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New Mining deals: Indonesian government & PT Freeport Indonesia

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Intro

Indonesian Energy Minister announced on Tuesday that Indonesia highly expects to conclude the deals with Freeport McMoRan Inc. About operating in one of their biggest copper mines in Papua. The cooperation should take place in the upcoming decades.

The country’s mining and energy minister announced these ideas.

Speaking about the U.S. deals with Indonesia, the country’s mining giant was in a slight quarrel with Indonesia over the rights at Grasberg mine. This dispute is making huge costs for both sides, and these are estimated at hundreds of millions of dollars.

When reporters asked Minister Ignasius Jonan about the status of current deals & negotiations, he said:

“I expect to have a conclusion this month!” (Jonan says for Reuters) 

 

Mining Permits 

In July this year, Richard Adkerson (FPT CEO) said he for sure expects to conclude this special mining permit before October this year.

“Jonan said, when they finalize the agreement,  and allow Freeport all the needed permits.. They could apply for two 10-year permit extensions to mine at Grasberg beyond 2021.” (Reuters)

Regarding the new rules in Indonesia: Miners have to divest 51% stake, pay taxes and royalties. And in the end they have to relinquish arbitration rights. Freeport insists on all participants to follow these rules.

Reporters asked Mr Jonan did Freeport accepted these 51% divestment, and he said:

“Well if they don’t, they can go. We don’t negotiate that.” (Jonan for Reuters)

 

Real Inside Relations

With the beginning of current year Freeport said talks are in blind alley, and reminded they could do lots of damage for both sides. Then The government explained that they could solve this subject even in court if necessary.

“We will listen. We will accommodate as much as we can, but we cannot accommodate something that is clearly written in the law.” (Jonan for Reuters)

Clearly he wanted to emphasize their willingness to cooperate, but only in the possibilities of legal deals.

Riza Pratama (FT spokesman) said the negotiations with the government are ongoing. And they will soon be concluded clearly if both sides respect the main point.

“(The) four issues in the negotiations are one package deal. Divestment is one of the four issues.”

Real effects

Is he concerned that these happenings could result with some agitated movement inside Papua mine… Pratama says: “I don’t think so … it’s an internal labor issue inside Freeport’s operations.”

 

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Will OPEC make it to co-exist with U.S. shale oil ?

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At the beginning , they ignored each other. After a while, they went into a bruising fight. Now, finally, they are talking, although with opposing agendas.

The evolution of the relationship between OPEC and the United States oil industry now lasts for about 5 years. 5 years ago, OPEC discovered it has a rival emerging in a core Oil market.

Officials of the U.S. shale bankers were present this week in Vienna, when OPEC held a meeting. After what happened, OPEC is preparing a trip for its officials. Aiming to visit Texas in order to check if it is possible for two industries to co-exist. Because if some new co-existing spirit is suffocated, the major future fights are near.

“We have to coexist,” said Khalid al-Falih,

 

Output Cuts

OPEC now realizes that agreed supply cuts and higher prices only make it easier for the U.S. shale industry to deliver higher profit. While it is aware that shale industry has  found ways of slashing costs. It happened three years ago, when Saudi Arabia ”turned up the taps”.

Permian Basin – the largest U.S. oilfield. Parsley Energy Inc, Diamondback Energy Inc, and others are pumping at the highest rate in years. Now taking advantage of new technology, low costs and steady oil prices to harvest profits at OPEC’s cost.

OPEC’s latest idea is to make certain co-agreements, and hold the prices below $60 per barrel. Meanwhile it is aware of the U.S. shale power, but aims to hinder its growth.

“All shale companies in the U.S. are small companies.” (Noureddine Boutarfa)

“The reality is that at $50 to $60 a barrel, (the U.S. oil industry) can’t break beyond 10 million barrels per day.”

“For all OPEC members, $55 (per barrel) and a maximum of $60 is the goal at this stage.” said Iran’s oil minister.

“So is that price level not high enough to encourage too much shale? It seems it is good for both.”

“We had a discussion on (shale) and how much that has an impact,” said Ecuador Oil Minister Carlos Pérez.

“But we have no control over what the U.S. does and it’s up to them to decide to continue or not.”

OPEC delegates asked Mark Papa, chief executive of Permian oil, to say more about the shale’s potential. He diplomatically did not open the cards.

“In terms of the threat, we still don’t know how much (U.S. shale) will be producing in the near future.” Nelson Martinez, Venezuela’s oil minister said after the talk. (Reuters)

 

Opinions On Shale

UAE Energy Minister Suhail bin Mohammed al-Mazroui, admittedhe didn’t believe U.S. oil production would rise by 1 million bpd next year.

Some of OPEC’s customers are indeed content to see an alternative for their Oil sources. For example India, the world’s third-largest oil consumer, currently said it is looking to the United States for greater supply.

