Rio’s Walsh Has Hope of ‘V-Shape’ Recovery in China (Update2)

Rio’s Walsh Has Hope of ‘V-Shape’ Recovery in China (Update2)
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By Rebecca Keenan and Jesse Riseborough

May 26 (Bloomberg) -- Rio Tinto Group, the world’s third- largest mining company, is hopeful of a “V-shape” economic recovery in China, boosting demand for iron ore as price talks with steel mills build toward settlement.

“What is unshakeable is our belief that China and India and the other emerging economies will be the key engines of any return to world growth and commodity demand growth,” Sam Walsh chief executive of the London-based company’s iron ore unit, its biggest earning division, said today at a conference in Canberra.

Rio sees “green shoots” of recovery in iron ore demand in China, the world’s biggest buyer, and expects annual price talks to end sooner than later, Walsh said. China will be able to meet its 8 percent growth rate target this year, Zhang Junsai, the nation’s ambassador to Australia, said today, backing Rio’s proposed investment deal with Aluminum Corp. of China.

“China buying is now setting a floor for bulk commodities prices,” Goldman Sachs JBWere Pty analysts led by Melbourne- based Malcolm Southwood said in a report. “Economic sentiment, demand for raw materials and commodities prices will be better in 12 months’ time and 24 months’ time, than they are now.”

Rio, battling shareholder and political opposition to the proposed $19.5 billion investment from Aluminum Corp., known as Chinalco, was little changed at A$64.01 at 12:33 p.m. Sydney time on the Australian stock exchange.

‘Worst Over’

The “worst is over” in demand for raw materials and prices for base metals may have bottomed, Goldman Sachs JBWere said in the report yesterday. There are early signs China’s 4 trillion-yuan ($586 billion) stimulus is boosting that nation’s economy, Australia’s Treasurer Wayne Swan earlier told the Minerals Week 2009 conference.

“We are ready to expand again” when there is a sustained recovery in metals demand, Walsh said at the conference. “Signs of improvement are present in recent data from China and such improvements continue the traditional recovery in exports and housing.”

Rio said this month it remains committed to the proposed Chinalco deal. The company has agreed to sell $7.2 billion of convertible bonds and stakes in projects worth $12.3 billion to Chinalco.

“Chinese investment in Australia is a win-win situation for the companies,” Zhang told reporters. “I understand the Australian government also welcomes Chinese investment and they will treat Chinese investment as they treat other international investments. That is the assurance we have been given by the Australian government.”

Australia Talks

Rio chairman Jan du Plessis arrives in Australia this week to hold talks with shareholders and government officials on the accord, Walsh told reporters. He held talks last week with investors in London.

“Once we have heard all those views we will determine the course of action in relation to the Chinaclo strategic alliance,” Walsh said. “It’s a situation that is evolving, and as has been made mention, we certainly have seen economic conditions improve since the deal was announced in February.”

Swan, who will make the final decision on the Chinalco proposal after an inquiry by the investment regulator, said today he won’t comment on the deal. “I never speculate about decisions that are before me as the minister for administering the Foreign Investment Review Board and the act we have,” Swan told reporters in Canberra.

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カウス夫人、前田五郎の年賀状から「ピンときた」

脅迫状の筆跡酷似
明るくふるまったカウスだが、芸人仲間の疑惑に胸中は？（クリックで拡大）
明るくふるまったカウスだが、芸人仲間の疑惑に胸中は？（クリックで拡大）

　きっかけは女のカンだった？！　吉本興業所属の漫才師、中田カウス（５９）宅に届いた脅迫状の筆跡が、同じ吉本所属の漫才師、前田五郎（６７）の筆跡と似ていた問題で、最初に筆跡の類似に気付いたのはカウス夫人だったことが２６日、分かった。前田の年賀状の文字を記憶していて「ピンときた」といい、吉本興業はカウス側からのこうした指摘をもとに独自の筆跡鑑定を行った。

　吉本の関係者によると、脅迫状は郵便で４月３日にカウスの自宅に届いた。その際、カウスの夫人が「以前届いた前田五郎さんの年賀状の文字によく似ている」と気付いた。指摘を受けたカウスも「そういえばそっくり」と実感したという。

　脅迫状は、「山本」という差出人名で「舞台に立てぬ様にしてやる」などと書かれ、カウス以外にも吉本興業幹部２人の実名をあげ、同様に危害を加えることを示唆。角張った金クギ流の文字で書かれており、当初はわざと字を崩しているともみられたが、関係者によると、前田も同様の特徴ある筆跡だった。
前田五郎さん前田五郎さん

　カウスらがその後、前田の相方の坂田利夫（６７）に脅迫文の一部を見せた際も、坂田は即座に「相方の字」と証言した。そこで坂田やカウスが４月に２度にわたって、前田に「お前とちゃうのんか」と詰め寄ったが、本人は認めず、吉本が専門機関に正式に筆跡鑑定を依頼することを決めた。

　鑑定書では脅迫状を書いた人物と前田が「ほぼ同一人」と結論づけられたという。

　吉本の事情聴取に対し、前田は関与を否定したものの、同社では「世間を騒がせた」として当分の間、前田の舞台活動を見合わせることを決めている。

　渦中のカウスは前田の休養が決まった２５日はオフだったが、午後になって吉本の大阪本社に立ち寄った。報道陣の呼びかけに「あしたから（なんばグランド花月で）出番や」と笑顔で返すなど、騒動とは対照的に、元気いっぱいだった。

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三井住友、日興無謀買収の代償…ドロドロ内紛危機も

証券業務の充実狙うが
大枚をはたいて日興を買収する三井住友。その決断が吉と出るか凶と出るか（クリックで拡大）
大枚をはたいて日興を買収する三井住友。その決断が吉と出るか凶と出るか（クリックで拡大）

　米シティグループが売りに出した日興をゲットした三井住友フィナンシャルグループ（ＦＧ）。これを機に証券業務の充実を狙うが、５４５０億円という買収価格について「無謀」との声が根強い。さらに、日興を買収してもドロドロの内紛状態に突入し、証券業務の充実どころの話ではなくなるとの見方もある。

　「日興の最終入札では三井住友と三菱ＵＦＪが競り合ったように報道されたが、これは事実とは違う。三井住友が断トツの価格を入れて落としたというのが、本当のところだ。少しでも高く売りたかったシティにすればしてやったりで、『三井住友さまさま』といったところだろう」

　有力金融筋が入札の舞台裏をこう明かす。

　三井住友が買収するのは、個人向け業務を行う日興コーディアル証券の全事業と、法人向け業務を行う日興シティグループ証券の国内株式・債券引き受け事業など。

　日興コーディアルの純資産（３９３３億円）と日興シティの純資産（１９０２億円）の合計額は５８３５億円。三井住友の買収額５４５０億円は妥当にもみえるが、金融界では高すぎるとの見方がもっぱらだ。

　ある金融関係者はこう指摘する。

　「現在、東証１部上場の証券会社の株価純資産倍率は平均０．６倍。これは、上場証券会社の時価総額（企業価値）が純資産額の６割になっていることを意味する。この水準を日興に当てはめると、時価総額は純資産額５８３５億円の６割、３５００億円程度ということになる」

　さらに懸念されるのは日興シティの成長性だ。証券関係者は「日興シティの事業規模は、同業のみずほ証券や大和証券ＳＭＢＣの２～３割程度しかなく、収益力の大きさや成長性で見劣りする。三井住友はすでに大和証券グループ本社とともに大和証券ＳＭＢＣを運営しており、買収する価値があるとは思えない」とみている。

　銀行界でも同じような見方が根強く、ある大手銀行幹部は「三井住友と競り合ったとされる三菱ＵＦＪの提示額は、３０００億～４０００億円といわれている。三井住友の５４５０億円は高すぎるという印象だ」と明かす。

