal sales spots in the two districts will be closed.

    The local residents are encouraged to use clean energy, such as electricity, as a substitute for coal to help improve air quality.

    A project was launched in 2000 to replace household stoves in bungalows with electric radiators in the core areas of the capital, helping the city to reduce its major pollutants over the past 16 years, the bureau said.

    So far, a total of 308,000 households from the Dongcheng District and Xicheng District have changed their heating system to cleaner sources because of the project.

    Environmental monitoring results shows that Beijing's annual average density of sulfur dioxide, a major air pollutant, has been reduced from 120 micrograms per cubic meter in 1998 to 13 micrograms per cubic meter in 2015.

    Beijing has shut down the third of its four major coal-fired power plants – Guohua thermal power plant -- as part of the government’s campaign to cut pollution in the smog-hit city, official media Xinhua news agency reported on March 20.

    In 2013, the municipal government of Beijing rolled out a clean air action plan to bring annual coal consumption down to less than 10 million tonnes by 2017, a reduction of 13 million tonnes in just four years.

    The final coal-fired power plant in the city – Huaneng thermal power plant -- is scheduled to close next year, Xinhua said.

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    Poland may stop producing coal at several mines until at least 2018

    Poland is considering stopping coal production at several of its mines until at least 2018 in an effort to help prices by reducing a global oversupply, while trying to keep state operations afloat and avoid job cuts, Reuters reported.

    Poland's troubled coal mining sector became a focal point, as the government failed to rescue the troubled Kompania Weglowa (KW), the EU's biggest coal miner.

    About 90% of Poland's energy is generated from coal, an industry with a strong local union, which can partly explain why Warsaw has long opposed the EU drive to curb carbon emissions.

    According to Eurostat data, around 83% of energy consumed in Poland is produced from black and brown coal, while in the rest of the EU the average is 28%. With UN climate negotiations in Paris coming up in December and the EU committing to cut greenhouse gas emissions by 40% on 1990 levels by 2030, Warsaw has been under significant pressure to reduce that figure.

    Currently, around 10% of the country’s energy needs are met by renewables (the average in the EU member countries is twice as high, at over 20%) and only 4% comes from natural gas and oil (while in the rest of the EU it is 25%), mostly imported from Russia.

    Due to technological underdevelopment, the productivity of Polish mines is very low, with 648 tonnes of coal produced per worker per year while in the worst US mines it is more then 2,000 tonnes.

    Despite that, Polish producers continue to invest billions in modernizing their coal-fired plants or in building new, more efficient ones. At least four new coal-fired power plants are expected to come on line by 2019, as the country faces a deficit of around 8 GW of capacity starting in 2020, once the EU’s Industrial Emissions Directive kicks in.

    The government would consider merging the country's top power firms — PGE, Tauron, Enea and Energa.

    "Personally I think Poland needs one big power company," said Grzegorz Tobiszowski, responsible for coal issues. He added the move would likely face scrutiny from the European Union over anti-monopoly regulations.

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    China's Oct crude steel output falls 3.1 pct on yr

    China's crude steel output fell 3.1 percent to 66.12 million tonnes in October from a year ago, government data showed on Wednesday.

    Production was virtually flat on the previous month, according to data from the National Bureau of Statistics.

    Read more at Reuters

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    Brazil to look at mandatory dry processing of iron ore after disaster -lawmaker

    A new mining code being proposed in Brazil will include stricter regulations for tailings pond dams and could make dry processing of iron ore obligatory for miners, the bill's reviewer, Congressman Leonardo Quintão, told Reuters on Tuesday.

    At least four people died and 22 are still missing five days after the collapse of two tailings ponds released a torrent of waste water from an iron ore mine operated by Samarco, a joint venture between BHP Billiton Ltd and Vale SA .

    Neither authorities nor Samarco have determined a cause for the rupture of tailings retaining dam.

    But the disaster has led to angry calls for tighter environmental safeguards and speeding up passage of the mining code that has been sitting in Congress for years. Under this pressure, lawmakers are adding the proposals for tailings ponds and dry tailings to an existing bill focuses on raising royalties levied on miners.

