AUSTRALIA • CHINA • INDIA • JAPAN • NEW ZEALAND • ASIA PACIFIC
DIGGING&DRILLING FEBRUARY 2014 - APRIL 2014 • Issue 7
AUSTRALASIA
AustralaSIA’s QUARTERlY Oil, Gas & Mining Magazine
gold price enjoys longest winning streak since 2012 Australia RAMPS UP EXPORTS China buys roughly 65% of the world’s seaborne iron ore trade
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Editor’s Letter I would like to start by thanking Budget Car and Truck Rental for their assistance in the growth of D&D Australasia print magazine distribution in Western Australia. If you hire a Mine-Spec or commercial vehicle from Budget Car and Truck Rental in WA this quarter, including from Perth Airport and the mining regions, you will find a complimentary print copy of D&D Australasia magazine in the vehicle. The main components of the Australian economy started to dramatically change from investment to trade late in 2013 and now GDP growth is alternating. In recent years mines and LNG plants were being constructed and materials were being imported, this was positive for investment but negative for net trade. Now the opposite is happening, investment is winding up and the mines, factories and plants are beginning to export. Notably, Australian GDP growth has hovered around 3% for the past ten years and this level of growth is slightly down but when the Coalition Government’s plans to repeal the Carbon and Mining Taxes are implemented, this should boost business and consumer confidence and push our GDP growth back to at least 3%.
Len Fretwell Publisher / Managing Editor Digging & Drilling Australasia
Indonesia has imposed export bans on unprocessed minerals and are dramatically increasing taxes on bauxite to establish their own Aluminium processing industry. Ten years ago, China produced 10% of the world’s Aluminium and it is predicted that this will rapidly grow to 50% and China’s demand for bauxite is also predicted to grow. This is most certainly good news for Australasian bauxite mining companies. Tellus Holdings Ltd are drilling in Central Australia to determine the establishment of Australia’s largest salt mine. An estimated 5 Billion ton of salt lies in the Chandler underground salt deposit 120 kilometres south of Alice Springs, in the Northern Territory. This project could offer major economic benefits for central Australia with mining and construction jobs and related infrastructure investment. On a personal note, I had some restoration work done to my classic Corvette recently and I would like to thank Josh at MechBro for rebuilding the rear end and Stuart at Bailey Automatics for reconditioning my thirty-eight year old Stingray’s transmission. I highly recommend the great work and service offered by both of these highly skilled professionals. As a matter of interest, by far the most expensive quote that I was given to recondition my T-350 transmission was from Wangara Automatic Transmissions. We are always looking for interesting energy and resource sector news and innovation content and I invite industry members to contact me with news that may be of interest to our readers. I hope you enjoy reading this first edition of D&D Australasia magazine for 2014 and I look forward to your feedback. Regards
Len F retwell FEBRUARY 2014 - APRIL 2014 DIGGING & DRILLING MAGAZINE 3
WHAT’S IN THIS 06» ISSUE
IN THIS ISSUE 3 EDITOR’s LETTER 6 MOMENTS IN PICS: Australia Oil & Gas Conference, Perth - Past Pictures 10 News in Brief: Oil & Gas News highlights for the month 12 Toll NQX helps new drill make its Australian debut 14 Abbot Point Permit Subject to Strict Environmental Conditions 18 Project PostCard: HYUNDAI FLNG Artist impression 21 FOCUS ON FRACCING 24 As stocks tank, gold price enjoys longest winning streak since 2012 28 AUSTRALIA RAMPS UP EXPORTS 32 Chevron Full Year Earnings Down 18% Digging & Drilling Level 28 AMP Tower Australasia 140 St Georges Terrace Perth WA 6000 Tel: +61 1300 284 637 Fax: +61 (8) 9300 9435 Feedback info@diggingdrilling.com News inquiries editor@diggingdrilling.com Advertising inquiries len.fretwell@diggingdrilling.com • Mobile: 0417 001 080 Editor Writers GUEST Writer SPECIAL FEATURES
Len Fretwell Robin whitlock, Stephen Dawson, ANDREW BURRELL MEGAN ANDREWS, SACOME EMMANUEL SOLOMON
Graphics Elvin Wong Subscription SUBSCRIPTION@diggingdrilling.com Publishing Digging and Drilling is a Trading name of LF Family Trust Information ABN: 97 893 623 301 VISIT US AT www.diggingdrilling.com COVER PORT HEDLAND IRON ORE TERMINAL
Digging & Drilling Australasia welcomes comments and suggestions, as well as information about errors that call for corrections. We are committed to presenting information fairly and accurately. Disclaimer: Reasonable care is taken to ensure that Digging & Drilling magazine articles and other information are up-to-date and accurate as possible, as at the time of publication, but no responsibility can be taken for any errors or omissions contained herein. The opinions expressed are those of the authors and do not necessarily reflect the views of Digging & Drilling Magazine. The publisher, editors, contributors and related parties shall have no responsibility for any action or omission by any other contributor, consultant, editor or related party.
