Mark Latham Commodity Equity Intelligence Service

Tuesday 15 October 2019
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China's gas demand growth to slow to 10% this year, Sinopec official says

China’s natural gas demand is expected to reach 307 billion cubic meters (bcm) this year, an increase of just 10% from 2018, an official of state-run Sinopec Gas Co said on Tuesday, as a slowing economy hits consumption.

China is the world’s second largest importer of liquefied natural gas after Japan, producing 160.2 bcm of gas last year and importing 124.8 bcm, of which 74.3 bcm was LNG, with pipeline gas making up the rest.

Any demand increase is expected to boost its imports of the super-chilled fuel.

“Due to the macroeconomic situation and the government’s easing push to the coal-to-gas program, China’s gas consumption growth is slowing,” said the official, reading prepared remarks on behalf of Wu Gangqiang, the firm’s deputy chief economist.

“We expect the consumption growth for this year is around 10%,” he added. That figure compares with annual growth of 17% in 2018.

In its steady push to clear smoke-blanketed skies, China is forcing homes and industrial plants to cut use of coal, which fuels emissions of toxic sulfur dioxide and greenhouse gases, in favor of cleaner energy, such as renewables and natural gas.

China’s gas demand is expected to reach 510 bcm by 2030, led by city gas, industrial and gas-powered utilities, while demand from chemical plants is expected to decline, added the official.

City gas demand of 92.5 bcm in 2018 accounted for 33% of total demand, but there is another 10 to 15 years of rapid growth in demand ahead, as the trend of urbanization gathers pace, he said.

China’s industrial gas demand was 110.6 bcm, or nearly 40% of overall demand, he added. As China adopts stringent environmental measures, the company expects demand for industrial gas to become a vital driver of growth, he said.

Gas demand by utilities was 48.4 bcm, or about 17% of overall demand in 2018, with gas power capacity at 85.87 gigawatts (GW).

Still, high costs and decreasing subsidies from the government will limit demand from gas-powered utilities for electricity generation, he added.

China’s domestic production of natural gas is expected to reach 174 bcm to 175 bcm this year, with shale gas making up about 15 bcm, a research official from the Ministry of Natural Resources said.Shale gas output is expected to increase further over the next five or six years, said Pan Jiping, director of the strategic research center for oil and gas resources at the ministry.

China has been encouraging use of natural gas, as it is more efficient and cleaner than coal, which constitutes the bulk of its primary energy use, and aims to add another 4.93 million households to its coal-to-gas or electricity plan this winter.

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Middle East to be safer without US

1. Three clear remarks by senior US officials in the past two months reveal some truths which the country’s governing body previously lacked the courage to accept and express.

2. After Yemeni Ansarullah’s drone attack on Aramco oil facilities in Saudi Arabia and in response to Saudi Kingdom’s pressure to confront the perpetrators of this attack, US officials clearly emphasized on not meeting the Saudi request and it was announced that it is the Saudi Arabia which has been attacked not the US.

3. Following consecutive political and military defeats in the region, the $8 Trillion costs of US military presence in the region came to light and it was announced that America’s presence in the Middle East has yielded no result and was a foolish act.

4. Recently and after Turkey’s aggression on northern Syria and the US’s turning its back on its Kurd allies, American officials admitted to having caused a bloody war in Iraq under the false pretext of weapons of mass destruction and stated that stepping into the trap of the Middle East was the worst decision America has ever made in history.

5. It seems that America’s governing body has reached this conclusion through actual experiences that the equation of power and political geometry in the world have changed, especially at its heart, the Middle East; and that the United States can no longer claim reign over the international system despite all its massive propaganda.

6. America has come to realize that it has only two ways to go; either it has to just be content with an empty mask of being a global superpower through bearing its great costs, or to take a realistic approach, acknowledge the present reality of the world, and free itself from enormous costs of this exposed show.

7. The US governing body has realized that today, for any reason, it has no superpower requirements and returning to the peak era is impossible and out of reach; its inability to execute strategic projects such as ‘partitioning the Middle East’, ‘Deal of the Century’, ‘regime change in Iran’, ‘instating Saudi Arabia as the regional police’, ‘Yemen war’, ‘Afghan peace’, and ‘Syrian crisis’ and etc. has been proved to all.

8. The US government's bitter but instructive admissions have led many West Asian nations, even those who have been preparing the grounds for and hosting America's presence in the region for years, to acknowledge that ‘the Middle East without America is a safer place’.

Translated by Mehr News Agency

MAH/IRN 83516262

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Venezuelan oil output could be halved without Chevron waiver extension: analysts

Washington — Venezuelan oil production, already averaging a historic low near 600,000 b/d, could quickly plummet below 300,000 b/d if the Trump administration allows a waiver for Chevron and four US oil services companies to expire next week, analysts told S&P Global Platts.

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"I think you'd see it go certainly to under 300,000 b/d within a month," said Neil Bhatiya, an associate fellow with the Center for a New American Security. "The question after that is whether and how fast there is backfilling by Chinese, or, more likely, Russian state firms. It will take a while though, so a Chevron-less Venezuela will probably be in the [sub-300,000 b/d] zone for the remainder of the calendar year."

At issue is a general license issued by the US Treasury Department on January 28 as the administration unveiled its most punitive sanctions on Venezuela's oil sector. The waiver allowed Chevron, Halliburton, Schlumberger, Baker Hughes, and Weatherford International to continue certain work with PDVSA, Venezuela's state oil company, while those sanctions were in place. The waiver, which was granted a 90-day extension in July, expires on October 25.

CAPITOL CRUDE PODCAST: Will Citgo's US refineries be seized by creditors?

A spokesman with Chevron said the company was still waiting for a decision on the waiver from the Trump administration. Spokesmen for the White House and Treasury did not respond to requests for comment.

Joe McMonigle, an analyst with Hedgeye Risk Management, said that the 90-day extension Treasury granted Chevron and other companies in July was likely the last and only extension for the waiver and served as more of a "wind-down period" for those US companies to prep their departure from Venezuela's oil sector.

Chevron "still prefers a waiver and most likely lobbying for it," McMonigle said. "But the reality is, the administration wants to ratchet up pressure and this is one of the few tools left in the toolbox."

Kevin Book, managing director with ClearView Energy Partners, said the Trump administration may increasingly oppose a waiver extension due to political sensitivities, particularly negative views voters may have of perceived leniency toward the Maduro regime. Any extension may require National Assembly leader Juan Guaido, who the US recognizes as Venezuela's legitimate president, to provide the administration "political cover" by publicly calling the Chevron extension a necessity for Venezuela's economy, Book said.


Andrew Stanley, an associate fellow with the Center for Strategic & International Studies, said about one quarter of Venezuela's active drilling rigs support joint-venture projects involving the US companies operating in Venezuela under the soon-to-expire waiver.

"If the waiver expires it will certainly have an impact on operations and production for PDVSA," Stanley said.