    Quintão said dry processing should replace wet processing of ores that requires tailings ponds for the mineral waste and water used in the process.

    "The technology exists and it is not more expensive," the lawmaker said in a telephone interview. He said the code could establish a five-to-ten year transition period for mining companies to move to dry processing.

    The bill stuck is at committee level in the lower house of Congress and, if approved, would still need to be debated and voted in the Senate.

    Senator Delcidio Amaral, an influential politician in the ruling Workers' Party, told Reuters over the weekend that the disaster could accelerate a vote on the mining code and lead lawmakers to include stricter regulations for mines.

    Read more at Reuters

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    Shanxi Coking Coal to add 5 Mpta coal capacity in Liulin

    Shanxi coking coal Group, the largest coking coal producer in China, is expected to add 5 million tonnes per annum (Mtpa) of coal producing and washing capacity, respectively, in Liulin of Shanxi province, upon gaining official approval on a mine complex and washing plant project.

    The company said on November 9 the project was ready for trial operation and would start it after approved by the Shanxi coal industryAdministration.

    The project helps expanding production capacity of Shanqu No. 1 Mine from 1.8 Mtpa to 5 Mtpa, and Shanqu No. 2 Mine from 1.2 Mtpa to 3 Mtpa, and boosting Shaqu coal washing Plant from 3 Mtpa to 8 Mtpa.

    Shaqu No. 1 and No. 2 mines are the first pair of mines developed in Liuliu mining area by Shanxi Coking Coal, located in Liulin county, Luliang city of Shanxi.

    The mine complex has minable reserves of 1.28 billion tonnes, with the main product being of premium coking coal used for steel production.

    Shanqu Coal Washing Plant mainly produces washed material for domestic users like Baogang, Angang, etc., as well as for overseas customers from Japan and South Korea.

    The project belongs to Huajin Coking Coal, a joint venture of Shanxi Coking Coal and China coal energy that mainly focuses on coal productionin Liliu and Xiangning mining areas in Shanxi’s famous Hedong Coalfield.

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    Brazil's Vale says Samarco disaster to cut output at nearby mines

    Brazilian mining company Vale SA said on Monday that a deadly collapse of a tailings dam at Brazil's Samarco, an iron-ore company it owns 50:50 with Australia's BHP Billiton, will cut output from two nearby mines. 

    Iron-ore output from Vale's Fábrica Nova and Timbopeba mines will be cut by three-million tonnes in 2015 and by nine-million tonnes in 2016, the company said in a statement. 

    Vale also said it planned to interrupt the sale of iron ore from its Fazendao mine to Samarco but did not say how much it planned to cut. The disaster on Thursday killed at least two and left 25 missing, and forced the cut-off of drinking water to cities more than 300 km away.
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    Arch Coal posts $2 BIL Q3 loss, says it may have to file for Chapter 11

    Arch Coal on Monday reported a $2 billion loss in the third quarter of 2015 and for the first time admitted it may be necessary to file for Chapter 11 bankruptcy even if it is able to restructure debt.

    In an earnings filing with the US Securities and Exchange Commission, the St. Louis, Missouri-based producer said it continues to be in "active dialogue" with creditors in an effort to restructure its balance sheet, but it may be necessary to file for relief under Chapter 11 protection in the "near term" even if an agreement is concluded.

    "The coal industry remains in a period of distress due to strict governmental regulations, oversupply in the global coal market, increased competition from natural gas, and low coal demand and prices, among other factors," Arch said. "Many coal companies, including Arch, have been consistently reporting cash burn and losses, and, due to current market conditions, expect to continue to use cash and report losses for the foreseeable future."

    Arch on Monday canceled its Q3 earnings conference call with the media and investors, citing "ongoing discussions with various creditors."

    The company reported a $2.1 billion asset impairment charge for Q3 "due to deteriorating market conditions" and $149 million in losses related to the bankruptcy of Patriot Coal. Arch's operations in Appalachia accounted for $1.7 billion of the asset impairment charges.