4 DIGGING & DRILLING MAGAZINE FEBRUARY 2014 - APRIL 2014
UGLY FISH TO LAUNCH NEW POSITIVE SEAL EYEWEAR
L
eading eyewear brand Ugly Fish is set to extend its impressive positive seal eyewear range, launching its popular Guardian series with a positive seal option, at the Safety in Action Darwin Show from 19-20 March 2014 at the Darwin Convention Centre.
continually exposed to the elements. We are confident it will receive the same fantastic reviews.” In addition to the permanent positive seal, the new Guardian features anti-fog coatings on both sides of the lens to prevent fogging and provide maximum clarity and vision at all times. Extremely
The new Ugly Fish Guardian (RS1515+PS) safety glasses have been designed with a permanent positive seal to protect workers who are continually exposed to wind, dust and other airborne particles. The foam-based backing provides a seal around the eye area to prevent tiny particles from penetrating the durable, the shatterproof lens area and entering the eye. polycarbonate lenses include an anti-scratch hard coating Head of Sales and Marketing, to strengthen and protect Mick Donohoe says the new the lens, ensuring it is highly Guardian with positive seal is scratch resistant. based on an existing flagship Donohoe said the new features model. appeal to many companies in “The Guardian has been a the oil and gas, mining and hero style in the Ugly Fish construction sectors including safety range for a number of Sunbuild, one of the largest, years now due to its comfort, most successful construction durability, cost and ability companies in the Top End. to fit most head shapes,” Mr Donohoe said. “As a major construction company based in the Northern “It was a natural progression Territory we required a safety to introduce the positive seal glass that would perform. The option to cater for workers Ugly Fish Guardian fitted all
our requirements and our boys love them because of their style and attitude. They are the perfect safety glasses for a tough Territory,” said Sunbuild Purchasing Officer, Alan Blythe. The new Ugly Fish Guardian (RS1515+PS) is compliant and certified to the Australian Safety Standard AS/NZS 1337.1 for Medium Impact and will be available in a smoke and clear lens. For more information visit Ugly Fish on stand D22 at the Safety in Action Darwin Show from 19-20 March 2014 or visit the Ugly Fish website, www.uglyfisheyewear.com.
Moments
MOMENTS IN PICs »
Australia Oil & Gas Conference,
6 DIGGING & DRILLING MAGAZINE FEBRUARY 2014 - APRIL 2014
PERTH - PAST PICTURES
FEBRUARY 2014 - APRIL 2014 DIGGING & DRILLING MAGAZINE 7
NEWS IN BRIEF »
Oil & Gas News highlights for the month
Apache Awards 3D EM Contract to EMGS in Australia
Australia’s Wolf Minerals ready for construction of UK tungsten mine
Electromagnetic Geoservices ASA (EMGS) signed a contract with Apache worth approximately USD 5 million, following a Letter Of Intent (LOI) received in November.
Australia’s Wolf Minerals is currently developing a major tungsten operation in south west England and recently announced that construction will begin during the second quarter this year.
The Company received the LOI for 3D EM data acquisition in the Asia-Pacific region.The vessel BOA Thalassa commenced the survey in north west Australia on 25 January.
The Hemerdon project received its final environmental permit last month. It’s believed to bethe third largest tungsten resource in the world.
BOA Thalassa is a purpose-built 3D EM vessel that has the capacity to carry 200 receivers. It is equipped with parallel source systems, including winches, cranes and hydraulic feeds to offer full redundancy.
As with many other commodities, China dominates tungsten production. The Asian giant holds about 60% of known tungsten reserves – considered a strategic metal by many countries – and accounts for more than half of the world’s demand. According to Wolf, demand is expected to increase at almost 6% per year until 2016.
Mining jobs in Australia to stage a comeback
CARBON OFFENSIVE SHIFTS TO OIL BUT SPARES NATURAL GAS
Mining-related employment in Australia is expected to grow 11% in the next five years thanks mainly to the iron ore and liquefied natural gas (LNG) sectors, says a recent study published by research firm BIS Shrapnel.
Oil is next in US President Barack Obama’s carbon offensive. With a regulatory barrage under challenge in court and Congress, the administration has been trying to slash coal combustion in the generation of electric power.
In its Mining in Australia 2013-2028 report, the analysts predict exports of those two commodities will continue to increase in coming years, bolstering the resource industry’s GDP share from 18.7% to 19.8%.