Chevron, a presence in Venezuela for nearly a century, currently works with PDVSA on four joint-venture operations in western and eastern Venezuela, including three heavy or extra-heavy crude oil projects, according to the company's website. Chevron's biggest project is Petropiar in the Orinoco Belt, which produces about 200,000 b/d, including an estimated 40,000 b/d by Chevron and 160,000 b/d by PDVSA.

Chevron's projects, however, are operating well below capacity, making up as little as 10% of the country's roughly 600,000 b/d output, according to Francisco Monaldi, the Latin American energy policy fellow at Rice University's Baker Institute for Public Policy.

Rosneft or a Chinese company may be willing to operate Petropiar if Chevron's waiver is allowed to expire, which could prevent oil output from falling more than 25,000 b/d to 50,000 b/d in the near term. But Venezuela's current constraint is sales, not production, Monaldi stressed.


"They are unable to sell due to sanctions and their on-ground inventories are at capacity," Monaldi said, adding that floating inventory has reached record highs as tankers have become less available and more costly. "So given that situation they will have to close output regardless of what happens with Chevron unless the secondary sanctions enforcement eases."

Monaldi said he expects Venezuelan oil output to continue to decline through this year, even if the waiver is extended.

Earlier this year, S&P Global Platts Analytics forecast Venezuelan oil output to fall to 375,000 b/d by the end of next year, in its low-case scenario, under which Maduro retains power, the US imposes secondary sanctions similar to its Iran oil sanctions, and creditors accelerate their pursuit of PDVSA assets.

Stanley with CSIS said the biggest issue for the Venezuelan oil sector remains President Trump's August 5 order which placed a full economic embargo on the Maduro regime and served as a formal warning to Russia and China to end their financial support of the embattled government.

That order caused PDVSA's crude oil export to drop below 500,000 b/d in September, as buyers' fears of enforcement action from the US Treasury increased.

"This combined with refinery runs that continue to fall has seen storage levels at export facilities and upgraders build significantly, which is causing significant operational issues for PDVSA," Stanley said.

--Brian Scheid,

--Edited by Alisdair Bowles,

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Factbox: Japan starts 0.5% sulfur bunker fuel oil supply ahead of IMO 2020 mandate

Tokyo — The majority of Japanese refineries are ready to supply 0.5% sulfur bunker fuels, well ahead of the International Maritime Organization's global sulfur mandate for marine fuels.

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The IMO will cap global sulfur content in marine fuels at 0.5% on January 1, down from the current 3.5%. This applies outside the designated emissions control areas, where the limit is already 0.1%.

Currently, IMO 2020 compliant bunker fuels still represent only a fraction of Japanese refiners' entire bunker fuel supply, but the proportion of cleaner fuels is expected to rise in the coming months as demand accelerates.

Low sulfur IMO 2020 compliant fuels are now available at 14 out of the 22 refineries, with three more refineries expected to be ready before year-end.

Japan's potential LSFO demand for bunkering is estimated to be around 100,000 b/d, according to S&P Global Platts calculations based on market information. This includes demand for domestic coastal vessels.

While Japanese refiners are ramping up LSFO production, they are still likely to maintain HSFO supplies to serve owners/operators installing scrubbers on their ships.

Japan has decided it will support the use of open-loop scrubbers aboard ships. Based on its environmental assessment, Japan will not ban discharge of washwater from open-loop scrubbers in its port waters, even though many ports worldwide have or are preparing to implement such bans.



**JXTG Nippon Oil & Energy, the largest Japanese refiner, started supplying 0.5% sulfur bunker fuel oil from its six refineries in Japan as well as from an oil terminal in Niigata in the country's northwest as of October 1.

**JXTG's supply of 0.5% sulfur IMO-compliant bunker fuel oil is now available from its 145,000 b/d Sendai refinery in the northeast, 270,000 b/d Negishi refinery in Tokyo Bay; 135,000 b/d Sakai refinery, 320,200 b/d Mizushima refinery, 120,000 b/d Marifu refinery in the west; and its 136,000 b/d Oita refinery in the south west.

**The refiner also plans to start supplying IMO-compliant bunker fuels from its 197,100 b/d Kashima refinery in the east coast and its 129,000 b/d Chiba refinery in Tokyo Bay.

**JXTG's 0.5% sulfur bunker fuel oil is only available for ocean liners at its Sendai and Marifu refineries, with Kashima, Chiba, Negishi, Sakai, Mizushima and Oita refineries supplying IMO compliant fuel oil for both ocean liners and coastal vessels.

**In addition to the Niigata oil terminal, JXTG also plans to start supplying IMO-compliant bunker fuel oil at its five other oil terminals in Muroran in the north, Sakaiminato in the west, as well as Kitakyushu, Nagasaki and Kagoshima in the southwest. But all of its IMO-compliant bunker fuel supply is available only for coastal vessels at the six oil terminals.

Idemitsu Kosan

**Idemitsu Kosan, also on October 1, started supplying IMO-compliant bunker fuel oil from its 190,000 b/d Chiba refinery in Tokyo Bay, the 160,000 b/d Aichi refinery and 255,000 b/d Yokkaichi refinery in central Japan as well as at the 120,000 b/d Seibu refinery in western Japan.

**Japan's second largest refiner also started supplying IMO-compliant bunker fuel oil at its Tokuyama complex -- a former refinery, which currently supplies energy and chemical raw materials -- in western and southwestern Japan.

**The company plans to start supplying IMO-compliant bunker fuel oil a the 150,000 b/d Hokkaido refinery in northern Japan in December.

Fuji Oil

**Fuji Oil, in which Idemitsu Kosan holds a 6.57% stake, also started supplying 0.5% sulfur bunker fuel oil at its sole 143,000 b/d Sodegaura refinery in Tokyo Bay in October.

Cosmo Oil

**Cosmo Oil started its 0.5% sulfur bunker fuel oil supply as of October 1 at its 177,000 b/d Chiba refinery in Tokyo Bay, its 86,000 b/d Yokkaichi refinery in central Japan, and its 100,000 b/d Sakai refinery in western Japan.


**Japan's current demand for low sulfur bunker fuel oil comes mainly from major Japanese shipowners, who had secured term contracts.

**Mitsui & Co. Petroleum Ltd. supplied its maiden marine fuel 0.5% bunker of about 300-400 mt at Osaka/Kobe in western Japan in the week ended October 5, according to traders.

**Toyota Tsusho will be delivering its first low sulfur bunker fuel oil cargo of 600 mt for the Grand Mercury, a Toyota roll-on/roll-off ship, at Toyohashi in central Japan around October 21, following its purchase of the cargo from Idemitsu Kosan.

**JXTG and Cosmo Oil had suspended the supply of 1.0% sulfur A-fuel oil -- a blend of gasoil and fuel oil in a 90:10 ratio -- in the domestic rack and waterborne markets as of September 30 to shift their focus to supply IMO-compliant bunker fuels.


**Reflecting Japan's growing preference for clean marine fuel, the spread between Japan delivered Marine Fuel 0.5% bunker and Mean of Platts Singapore Marine Fuel 0.5% averaged $136.46/mt month to date. In comparison, the premium for Japan Delivered Marine Fuel price marker averaged $76.30/mt in September, $71.14/mt in August and $38.39/mt in July.