    At the end of Q3, Arch had almost $6.5 billion in total liabilities, including $5.1 billion in long-term debt.

    Despite the Q3 loss, Arch said it still had liquidity of $704.4 million at the end of September, with $694.5 million in cash and liquid securities. That high liquidity could keep the company operating for some time, said Chiza Vitta, associate director of natural resources at Standard & Poor's.

    "The weird thing about Arch is they have so much cash on hand, so much liquidity, they can stretch this out for a while," Vitta said. "When things are tough, you usually don't see that."

    "Ultimately, it is up to them on how long they can keep going," he said. "They have to balance how much they are bleeding [financially] against when and to what extend a turnaround will happen."
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    EU fails to take action to stop cheap Chinese steel imports

    that European Union ministers failed to agree on Monday on urgent measures that steelmakers are demanding to stem a flood of cheap imports from China after the loss of some 5,000 jobs in the sector in Europe in the past three months.

    Luxembourg economy minister Etienne Schneider, whose country holds the six-month rotating presidency of the bloc, told a news conference that they agreed on the gravity of the situation and the need to take concrete actions. Luxembourg has called for a conference later this year to consider a response.

    British steelworkers union Community said the ministers had failed to grasp the urgency of the situation, with the promise of another conference only delaying action.

    Economy and industry ministers had gathered in Brussels at the request of Mr Sajid Javid, business minister for Britain, where the majority of jobs have been lost.

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    Vallourec has no current plans to raise cash after loss

    French steel pipe maker Vallourec on Monday reported a loss in the third quarter against a backdrop of falling demand from its oil and gas customers and said it did not expect market conditions to improve in the short-term.

    But Vallourec stuck to its target for positive free cash flow generation over the full year. Finance chief Olivier Mallet told a conference call that the group had no plans at the current stage for a capital increase, when asked about speculation the company might raise cash.

    The company made a loss of 66 million euros ($70.92 million) compared with 175 million euros core profit in the same period in 2014.

    Vallourec makes two-thirds of sales from the oil and gas sector, and has been trying to cut production capacity and jobs to cope with the downturn affecting its oil company customers following the fall in global crude oil prices.

    Vallourec had warned in July that it expected full-year 2015 earnings before interest, taxes, depreciation and amortisation to be negative.

    The company said that it expected further deterioration in the fourth quarter, as it would be affected by the unfavourable phasing of oil and gas deliveries in Brazil.

    It has already said it would cut capital expenditure to 300 million euros in 2015 from the 350 million initially planned. On Monday it said it would further reduce capex to below 300 million euros.

    Global staff reduction in the first nine months of 2015 has reached 2,500 or about 11 percent of total headcount, it said.

    Read more at Reuters
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    Rush to speed Brazil mine permit may be behind dam disaster

    Mining companies often complain endless red tape makes it hard to do business in Brazil but prosecutors and environmentalists say burst dams at an iron ore mine that triggered massive flooding last week point to gaping lapses in regulation.

    The floodwaters and mudflow killed at least two people and another 25 are still listed as missing in a disaster that came two years after a study requested by a prosecutor warned the dams in the mineral-rich state of Minas Gerais could collapse.

    "It was evident this dam was risky," Carlos Eduardo Pinto, a state prosecutor who probes the mining industry, told Reuters, referring to the first dam that gave way, leading to the rupture of another.

    Pinto is investigating whether a tailings pond, a reservoir for water with mine waste held by the dam, was too full.

    The dams burst on Thursday at a mine operated by Samarco, a joint venture between BHP Billiton Ltd , the world's largest mining company, and Vale SA, the biggest iron ore miner.

    In 2013, when Samarco was seeking renewal of its operating license, Pinto commissioned a study that found a design flaw in the tailings pond. It warned that an embankment could give way if it became saturated by water.

    The Instituto Pristino, an environmental group staffed by researchers from the Federal University of Minas Gerais, recommended the company conduct a dam-break study and draw up a contingency plan in case it burst.

    But the state licensing agency ignored the recommendations and renewed the mine's license a week after it was published, in October 2013.