Now the president is pulling oil—without natural gas—into the line of fire. In a speech in Chattanooga, Tenn., he supported “accelerating our clean energy and natural gas revolutions.” Then he declared: “Now is the time to double down on renewable energy and biofuels and electric vehicles and to put money into the research that will shift our cars and trucks off oil for good.”
While the mining investment boom peaked in 2012/13 and is forecast to decline 20% over the next five years, the report highlights that mining production is poised to grow 41% in the same period, driving commensurate increases in mining operations activities, maintenance and exports. The study also suggests that several jobs will be created in other related industries, such as construction. “With respect to the mining boom, it’s probably fair to say that this is not the beginning of the end, but the end of the beginning. Over the next five years the strong boost from mining production will more than offset the economic negatives from falling mining investment, which will flow through to construction and manufacturing,” says the report. While employment levels across the resource industry are expected to fluctuate greatly, increased productivity levels will complement the slowing job creation, it adds. “Miners will continue to be squeezed by lower commodity prices and a high Australian dollar over the next few years,” says Adrian Hart, Senior Manager of BIS Shrapnel’s Infrastructure and Mining Unit. “[But] given the strong increases in production expected, this translates to a 60% labour productivity surge over the next five years.”
Apache’s Bianchi wildcat finds gas off WESTERN Australia Apache Energy has made a natural gas discovery with its Bianchi-1 wildcat, which was drilled in retention lease WA49-R offshore Western Australia. The find is within a separate fault block down-dip and 6 km northeast of the company’s April 2011 Zola-1 gas discovery and about 11 km north of the earlier Antelope find.Wireline logging and pressure testing confirmed 112 m net gas pay in Bianchi-1 in the Triassic-age Mungaroo formation. The well lies in 240 m of water.Bianchi adds to the prospectivity of other leads in the lease as well as the adjoining Santos Ltd.operated exploration permit WA-290-P.Apache has 30.25% of both permits, Santos has 24.75%, OMV Australia has 20%, JX Nippon 15%, and Tap Oil of Australia 10%.
OFFICE & WORKSHOP 49 Candlewood Boulevard, Joondalup 6027 Tel: (08) 9300 3135 Fax: (08) 9300 3236 Email: mark@mechbro.com.au
MechBro Australia has been set up to respond to the demand for Heavy Duty Diesel Mechanics and Fitters involved in the repair, maintenance and servicing of earthmoving, mining and transport equipment as well as light vehicles. Our business is based in Perth and also services regional areas, including the Pilbara. Our people are highly skilled and motivated to provide the highest level of service to companies throughout Western Australia. With a fleet of mine specified and fully equipped service utilities, we are unique in that we are not simply a labour hire company. Because with MechBro you don’t just get a capable individual, you get the strength of our entire team! MechBro’s team of mechanics and fitters are committed to the economic success of our customers. And so, before joining us, must demonstrate they possess the passion, skills and attitude required to satisfy our customers. Accordingly, we believe this set of values will help to ensure the mutual economic success of all parties.
Our People Whether it be a civil or mining project, every person on our team knows that to keep plant operating means productivity. We work hard and use our heads! As a collective, our team of highly skilled mechanics diagnose, repair and maintain a wide variety of plant and equipment, dozers, excavators, graders, scrapers, profilers, dump trucks, bobcats, heavy haulage road transport, etc. Our team has the experience, qualifications and equipment to work on all aspects of these machines including engine rebuilds, hydraulics, track and frame, electrics and air conditioning and on all brands, including, but not limited to; CAT, Hitachi, Komatsu, Terex, O&K, Volvo, Bell, Vermeer, Cummins. As a team of mechanics, fitters, servicemen and fabricators we keep machines going, as well as being involved in site mobilization where we establish containerized workshops complete with domes and commission machinery ready for operation. Upon project completion we demobilize workshops and plant and are often the last to leave site.
Throughout a project we are able to manage all parts ordering and delivery, including urgent hot shots. Our tilt tray can pick up and deliver parts and 20’ containers up to 8.5T.
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Our aim is to conduct our business using systems and practices which will ensure that our workforce and the community are protected from injury and harm. Safety and productivity go hand in hand with our people working as problem solvers to get the job done.
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Toll NQX helps new drill Leading freight transport provider Toll NQX, part of Toll Group, has helped a new cutting edge drill make its Australian debut, delivering the 20 tonne piece of equipment over 6000km across the country. Toll NQX delivered the Cat “Toll NQX can move almost any hours or 400km by the driver. MD5150 Track Drill from freight of any size, whether it’s Brisbane to Townsville where it a carton, a pallet or a 20 tonne “One of Toll NQX’s specialties was on display at the Institute mining drill,” Toll NQX General is transporting mining related equipment and we’re proud of Quarrying Australia Manager Greg Smith said. to have been involved in Conference at Jupiters in “The drill was transported the delivery of this piece of September. by a drop-deck trailer fitted equipment.” The 20,500kg drill was then with drive on ramps, secured transported to Perth, covering by high tensile chains and Caterpillar logistics analyst a total distance of 6272km. checked on average every five Jonathan Lagman said the
make its Australian debut machine could be used in large quarries or in gold and iron ore mines and it was the first fully designed Cat drill into the market with new auto functions.
design that is outpacing its predecessor, the renowned MD5125, with performance data such as an engine with 18 per cent more horsepower,” Mr Lagman said.