**The spread between Japan delivered Marine Fuel 0.5% and 380 CST Fuel Oil hit a record high at $199.50/mt on October 8. The differential remained close to that level Thursday, assessed at a premium of $197.50/mt.

**Mitsui and Co. Petroleum Ltd. were the first to begin bidding for spot Marine Fuel 0.5% bunker during the Platts Market on Close assessment process. It submitted a bid for 800-900 mt of Marine Fuel 0.5% for delivery over October 18-20, at $587/mt on Thursday.

-- Takeo Kumagai,

-- with Rason Chen,

-- Surabhi Sahu,

-- Edited by Norazlina Jumaat,

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Iran’s Rouhani vows response to oil tanker attack

Iran’s Rouhani vows response to oil tanker attack

By Arsalan Shahla and Golnar Motevalli on 10/14/2019

LONDON (Bloomberg) - President Hassan Rouhani vowed Monday that Iran would respond to an attack on one of its oil tankers in the Red Sea, saying the evidence suggested it was the work of a government not a terrorist group.

Addressing reporters in his first news conference since the U.S. abandoned the 2015 nuclear deal last year, Rouhani said officials in Tehran had seen footage of the incident and it was likely that several rockets were aimed at the tanker. He stopped short of assigning blame, but the vessel was sailing near the Saudi port of Jeddah at the time of the attack.

“This wasn’t a terrorist move, nor was it carried out by an individual. It was carried out by a government,” Rouhani said, adding that officials were also assessing rocket fragments.

The Gulf has seen a surge in tit-for-tat attacks on oil facilities, drones and shipping traffic since Donald Trump’s administration tightened sanctions on Iran’s oil exports earlier this year. The measures are part of Trump’s “maximum pressure” policy aimed at forcing Iran to curb its ballistic missile program and support for proxy militia around the Middle East, but have been met with defiance by the Iranian government, which has, instead, rolled back its own compliance with the nuclear accord.

Although all sides have said they want to avoid war, repeated incidents pose a growing risk to supplies from the world’s most important oil-producing region.

The attack on the Sabiti tanker came weeks after a drone strike on a major Saudi oil facility which the kingdom blamed on Iran. Iranian officials have said they weren’t involved in the attack, which rattled global oil markets, and was claimed by Iranian-backed Houthi rebels in Yemen.

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Neptune Energy acquires North Sea assets from Energean

Neptune Energy acquires North Sea assets from Energean


COURBVOIE, FRANCE - Neptune Energy has entered into a conditional Sale and Purchase Agreement with Energean Oil and Gas to acquire Edison E&P’s UK and Norwegian producing, development and exploration assets for an initial cash consideration of $250 million. The purchase is contingent on Energean completing its proposed acquisition of Edison E&P.

The portfolio will provide Neptune with material growth in contingent resources, an estimated 30 MMboe of 2P reserves and near-term production in core areas of the North Sea close to infrastructure. It includes:

Glengorm gas condensate discovery (25% WI) in the UK’s Central North Sea, close to Neptune’s operated Seagull project. Glengorm is an additional contingent resource.

Nova gas development project (15% WI) in the Norwegian North Sea: Nova is being developed as a subsea tie-back to the Neptune-operated Gjøa field. Production is expected from 2021, with estimated net 2P reserves of more than 11 MMboe.

Dvalin (10% WI) gas development project in the Norwegian North Sea: developed as a subsea tie-back to Heidrun, the four gas wells are expected to be drilled from the end of 2019, with first gas expected by the end of 2020. Net 2P reserves are estimated at more than 11 mmboe.

Scott (10.5% WI) & Telford (15.7% WI), Tors (68% WI), Wenlock (80% WI) and Markham (3.1% WI): combined incremental non-operated production of 3,000 boepd in 2019. Tors is strategically important to the Neptune-operated Cygnus field due to the shared export route.

Jim House, CEO of Neptune, said: “This is an important bolt-on acquisition that is in line with our strategy of consolidating our position in key areas with high quality and complementary assets.

“The assets are an excellent fit with our North Sea portfolio. Nova and Dvalin are expected to add 12,000 boepd to our production base over the next two years and Glengorm adds significant potential for the longer term.”

The transaction is subject to customary regulatory approvals, with completion expected early in 2020.

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Nigeria, oil majors start talks to end $62 billion dispute

Nigeria, oil majors start talks to end $62 billion dispute

By Elisha Bala-Gbogbo on 10/14/2019

ABUJA (Bloomberg) - Nigeria began preliminary talks with international oil companies to settle a dispute over revenue.

The government, citing a 2018 Supreme Court ruling, says it’s entitled to $62 billion from the companies after they failed to comply with a 1993 law that hands the state a greater share of income when oil exceeds $20/bbl. The companies are challenging the claim.

“We have opened up a process of engagement between the parties,” Justice Minister Abubakar Malami said at his office in Abuja late on Saturday. “Whether those discussions will eventually translate to settlement, whether it will translate to opening up of a full-blown negotiation process, is what we wait to see.”

President Muhammadu Buhari is trying to bolster government funds after crude output and prices dropped. Nigeria relies on oil for at least two-thirds of state revenue and more than 90% of foreign-currency income. While oil is the country’s main export, it has also targeted other foreign companies in the past, fining mobile operator MTN Group Ltd. $5.2 billion in 2015, and eventually settling for less than $1 billion after months of negotiations.

Most of Nigeria’s crude is pumped by Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA, who operate joint ventures with state-owned Nigerian National Petroleum Corp. Under production-sharing legislation, the companies agreed to fund the development of deepwater oil fields on the basis that they would share profit with the government after recovering their costs. Crude was selling at $9.50/bbl when the law became effective 26 years ago, and is now trading above $60 in London.

Oil companies including Shell have gone to the Federal High Court to challenge the government’s claim that they owe the state any money, arguing that the Supreme Court ruling doesn’t allow the government to collect arrears. They also contend that because the companies weren’t party to the 2018 case, they shouldn’t be subject to the ruling.

“Taking into consideration the government’s need to attract investments, no possibility can be out-ruled,” Malami said. “The possibility of settlement is not out of sight.”

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Oil short-selling more than doubles despite Mideast risks

Oil short-selling more than doubles despite Mideast risks

By Carlos Caminada and Sheela Tobben on 10/14/2019

CALGARY (Bloomberg) - Oil short-selling has more than doubled in three weeks, with attacks on oil facilities and tankers unable to push prices higher for very long.

Hedge fund bets on a West Texas Intermediate crude rout jumped 47% in the week ended Oct. 8, following surges of more than 30% in the previous two, data released Friday show.

Futures in New York erased early gains on Friday following missile strikes on an Iranian tanker in the Red Sea, before climbing once again ahead of a partial trade deal between the U.S. and China. Oil closed 2.2% higher at $54.70/bbl. Crude has retraced all the gains made since the attack on Saudi Arabia’s giant Abqaiq oil-processing complex in mid-September.