    The state environment office in charge of the licensing agency said in an email the report recommended only industry standards. It did not say whether it asked the company to enforce those standards before renewing the license, though it did say an independent audit of the dam in July this year concluded the structure was stable.

    Prosecutors are investigating whether increased production at the mine might have affected the volume in the reservoir. Vale has said the Samarco mine increased output last year by 37 percent with the addition of a new iron ore pellet plant.

    Pinto said the company opted to accommodate the growth by raising the dam wall instead of building a new one, which would have been more costly, and was still working on it when the dam burst.

    Read more at Reuters

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    China Oct steel products exports down 20pct on mth

    China’s steel products exports rose 5.5% on year but dropped 19.8% on month to 9.02 million tonnes in October, after hitting the record high of 11.25 million tonnes in September, showed the customs data on November 9.

    The monthly decline was mainly due to steel producers’ customs clearance in advance before the National Day holidays. Besides, foreign countries’ intensified anti-dumping acts also brought some negative effects on China’s steel products exports.

    The value of October steel exports stood at $4.67 billion, dropping 24% on year and down 17.7% on month. That translated to an average export price of $517.96/t in October, rising $13.3/t from September but down $201.1/t year on year.

    Over January-October, the exports of China’s steel products stood at 92.13 million tonnes, a year-on-year rise of 24.7%.

    Total exports value during the same period stood at $53.33 billion, down 6.9% from a year ago.

    Meanwhile, China imported 950,000 tonnes of steel products in October, dropping 12.8% on year and down 5.9% on month. The value of imports stood at $978 million, dropping 9.2% from September and down 27.4% from a year ago.

    Over January-October, the imported steel products amounted to 10.68 million tonnes, down 11.7% on year. The value totaled $12.13 billion, a decline of 19.5% year on year.

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    India coal imports falling in boost to self-sufficiency goal

    India's coal imports fell 5 percent in October in their fourth straight monthly slide as local output rose fast under the government's push to open a mine every month, keeping the country on course to become self-sufficient in thermal coal in three years.

    Asia's third largest economy is targeting to more than double coal output to 1.5 billion tonnes this decade, and state-run Coal India has already turned around its
    poor performance with record growth from old and new pits.
    Coal imports into India, the world's third-largest buyer, fell to 14.52 million tonnes last month from a year earlier, according to trade ministry data provided by Coal Secretary Anil Swarup. April-October purchases fell 4.6 percent to 108.4 million.

    "The trend (of falling imports) will continue because of sustained increase in coal production by Coal India," Swarup told Reuters on Monday.

    Apart from Coal India, Swarup expects about 500 million tonnes of coal coming from the private sector by the end of this decade. The government is working out details to open up the nationalized sector and allow private companies to mine and sell coal.

    India has enough reserves of thermal, or power-generating, coal but will have to continue buying foreign coking coal used by the steel industry.

    Read more at Reuters

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    China's iron ore prices seen set to fall further as low season begins

    Both domestic and imported iron ore prices will remain under downward pressure over November and December as steel mills enter the seasonal winter low production period, market sources said Friday.

    "Winter is coming, which will drag down steel demand in China further, and iron ore prices will probably decline on waning buying enthusiasm from Chinese steel mills as a result [from this month]," a mining official in northern China said.

    Beijing saw its first snowfall of the year Friday.

    China's iron ore miners have been monitoring import price movements closely this year and routinely adjusting their prices to remain competitive, but their room to maneuver has been crunched to Yuan 5-10/dmt(80 cents-$1.60/dmt) since August when domestic concentrate prices hit Yuan 550/dmt, close to or below their cost of production.

    "China's steel output will most probably decline with the demand going into the low season," the China Iron and Steel Association or CISA said in a monthly report released Wednesday.

    A fall in inventories of iron ore both at steelworks and ports has failed to ease the oversupply situation in China and done little to support iron ore prices as a result, CISA said.
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    ArcelorMittal South Africa plans R4.5bn rights offer Steelmaker says

    ArcelorMittal South Africa (AMSA), the latest local steelmaker to fall victim to record low steel prices, weak demand, and an influx of cheap imports, is planning to raise as much as R4.5bn through a planned rights offer that will be underwritten by the parent company.