“The new MD5150 is turning “The drill has more new Cat heads with its cutting edge components and the next
generation of technology and systems that are real productivity boosters.” Mr Lagman said the machine’s final destination was Kewdale in Western Australia.
Abbot Point Permit Subject to Strict Environmental Conditions After rigorous assessment, the Great Barrier Reef Marine Park Authority has approved an application by North Queensland Bulk Ports Corporation to dispose of dredge spoil at a deepwater location offshore of Abbot Point, subject to strict environmental conditions.
A
uthority Chairman, Dr “As a deepwater port that has Russell Reichelt, said he been in operation for nearly recognised the amount 30 years, Abbot Point is better of debate and community placed than other ports along concern that the project had the Great Barrier Reef coastline generated and shared with to undertake expansion as everyone a strong desire to the capital and maintenance ensure the Reef remains a dredging required will be great natural wonder into the significantly less than what future. would be required in other areas. “This approval is in line with the agency’s view that port “It’s important to note the development along the Great seafloor of the approved Barrier Reef coastline should disposal area consists of sand, be limited to existing ports,” silt and clay and does not Dr Reichelt said. contain coral reefs or seagrass beds.”
14 DIGGING & DRILLING MAGAZINE FEBRUARY 2014 - APRIL 2014
General Manager for Biodiversity, Conservation and Sustainable Use, Bruce Elliot said the stringent environmental conditions imposed on the dredge disposal would help protect biodiversity, heritage and social values of the multiuse Marine Park and ensure potential impacts of this activity are avoided, mitigated or offset.
“The Federal Environment Minister, as part of his approval conditions for this development, has required
North Queensland Bulk Ports to identify alternate disposal sites within an identified investigation zone,” Mr Elliot said. “We would support the use of an alternative site if it is found to be equal to or better in terms of environmental or heritage outcomes.” Mr Elliot said the agency had fully considered and taken into account the Environment Minister’s approval, granted on 10 December 2013, of the capital dredging program and dredge disposal site for the Abbot Point terminal expansion, as well as community views and relevant scientific and technical reports.
“By granting this permit application with rigorous safeguards, we believe we are able to provide certainty to both the community and the proponent while seeking to ensure transparent and best practice environmental management of the project,” he said.
Forty-seven environmental conditions, which reflect the latest science and best industry management practices, as well as the conditions already put in place by the Environment Minister, impose strict mitigation measures such as: • measures to minimise impact on biodiversity, particularly coral • a long-term water quality monitoring plan that extends five years after the disposal activity is completed • a heritage management plan to protect the Catalina World War II aircraft wreck located in Abbot Bay
site • environmental supervision by a GBRMPA nominee • establishment of an independent dredging and disposal technical advice panel and a management response group which will include community representatives. The approved disposal site is located approximately 25 kilometres east-northeast of the port, while the investigation zone being assessed for alternative locations is located 20 to 30 kilometres from the area being dredged.
All material destined for ocean relocation is tested measures for by accredited laboratories • offset commercial fishers in the and has to comply with event of adverse impacts strict requirements under the National Assessment • a requirement to prevent any harm to environmental, Guidelines for Dredging. cultural and heritage values Testing has confirmed there of any areas beyond 20 are no identified contaminants kilometres from the disposal in the sediments in Abbot site. Point that will be dredged and relocated.
Westsea Solutions
Providing Tugs & Barges for
WA-based company Westsea Marine is working with Saipem-Leighton Consortium(SLC) to supply vessels and barges for the Chevron-operated Gorgon project.
technologies and a modern fleet of vessels, we are the preferred provider of offshore support vessels in the oil and gas industry.
Westsea is a trusted partner, acknowledged and depended upon for our experience and capabilities. Combining a dedicated and highly skilled team with innovative
Westsea Marine is supplying 28 vessels comprising of Work Barges, Anchor Handling Tow Tugs and Support Vessels, to support the construction of the 2.1km LNG jetty and marine structures at Barrow Island, off the north coast of WA.
16  DIGGING & DRILLING MAGAZINE  JULY 2012
Our know-how, expertise and marine experience delivers innovative and cost effective solutions to our clients across the oceans in the most challenging offshore environments.