“The new normal has to be accepted.” Dharmendra Pradhan, India’s energy minister said this week at the OPEC meeting.

OPEC will meet again in November. Aiming to reconsider output policy and check if everything was going as planned. While most in the group now seem to believe that shale has to be accommodated, there are still those in OPEC who think another fight is close.

 

 

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Saturday: Donald Trump’s Visit to Saudi Arabia; Ryadh CEO forum

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Firstly, Donald Trump is visiting Saudi Arabia this Saturday. The Saudi Aramco is going to conclude deals with 12 United State’s companies during this visit.

Secondly, Saudi Aramco plans to push and develop the local workers and manufacturing in all the possible ways. According to sources, this is part of Saudi Aramco’s plan to develop their operations in different areas. They plan to make deals with Oil companies, etc. Schlumberger, Halliburton, Baker Hughes, and Weatherford.

Thirdly, amid these plans, Aramco also intends to conclude agreements with other important companies, among others even: General Electric, National Oilwell Varco, Nabors Industries and Rowan Companies.

Fourthly, Reuters reported that when trying to reach Aramco and ask them about this subject; no one was available to comment.

 

Aramco’s plans dating from 2015

 

Following, IKTVA programme was launched in 2015 by Saudi Aramco. The idea of this programme was to double the amount of ”local produced energy related” and all similar goods to 70%. The year for this aim was 2021.

Furthermore, observing the past periods, Aramco cooperated with U.S management companies. They were covering the important projects which collided U.S. management and Aramco operating parts. The aim was to upgrade the Oil potential and develop the oil businesses in country.

“The upcoming partnerships will boost bilateral investment towards localisation.” (Reuters)

 

IKTVA closer

Aramco signed deals with drilling firms Rowan and Nabors Industries to establish joint ventures under the In-Kingdom Total Value Add programme. This happened last year, due to Aramco’s idea to develop this programme at the high levels.

IKTVA  is going to help in developing 500,000 jobs for Saudis. Both directly and indirectly, connected to the everyday operations.  

In forthcoming period Saudi Arabia is planning to change structure of its economy, in a way. It wants to diversify the economy, and widen its spectre aiming not to rely only on oil exports. Aramco will mainly participate in these massive projects. It is a main part of Vision 2030 economic reform drive.

The Engineering companies who support Aramco will sign these agreements too. Some of which are: KBR and Jacobs Engineering, as well as McDermott and Honeywell.

 

Saudi-U.S. CEO forum

This Saturday in Riyadh, the main event which is taking place is an inaugural Saudi-U.S. CEO forum. Most noteworthy, several important deals will be signed. Covering the areas of: defence, electricity, oil and gas, industrial and chemical sectors.

The new documents, in form of licences will be signed; giving the U.S. companies rights to operate in Kingdom, and that way have their power diversified on bigger theritory. And at the same time, giving them the power to influence Saudi’s energy market.

 

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Wintershall question retains Libyan oil output, as it tops 800,000 bpd

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Oil production in Libya

 

For the very first time since 2014, Oil production in Libya came to 800,000 bpd. Which makes it the highest level in 3 years. The info is from National Oil Corporation report which came out on Wednesday. The hack question of Wintershall, the German Oil film was stating that Libyan oil production closed at additional 160,000 bpd. The real Libyan output can reach the level amongst 1.1 million and 1.2 million bpd. Only in condition that officials are going to remove political obstructions. 

 

“Libya could produce between 1.1m to 1.2 million bpd. Regarding the period till the end of the year. This will happen only if Oil flows loosely & free. We require Serious National efforts.” (Mustafa Sanalla) He gave a comment on this subject for FT. Mr Sanalla is the chairman of Libya NOC.

 

Despite the output seriously recovering in forthcoming months, it still is at less than 1.6m barrels per day. These levels were normal in 2011, when M. Gaddafi crashed the uprising trends. Armed conflicts and political chaos destroyed the output trends which were smoothly but steadily rising in 2011.

 

OPEC

 

OPEC countries are planning a meeting on May 25th. That is a day when they will decide on whether to prolong output cuts. Knowing this, officials are watching Libyan outputs closely. While most producing countries have brought up the output cuts, Libya is released of these agreements. The inconsistency with Wintershall on the operator’s production will be put on Libyan state. (NOC) Also, the resulting debts have to go back to the levels from 2010. At least. These agreements have shut more than 160,000 b/d.

 

The NOC plans

 

The NOC plans to switch the concession agreement it has with Wintershall. About a production-sharing contracts, aiming to reduce the German company’s production share for more than a half. It considers that Libya, being under pressure from an oil price collapse, already is missing out on revenues of huge value that provide the spine of it’s economy.

UN Presidency Council government in Tripoli negotiated about the agreements on further (un)blocks in oil production. Which gave them a power to discuss on country’s agreements and deals with foreign companies.