    Africa’s largest steelmaker, which expects to post an annual headline loss of more than R6/share (11 times greater than that recorded last year) for the financial year ending December, believes the cash call is the first step in reducing debt and funding near term investments. Referring to the challenging trading environment which has rendered four consecutive years of net losses, CEO Paul O’Flaherty said, “…it has become critical to restructure the financial position of the company”.

    The funds raised by AMSA’s rights issue have already been earmarked to settle a loan of R3.2bn from the Luxembourg based parent company. South African shareholders are therefore being asked to repay the loans owed to the ArcelorMittal (AM) Group.

    Judging from the third quarter results the AM Group have just released, it becomes clear why. ArcelorMittal reported a $700 million loss for the third quarter and revised its full year Ebitda expectations down to between $5.2bn and $5.4bn from previous estimates of between $6bn and $7bn. In an attempt to reduce its 2016 cash requirements by $1bn, it is lowering its capex spend and suspending its dividend for the 2015 financial year.

    At the same time, AMSA is placing its Vaal Meltshop in Vereeniging under care and maintenance. The 283 employees at the meltshop will be affected when production there ceases in the fourth quarter. It may also outsource jobs at its Corporate Services Division. The company will also implement “a number of significant operational, productivity and cost efficiency improvements” at its Vanderbijlpark Works over the next two years.

    AMSA is also renegotiating the pricing mechanism terms of a long term deal with Kumba Iron Ore, from whom it procures up to 25Mt of iron ore a year. Under the new agreement, AMSA will no longer pay cost-based prices but rather export parity prices (EPP) which will be based on an international index. It will receive discounts of between 5% and 7.5% to the EPP based on the index price of iron ore. “The current market environment presents significant challenges for the mining and steel industries.
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    China October Iron Ore, Coal, Oil and Copper imports dip on month - customs

    China imported 75.52 million tonnes of iron ore in October, down 12.3 percent from the previous month, official data from China's customs authority showed, with National Day holiday disruptions compounded by a slowdown in the domestic steel industry.

    Slowing economic growth in China has had a massive impact on heavy industries like steelmaking and power generation, leading to a slump in demand for bulk commodities like iron ore and coal.

    Iron ore imports in October were down 4.9 percent on the year, while shipments for the first 10 months of the year have reached 774.5 million tonnes, down 0.5 percent compared with last year, despite a huge crash in prices and a decline in high-cost domestic production.

    Coal shipments in October, including lower-grade lignite, reached 13.96 million tonnes, down 21.4 percent from September and 30.7 percent from a year ago. Volumes for the year so far reached 170.3 million tonnes, down 29.9 percent compared with the same period of last year.

    Domestic steel mills have been struggling with weak demand and product prices now at multi-decade lows, and have relied on the export market to help absorb surplus production.

    However, despite complaints that China continues to dump large amounts of cheap steel on overseas markets, exports in October actually fell 19.8 percent to 9.02 million tonnes.

    October crude oil deliveries fell 5.7 percent from September to 26.35 million tonnes, amounting to 6.2 million barrels per day.

    Copper imports also declined 8.7 percent compared with last month, reaching 420,000 tonnes. Traders said imports had been affected by lukewarm domestic demand. Importers also arranged more deliveries in the previous month to compensate for the week-long October holiday.

    Arrivals of anode, refined copper, alloy and semi-finished copper products reached a 20-month high of 460,000 tonnes in September.

    Soybean imports also declined 23.8 percent on the month to 5.53 million tonnes, customs data showed, matching expectations, with supplies from South America in decline and production from North America still in transit.

    With U.S. deliveries now starting to arrive, imports are likely to pick up to about 7 million tonnes in November, the China National Grain and Oils Information Centre (CNGOIC) said.

    Read more at Reuters

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    UK steelmakers call for immediate EU action on Chinese imports

    British steelmakers called for business minister Sajid Javid to insist on immediate action against Chinese steel 'dumping' when he meets European Union economy and industry ministers in Brussels on Monday.