Marine Solutions. The total value of the contract is in excess of $100 million, with the first phase of vessel deliveries already being completed earlier this year. The SLC contract includes the construction of the LNG Loading Jetty, Heavy-Lift Facility and Tug Pens at Barrow Island to facilitate the transport of LNG to international markets. Westsea Marine has been involved in providing offshore marine solutions and vessels in Australia since it was established in 2002. The company is proud to continue being a part of the Gorgon project, and is already providing quality marine equipment for Preliminary Works and the Materials Offload Facility Wharf Construction phases.
Westsea Marine started its operations in Perth, WA, providing specialised offshore marine solutions to serve its Australian-based clients with a nationally compliant fleet of ocean going towing tugs, anchor handlers and work barges. The Gorgon Project is a joint venture between the Australian subsidiaries of Chevron, ExxonMobil, Shell, Osaka Gas, Tokyo Gas, and Chubu Electric Power. For more information, visit:
www.westseamarine.com
Deployment of Westsea Marine vessels on the Gorgon Project, utilizing the Westsea Anne Marie, Westsea Kestrel, Westsea Hawk, Westsea 3006 off Barrow island WA.
Westsea Gail mobilising Westsea 79 - 300ft Rock Barge For Gorgon LNG Jetty Construction Project
r My Africa: Kenya POSTCARD PROJECT»
HYUNDAI FLNG ARtist impression
18 DIGGING & DRILLING MAGAZINE JULY 2012
Image Courtesy: Woodside JULY 2012 DIGGING & DRILLING MAGAZINE 19
FEATURE ARTICLE»
FOCUS ON
FRACCING
FEATURE ARTICLE»
FOCUS ON FRACCING
H
ydraulic fracturing (fraccing) has been used in the energy sector since the 1940s to access oil and gas resources. Although not required for all wells (depending on the properties of the host rocks) it has been used in South Australia’s lucrative Cooper Basin since the late 1960s. Fraccing unlocks the gas by making or expanding narrow channels (“fractures”) through which oil and/or gas trapped in the small pores within the rock can escape towards the wellbore. This is achieved by injecting fluid under high pressure into the well. Once a well has been fracture stimulated, it can produce gas for up to 20 years or more. Well integrity is the highest priority for both the regulator and operators, with a reliable barrier to rock layers and ground water necessary from both an environmental and production perspective. Strict regulations concerning drilling and well construction are enforced by state government regulators (DMITRE in South Australia). Wells may be drilled either vertically, or vertically then horizontally; in both cases multiple strings of steel tubing called “casing” are installed and cemented in place to
Hydraulic fracturing fluids can have ingredients that are found in commonly used household products. This does not mean they are all harmless, but with appropriate control their use can be managed. Certain additives are banned in some Australian states, in others geological risk assessment and A wide range of management strategies are geophysical techniques are taken to determine approval used to characterise geological of fracturing operations and formations in the planning additives. and modelling of hydraulic The high proportion of fracturing operations. The results of modelling can water and sand in fraccing fluid identify where fraccing heavily dilutes the chemical operations must be avoided. additives, and once inside Real time monitoring of the geological formation, the hydraulic fracturing operations natural water present provides also provides quality control further dilution. For a typical to ensure fractures do not single horizontal well, fraccing extend beyond the targeted can use anywhere from 1,000 geological formations. – 10,000 metric tonnes of proppant and 9-24 million Fraccing fluid is litres of water. comprised mostly of water (at least 95%); ‘proppants’, to After the fraccing keep fractures propped open operation, frac fluid and fluids allowing trapped oil and gas to from the geological formation escape; and a small percentage travel within the well back to of chemicals (less than 0.5%). the surface. About 40 - 60% of this fluid is recovered, ideally The proppant is usually for treating and recycling for sand or manufactured ceramic future stimulation operations, balls. The chemicals used or disposed of under highly are required to carry the policed environmental proppant, remove bacteria, practices, including lined pits prevent corrosion, restrict scale or tanks. formation and reduce friction to enable easier pumping of Community concerns frac fluid and sand into the over both fraccing and dewell. watering have arisen from increased shallow CSG activity provide a non-permeable barrier between the produced gas and surrounding rock layers, including aquifers. The casing is then perforated at specific intervals, typically hundreds or thousands of metres below groundwater aquifers, to enable hydraulic fracturing.