“Investors are more worried about the global market and the poor outlook on demand,” said Stewart Glickman, an energy analyst at CFRA Research Inc. “I don’t think that one attack on a tanker in the Red Sea is enough to turn the tide.”

Aside from a few short-lived spikes, WTI has been stuck in the $50s since June as the U.S. keeps producing crude at a record pace. Meanwhile, the International Energy Agency on Friday trimmed forecasts for global oil demand growth this year and the next by 100,000 bpd.

The WTI net-bullish position -- the difference between wagers on a rally and bets on a rout -- shrank 30% to 94,875 futures and options, the U.S. Commodity Futures Trading Commission said. Long bets fell 3%. Shorts have surged 167% since mid-September.

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Green light for Equinor’s North Sea wildcat

The Norwegian Petroleum Directorate (NPD) has granted Equinor a drilling permit for a well in the North Sea offshore Norway.

The well 35/11-23 will be drilled from the Deepsea Atlantic semi-submersible drilling rig. The well has been given the prospect name Echino Sør.

The drilling program for well 35/11-23 relates to the drilling of a wildcat well in production license 090.

Equinor received consent from the Petroleum Safety Authority (PSA) for exploration drilling in block 35/11 in the North Sea, using the Deepsea Atlantic rig, in September 2019. However, at first, the oil company did not receive consent for a sidetrack in exploration well 35/11-23.

The consent for the sidetrack was received later, in October 2019.

Equinor is the operator of production license 090 with an ownership interest of 45 percent. Other licensees are ExxonMobil Exploration and Production Norway (25 percent), Idemitsu Petroleum Norge (15 percent), and Neptune Energy Norge (15 percent).

The area in this license consists of a part of block 35/11. The well will be drilled about seven kilometres west of the Fram field.

Production license 090 was awarded on March 9, 1984 (8th licensing round on the Norwegian shelf). This is the 17th well to be drilled in the license.

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MOL gains drilling permit for North Sea well

The Norwegian Petroleum Directorate (NPD) has granted MOL Norge, a Norwegian unit of the Hungarian oil company MOL, a drilling permit for well 25/8-19 S in the North Sea offshore Norway.

The NPD said on Monday that the well, which was given the name of Evra/Iving, would be drilled from the Deepsea Bergen drilling rig.

The drilling program for the well relates to the drilling of a wildcat well in production license 820 S. MOL Norge is the operator with an ownership interest of 40 percent. According to the NPD, this is the first well to be drilled in the license.

Other licensees are Lundin Norway, Wintershall Norge, and Pandion Energy with 30, 20, and 10 percent interest, respectively.

The area in this license consists of parts of blocks 25/7 and 25/8. The well will be drilled about six kilometers northwest of Ringhorne and 210 kilometers northwest of Stavanger.

Production license 820 S was awarded on February 5, 2016, in APA 2015 on the Norwegian shelf.

To remind, MOL has already received consent from the Petroleum Safety Authority (PSA) to use the Deepsea Bergen rig for the drilling of the 25/8-19 S well. The consent was given to the Hungarian operator in mid-September.

According to the consent from the PSA, the drilling operations were scheduled to begin on September 25 and expected to last 44 days.

As for the rig, Deepsea Bergen is a semi-submersible mobile drilling rig of the Aker H-3.2 type, built at Aker Verdal in 1983. It is owned and operated by Odfjell Drilling. The rig is classified by DNV GL and is registered in Norway.

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Saudi oil output seen above pre-attack levels in October, November

Saudi Arabia’s oil production will recover in October and November to levels above those seen before attacks on its energy installations in September, energy minister Prince Abdulaziz bin Salman said on Monday.

Production by the world’s largest oil exporter will reach 9.86 million barrels per day (bpd) in October and November, the minister said at a Russian-Saudi investment event in Riyadh.

Output fell by 660,000 bpd from August to 9.13 million bpd in the wake of the Sept. 14 attacks.

The attacks knocked out half of the kingdom’s oil production, or 5% of global output, sending oil prices soaring. But a quick recovery in production, coupled with concerns about slowing global economic growth, have reversed all those gains.

Prince Abdulaziz said Saudi Arabia’s production capacity would reach 12 million bpd by the end of November. Current exports stand at around 6.9 million bpd.

Saudi Arabia will continue with voluntary output cuts - part of a global deal by producers aimed at propping up prices - of around 400,000 bpd, he added

Compliance by OPEC and non-OPEC producers with the deal is seen at above 200% in September, sources familiar with the matter said on Monday.

The Saudi minister called for a focus on stability of the oil market, rather than prices.

OPEC members and allies, a grouping known as OPEC+, meet next in December to decide on output policy for 2020.

“We hope that Nigeria, Gabon, South Sudan and Iraq will be fully compliant with OPEC+ deal in October,” Prince Abdulaziz told reporters, referring to countries that have missed targets.

Speaking at the same event, Russian Energy Minister Alexander Novak said there were no talks underway to change the global output deal.

Moscow is fully committed to the deal, he added.

At an oil event in Kuwait City, Kuwaiti oil minister Khaled al-Fadhel said the prospect of talks about a deeper cut in production were “up in the air”.

An OPEC+ committee, known as the JMMC, will continue to monitor the oil market to see whether there is a need for a deeper cut or to continue at current levels, he said.

Any decision has to be taken by all members, he added.

There was a strong agreement between OPEC and non-OPEC producers to balance the market and that would continue, the Kuwaiti minister said.

The deal between OPEC, Russia and other non-OPEC producers aims to reduce output by 1.2 million bpd until March 2020 amid forecasts of excess supply next year.

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China's Sinopec weighs December crude import cut after freight rates surge: sources

Asia’s largest refiner Sinopec is considering cutting crude oil imports in December after global tanker freight rates surged and crimped its refining margins, three sources with knowledge of the matter said on Tuesday.

The refiner is studying how much volume and which long-distance cargoes it could cut among the cargoes due to arrive in China in December, one of the sources said.

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Oil and Gas

NNPC inks $2.5 bln gas supply deal with Nigeria LNG

zoom Image courtesy of NNPC

The Nigerian National Petroleum Corporation (NNPC) signed a $2.5bn pre-payment agreement with Nigeria LNG for upstream gas development projects to supply gas to NLNG Trains 1 – 6.

NNPC’s general managing director, Mallam Mele Kyari said the agreement will help resolve the issues regarding gas supply to trains 1-6, at the facility, adding that there was a need to fast-track action on the process of bringing more trains on stream.

He added that the pre-payment gas supply agreement was a milestone which aligned with the government’s aspirations of monetizing the nation’s gas resources, protecting the investment in NLNG, ensuring full capacity utilization (22mtpa LNG and 5mtpa NGLs) of Trains 1-6 plants and providing new vistas of growth opportunities in the nation’s LNG sector.

Additionally, NNPC challenged shareholders of Nigeria LNG to work towards expanding the production capacity of the project beyond Train 7 at the liquefaction plant on Bonny Island.

The Train 7 project is expected to expand NLNG’s production capacity by 35 percent from 22 million tonnes per annum (mtpa) to 30 mtpa.