　いくら証券部門の強化といっても、無謀な買収価格はいただけない。その点を三井住友関係者にぶつけると、こんな答えが返ってきた。

　「買収価格は適正なもの。買収を発表した５月１日以降、三井住友ＦＧの株価が上昇していることをみても、市場が好評価を下していることが分かる」

　ただ、金融界からはこんな“不穏な声”も漏れ聞こえてくる。

　「三井住友と親密な関係にある大和証券グループにとって、日興買収は決して心地よいものではない。が、それほど強い拒絶反応は出ていない。その背景には、三井住友と大和証券グループの間で『日興の人間には決して証券部門での主導権は渡さない』との“密約”があるからといわれている」（大手行幹部）

　日興はシティの軍門に下ったときも、経営主導権を日興側に残そうと死にもの狂いになった。三井住友でも同じような行動に出れば、証券部門は本来のパワーを発揮できず、ドロドロの内紛状態に突入、人材や顧客が流出する危険性もある。

ZAKZAK 2009/05/26

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板橋資産家殺人、襲撃後すぐ放火か…部屋に油臭気

　東京都板橋区の資産家夫婦宅の放火殺人事件で、火元とみられる離れの焼け跡に油の臭気が残っていたことが２６日、警視庁板橋署捜査本部の調べで分かった。この離れには石油ストーブも置かれているが、捜査本部は犯人が部屋に灯油などをまいて放火した可能性もあるとみて慎重に捜査している。

　捜査本部は同日、不動産賃貸業の男性（７４）の遺体と、妻（６９）とみられる遺体を司法解剖して詳しい死因を調べる。

　捜査本部によると、男性宅は母屋と離れ、倉庫の計５棟あり、男性夫婦が主に生活していた離れが火元とみられる。離れには３室あり、玄関に近く、妻とみられる遺体が見つかった部屋の燃え方が最も激しかった。

　検視の結果、２人は胸を刺されるなどした後、死亡する前に火災に巻き込まれたとみられ、捜査本部は犯人が２人を襲撃後、すぐに火を放った可能性が高いとみて、現場検証して詳しく調べる。

■有名な大地主

　殺害された男性は不動産賃貸業を営み、広い土地を所有する大地主として近所でも知られていた。男性を知る人は「話し好きで、社交的な人だったのに」と突然の事件に驚いていた。

　殺害された男性と２０年来の知り合いという男性は「性格は親分肌でお酒好き。銀行を通さず、多額の現金を手渡しして取引していた」と話す。広大な自宅庭には木が生い茂り、オランダから輸入した骨董品なども所有していたという。子供時代から男性と親交のあった女性は「男性が資産家というのはみんなが知っているけど、まさかこんなことになるなんて」と驚いていた。

ZAKZAK 2009/05/26

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Draft bill by Israel to ban Nakba is attacked

By Tobias Buck in Jerusalem

Published: May 26 2009 01:51 | Last updated: May 26 2009 01:51

Israel’s rightwing government has become embroiled in fresh controversy, over a draft law that would ban the country’s Arab minority from commemorating the mass exodus of Palestinians from their homes and villages during the 1948 Arab-Israeli war.

The draft bill would make it a criminal offence – punishable by up to three years in prison – for Israeli citizens to mark the “Nakba”. The term means catastrophe, and is used by Palestinians to describe the year of Israel’s foundation, when between 700,000 and 800,000 of them fled or were expelled by advancing Israeli troops. It is commemorated every year on May 15, and involves demonstrations and marches to destroyed Palestinian villages inside Israel.

The draft bill was introduced by the far-right Yisrael Beiteinu party, which forms the second-largest bloc in the current coalition government. Led by Avigdor Lieberman, Israel’s foreign minister, the party achieved a record haul of seats in the February general elections, largely on the back of a campaign that targeted the country’s Palestinian minority.

The Nakba Day bill passed an important milestone on Sunday, when it won the backing of a government committee that vets legislative proposals. However, it has not yet been debated in parliament, which would have to pass the bill for it to become law.

The committee’s decision provoked an outcry from human rights groups and from Israeli Palestinian leaders, who have long suspected the new government of harbouring anti-Arab sentiments. Their protests are likely to intensify as the government moves to debate another highly-controversial Yisrael Beiteinu proposal next Sunday – this time forcing all Israelis, including the Arab minority, to sign a pledge of loyalty to the state.

According to the draft proposal, anyone applying for an Israeli passport or ID card would have to commit to be “faithful” to Israel as a Jewish and Zionist state – a pledge that many Israeli Palestinians say they will refuse to make.

Yisrael Beiteinu’s drive to deliver on its campaign slogan – “no loyalty, no citizenship” – has also exposed a rift within the government of Benjamin Netanyahu, the prime minister. Several ministers from the centre-left Labour party, another member of the coalition, said they opposed the Nakba Day proposal.

Sammi Michael, the president of the Association for Civil Rights in Israel, condemned the move in a statement on Monday as “the surest way to brutal oppression of everyone’s freedom of speech”. He added: “Marking the Nakba does not threaten the safety of the state of Israel, but is rather a legitimate and fundamental human right of any person, group or people, expressing grief at the face of a disaster they experienced.”

A spokesman for Yisrael Beiteinu on Monday defended the draft bill as a measure that would ensure the unity of the country. “The Israeli Arabs are still Israeli citizens. We don’t want to force people to celebrate [the foundation of Israel], but the law would forbid organised demonstrations.”

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Rio agrees to 33% cut in iron ore price

By Peter Smith in Sydney, Javier Blas in London and Patti Waldmeir in Shanghai

Published: May 26 2009 05:30 | Last updated: May 26 2009 08:53

Rio Tinto said on Tuesday it had reached an agreement with Japanese steelmakers for a 33 per cut in iron ore prices for 2009-10 in a deal that could save the benchmark system of annual prices negotiations, but opens the door to a battle with China.

The deal between with Nippon Steel, JFE Steel and other smaller Japanese mills comes as the talks between the Chinese steelmakers and the miners Vale of Brazil, Rio and BHP Billiton remain deadlocked beyond the traditional deadline of April 1.

China, the world’s largest iron ore importer, is demanding a far larger cut of 40-50 per cent and its top iron ore negotiators have warned it would not accept a lower price cut as a “benchmark” irrespective of what Japan, South Korea, Taiwanese and European mills agree on prices, threatening to move spot prices.

The secretive annual talks have become acrimonious and, for the first time in 40 years, industry executives has talked openly about the end of the “benchmark” system, in which the first price settlement is followed by the rest of the industry,

Baosteel, China’s largest steelmaker, declined to comment on Tuesday, while the China Iron and Steel Association, Beijing’s top negotiator, was not available for comment. But analysts said it was very likely that China would initially reject the deal.

“I don’t exclude the possibility that the benchmark system between China and miners will die at the end of the day,” said Du Wei, at iron ore analyst at Umetal. “The reason that the Japanese are able to strike a 33 per cent deal is because they’d like to protect the contract system. But it seems China is more concerned about whether their mills can make a profit this year than the fate of the benchmark system.”

Other analysts said that in spite of an expected initial rejection, China would finally agree with a benchmark deal around 33 per cent, as most of its steel mills prefer the security of long-term annual deals rather than moving to the volatile spot market.

The deal between Rio and the Japanese steelmakers snaps six consecutive years of iron ore price increases totalling 500 per cent – including a record 85 per cent rise in 2008-09 – which had been propelled by the industrialisation and urbanisation of China.

Iron ore prices influence the global economy as they filter into steel costs and ultimately in the prices of goods such as cars and washing machines.

The 33 per cent cut for iron ore fines – the main quality of the commodity used to produce steel – represents a premium when compared with current spot prices and is smaller than analysts’ forecast for a 35-40 per cent cut. The miners also agreed to a 44 per cent cut for high-quality lump iron ore. Chinese steelmakers buy mostly fines.

Goldman Sachs said that the “worst is over” for miners. “We are becoming increasingly confident that the period of weakest demand for raw materials is behind us,” analysts at the bank said. “Demand for raw materials, and commodities prices will be better in 12 months’ time and 24 months’ time than they are now.”