22 DIGGING & DRILLING MAGAZINE FEBRUARY 2014 - APRIL 2014
on agricultural land in QLD drilling engineers to ensure the and NSW in recent years. Coal necessary approval conditions seam dewatering is a different are in place, and procedures process to fraccing. It is used are strictly adhered to. Any to remove water from a coal company wishing to extract seam to reduce pressure and hydrocarbons must submit a release any gas present. In Statement of Environmental South Australia only very Objectives (SEO) based on an deep coals have high gas Environmental Impact Report contents, and these have been (EIR), which details all aspects of naturally dewatered by burial the project, including potential compaction. impacts, together with
The majority of South Australia’s unconventional gas is located in the world-class, remotely located Cooper Basin. There is also potential in other onshore basins, but as with the Cooper Basin, prospective rock layers are mostly located very deep and far removed from groundwater.
utmost, that there shall be no contamination of aquifers with frac fluids or hydrocarbons extracted from any reservoirs as a result of fraccing operations. Other regulatory requirements include groundwater sampling and reporting, both prior to and post fraccing; hydraulic fracture fluid testing and reporting and undertaking of geological risk assessments to ensure that there is no risk of contaminating aquifers as a result of fraccing. There are some misunderstandings in the community surrounding earthquakes and fraccing. Although it is true that fraccing operations may cause minor seismic activity, these events are rarely even detected by people on the surface. Other man made events have been known to cause seismic activity, including the construction of dams and reservoirs. There is a possibility that higher seismic activity could be induced if operations were to hit a fault line that was already close to failure. These locations are usually known and activities adjacent to any suspect fault lines are not permitted.
measures to be taken to avoid or minimise these. In addition, where applicable, coal seam gas projects may be subject to assessment and approval under the Commonwealth Environmental Protection and Biodiversity Conservation Act 1999, where the project proponent must demonstrate All South Australian oil, that activities will not have gas and geothermal activities significant impacts on water GUEST WRITER: are regulated under the South resources. Australian Petroleum and Some of the typical Megan Geothermal Energy Act 2000 compliance requirements Andrews, and DMITRE employs a range for fraccing include, first and SACOME of technical experts, including
FEBRUARY 2014 - APRIL 2014 DIGGING & DRILLING MAGAZINE 23
FEATURE ARTICLEÂť
Image Courtesy of Ken Watson, Redstone Minerals Pty Ltd
As stocks tank, gold price enjoys longest winning streak since 2012 The price of gold added to strong gains, jumping to a high above $1,270 an ounce amid widespread carnage on financial markets.
U
p five weeks in a row; it is the yellow metal’s longest weekly winning streak since September 2012. Gold is trading 5% higher year to date.
132,000, contracts compared average daily volumes on the exchange of less than 160,000. Trading in gold for delivery in April was also up at some 28,000 contracts at a price of $1,264 an ounce.
In lunchtime trade on the Comex market in New York, February gold futures had given up most of the early gains to change hands at $1,263.80 up slightly from yesterday’s close after hitting a high for the day of $1,273.20 around 10am EST.
Gold was finding favour on Friday as a safe haven asset as the US dollar slid, stock markets tankedmand bond yields daropped. Mining stocks were not spared and the S&P/TSX Global Mining Index lost 2.6% in value, wiping out recent gains.
Volume was brisk and by 1pm EST, volume traded in February gold, the most active future, reached
Gold’s 28% price drop in 2013 were marked by a rotation out of gold-backed ETFs into riskier assets like
equities, prompting many to speculate that gold’s reputation as a hard asset and storer of wealth were something of the past. Friday’s action suggested gold’s safe haven status is not as tarnished as some would have it.
Friday’s action suggested gold’s safe haven status is not as tarnished as some would have it. The destruction on stock markets were caused by fears of an emerging market crisis after manufacturing numbers from China showed a surprising contraction.
FEBRUARY 2014 - APRIL 2014 DIGGING & DRILLING MAGAZINE 25
gold import curbs ahead of parliamentary elections later this year reports the Times of India.
Reuters GFMS gold survey released yesterday, Indian consumption still rose 5% to 987.2 tonnes last year.
Long the top importer of gold, India fell behind China in 2013 after bullion A slowdown in Chinese metal import duties were pushed up tenfold – from 1% at and mineral imports will the start of 2012 to 10% have a knock-on effect on – and other rules such as other resource-dependent strictly cash only for imports, countries like Brazil and mandatory re-export of 20% other Latin American of imports and transaction economies, South Africa, taxes stymied India’s gold Australia and Canada, which have all seen their currencies industry. retreat sharply in 2014. Despite the fact that premiums over the London Gold’s gains on Thursday fix demanded by Indian came after news that Sonia gold traders from jewelers Gandhi, leader of India’s shot up as high as $140 an Congress party and ruling ounce, according to the alliance, had asked the closely watched Thomson Indian government to relax
Lifting the restrictions, which will be made easier by gains for the rupee from historic lows set last year and an improving balance of payments, could unleash this pent up demand.
China dominates the global trade in just about every commodity including iron ore (representing 70% of world trade), copper(42%), coal (47%), nickel (36%), lead (44%) and zinc (41%).
China dominates the global trade in just about every commodity including iron ore (representing 70% of world trade), copper(42%), coal (47%), nickel (36%), lead (44%) and zinc (41%).