NLNG is owned by four shareholders, namely, the Federal Government of Nigeria, represented by NNPC (49 percent), Shell (25.6 percent), Total (15 percent), and Eni (10.4 percent).

In September, Nigeria LNG signed a Letter of Intent (LOI) for the engineering, procurement, and construction (EPC) of Train 7 with a consortium comprising Saipem, Chiyoda and Daewoo.

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Saudi Arabia puts domestic stock exchange at center of Aramco IPO

London — Saudi Arabia is focused on a domestic stock market listing for its state oil company, Aramco, and no decisions have been made for any international share sale, the Saudi ambassador to the UK told S&P Global Platts on Monday.

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"We are tending now towards looking at a Tadawul listing," said Prince Khalid bin Bandar, referring to the Saudi stock exchange, after speaking at the Royal United Services Institute in London. "But if that doesn't work, then we will look otherwise. But the important thing is to be pragmatic, depending on the situation, and we'll wait and see how [the domestic listing] goes."

No international venues had been ruled out if a listing outside Saudi Arabia proceeds, he added.

"Everything is a candidate," the prince said. "We will do what's right for Saudi Arabia."

The much hyped Aramco IPO, first announced by Crown Prince Mohammed bin Salman in 2016, is a centerpiece of the kingdom's economic transformation plan, with officials aiming for a company valuation of $2 trillion, though analysts say $1.5 trillion is more realistic.

If the kingdom's desired valuation is achieved, the rumored 5% public listing could bring in $100 billion that could be used for development programs aimed at weaning Saudi Arabia off its reliance on oil revenues.

Reports indicate that the kingdom could float a small portion of the planned total listing -- perhaps 1% or 2% -- on the Tadawul, before looking internationally, where exchanges in London, New York, Tokyo and Hong Kong are among the contenders.

The Tadawul is the Middle East's largest exchange, with a market cap of Riyal 1.80 trillion ($479 billion). A 1% listing, even at the lower range of valuation estimates, would make Aramco one of the largest stocks traded on the Saudi bourse in terms of market value.

Details of the IPO will be announced later this month, Aramco Chairman Yasir al-Rumayyan said Monday, according to a report by Russia's Prime news agency.

"The Saudi Aramco IPO will happen very soon, our plans are moving along quickly and smoothly. You will hear about it very soon. I think we can expect this month," Rumayyan said during the Russia-Saudi Investment Forum held in Riyadh on the sidelines of Russian President Vladimir Putin's state visit to Saudi Arabia.


Saudi Aramco is the world's most profitable company and biggest oil producer, with exclusive rights to pump all of the country's vast reserves.

It claims a maximum sustained crude production capacity of about 12 million b/d, though significant chunks remain offline due to repairs following last month's attacks on its critical Abqaiq crude processing facility and Khurais oil field. Full capacity should be restored by the end of November, officials have said.

Saudi Arabia plans to produce 9.86 million b/d of crude in October and November, energy minister Prince Abdulaziz bin Salman said Monday, according to Prime news agency, with exports currently around 6.9 million to 7 million b/d.

The kingdom has a production quota of 10.31 million b/d under the OPEC/non-OPEC production cut accord, though it has held its output significantly below that cap as it seeks to accelerate the rebalancing of the oil market, given that oil prices remain far below the $80-$85/b that many analysts say Saudi Arabia needs to balance its budget.

Aramco also has significant downstream and storage assets globally, including refineries in the US, China, Japan and South Korea, in addition to domestic refineries.

As an alternative to an IPO, analysts have suggested that a private placement could be brokered with sovereign wealth funds.

Earlier Monday, Kirill Dmitriev, CEO of Russia's sovereign wealth fund the Russian Direct Investment Fund, said Russian investors were interested in the listing, Prime reported.

-- Herman Wang,

-- Rosemary Griffin,

-- Edited by James Burgess,

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EU foreign ministers urge new Turkish sanctions over Cyprus drilling

London — EU foreign ministers agreed Monday that sanctions should be imposed against parties involved in Turkey's campaign of exploration drilling in the gas-rich waters offshore Cyprus.

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The latest escalation in tensions between Brussels and Ankara follows the move earlier this month by Turkey's state-owned Turkish Petroleum to position one of its drill ships in a Cypriot-licensed block.

The EU in July already imposed limited sanctions against Turkey, but the EU Council said Monday it wanted to target measures against those "responsible for or involved in the illegal drilling activity of hydrocarbons in the Eastern Mediterranean."

"The Council agrees that a framework regime of restrictive measures [...] is put in place, and invites the High Representative [Federica Mogherini] and the [European] Commission to swiftly present proposals to this effect," it said.

On Friday, European Council President Donald Tusk said the EU stood in "full solidarity" with Cyprus over the growingcrisis in the East Mediterranean.

Cyprus is already home to as much as 550 Bcm of gas resources following the Aphrodite, Calypso and Glaucus discoveries of recent years, so the stakes are high as the dispute over maritime rights continues to intensify.

Turkey has previously warned it would increase its presence in the East Mediterranean if EU sanctions were imposed.


Turkish Petroleum in early October sent its drillship, the Yavuz, to an unspecified site in Cyprus' Block 7, which Nicosia says is part of its maritime Exclusive Economic Zone (EEZ).

S&P Global Platts trade flow software cFlow shows the Yavuz as being in the northwestern part of Block 7.

In September, the Cypriot government signed agreements with France's Total and Italy's Eni giving them the license todrill in Block 7.

Eni CEO Claudio Descalzi said Friday the company remained committed to the exploration of the Cypriot EEZ and its "contractual commitments" with Cyprus and that it was planning a joint exploration campaign in the first half of 2020 together with Total.

Turkey, though, has warned non-Turkish companies not to drill in the block, saying it has the right to drill in the northwest of Block 7 under its interpretation of maritime law.

It is the first time Turkey has moved into a block already licensed by Cyprus.

The Yavuz entered the Mediterranean in July and in August began drilling the Karpaz-1 in the Bay of Gazimagusa off the east coast of Cyprus, before returning to port on the south coast of Turkey in early September.

Turkey's first drillship, the Fatih, is continuing to drill off the northwest coast of Cyprus, where it has been located since May.

Neither area has been licensed by Cyprus to date.

-- Stuart Elliott,

-- Edited by Jonathan Dart,

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Crude oil futures lower as market 'cautious' over US-China trade deal

Singapore — Crude oil futures were lower during mid-morning trade in Asia Monday as the market remained cautious following the partial trade deal between the US and China.

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At 11:12 am in Singapore (0312 GMT), ICE Brent December futures were down 25 cents/b (0.41%) from Friday's settle at $60.26/b, while the NYMEX November light sweet crude futures contract was 27 cents/b (0.49%) lower at $54.43/b.

The US and China have reached a partial agreement Friday that covers agricultural purchases, financial services, currencies and intellectual properties. The agreement came after President Donald Trump met with Chinese Vice Premier Liu He in the White House.

"I agreed not to increase tariffs from 25% to 30% on October 15. They will remain at 25%," US President Donald Trump tweeted on Sunday.