Sam Walsh, head of Rio’s iron ore business, said in a statement the miner was pleased with the outcome. “We believe this settlement is a realistic outcome for both parties – one that reflects the global market for iron ore and the current challenging market conditions facing our customers,” he said.

Michael Gaylard, a iron ore broker at London-based Freight Investor Services, said iron ore prices were rising on the spot market, with prices for immediate delivery at about $64 a tonne, but prices for delivery at the end of the year were already trading at about $70 a tonne. “Prices are moving higher,” Mr Gaylard said.

BHP, which like Rio produces the bulk of its iron ore from the Pilbara region of Western Australia, typically agrees similar contract prices to its Anglo-Australian rival. BHP remains in talks with customers and declined to comment on Tuesday.

Vale last year agreed an annual contract price that was not used as a benchmark for Rio and BHP, with the Anglo-Australian duo negotiating separate prices that took into account lower shipping costs to export iron ore from Australia to China.

Nippon Steel has agreed to pay 97 cents a dry metric tonne for Rio’s Pilbara blend fines, 33 per cent lower than the $1.4466 agreed last year. Pilbara blend lump is down by 44 per cent from last time’s $2.0169 to $1.12. The lower prices are for iron ore deliveries for the contract year that began on April 1 2009.

Rio’s Sydney-listed shares closed 2.2 per cent higher at A$65.46. The London-listed stock was 24p lower at £27.45 in early dealings.

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Australian gas: Producers need to be sure the price is right

By Ed Crooks

Published: May 26 2009 05:25 | Last updated: May 26 2009 05:25

A couple of years ago, if you had tried to predict the next hot areas for investment in the global oil and gas industry, eastern Australia would probably not have been top of the list.

Yet the country’s openness to foreign investment and lavish endowment of natural resources has made it one of the most popular areas in the world for takeovers and development projects in the past 18 months.

In particular, international companies have been drawn to eastern Australia’s vast reserves of coal-bed methane, or coal seam gas as it is known locally: natural gas produced from coal deposits.

The problem has always been finding a way to turn those resources into revenues. Now, many companies believe they have the answer, although there are still formidable obstacles.

For some of the companies that have plunged so enthusiastically into Australia, the adventure is likely to prove a disappointment.

The coal-bed rush has been led by companies such as BG Group of the UK, Petronas of Malaysia and ConocoPhillips of the US, who have seen an opportunity to use coal-bed methane to serve the lucrative gas markets of Asia.

Singapore, South Korea, Japan and above all China are the targets: markets with steady demand for gas and, in China’s case, enticing growth potential.

The companies plan to convert the methane into liquefied natural gas, super-cooled to about minus 160 degrees centigrade, so it shrinks in volume and can be transported by tanker.

For as long as coal has been mined, the methane found in many seams has been known, mainly as a perennial hazard for miners. It is the reason why canaries used to be taken underground.

Extracting the gas is relatively straightforward: the biggest problem is that the gas is often accompanied by large amounts of water that have to be disposed of. Also, although the gas wells are relatively cheap to drill, they produce gas at very low volumes. A large development requires thousands of wells.

The slow rate of output from coal-bed methane wells creates a potential problem for converting the gas to LNG: a process that has not yet been proved commercially.

An LNG “train”, as the liquefaction facilities are known, requires a steady throughput of gas to keep it running, and economies of scale mean the most cost-effective trains have to process very high volumes.

BG’s planned two-train LNG plant in Queensland will produce 7.4m tonnes of LNG, equivalent to about 10bn cubic metres of gas a year: enough to meet one-sixth of China’s demand.

BG and the other companies pushing ahead with methane to LNG projects are confident the process is commercially viable. Others have their doubts.

Shell, Europe’s biggest oil company, has also invested in Queensland, setting up a joint venture with Arrow Energy of Australia.

Jeroen van der Veer, Shell’s chief executive, suggests the company’s interests in Australia are more focused on conventional LNG projects, including Gorgon, the vast Chevron-led development off the north-west coast, which is expected to get the go-ahead this year. Shell has a 25 per cent stake.

Mr van der Veer says coal-bed methane is “an interesting and promising technology”, but warns “you need pretty good world market prices in order to export. This is because coal seam gas is not the cheapest gas to produce.”

Today’s depressed prices do not affect any of the coal-bed methane to LNG plans now under evaluation; the earliest is expected to come onstream only in 2014. But to commit themselves to the huge investments required, companies will have to be confident Asian demand will be strong enough.

The gas prices needed to make a project viable are the higher the greater the cost of the investment. Conoco, which was generally seen by analysts as having agreed a very full price when it promised $8bn for a coal-bed methane to LNG joint venture with Australia’s Origin Energy last September, risks starting off at a competitive disadvantage.

Frank Harris of Wood Mackenzie, the consultancy, has argued that there may not be buyers for all the LNG that companies hope to produce in Queensland.

The decisive factor may be the ability to secure markets for their planned production, and in that competition BG appears to have given itself a head start, signing long-term supply deals with Singapore, Chile – which is part of the same Pacific market – and most recently China. Its deal with CNOOC of China commits BG to sales of almost half the planned output of its LNG plant: enough to meet 8 per cent of China’s gas demand today.

With BG edging ahead, the projects backed by Origin and Conoco, and a rival plan from Petronas and Santos of Australia, may be forced to merge. Certainly, they are unlikely all to be winners.

But in this new market, with a new production process, the next moves may be as unpredictable as Australia’s sudden rise to popularity.

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Middle East: Oil-rich region faces gas shortfall

By Andrew England

Published: May 26 2009 05:25 | Last updated: May 26 2009 05:25

It may seem a strange idea in the region of the world that is richest in hydrocarbons, but it is one that has been raising increasing concerns: the possibility of a critical gas shortage in Middle East.

The countries of the region, particularly the wealthy Arab Gulf states, have one of the fastest growing rates of energy demand, as populations swell and the accumulation of petrodollars during the recent oil boom has driven rapid economic expansion.

But they are finding to their cost that, after years of focusing on oil production, too little attention was paid to gas, which is now needed for power generation, desalination plants and to provide feedstock to the energy-intensive industries they have been seeking to lure.

By some estimates, the cumulative supply shortfall for the six countries of the Gulf Cooperation Council up to 2015 will be at least 7,000bn cubic feet. Of the GCC members – Saudi Arabia, Qatar, Kuwait, Oman and Bahrain – only Qatar, which has the world’s third largest proven gas reserves and the largest natural gas field, can avoid the problem.

The recent economic slowdown, which has caused a swathe of projects to be put on hold, will alleviate some of the short-term pressures. But, experts say, the medium and long-term outlook remains critical.

“The long-term issue of ensuring adequate gas supplies to fuel growth has not gone away,” says Rajnish Goswami, an analyst at Wood Mackenzie, the consultants. “We see, with the exception of Qatar and Iran, every other country in the region facing challenges in ensuring supply growth.”

Qatar is already piping 2bn cu ft a day to the United Arab Emirates, and is expected to provide around 1m tons of LNG to Dubai from 2010, analysts say. Kuwait has also been in talks with Qatar over gas imports, while Bahrain has been in discussions to buy gas from Iran – in spite of concerns from the US.

Yet, neither Qatar nor Iran will necessarily provide answers to their neighbours’ predicament. Qatar has a moratorium in place on new projects in its North Field that is expected to remain until at least 2013 while a study is conducted into the reservoir. And even when it is lifted, there will be no guarantees that Qatar will look to the region.

When recently asked if Qatar would be under pressure to help meet gas demand from its neighbours, Abdullah bin Hamad al-Attiyah, the energy minister, was straighttalking.

“If this study [in the North Field] shows we can produce more gas, then we will put this gas in a judgment where we should use it. Then we will see what is the added value, what is the best for us to sell it in the region or convert it to LNG or GTL,” Mr Attiyah says.