26 DIGGING & DRILLING MAGAZINE FEBRUARY 2014 - APRIL 2014
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FEATURE ARTICLE »
FEATURE ARTICLE»
Australia
RAMPS UP
EXPORTS The price of iron ore slumped to a 7-week low and metallurgical coal traded at its lowest level since August recently.
FEBRUARY 2014 - APRIL JULY 2012 2014 DIGGING & DRILLING MAGAZINE 29
T
he benchmark CFR import price of 62% iron ore fines at China’s Tianjin fell to $133.40 a tonne on a level last seen at the end of October, while FOB premium Australian coking coal declined to $136.30 a tonne, the lowest since August 2, according to data provided by SteelIndex. Pushing prices down were renewed worries whether economic growth in China, the world’s number one importer of the steelmaking raw materials, would be sufficient to absorb a massive increase in supply.
per day – almost as much as the rest of the world combined – but the industry suffers from chronic overcapacity and low profitability.
The questions now becomes whether surging supply is about to overwhelm demand
Cargoes from the world’s largest exporters in Brazil, Australia and South Africa have been edging out generally low-quality domestic supply, with imports into China reaching a record high of 77.8 million tonnes in November, but the questions China buys roughly 65% of the world’s now becomes whether surging supply is 1.2 billion tonne seaborne iron ore trade about to overwhelm demand. and after an astonishing 30% jump in 2013 to an estimated 92 million tonnes New research by Australia’s Bureau of absorbs almost a third of all coking coal Resources and Energy Economics (BREE), the country’s official forecaster, show exports. another sharp increase in exports of iron Chinese mills are still forging steel at ore and coking coal, which may coincide a rate of more than 2 million tonnes with a slowdown in China as the country’s 30 DIGGING & DRILLING MAGAZINE FEBRUARY 2014 - APRIL 2014
red hot construction sector cools and the the outlook for the coal price is better. country moves from an investment to a Chinese imports will increase a still consumer-led economy. respectable 7.8% and met coal exports BREE predicts that while Chinese iron will show more modest growth with ore imports will grow 7.4% next year, Australia, which at 168 million tonnes the world’s top exporter Australia will is expected to export three times more increase cargoes a whopping 22.1% to than second placed US, growing at just 709 million tonnes as projects by Rio under 4%. Tinto (LON:RIO), Fortescue Metals Group (ASX:FMG) and BHP Billiton (LON, ASX: US exports will decline for the the third year in a row, dropping 4.6% in 2014. BHP) come on stream. Brazil, led by world number one iron Iron ore is second only to the seaborne ore miner Vale (NYSE:VALE), is set to up crude oil trade and represents close to 25% of global dry bulk cargoes with coal exports 9.1% to 352 million tonnes. a close second. India, which has seen exports fall from 120 million tonnes to close to just 11 More than 35% of mined iron ore million tonnes this year, will also re-enter is shipped and 12% of global coal the market as a self-imposed ban on production is carried by sea. exports expire and stockpiles are sold on. With more limited supply growth and no new major projects coming on stream, FEBRUARY 2014 - APRIL 2014 DIGGING & DRILLING MAGAZINE 31
FEATURE ARTICLE »
Chevron Full Year
Earnings DOWN 18 PERCENT
Chevron Corporation today reported earnings of $4.9 billion ($2.57 per share – diluted) for the fourth quarter 2013, compared with $7.2 billion ($3.70 per share – diluted) in the 2012 fourth quarter.
F
deliver significant production growth and shareholder value in the years ahead. We also raised the dividend on our common shares for the 26th consecutive year and continued our share repurchase program, Sales and other operating both of which underscore our revenues in the fourth commitment to providing quarter 2013 were $54 billion, strong shareholder returns.” compared to $56 billion in the Watson continued, “We year-ago period. made significant progress on “Global crude oil prices our LNG projects in Australia and refining margins were during the past year, with generally lower in 2013 than Gorgon almost 75 percent 2012,” said Chairman and complete and Wheatstone CEO John Watson. “These conditions, as well as lower gains on asset sales and higher expenses, resulted in lower earnings. We continue to have an advantaged portfolio and we have maintained our industry-leading position in upstream earnings per barrel for the past four years.” successfully reaching important construction and “Our strong financial position and healthy cash generation LNG marketing milestones. in 2013 have allowed us to We expect 2014 will be the fund a substantial investment peak year for spending on program, add several new these two projects as we move resource opportunities and, at them closer to first production. the same time, raise shareholder Significant progress was also distributions. Major capital made at two important Gulf projects currently under of Mexico deepwater projects, construction are expected to Jack/St. Malo and Big Foot.” ull-year 2013 earnings were $21.4 billion ($11.09 per share – diluted), down 18 percent from $26.2 billion ($13.32 per share – diluted) in 2012.