"The relationship with China is very good. We will finish out the large Phase One part of the deal, then head directly into Phase Two. The Phase One deal can be finalized and signed soon!" Trump added.

While the partial agreement between the two countries had initially boosted sentiments, analysts noted that details were lacking in the deal, while uncertainties remained on other issues not covered in the deal.

"While the market welcomed the deal, it remained cautious over the long term issues underlying the dispute," ANZ analysts wrote in their report on Monday.

"Five uncertainties remain including the delay of December tariff hike, Huawei, the new US entity list, currency manipulation designation and removal of existing tariff," OCBC analysts Tommy Xie and Carie Li wrote in their report on Monday.

Elsewhere, Saudi Arabia was not involved in the attack on the Iranian oil tanker on Friday, its Minister of State for Foreign Affairs Adel Al-Jubeir said Sunday.

Oil prices had jumped Friday following news of the attack on National Iranian Tanker Company's suezmax tanker Sabiti, which had caused an oil spill in the Red Sea. The company has since said the situation was under control and the oil leakage has stopped.

As of 0312 GMT, the US Dollar Index was up 0.13% at 98.155.

--Ada Taib,

--Edited by Norazlina Juma'at,

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Greenpeace activists board Shell’s North Sea platforms

Greenpeace activists from the Netherlands, Germany, and Denmark boarded two oil platforms in Shell’s Brent field on Monday in what they say is a protest against plans by the company to leave parts of old oil structures with 11,000 tonnes of oil in the North Sea.

Greenpeace said in a statement on Monday that its climbers, supported by the Greenpeace ship Rainbow Warrior, had scaled Brent Alpha and Bravo and hung banners saying, ‘Shell, clean up your mess!’ and ‘Stop Ocean Pollution’.

Greenpeace claimed that Shell plans to leave parts of four Brent oil platforms at sea with a total of around 640,000 cubic metres of oily water and 40,000 cubic metres of oily sediment, containing more than 11,000 tonnes of oil.

According to Greenpeace, a ban on dumping installations and platforms in the North East Atlantic Ocean was agreed in 1998 by all members of the OSPAR Commission and Shell has requested an exemption from the UK government.

“Shell’s plans are a scandal and go against international agreements to protect the environment. With escalating climate emergency, biodiversity loss and species extinction, we need healthy oceans more than ever. Abandoning thousands of tonnes of oil in ageing concrete will sooner or later pollute the sea. Shell must be stopped,” said Dr Christian Bussau, Greenpeace campaigner on board the Rainbow Warrior.

“We urge OSPAR governments to protect the ocean and not cave in to corporate pressure.”

Germany & Netherlands object

Greenpeace stated: “The UK government is willing to approve Shell’s plans when OSPAR meets in London on October 18. Germany has filed an official objection. The Netherlands will also object and the European Commission has raised serious concerns.”

Namely, Dutch infrastructure minister, Cora van Nieuwenhuizen, earlier in October sent a letter to the Parliament about the country’s position on cleaning up Shell’s oil platforms in the North Sea, saying it was consistent with that of Germany, which has already objected.

She said that, as a party to the OSPAR treaty, the Netherlands would object to the UK’s intention to grant Shell a license to abandon Brent platforms foundations with contaminated material in them.

‘Dangerous precedent’

“The UK government cannot claim to be a global oceans champion while allowing Shell to dump thousands of tonnes of oil in the North Sea,” said Dr Doug Parr, Greenpeace UK’s chief scientist.

“If ministers allow Shell to bend the rules, this will set a dangerous precedent for the decommissioning of hundreds of ageing North Sea platforms in the coming years. Shell made billions from drilling for oil in this region – they shouldn’t be allowed to scrimp and save on the clean-up at the expense of our marine environment.”

“Oil in the base of Shell’s platforms will reach the sea as the concrete structures rot and collapse. Shell’s plans leave a ticking time bomb and that is totally irresponsible,” added Bussau.

In 1995, public support for the Brent Spar campaign pushed Shell to agree to dismantle the oil tank and loading platform on land instead of dumping it in the sea. The campaign also led to OSPAR’s decision in 1998 to ban such dumping in the North East Atlantic.

“Shell is directly fuelling the climate emergency that is causing more extreme storms, floods, droughts and wildfires and bringing misery to millions of people around the world. The company’s reckless business threatens some of the world’s most important ecosystems with extinction and has to be stopped. For us to have a future, toxic oil companies like Shell must have no future,” said Bussau, who was also part of the 1995 Brent Spar protest.

Brent decommissioning

The Shell-operated Brent field, located 115 miles north-east of the Shetland Islands, has produced around three billion barrels of oil equivalent since production started in 1976, which is almost 10% of UK production. The field comprised four large platforms: Alpha (a steel jacket), Bravo, Charlie, and Delta (concrete gravity-based structures).

Shell submitted its decommissioning program for the Brent oil and gas field to the authorities in February 2017. The Brent decommissioning program recommended the upper steel jacket on the Brent Alpha platform to be removed, along with the topsides of the four Brent platforms, debris lying on the seabed, and the attic oil contained within the concrete storage cells of the gravity base structures.

Shell has already removed the Brent Delta and Brent Bravo platform topsides in April 2017 and June 2019, respectively. Both were removed using the Allseas-owned Pioneering Spirit vessel.

Offshore Energy Today Staff

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Asia naphtha margins at 2019 highs on supply woes

SINGAPORE (ICIS)--Asia’s naphtha margins have climbed to their highest this year driven by concerns over supply combined with a steady bout of buying, boosting spot premiums.

A container ship at a Tokyo port in Japan. (Photo by Franck Robichon/EPA-EFE/Shutterstock)

Naphtha’s crack spread, a measure of the product’s refining margin, closed on 11 October at $105.83/tonne, the first time this year it has surpassed the $100/tonne mark - a level not seen since October 2018.

The crack spread had languished in negative territory four months ago in mid-June.

In part buoyed by gains in global crude oil futures, open-specification naphtha prices for second-half November delivery averaged at $559.50/tonne CFR (cost and freight) in the morning session on Monday, steady from the previous close on 11 October and at the highest since 22 May, according to ICIS data.

On a free-on-board (FOB) Middle East basis, spot naphtha prices have hit a five-month high of $510.11/tonne as of 11 October, ICIS data showed.

International benchmark December ICE Brent crude oil futures rose by more than 3% last week to settle at $60.51/bbl on 11 October.

Market sentiment was boosted by gains in oil prices, following news reports of an Iranian oil tanker being struck by missiles in the Red Sea near Saudi Arabia, stoking concerns on supply disruptions.

Ever since the attacks at oil facilities in Saudi Arabia on 14 September, along with moves to plug supply shortfalls, naphtha markets have rebounded.

Re-inforcing strong market fundamentals, naphtha's forward market structure has widened significantly in backwardation, with prompt-month values well above forward months.

Second-half November open-specification naphtha prices stood at $24.00/tonne higher than second-half December prices, compared with the backwardated spread of $2.00/tonne a month ago.