“At the end of the day I am concerned about what is the best revenue for the country,” he explains. “I’m not in a social security game. I’m business-oriented here and we will see.”

Iran is unlikely to provide a solution in the near future, because of global and regional politics. Observers believe that Bahrain’s discussions with Iran are in part designed to get its key allies, the US and Saudi Arabia, to press Qatar to help Manama meet its demand.

Mr Goswami says Gulf policymakers are aware of the gas issue, but warns that much needs to be done.

“In our view, the steps that have been taken may be adequate in terms of near- to mid-term planning, but, on a 10-year view, the supply challenge is pretty enormous and more still needs to be done,” he says.

Gulf countries, including Saudi Arabia, the UAE and Kuwait, already burn fuel for power generation, and they are expected to have to divert more oil to domestic use rather than exports. This creates an opportunity cost, has impact on global supply and an obvious environmental effect.

Saudi Arabia has been boosted by discoveries in the Karan field – its first non-associated offshore gas discovery – which it hopes will produce 1.8bn cu ft a day. Contracts for the field’s development were awarded this year. But a second project involving international companies in the Empty Quarter has yet to produce discoveries, and experts warn that gas shortages will become a serious issue for the kingdom.

“It will not be an issue for the next couple of years,” says John Sfakianakis, chief economist at SABB Bank.

“But if they continue to build like this, develop industry and do not become more efficient and do not find more gas, it will become a crisis.”

Kuwait has also begun producing from its first non-associated gas field, but hydrocarbons development in that nation has been stymied for years by political disputes between the government and parliament.

In the UAE, meanwhile, the authorities are considering developing a peaceful nuclear energy programme to supply base-load electricity after concluding that national peak electricity demand will rise to more than 40,000MW by 2020.

They estimate that the known volumes of natural gas that could be made available for electricity would provide adequate fuel for only 20,000MW to 25,000MW by that time.

Abu Dhabi, the UAE’s capital and home to 95 per cent of the nation’s hydrocarbons resources, is developing a sour gas field after awarding a contract to ConocoPhillips last July. But experts say the completion date for that project – originally set at 2012 – is expected to be significantly delayed.

The Abu Dhabi National Oil Company (Adnoc) is also looking at developing new gas fields and building a pipeline to enable the emirate to utilise its offshore gas.

Still, the fact that such a pipeline needs to be built “demonstrates that there was not an appreciation for the way that gas demand would grow, so I think the country has been caught a little off-guard by that”, acknowledges an official.

The emirate’s authorities are now investing heavily in renewable energy technology in an attempt to help meet demand.

“We are at a decision point in our energy future and what Abu Dhabi is trying to do is to avoid having to fall into the default GCC model, which is using as much gas as you have got and then diverting your crude production to domestic energy consumption,” the official says.

“Most people don’t recognise it, but the Middle East has one of the world’s fastest growing rates of [power] demand on a percentage basis of any region, and the net effect is a lot of crude oil is getting diverted to the electricity sector.

“If we don’t find solutions, that diversion rate will get even greater in the future, putting significant new pressures on global crude markets and reducing the amount of new exports available from important Middle East producers.”

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Canada: The future of oil sands is murky but promising

By Bernard Simon in Toronto

Published: May 26 2009 05:25 | Last updated: May 26 2009 05:25

Jean-Marc Guillamot does not work in the energy industry but his job in Fort McMurray, Alberta, gives him a bird’s eye view of the ups and downs of Canada’s vast oil sands projects.

Fort McMurray is the hub of the oil sands and the five hotels in the town that Mr Guillamot manages have seen a 20 per cent drop in occupancy since oil prices began falling last summer.

But there is a silver lining. “It’s much easier to hire,” he says, referring to a pile of job applications from local women hoping to work as chambermaids to replace the wives of laid-off construction workers.

Mr Guillamot no longer needs to apply to immigration authorities for permission to recruit staff from outside Canada.

Similarly, cost pressures are no longer the headache for oil sands operators than they were a year ago, as projects are being scaled back and demand for labour and materials has slackened.

Suncor, one of the biggest producers, expects its operating expenses to fall 10-15 per cent in the next 12 months.

Petro-Canada recently lowered by a third its cost estimate for the yet-to-be-built Fort Hills project. Husky Energy now expects its Sunrise project to cost C$2.5bn (US$2.2bn), down from the previous C$4.5bn estimate.

Even Mr Guillamot’s hotels are doing their part to contain costs. A drop in visitors to Fort McMurray has brought the typical weekday rate down from C$229 to C$209 a night.

The combination of volatile costs and prices has made it difficult to assess prospects for the oil sands. According to Don Thompson, president of Oil Sands Developers, an industry lobby group: “Forecasts are now being done in pencil, with an eraser to hand.”

On the plus side, the bitumen-like deposits represent a potentially huge resource. Canada’s oil sands contain reserves, estimated at 173bn barrels, exceeded only by Saudi Arabia.

Before last year’s energy slump, the Alberta oil sands – as well as promising deposits in neighbouring Saskatchewan – were expected to surpass deep-water offshore wells as the biggest source of new global oil supplies.

Among the world’s top 10 oil-producing nations, only Russia’s output grew by more than Canada’s between 1997 and 2007.

But the oil sands remain among the world’s most costly sources of oil. Two tons of raw material must typically be extracted to yield a barrel of crude. While deposits close to the surface can be mined, deeper ones must be extracted by injecting huge quantities of steam into wells.

According to analysts, most existing operations can cover their costs at a price of about $40 a barrel but new projects requiring heavy capital investments require a price of close to $100 a barrel to be commercially viable.

The plunge in prices has led to numerous cancellations and delays. Plans for capital-intensive upgraders, which convert bitumen into crude oil, have been hit especially hard.

Even so, Mr Thompson says: “Recently completed projects will continue to ramp up to full production and existing facilities will continue to improve.”

The developers’ group estimates crude production from the oil sands will grow to 2m barrels a day next year from 1.5m b/d in 2008.

The uncertainties are encapsulated in the Fort Hills project, one of the largest undeveloped leases in the Athabasca oil sands region.

Construction is on hold until commodity prices and financial markets stabilise. Plans for an upgrader have been shelved and all three of the project’s shareholders are in a state of flux.

Petro-Canada, with a 60 per cent stake, is in the throes of being acquired by Suncor, the second-biggest oil sands producer. If all goes to plan, synergies with nearby Suncor facilities will enable Fort Hills to be viable at a lower oil price, helping attract financing for development.

But the challenge of putting a value on oil sands projects has been underlined this year by an abortive bid by France’s Total for UTS Energy, one of Petrocan’s junior partners, with a 20 per cent stake.

Despite initially offering a large premium and then raising its bid by more than a third to C$830m, Total failed to win over UTS shareholders who remain confident their stake is worth even more. Total has walked away, at least for the time being.

Meanwhile, the project’s third shareholder, Teck Resources, a Vancouver-based mining group, is considering the sale of its 20 per cent stake to help bring down its own debt (following its acquisition of Calgary-based Fording Coal at the peak of the energy boom).

Don Lindsay, Teck’s chief executive, says the com­bination of 50-60 years of bitumen reserves, the benefits of Suncor’s participation, Total’s interest and Alberta’s political stability all augur well for Fort Hills. The Alberta government gave Fort Hills some breathing space in March by extending its leases from 2011 to 2019. In exchange, the owners have agreed to upgrade bitumen from the second phase of the project in Alberta.

Mr Guillamot, the hotel manager, thinks a rebound in activity in the oil sands and the concomitant return of inflationary pressures are just a matter of time. “Once the business starts again, we’ll be back in the same boat,” he predicts.

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Saudis to ease foreign workers' rules

By Abeer Allam in Riyadh

Published: May 26 2009 03:00 | Last updated: May 26 2009 03:00

After working for a year without a day off, Eva, a 37-year-old Filipino housekeeper in Riyadh, wanted a vacation. Her employer thought otherwise, and demanded SR8,000 ($2,139) to obtain her exit visa.