 

Wintershall attitude

 

Crude Oil Exports form Zueitina Terminal were not loaded, so the state forced Company  to shutdown the production.

Zueitina Terminal location is in the Central Northern part of Libya on the Mediterranean Sea cost. It consists of offshore loading berths for oil tankers and LPG carriers. The main cargoes handled are crude oil, naphtha, butane and propane.

 

“It would not be an economic exploitation of the petroleum resources . . . to continue production without generating revenues but still being obliged to carry all production-related operational expenses.” (Financial Times)

 

Finishing, The Wintershall did not assign an export distribution since March, due to the previous disputes. (NOC)

“There is no claim over money allegedly owed by Wintershall. Wintershall has always met its obligations towards the Libyan state.”

“Our concession agreements with the state of Libya are still valid and in full force. We are in contact with NOC about a number of issues.”

In conclusion, Libyan Oil outputs have been affected mostly by country’s policies and agitated past which definitely has a deep consequences. As well as on Oil outputs, it affects every aspect of Libyan economy. It needs time to recover, and collaboration with foreign companies will help.

 

 

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Main Economic Events & LME Today

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Wednesday, May the 10th deserves to be nominated for one of the most tense days regarding this week. So much going on in financial markets, being pulled and inspired by main political events which are causing a little earthquakes all along the global scene. Will euro come to its 6-month highs lifted by Mario Draghi, and which way will the release of James Comey affect U.S. market… And what is happening with London Metal Excchange Prices today, Let’s see:

 

Main Economic Events Today:

  • China Consumer Price Index(CPI) YoY rose to actual 1.2% (1.1% forecast)
  • ECB President Draghi Speaks
  • U.S. Crude Oil Inventories came to actual -0.930M, while expected was -2.333M
  • New Zealand Interest Rate Decision is at actual 1.75%, same as expected
  • Reserve Bank of NZ Rate Statement (the outcome of factors on interest rates..)

 

Top 5 Things In Wednesday’s Market

inspired by http://www.investing.com

  1. Trump dismissed the FBI director James Comey; It was a very shocking move for Washington (and this really weighs on risk appetite)
  2. Global stocks mixed as Comey’s termination HIT western markets
  3. Oil JUMPS 1% on large inventory draw
  4. Disney set to weigh on Dow, Apple pulls back
  5. Mario Draghi might help to lift euro back to 6-month highs

 

LME Base Metal Prices

Dropped again, across the board of this morning. Coming after short term of recuperation at yesterday’s closing hour.

Following the publication of further unimpressive data, this time from China, copper has fallen below $5,500 per tonne and nickel is back below $9,200 barrier.

While the Chinese CPI for April at 1.2% y-o-y was better than 0.9% in the previous month, its PPI at 6.4% was below the previous figure of 7.6% and the expected 6.7%.

”Copper prices have lost upward momentum since mid-February and more recently they have gained downward momentum.”  (Metal Bulletin)

Copper goes below $5,500/t 

Firstly, three-month copper price fell $24 per tonne to trade recently at $5,488 per tonne. Secondly, copper stocks fell a net 3,625 tonnes to 339,200 tonnes. Also the Inventories started to decline on Monday this week, after they rose more than 100,000 tonnes last week.

Based on the reports of the Chinese trade balance, and their imports, Copper prices came under pressure after Monday. When data showed total copper imports into the nation fell to their lowest since October 2016.

Following, the expected second expansion phase at Polish miner KGHM’s Sierra Gorda copper project in Chile, IS CANCELED, the company announced on Monday.

 

Other base metals  

Speaking about Aluminium prices, the three-month price fell $5.50 to $1,865 per tonne. Stocks fell 7,225 tonnes to 1,570,575 tonnes.

“Aluminium looks a tad better but really needs to stay above $1,860 on the downside.” (FastMarkets)

Observing the Nickel, it fell $55 per tonne to $9,160 per tonne. It is hardly struggling to recover last week’s dropdown of more than $500 per tonne…

“Nickel prices will might be under pressure on weaker demand. With steady nickel trade flows from Indonesia, and some stainless steel plants starting from late May.” Nickel stocks rose 660 tonnes to 381,378 tonnes.

Noteworthy, The three-month tin price fell $55 to $19,660 per tonne, with inventories unchanged at 2,290 tonnes.

Currencies & data  

The Brent crude oil spot price was up 0.36% at $49.13 per barrel. Later, the US dollar index was effectively unchanged at 99.43. In equities, that shoes the UK FTSE 100 was down 7.17 at 7,335.04. But the power of dollar these days is not to be neglected.

Speaking about Europe, French and Italian industrial production both bid better than expectations. Especially the French trade deficit, which fell to a €5.4 billion. It bet the forecast.

US April export and import prices, crude oil stocks and the Federal budget balance are due later today. Mr Donald Trump’s decisions are often shocking for people around him as well as for the global market participants. But we can only watch and testify the outcomes by ourselves.

 

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