Spot naphtha cargoes were transacted at strong premiums, including exports from India, mirroring the firm sentiment amid perceived contraction in supply.

An estimated 2.1m tonnes of naphtha are expected to arrive in Asia this month, lower than September volumes at around 2.5m tonnes, according to industry sources.

India’s Bharat Petroleum Corp Ltd (BPCL) sold a 30,000-tonnes cargo for 3-5 October loading from Mumbai, at a premium near $21/tonne to its pricing formula - sharply higher than the single-digit premium it fetched for a September cargo.

South Korea's Yeochun NCC (YNCC) was understood to have picked up second-half November naphtha at a premium of above $20/tonne to spot CFR Japan quotes, compared with the $10/tonne premium it paid for first-half November supplies.

Focus article by Melanie Wee

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Drilling Down: Sanchez Energy drilling way out of Chapter 11

Houston oil company Sanchez Energy appears to be drilling its way out of bankruptcy.

The company temporarily placed its drilling operations on hold after seeking Chapter 11 protection, but over the past week filed 13 drilling permit applications with the Railroad Commission of Texas, the state agency regulating the oil and natural gas industry. The company is seeking permission to drill 10 horizontal wells on a pair of leases in Dimmit County and another three on a lease in neighboring Webb County.

The wells target the Briscoe Ranch field of the Eagle Ford geological layer down at total depths ranging from 8,600 to 9,600 feet.

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Parsley Energy to buy Jagged Peak Energy in $1.62 billion deal

Parsley Energy Inc (PE.N) said on Monday it would buy smaller peer Jagged Peak Energy Inc (JAG.N) in an all-stock deal valued at $1.62 billion, adding acreage in the oil-rich Delaware shale basin.

Shares of Parsley Energy, which was itself seen as a buyout target for some time, fell about 8.7% in premarket trading to $15.50. Jagged Peak shares were marginally lower after briefly rising on the announcement.

The offer of 0.447 shares of Parsley Class A common stock values Jagged Peak at $7.59 per share, based on Parsley’s closing price on Friday. The offer represents a premium of 11.3% to Jagged Peak’s last close.

“Jagged Peak’s oily, high-margin asset base slots in nicely to our returns-focused development approach, its acreage footprint and water infrastructure dovetails into our legacy Delaware Basin position,” Parsley’s Chief Executive Officer Matt Gallagher said in a statement.

Including Jagged Peak’s debt of about $625 million as of June 30, the deal is valued at $2.27 billion.

Parsley expects the deal to generate savings of about $25 million in the first year, and $40-$50 million of annual savings thereafter.

The companies expect the deal to close in the first quarter of 2020.

Texas-based Parsley said it expects the “low-premium” deal to immediately add to 2020 cash flow per share.

After the deal, Parsley will have about 267,000 net acres in the Permian basin, consisting of 147,000 net acres in the Midland Basin and 120,000 net acre footprint in the Delaware Basin.

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Exxon Mobil, India's ONGC sign expertise-sharing deal

Global energy giant Exxon Mobil Corp (XOM.N) will offer its expertise and technology to India’s biggest state-owned explorer Oil and Natural Gas Corp Ltd (ONGC.NS) to help develop its resources in offshore blocks, according to two sources directly privy to the development.

The memorandum of understanding (MoU), signed late Monday, will be later signed as a definitive deal after Exxon studies the blocks of the company, one of the sources told Reuters.

Lately, India is generating a lot of interest worldwide in its oil and gas operations, as growing demand amid a global slowdown and government policies have made investments and returns attractive.

"Witnessed the exchange of a MoU between ONGC and ExxonMobil to identify areas for exploration in deep water in east and west coast of India," Oil Minister Dharmendra Pradhan said in a tweet here

ONGC and ExxonMobil will also jointly identify areas to submit bids for more exploration assets in India, he added.

ONGC is currently developing deep water oil and gas blocks in India’s east coast, which are expected to come onstream by 2020 and produce 15 million standard cubic meters per day (mscmd) of gas at its peak.

On Monday, Exxon signed another memorandum with India’s biggest refiner Indian Oil Corp Ltd (IOC.NS) to explore ways to supply liquefied natural gas to meet India’s 1burgeoning gas demand.

French energy major Total SA (TOTF.PA) also announced that it would buy around 35% stake in India’s Adani Gas Ltd.

“It is a non-binding agreement. It is a technical tie up. The MoU provides a framework to enable future tie ups between the two companies,” one of the sources said.

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Aker BP shares fall after third-quarter output miss

Norway’s Aker BP (AKERBP.OL) fell short of its third-quarter oil and gas output target and will take an impairment charge of $80 million, it said on Monday, sending its shares down more than 4%.

Daily output fell to 146,100 barrels of oil equivalents per day (boepd) in the July-September quarter period from 150,600 boepd a year earlier and was short of a target of around 158,700 boepd announced in April.

Aker BP blamed the fall on a delay in starting new wells at the North Sea Valhall field following maintenance in June, adding there was no impact on reserves.

The Oslo-listed firm, 30% owned by BP Plc (BP.L) and 40% by Norway’s Aker ASA (AKER.OL), also said it would book an goodwill impairment charge of $80 million and would see an additional $14 million in costs stemming from repair work at one of its North Sea fields.

As the goodwill cost incurred is not deductible under Norway’s tax code, Aker BP’s tax bill for the third quarter will be “well above” 100% of its profits, the company said.

However, the start-up of the new wells at Valhall, and the ramp-up of the giant Johan Sverdrup oilfield which started production in October will significantly boost output going forward, it said.

Aker BP has a 11.6% stake in the Sverdrup field, which is expected to ramp up production to 440,000 boepd by summer 2020, its operator Equinox (EQNR.OL) has said.

That translates into more than 50,000 boepd for Aker BP, meaning that its total production could top 200,000 boepd.

“With Sverdrup first oil on Oct. 5, Aker BP’s 2019 production guidance of 155,000-160,000 boepd should be safe,” Sparebank 1 Markets analyst Teodor Sveen-Nilsen, who has a “buy” recommendation on the stock, wrote in a note to clients.

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Base Metals

MMG's Las Bambas copper mine faces production halt amid protests

Chinese miner MMG Ltd is likely to have to halt production at its Las Bambas copper mine in Peru “within a week” due to protests that have blocked access to the site, a senior local executive told Reuters on Friday.

Alvaro Ossio, the mine’s vice president of finances, said Las Bambas, Peru’s largest copper minefield, had declared “partial” force majeure with contractors and was evaluating doing the same for copper sales.

“The plant is still operating with the stock we have, which is limited and will only give us a few more days of production,” Ossio said. If the blockade continued then “probably in less than a week it would clearly paralyze all production,” he added.

The potential freeze on operations comes amid wider protests that have hampered a number of mines in Peru’s southern copper belt. The country is the world’s second largest producer of the metal, which is also the main driver of its economy.

MMG said on Thursday that operations at Las Bambas would be affected by road disruption with supplies being blocked by anti-mining protests. The roadblocks have disrupted logistics at the site since Sept. 22.