"I just wanted to go home to see my children,'' says Eva, who asked that her surname be withheld. "Madame agreed to sign my exit visa only after I threatened to kill myself."

Saudi Arabia, along with most Arab Gulf states, applies a kafala , or sponsorship, system in which 8m foreign residents, from investment bankers to house maids, work under a sponsor/employer, known as kafeel. The sponsor is responsible for the resident, and must approve exit visas. Without the exit visa, no foreign resident of Saudi Arabia, not even the deceased, may leave.

To prevent foreign workers from switching to other employers, sponsors often confiscate passports or withhold salaries. While professionals can go to court to settle disputes, the law does not apply to the roughly 2m private domestic helpers such as Eva.

The total control of the employer often results in workers being abused, overworked and denied wages, according to Human Rights Watch and the Saudi National Society for Human Rights, a local organisation. The SNSHR says that 12 per cent of the complaints it receives come from domestic workers.

Mounting local and international criticism has prompted the Saudi government to consider reforming the system. Last month, the council of ministers approved measures to ease the process of changing sponsors for foreign workers at government departments.

"Only 10 to 15 per cent of domestic workers have problems with their employers, and most stay here for many years," says one government official. "We are working to fix this by moving their sponsorship to big agencies instead of individuals. It is part of the overall legal reform in the kingdom - but it takes time."

The government has been working to redress the problems for some time. In 1997, the Saudi government established a centre to handle complaints, and opened shelters in Jeddah, Riyadh and Dammam to provide food and temporary papers for female workers.

The authorities are also considering proposals to move all domestic foreign workers to the sponsorship of three or four recruitment agencies and to limit working hours.

Many Saudis protest against such moves. When a member in the consultative Shura Council proposed a motion to give workers a day off and rest between 10pm and 4am, other members objected saying this amounted to interference in a family's private life.

Employers feel they have made a certain "investment" and spent thousands of riyals on travel tickets, visas and recruitment company fees, only to find that the maids run away or want to return home before their contracts expire.

Most resistance to abolishing the kafala system comes from the recruitment companies which benefit from importing labourers and switching them between employers to maximise fees.

These companies, which act as sponsors, also profit by exploiting loopholes.

Eman Fekri, an Egyptian hairdresser, paid an agent SR10,000 to procure a residency permit and SR2,000 a year for annual renewal so she could join her husband in the kingdom. The actual cost is no more than SR700.

"The current system gives the sponsor great power over the migrant workers," says Christopher Wilcke, a senior researcher at HRW.

However, a government official says the problem is often exaggerated: "Human trafficking is illegal, and punishments include fines and a ban on recruiting foreign workers for five years."

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G8 move to halt 'farmland grabbing'

By Michiyo Nakamoto in Tokyo and Javier Blas in London

Published: May 26 2009 03:00 | Last updated: May 26 2009 03:00

Japan will spearhead a drive at the Group of Eight summit to prevent "farmland grabbing" in developing countries and encourage responsible investing in agriculture.

The move shows growing fears among leading nations that rich countries such as Saudi Arabia or South Korea, which are not self-sufficient in food production, are investing in overseas land, particularly in Africa, to boost their food security.

Two United Nations agencies said African countries were giving away vast tracts of farmland to other countries and investors almost free of charge, with the only benefits consisting of vague promises of jobs and infrastructure, the Financial Times revealed yesterday.

Tokyo's initiative, which would include a set of principles for investment, aims "to harmonise and maximise the interests of both host countries and investors", in order to promote greater investment in agriculture, Japan's foreign ministry said.

While the initiative would also draw up a flexible methodology for monitoring the adherence of members to the principles, the main objective is to promote, not discourage, investment in agriculture, according to Tamaki Tsukada, director of the economic security division at the Ministry of Foreign Affairs. "The objective is to increase global food production," he told the FT.

The trend to invest in overseas farmland is contentious, with some saying it represents a "neo-colonial" race to secure water and fertile soil with little benefit to local populations, while others say the investments can boost economic growth and provide jobs in poor countries where farmland and water are abundant.

Although the UN's Food and Agriculture Organisation, the World Bank and the African Union are drawing up guidelines, agriculture officials say a G8-backed plan would have more force.

Japan will propose the initiative at the G8 summit in l'Aquila, Italy, in July, where food security will be a top issue. The G8 ministers of agriculture, at their first ever meeting last month, already warned in their communiqué that "attention should be given to the leasing and purchase of agricultural land in developing countries, to ensure that local and traditional land use is respected".

Joachim von Braun, head of the International Food Research Policy Institute, a Washington-based think- tank funded by governments, said the US was likely to be supportive of Japan's initiative as long as such guidelines were not restrictive.

The principles Japan is proposing would call for greater transparency in investment deals, respect for existing land rights, sharing benefits with locals and environmental sustainability.

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Saudi warns of $150 oil within three years

By Giulia Segreti and agencies in Rome

Published: May 25 2009 18:59 | Last updated: May 25 2009 18:59

Saudi Arabia warned oil prices could spike to beyond the near $150 record high of 2008 within three years as it joined other energy leaders on Monday to call for more investment to boost production over the long term.

Energy ministers and officials at the Group of Eight energy summit wrapped up the two-day meeting by urging the industry to pump money into projects to expand capacity despite the credit crisis, which has put the brakes on investment.

Saudi Arabian Oil Minister Ali Naimi said the world was heading for a fresh spike after the current phase of faltering demand and lower prices, which he said reflected the economic downturn rather than being an indicator of things to come.

”We are maintaining our long-term focus rather than being swayed by the volatility of short-term conditions,” he said in prepared remarks at the summit.

”However, if others do not begin to invest similarly in new capacity expansion projects, we could see within two-to-three years another price spike similar to or worse than what we witnessed in 2008.

Mr Naimi painted a bleak picture of the investment scenario, saying low prices, weak demand, high costs, tight credit markets and energy policies focused on alternative fuel sources had all combined to hurt spending on new projects. He has been warning about the drop in investment in oil over the last few months.

The meeting came as oil prices have recovered from a low of $30 a barrell to a six-month high of over $60, but producers fret that it remains below the $75 level needed to spur investment while consumer nations fear further rise in prices could hurt global economic prospects.

The recent rally in prices is expected to have eased OPEC concerns about high inventories and weak demand, and Opec officials have suggested an output cut is unlikely at a Thursday meeting, though Libya says that possibility still exists.

“Opec will not want to take decisions which will harm the first signals of economic recovery”, said Chakib Khelil, president of Opec.

The International Energy Agency also expressed some concern regarding the impact the financial and economic crisis might have on global energy investment.

“Supply and demand side investments are being affected in the face of a tougher financing environment. Global upstream oil and gas investment budgets for 2009 have been estimated to be cut by around 21 per cent compared with 2008”, said Nobuo Tanaka, executive director of the IEA.

The capital intensive renewable sector could suffer from a drop in investments “by as much as 38 per cent although stimulus provided by government fiscal packages can probably offset a small proportion of this decline”, the IEA said.

Both Fulvio Conti, CEO of Enel, and Roberto Poli, President of Eni, denied this, reassuring that investments are still being made. “Enel, present in 22 countries, is investing more than €6bn in new projects”, said Mr. Conti during a press conference.

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Libya: Promising prospects remain unrealised

By Heba Saleh

Published: May 26 2009 05:25 | Last updated: May 26 2009 05:25

Although Libya’s promise as a vastly underexplored oil producer remains undimmed, experts say it is unlikely to meet its target of 3m barrels a day by 2012-2015.

The results of exploration undertaken by foreign companies since international sanctions on Libya were lifted in 2004 have so far yielded few sizeable finds.

While this may change over the longer term, experts argue that, for the moment, Libya’s best hope of increased volumes lies in field redevelopment and enhanced oil recovery projects.