“We continued to pursue shale and tight-rock opportunities during 2013,” Watson noted. Key achievements included major new investments in the Vaca Muerta Shale in Argentina and the Kitimat LNG Project in Canada, acquisition of additional acreage in the Duvernay Shale in Canada, and securing new shale opportunities in Ukraine and central Australia. Watson commented that the company added approximately 800 million barrels of net oil
Full-year 2013 earnings were $21.4 billion ($11.09 per share – diluted), down 18 percent from $26.2 billion ($13.32 per share – diluted) in 2012. equivalent proved reserves in 2013. These additions, which are subject to final reviews, equate to approximately 85 percent of net oil-equivalent production for the year. The largest additions were for the Marcellus Shale and the Permian Basin in the United States. Also significant were additions for fields in Asia and Africa. The company’s
FEBRUARY 2014 - APRIL 2014 DIGGING & DRILLING MAGAZINE 33
three-year average reserve replacement ratio is 123 percent of net oilequivalent production. The company will provide additional details relating to 2013 reserve additions in its Annual Report on Form 10-K scheduled for filing with the SEC on February 21, 2014.
“In the downstream, we progressed our new premium base-oil plant in Pascagoula, Mississippi, and look forward to start-up in early 2014,” Watson continued. “In addition, Chevron Phillips Chemical reached a final investment decision on a new ethane cracker in Texas. Both of these projects advance our strategy of focusing investments on higher growth and higher margin products.” The company purchased $1.25 billion of its common stock in fourth quarter 2013 under its share repurchase program. Repurchases for the full year totaled $5 billion. At yearend, balances of cash, cash equivalents, time deposits and marketable securities totaled $16.5 billion, a decrease of $5.4 billion from the end of 2012. Total debt at December 31, 2013 stood at $20.4 billion, an increase of $8.2 billion from a year earlier.
Upstream Worldwide net oil-equivalent production was 2.58 million barrels per day in the fourth
quarter 2013, down from 2.67 million barrels per day in the 2012 fourth quarter. Production increases from project rampups in the United States and Nigeria were more than offset by normal field declines and lower cost recovery volumes.
International upstream earnings of $4.0 billion decreased $1.45 billion from the fourth quarter 2012. The decrease between quarters was primarily due to the absence of a gain of approximately $1.4 billion on an asset exchange in Australia and higher exploration expenses. Foreign currency effects increased earnings by $300 million in the 2013 quarter, compared with a decrease of $34 million a year earlier.
U.S. upstream earnings of $803 million in the fourth quarter 2013 were down $560 million from a year earlier due to lower crude oil production and higher operating, income tax, depreciation and exploration expenses. The average sales price for crude oil and natural gas The company’s average sales liquids in the fourth quarter price per barrel of crude oil 2013 was $101 per barrel, up and natural gas liquids was from $100 a year earlier. The $90 in the fourth quarter average price of natural gas 2013, down from $91 a year was $5.75 per thousand cubic ago. The average sales price feet, compared with $5.97 in of natural gas was $3.35 per last year’s fourth quarter. thousand cubic feet, compared with $3.22 in last year’s fourth Net oil-equivalent production quarter. of 1.93 million barrels per day in the fourth quarter 2013 Net oil-equivalent production was down 68,000 barrels per of 650,000 barrels per day in day, or 3 percent, from a year the fourth quarter 2013 was ago. Production increases down 24,000 barrels per day, or due to project ramp-ups in 4 percent, from a year earlier. Nigeria were more than offset Production increases in the by normal field declines and Marcellus Shale in western lower cost recovery volumes. Pennsylvania and the Delaware The net liquids component Basin in New Mexico were of oil-equivalent production more than offset by normal decreased 4 percent to 1.29 field declines elsewhere. The million barrels per day, while net liquids component of net natural gas production oil-equivalent production decreased 3 percent to 3.84 decreased 5 percent in billion cubic feet per day the 2013 fourth quarter to 440,000 barrels per day, while net natural gas production decreased 1 percent to 1.26 billion cubic feet per day.
34 DIGGING & DRILLING MAGAZINE FEBRUARY 2014 - APRIL 2014
CICEME-2014 10th China International Coal Equipment & Mine Technical Equipment Exhibition June,12-14,2014
China International Exhibition Center(CIEC)
www.ciceme.com/en
top coal & mine expo in the world + more than 800 exhibitors + 60000sqm exhibiting are a + 50,000 professional visito rs + 80 countries & regions
Organized By
Tel: +86-10-68809051 Fax: +86-10-68631368 Email: chinatopexpo@gmail.com Address: RM 1604,North Building,Raycom Creative Center,East Bajiao Street,Shijingshan,Beijing,100043,China
JULY 2012 DIGGING & DRILLING MAGAZINE 35
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