The unrest has affected shipments from four mines that produce about half of Peru’s copper - Freeport-McMoRan Inc’s Cerro Verde, Las Bambas, Glencore PLC’s Antapaccay and Hudbay Mineral’s Constancia.

Las Bambas, which accounts for 16% of Peru’s entire copper output, had targeted between 385,000 tonnes and 405,000 tonnes of copper production this year, versus 385,000 tonnes in 2018.

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Workers at Teck Resources' Chile mine to go on strike

Canadian miner Teck Resources Ltd (TECKb.TO) said on Sunday that a union representing 473 workers at its Chile mine will start a strike on Oct. 14.

The strike at Teck Carmen de Andacollo Operations (CdA) in Chile from the Teck Carmen de Andacollo Workers Union will lead to operations at the mine being suspended.

The mine, located in central Chile about 350 kilometers north of Santiago, produced about 15,000 tonnes of copper in the quarter ended June 30.

Teck owns a 90% interest in the mine, according to its website

The company and the union could not arrive at an agreement at the end of a five-day mediation process, which concluded on Oct. 11, the Canadian miner said in a statement.

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Vale Indonesia's nine-month nickel matte output down 7% year/year

PT Vale Indonesia produced 50,531 tonnes of nickel matte between January and September, down 7% from the same period last year, the Indonesian mining company said in a statement on Monday.

Third-quarter output was up nearly 12% output from the second quarter, it said.

“Production in the third quarter was higher than production in second quarter as major maintenance activities have been completed,” CEO Nico Kanter said, adding the company was optimistic it could reach its full-year production target of around 71,000 tonnes of nickel matte.

Earlier this year Vale Indonesia lowered its 2019 output target to 70,000-72,000 tonnes from 74,000 tonnes.

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Steel, Iron Ore and Coal

Guinea's Nimba iron ore project gets green light to export via Liberia

Guinea and Liberia signed a deal on Friday to allow several mines in Guinea, including the giant Nimba iron ore project, to export through Liberia, officials from the West African countries said.

The logistics of transporting tonnes of raw materials to port from mining sites in remote parts of Guinea has been a major hurdle for prospective developers of the country’s vast mineral wealth.

The agreement, which builds on an initial memorandum of understanding signed six years ago, is a victory for U.S.-Canadian investor Robert Friedland’s HPX, which last month acquired Nimba, a high-grade deposit in southeast Guinea.

“The mining projects in question are near the border with Liberia and cannot be profitable if they export through Guinea’s coast,” Guinea’s mines Minister Abdoulaye Magassouba told Reuters.

A graphite project owned by SRG Mining and a Zali Mining project would also be able to export through Liberia under the deal, Magassouba said.

The authorization to export via Liberia applies to the first 5 million tonnes produced at the mines, Magassouba said, beyond which the government will evaluate the feasibility of exporting via a 650-kilometre railway to the Guinean coast.

The “Transguineen” railway is to be built by the eventual owner of the much larger Simandou iron ore project, which the government insists must export through a Guinean port. Fortescue and SMB-Winning have bid to develop the mine.

Zogota, a nearby iron ore deposit owned by former Xstrata boss Mick Davis’ Niron Metals, has already negotiated an agreement to export through Liberia.

But Nimba and Zogota still need to reach agreements with Germany’s ArcelorMittal, the sole rail concession holder in Liberia, to allow them to use its infrastructure.

ArcelorMittal declined to provide an immediate comment.

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Vale third-quarter iron ore output falls 17.4% year-on-year following Brazil dam break

Brazil’s Vale SA said on Monday its third-quarter iron ore production was up from the previous quarter but still down 17.4% from a year ago, as the miner slowly began to resume production at mines that were shut down following a deadly dam burst in January.

The company produced 86.704 million tonnes in the July-September period, up more-than two-thirds from the second quarter as operations resumed at Brucutu, its largest mine in the southeastern state of Minas Gerais, and at part of its Vargem Grande complex.

In a securities filing, the world’s top iron ore exporter added it expects to lift production capacity to around 50 million tonnes at its Vargem Grande complex by the end of 2021.

Vale shares were down 1.6% in morning trading in Sao Paulo.

The production figures were “largely in line with our expectations,” said BTG Pactual analyst Leonardo Correa.

“Thus, Vale’s path of recovery in iron ore volumes is progressing smoothly, and we expect these trends to continue into 2020-21,” he said in a research note.

Vale’s iron ore pellet production hit 11.133 million tonnes in the third-quarter, down 19.8% from a year ago, the mining company said.

Vale’s quarterly sales of the key raw material fell 11.8% from a year ago to 74.039 million tonnes.

The miner once again reaffirmed its previous full-year iron ore and pellets sales outlook forecast at between 307 million to 332 million tonnes.

The output and sales figures come a little over a week before Vale’s quarterly results.

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China iron ore hits over two-week low as Vale output rises in third quarter

Iron ore futures in China, the world’s top buyer of the steelmaking raw material, dropped to their lowest in more than two weeks on Tuesday after Brazilian miner Vale SA reported higher output in the third quarter.

Concerns about iron ore demand slowing in China, which makes about half of the world’s steel output, due to its renewed efforts to curb pollution by restricting steel mills operations in some areas also weighed on prices.

Dalian Commodity Exchange’s most-traded iron ore contract fell as much as 3.3% to 630 yuan ($89.12) a tonne, its weakest since Sept. 26. It was down 2% by 0312 GMT.

Vale, the world’s top iron ore exporter and China’s major source of high-grade material, on Monday reported a 35.4%quarter-on-quarter jump in output to 86.7 million tonnes in the July-September period.

The miner also said it expects to lift production capacity to around 50 million tonnes at its Vargem Grande complex by the end of 2021.

A deadly tailings dam burst at Vale’s Brumadinho complex in January prompted several dam and mine shutdowns for safety checks, tightening global supply and pushing iron ore prices to five-year peaks.

China’s spot 62% iron ore benchmark, which was steady at $92.50 a tonne on Monday, is still up 15% this year despite a 27% slump from its July 3 peak of $126.50 amid easing supply concerns, based on SteelHome consultancy data.

Improving iron ore supply from Brazil and Australia has pushed port inventory in China to a five-month high of 129.95 million tonnes, latest SteelHome estimates showed.

That improvement was reflected in China’s iron ore imports, which rose for a third straight month in September to a 20-month high, according to customs data released on Monday.

“For 2020, Vale expects to produce an additional 30 Mt (million tonnes) from the halted operations related to the Brumadinho tragedy,  the miner said.

 Other steelmaking raw materials also slumped, with Dalian coke slumping as much as 4.5% to 1,769 yuan a tonne, its lowest since Dec. 3, 2018.

The most-traded construction steel rebar on the Shanghai Futures Exchange fell as much as 2.3% to 3,325 yuan a tonne.

Hot-rolled steel coil, used in cars and home appliances, dipped as much as 2.2% to 3,301 yuan a tonne.

Stainless steel, made from nickel pig iron, slumped as much as 3.9% to 15,165 yuan a tonne, tracking Shanghai nickel’s sharp decline.

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