“The biggest impact on oil production will come from the application of secondary and tertiary recovery techniques,” said Wood Mackenzie, the research and consultancy firm, in a report in November.

Libyan oil production peaked at 3.3m b/d in 1970, but after the introduction of UN and US sanctions in 1982, production fluctuated between 1.1m and 1.5m b/d.

One of the main reasons for the drop was that US companies left and most of the oil majors stayed away, depriving the country of crucial technology, particularly that needed to improve yields in maturing fields.

But since the removal of sanctions, foreign companies have piled into Libya, lured by the promise of the biggest proven reserves in Africa.

The country has held four licensing rounds, giving out dozens of contracts and renegotiating older ones to bring them in line with new fiscal terms.

“In 2005, Libya was one of the industry’s hottest prospects,” says Craig McMahon, lead Middle East and North Africa analyst at Wood Mackenzie.

“Companies that offered the most aggressive fiscal terms won the exploration licences. There was a feeding frenzy, which resulted in some exceedingly tough terms being agreed. Only when oil prices rose did some of the most aggressive bids start to look potentially economical.”

Output rose to 1.9m b/d in 2008, but the target of 3m b/d is “unrealistic in the short term” according to Wood Mackenzie.

In the past 18 months, National Oil Corporation, the Libyan state-owned company has finalised contract extension agreements with Eni, Petro-Canada, Occidental, Repsol-YPF and Total resulting in the pledging of significant development budgets.

Wood Mackenzie says the contract extensions have the potential for “a large increase in production”.

But NOC approvals of companies’ redevelopment plans have been slow to come, holding up the potential increases in output.

“Very little is happening,” says Mr McMahon. “The reason is that National Oil Corporation has not yet sanctioned the development plans.”

He says that the main reasons for delays are funding pressures within NOC and a reluctance on Libya’s part to increase production at a time of lower oil prices and demand.

“Production in 2009 has actually been cut as a result of the reintroduction of Opec constraints.”

Mr McMahon and others say that the current situation leaves companies frustrated, especially given the large signature bonuses companies paid to extend the duration of their licences.

John Hamilton, a Libya specialist on Africa Energy, an industry newsletter , says that leading companies with established exploration or production agreements, such as ENI, Shell, Total and BP, can afford to continue with their plans in Libya.

However, there is pressure on a number of US and Asian operators whose exploration licences will expire next year, several of whom have not made significant finds.

One of the largest companies that may have to decide whether to negotiate extensions with NOC or scale down its exploration is Occidental Petroleum, which has had limited success at five licences acquired in 2005, although it also has other exploration and redevelopment agreements with NOC that will expire in 2037.

“Some companies are worried that NOC wants to tighten the terms of future exploration agreements,” says Mr Hamilton. “This is causing concern, as, in most cases, they haven’t made the discoveries they hoped for, and in the current climate it will be hard to justify reductions in their stakes.”

So far only Verenex of Canada and RWE Dea of Germany have made significant discoveries.

But Mr McMahon believes it is unlikely that companies will abandon Libya.

“There are a lot of press reports about companies scaling down operations,” he says. “But those who have sizeable possessions there have all paid large signature bonuses. They may well review the size of their Libyan operations but their commitment to the country will remain.”

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Industry threatened after militants resume delta pipeline attacks

By Matthew Green in Warri

Published: May 26 2009 03:00 | Last updated: May 26 2009 03:00

Nigerian militants launched their first major strike against the oil industry since the start of a 10-day military offensive yesterday, blowing up a significant Chevron pipeline.

The attack has prompted Africa's biggest oil industry to brace for more attacks in revenge for the military's decision to raze a base occupied by one of the Niger Delta's most influential militant leaders.

"We will continue our cat-and-mouse tactics . . . until oil exports cease completely," the Movement for the Emancipation of the Niger Delta, an umbrella group for various armed factions, said in an email.

Hundreds of troops backed by gunboats, helicopter gunships and jets have taken part in operations in the western Delta State over the 10 days to chase militants from bases in the western delta and pursue them into villages in the region's creeks.

The military action has led to a sharp escalation of tensions in the delta, where attacks on pipelines and other facilities over the past few years have reduced crude output to about half of the country's estimated 3.2m barrels-per-day capacity.

Chevron said it had been forced to shut in about 100,000 b/d after the latest attacks on its pipelines. The raids took place in a region of creeks and swamps where the army is seeking to consolidate its hold after hundreds of troops were deployed to attack a major militant base - the so-called "Camp Five" - at the start of its offensive.

The camp was home to a commander known by the nickname Tompolo, regarded as among the most powerful militant leaders in the Niger Delta. Some local people describe him as a businessman who has used legitimate contracts with companies such as Royal Dutch Shell and Chevron to build up his influence and champion grievances held by the Ijaw community.

Major-general Sarkin-Yaki Bello, in charge of the military offensive, describes him as kingpin of the oil theft industry and has declared him a wanted man.

The military's operation in the region around Camp Five has forced an unknown number of people to flee their homes. Some members of a group of about 50 women and children who sought shelter in the city of Warri last week said they believed thousands of people had been displaced by the offensive.

A doctor employed by the state government to treat arrivals from the villages affected by the offensive said some of those he treated had told him they had been forced to walk through the bush for several days, some of them having to swim at times, to escape the military's advance.

"There are concerns that others are trapped in riverine areas," he added, saying he could not be named due to civil service policy.

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Nuclear: Atomic power has favourable reaction

By Ed Crooks

Published: May 26 2009 05:25 | Last updated: May 26 2009 05:25

A western energy executive who has been studying China’s nuclear programme tells a story about looking at pictures of the site being cleared for construction. “Before, there was a mountain there. Then they bring the army in and a few months later the mountain has gone, and they have the space to build six reactors.”

He tells the story with a slightly wistful air. If only – he must be thinking – building reactors in the west were that easy.

China’s determination to achieve its goals for nuclear power highlights the central feature of the world nuclear industry: government support is essential to deliver investment, and the stronger that support, the faster the progress will be.

Industry talk about a “nuclear renaissance” is more than just wishful thinking. Concerns about energy security and climate change have transformed the debate about nuclear power in the past decade. The spectre of the Chernobyl accident in 1986, which put the nuclear industry into suspended animation for two decades, has been dispelled, and all over the world interest in nuclear power is waking up.

The World Nuclear Association, the industry group, estimates that worldwide 388 reactors are planned or proposed; almost as many as the 436 now in operation.

Tony Ward, partner in the utilities practice at Ernst & Young, says: “A growing number of countries are taking steps towards new nuclear build, from historic nuclear states such as Italy, the Netherlands and Lithuania to emerging markets, including a number in the Middle East, such as Jordan and the UAE.”

However, the revival is far from uniform. The plunge in energy prices and the financing constraints that have emerged over the past year have not had much of an impact on nuclear investment plans.

For reactors with 60-year lives, even a six-year downturn would not necessarily be decisive. But there have been signs of projects slipping, most visibly in South Africa and the US.

The common factor in all the countries pushing ahead with nuclear investment is strong government backing.

It is no coincidence that, of the 45 reactors under construction worldwide, according to the WNA, 12 – more than a quarter– are in China. A further eight are in Russia.

The US does not have a single project with a full construction and operation licence, although Southern Company has been given permission to break ground at its site in Vogtle, Georgia, in anticipation of a full licence being awarded in 2011.

In the west, the country pushing ahead most aggressively with investment is France, which already generates 80 per cent of its electricity from nuclear plants.

EDF, the France energy group, has a reactor under construction at Flamanville on the Normandy coast, and plans another at Penly, near Dieppe. A third is also likely to be approved soon.

EDF has private investors, but it is 85 per cent state-owned, and the other companies investing in France’s nuclear programme, GDF Suez of France and Enel of Italy, also have their national governments as significant shareholders.