    Britain requested the emergency meeting after nearly 4,000 of its steel jobs were lost or put at risk in October - equivalent to about a fifth of the sector's workforce - with steelmakers and unions pinning much of the blame on China.

    "The U.S. and other countries have already moved to prevent cheap Chinese imports distorting their markets and now the EU must do the same and, do so quickly ... if we're to prevent large scale problems for steelmakers spreading," said Gareth Stace, director of UK Steel, an industry lobby.

    China makes nearly half the world's 1.6 billion tonnes of steel. It is expected to export a record 100 million tonnes of steel to world markets this year to help address its spare steelmaking capacity - estimated at 300 million tonnes.

    The issue made national headlines during Chinese President Xi Jinping state visit to Britain last month, putting the government under pressure.

    As a result, it promised last week to start refunding the cost of green taxes which push up energy prices for steel manufacturers as soon as the European Union grants state aid approval.

    But Britain's steel sector says its biggest problem has been a sharp rise in steel imports from China. UK Steel said forecasts show that Chinese 'dumping' of rebar steel in the UK is set to account for more than half the UK market of 720,000 tonnes in 2015.

    The European Commission opened an investigation into alleged rebar dumping in April. The investigations usually take 15 months, although the Commission can set provisional duties after an initial nine months.

    Global steel prices are at the lowest level in over a decade ST-CRU-IDX due poor demand growth and structural oversupply. Consultants CRU estimate that some 700 million out of a total 2.3 billion tonnes of global steelmaking capacity is spare.

    Read more at Reuters
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    BHP iron ore target under review after Brazil disaster

    BHP Billiton Ltd said it was reviewing its fiscal 2016 iron ore production guidance following a deadly mudflow and flooding disaster at a mine in Brazil, which analysts described as a severe blow for the world's biggest miner.

    At least two people died and as many as 28 are missing after a dam ruptured at the Samarco Mineração S.A. mine and unleashed floods and mud that swept as far as 100 km (60 miles) from the mine.

    Samarco, a joint venture between BHP and the world's biggest iron ore miner, Vale SA , said it had set no date to restart the mine, which produced 29 million tonnes of iron ore last year.

    BHP's share made up about 6 percent of its total iron ore output in the year to end-June 2015 and contributed about 3 percent of underlying earnings before interest and tax, although analysts said the potential liabaility from the disaster would be more significant for the company.

    "It's probably the last thing the company needs, given it's struggling to generate earnings, it's on track to pay dividends out of debt, and then they've got this liability," said Ric Ronge, a portfolio manager at Pengana Capital.

    "In dollars and in terms of their ability to operate as a responsible citizen, it's very material," Ronge said, declining to put an estimate on how large the liability might be.

    BHP's shares fell 3.5 percent t A$21.90 a share by midday trading on Monday to a six-week low.

    BHP had been planning production of 247 million tonnes in the year to June 30, 2016 prior to the disaster, up 6 percent on a year earlier, ranking it behind Vale and Rio Tinto

    Samarco has the capacity to produce 30.5 million tonnes a year of iron ore pellets and to process 32 million tonnes of iron concentrate annually.

    The operations in the southeastern state of Minas Gerais include a three-tiered tailings dam complex. It was the Fundao dam that failed on Nov. 5.

    "This resulted in a significant release of mine tailings, flooding the community of Bento Rodrigues and impacting other communities downstream," BHP said in a statement to the Australian Securities Exchange.

    A second dam has also been affected, according to the company, which did not make clear the extent of damage, while a third dam was being monitored by Samarco, it said.

    Andrew Mackenzie, chief executive of Melbourne-based BHP, will travel to the mine this week to get a better understanding the disaster, according to the company, which reiterated the safety of Samarco's workforce and local communities remained its top prioirty

    "There's no way to dress this up as anything other than an ugly and sad thing," said Morningstar analyst Mark Taylor. "It's particularly disappointing for them (BHP) as it's not really a core asset."

    Read more at Reuters
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