Stephen Thomas, professor of energy studies at the University of Greenwich, argues: “The two main French entities in nuclear power – Areva and EDF – originally were, and remain today, largely branches of the French government. They are directed as a matter of state policy and have benefited from extremely favourable government financing and credit assurances.

“To duplicate this experience in the US, you would essentially have to nationalise your electric utilities and have all new power plant siting decisions emanate from the White House.”

Although issues of safety, nuclear proliferation and waste disposal often dominate the political debate about nuclear power, the central issue for companies thinking of investing in nuclear power is simply cost.

New nuclear plants are hugely expensive. EDF estimates about €4bn-€5bn ($5bn-$7bn) for one of its 1,600 megawatt reactors.

As with any big project, the costs can be difficult to predict, as the Areva plant being built in Finland has demonstrated, and the poltical sensitivity of nuclear power creates additional cost risks.

Meanwhile, revenues are also uncertain over the 60-year life of a plant, and the prospect of a future government taking an anti-nuclear stance also makes investors nervous.

So, a commitment to long-term government support seems critical: not just to allow reactors to be built, but to give sufficient confidence in returns for investors to be prepared to commit the huge sums needed.

The UK looks like an important test case of the question of whether a free-market model can deliver large-scale investment in new nuclear power.

The government is strongly in favour of building reactors, to address concerns about both climate change and energy security. In 2006 Tony Blair, the then prime minister, said that nuclear power was “back with a vengeance”.

Under his successor Gordon Brown that policy has continued, and the government has been making great efforts to create the right conditions for nuclear investment.

It has put in place a new planning regime, streamlined the safety approvals process, and helped broker a deal for EDF to buy British Energy, the partially state-owned company that owns almost all the UK’s old nuclear power stations and many of the best sites for building new ones.

However, what the government has not yet done is put in place a financial framework to support the returns from nuclear investment. As a result, the economics of that investment are still not clear.

The British government has been maintaining a degree of careful ambiguity, but, when pushed, ministers will say they do not believe nuclear power needs any special subsidies.

They argue that a free electricity market, supported by the support for low-carbon electricity provided by the EU’s emissions trading scheme, will be sufficient to bring forward that huge investment in new reactors.

Renewables – and now clean coal – have been given their own support mechanisms: guaranteed feed-in tariffs or other special subsidy regimes.

The question is whether nuclear investment, backed by the private sector, can go ahead without similar financial support.

Today the US is taking the same stance.

President Barack Obama’s administration is pro-nuclear, but the regulatory incentives favour renewables, rather than nuclear power. Such incentives include generation portfolio standards that exist in many states and are likely to be extended at the federal level.

If the free-market nuclear model fails in Britain, it should send an important message to the US.

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India’s Bouncing Tycoons

By John Elliott, the FT’s first south Asia Correspondent (1983-88)

Published: May 25 2009 10:58 | Last updated: May 25 2009 10:58

It is of course a coincidence, but the pace of corporate news in India is accelerating while the new government, whose election last week sparked a surge of corporate optimism and a stock market boom, dithers over which ministers to appoint to which jobs.

In the news this morning are two family businessmen, both market leaders, who have wanted to internationalise their businesses – Sunil Bharti Mittal, founder and chairman of Bharti Airtel, and Malvinder Singh, who inherited his chairman’s and chief executive’s position at the top of Ranbaxy Laboratories.

One now looks like succeeding, while the other appears to have failed.

A year ago Mr Mittal started audacious $19bn merger talks with MTN, a leading South Africa telecom company, but was ousted by Anil Ambani’s Reliance Communications. Mr Ambani’s bid was then mischievously foiled by his estranged brother, Mukesh, who claimed prior rights to Reliance Communication’s shares in any deal.

Also a year ago Mr Singh amazed India’s corporate world by selling control of Ranbaxy to Daiichi Sankyo of Japan, while staying in charge as chairman and chief executive.

Now the fortunes of these three men have been reversed:

- Mr Mittal is back with a bid for a new $24bn deal that would give him control of MTN and potential to build one of the world’s biggest mobile phone businesses.

- Mr Singh and his brother left the Ranbaxy board along with two other executives in what looks like a Daiichi coup.

Mr Singh’s apparent ouster is a sad end for the family’s links with Ranbaxy, which has spearheaded the Indian pharmaceutical industry’s international growth. However, he has other interests – in Fortis healthcare and hospitals, and Religare financial services. He remained chairman and chief executive and managing director when Daiichi bought control, but the share price has slipped by more than 60 per cent since then and a $150m loss is forecast for the year.

More significantly, there are continuing US drug regulatory problems with over 30 Ranbaxy products and it looks as if the Japanese, after watching from the sidelines, decided to signal to the US that Daiichi is now in charge. The changes, which saw an Indian executive promoted to chief executive and a Daiichi executive coming in as chairman, were billed on Sunday as “amicable” – but mr Singh, who was to have held the jobs until 2013, did not appear at the announcement press conference.

It has never been clear how seriously, nor for how long, Mr Singh wanted to straddle the potentially ill-fitting two roles of being a hired top executive in a Japanese group, and a healthcare and financial services entrepreneur, but clearly the mix did not gel.

Mr Mittal is much more sure of what he wants to do. Having batted successfully for years against the powerful Ambani brothers, he has made Bharti the undisputed market leader and the world’s third largest mobile services operator – it announced 100m customers ten days ago. He has said he now wants to expand globally, and clearly his Bharti Enterprises group is primarily eyeing the world’s next big telecoms growth area of Africa.

Like Singh, he is willing to sell some of the Bharti stake to achieve his ambitions, but he will not cede India-based control. Last year’s talks eventually failed on MTN’s plan to base the merged group in South Africa, which Mittal would not accept, even though it looked as though he would have been in control. Now he plans to acquire a 49 per cent stake in MTN which, along with its shareholders, would get 36 per cent in Bharti, producing a merged Delhi-based Indian business.

A year ago he seemed not to have ring-fenced his MTN talks well enough, nor fully mastered the intricacies of South Africa’s politics and focus on black economic empowerment. That left a gap that allowed Anil Ambani to burst in.

Mr Mittal’s pride was hurt – he had just ended a year as president of the CII, a leading Indian business federation, and had won many top businessmen awards. He was also facing delays building up a retail store business in India with Wal-Mart (which would have been opening its first wholesale store this week in his home state of Punjab, were it not for religious-related riots). Now Mittal has presumably organised his pieces better on the South African chessboard.

He has secured exclusive talks until July 31 to seal the deal, which will have to clear various regulatory hurdles. These include India’s foreign direct investment regulations that the last government controversially eased just before the general election, though both finance ministry and Reserve Bank of India officials later filed objections.

The MTN deal would be fine under those changes, which look like being maintained by the new government with Pranab Mukherjee confirmed as finance minister.

FT’s first South Asia Correspondent (1983-88) and now writes from India - see Riding the Elephant blog

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Latin America: Revolution that killed the fabled golden goose

By Carola Hoyos

Published: May 26 2009 05:25 | Last updated: May 26 2009 05:25

As Venezuelan troops this month seized the assets of oil service contractors, the fable of the goose that laid the golden eggs again made the rounds of conversations among oil executives.

Venezuela’s oil industry may not be dead, as was the fate of the goose in the fable, but the latest round of nationalisations could prove a near-fatal blow, oil executives warn.

Analysts believe the move could reduce the country’s production to lows not seen for 20 years and prompt a significant shift in power that will redefine the relative importance of Latin America’s oil producers.

In fact, the oil service contractors were not the first to suffer under the drive of Hugo Chavez, Venezuela’s populist president, to use the country’s oil wealth for social programmes and to increase his influence among neighbouring countries.

During his decade in power, Mr Chavez has decimated PDVSA, Venezuela’s national oil company, which in the 1990s ranked as one of the world’s best-run. And as oil prices rose from about $20 to $147 a barrel in the past decade, he wrested control of Venezuela’s oil fields back from international oil companies before turning his sights to the oil service sector.

All this has had a profound effect on the country’s ability to produce oil. Output has dropped from 3.4m just before Mr Chavez came to power in 1999 to barely more than 2m barrels a day today.

Until the second half of last year, the drop in production had been masked by the extra income from rising oil prices. But prices have collapsed since hitting their peak last July, falling to as low as $32 before recovering to trade at about $60 today.

This has meant PDVSA, burdened by financing Mr Chavez’s social programmes, has had to slash costs and Venezuela has run up billions of dollars in debt to oil service contractors it can no longer afford to pay. Nationalising them has only dug Caracas into a deeper hole, analysts warn.

“It is clear that, even though in 2009 PDVSA will probably see an important decline in oil income and expenditures will keep increasing, it will still have the capacity to pay its [debt] obligations,” analysts at Barclays wrote in a note to institutional investors.

Observers say this means Mr Chavez’s reign is far from over and his actions, though disastrous for Venezuela’s oil industry and the country’s long-term prosperity, have not yet caused enough trouble to destabilise his government.

But Venezuela is not alone in having mismanaged its most precious resource. For more than 50 years Mexico has rivalled Venezuela as Latin America’s most important oil producer. But it too has relied too heavily on its national oil company as a piggy bank.

For decades Mexico’s congress has dipped into the coffers of Pemex, the national oil company, plunging it deep into debt and forcing it to borrow money to keep investing in producing and developing the country’s oil fields.

Meanwhile, Mexican politicians have denied Pemex the opportunity to use foreign oil companies to fill the resulting gap in investment by maintaining strict laws that make investing in the country unattractive.

All this has had severe consequences. Pemex has been unable to halt the steep natural decline of Cantarell, the giant, ageing field that at its peak produced more than 2m barrels of oil a day, but now no longer manages even half that.

Nor has Pemex succeeded in compensating for Cantarell’s losses by finding and developing new fields.

Despite recent political reforms, Mexico now faces the daunting prospect of becoming a net oil importer within a decade.

The fates of Mexico and Venezuela stand in stark contrast to that of Brazil, the country that represents the future of Latin American oil.

In the past two years, Petrobras, Brazil’s sophisticated, partially traded national oil company, has discovered such promising reserves in the deep waters off the south-west coast, that executives are comparing this new frontier with the North Sea, which saved the world from the energy crises created in the Middle East in the 1970s.

So far, Brazil has managed its industry well, allowing Petrobras to grow into one of the world’s most advanced oil companies, using foreign investment and expertise to its advantage.

It is an enviable position, but Petrobras has huge technical and financial hurdles to overcome. It took a dozen big oil and gas companies more than a decade to tap the North Sea.

Far fewer are active in Brazil and the country’s politicians have yet to thrash out a new energy law that will govern the development of the potentially huge reserves that are still to be discovered.

As discussions in Brasilia continue, the story of Venezuela and Mexico should serve as a cautionary tale similar to the one about the goose and the golden eggs.

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国際協力銀、海外展開の中小支援　30億ドル規模融資

　日本政策金融公庫の国際部門である国際協力銀行（ＪＢＩＣ）は26日、アジアを中心に海外で事業展開する日系の中堅・中小企業を支援するため、新たに 30億ドル（約2800億円）規模の資金繰り支援制度を設けたと発表した。日本に本支店を置く民間金融機関を通じて、ドル資金を融資するのが特徴。これまで国際協力銀との取引関係がなかった中堅以下の規模の企業にも、資金が行き渡るようにする。

　金融・経済情勢が世界的に不安定ななかで、海外展開する日系企業の資金繰りを支えるのが狙いで、2010年3月末までの時限措置とする。支援対象はアジアを中心とした途上国で事業展開する中堅・中小企業で、日本企業が10％以上出資していることが条件だ。(15:42)

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東京金融取引所、６期ぶり減収減益　09年3月期

　東京金融取引所が25日に発表した2009年3月期決算は、純利益が前の期比72％減の14億円だった。主力の円金利先物取引が急減したことが響いた。事業会社の売上高にあたる営業収益も減少し、03年3月期以来、6期ぶりの減収減益となった。

　営業収益は同30％減の84億円。昨年秋以降の金融危機と景気後退を受けて日銀が政策金利を引き下げ、投資家が将来の金利変動を予測して取引する円金利先物の取引量は約1800万枚と半減した。円金利先物などから得る手数料収入も約3割減った。

　外国為替証拠金取引である「くりっく３６５」の取引量は同37％増で過去最高の約4800万枚となった。特に昨年秋以降に為替相場が急変動したことで個人の取引が伸び、円・ドルや円・ユーロ取引が同6―7割増加した。ただし、くりっく３６５は昨年5月に手数料を引き下げており、収益上は円金利先物取引の減少を補うことはできなかった。(07:02)

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Five million rubles worth of jewelry stolen from Moscow shop

24.05.2009, 19.23

MOSCOW, May 24 (Itar-Tass) -- Five million rubles worth of jewelry were stolen from a shop in southern Moscow on Sunday, a city police source told Itar-Tass.

The search for the burglars has been unsuccessful.

Four men broke into the shop located on Varshavskoye Highway and seized the jewelry at gunpoint.

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OPINION: Russia–EU Summit: A very long way to travel

Contributed by Chris Weafer, chief strategist at UralSib


MOSCOW, May 21 (Prime-Tass) -- Better tone expected. The latest two day Russia-EU summit opened today in the city of Khabarovsk, the administrative capital of the Far Eastern Federal District. Both sides will come to the summit with some legacy baggage but the tone should be a lot more accommodating, and encouraging, than heard in the past.

The Obama Administration has all but removed what has been a very contentious issue between both sides with the shelving of the missile plan. The fact that Russia now has a post Soviet-era President has also provided the excuse for some East European countries to rein back their objections to new deals between both sides. But there are still some very substantive issues to be resolved. Energy and cross border investment access will certainly be near the top of the agenda. In reality, nothing new or significant is expected from this event. There is still a long way to go before we see progress on the Energy Charter, on the issue of next gas pipelines, on investment access for both sides, etc. A new Partnership and Cooperation Agreement seems as far off as ever.

Location sends a message. The risk is that both sides see the current economic crisis as disadvantaging the other side to a greater extent and the notion that “they need us more than we need them” could very well block any meaningful progress. The fact that Khabarovsk is located some 9,000 kilometers from the Russia-EU border, but only 30 kilometers from the Chinese border, will be taken by many delegates as a statement from Russia that it has alternatives in the east if a better deal with the west cannot be secured. In reality, that is not the case if the current Medvedev-Putin programme is to progress. Of course, another interpretation is also possible, i.e. Russia straddles both Asia and Europe and can provide trade and logistics opportunities for EU companies. President Medvedev has commented that “it is symbolically important that I invited our partners from the EU here”. The big question is exactly what symbolism he has in mind.

Energy delays. The EU side will be unhappy with Moscow’s efforts to block the Nabucco gas pipeline while also moving at what Brussels views as far too slow pace to develop new gas projects. The giant projects in the Yamal Peninsula in particular. There will also likely be some frustration at last week’s signing of deals with Bulgaria, Italy and Greece to finalize the consortium to build the competing South Stream pipeline. Many in Europe see that project, and its northerly counter-part, Nord Stream, as little more than a Kremlin effort to divide Europe. Intended or not, it certainly has succeeded in causing some internal EU division. On the other hand, Russia is still angry with the EU’s support for Ukraine’s proposal to upgrade its transit pipeline without having first consulted with Moscow. Nabucco ran into another problem this week when Turkey’s Foreign Minister linked his country’s support for Nabucco with the start of EU membership talks.

Moscow frustrated at lack of access. On the other had, the current economic crisis has made it very clear that Russia cannot rely on its own financial resources to create the diversified economy and fund the infrastructure improvements that are at the core of the Medvedev-Putin plan for government. Even the most die-hard isolationists must realize that Russia needs to attract significant flows of investment into the country and that Russia’s key industries have to become more international by creating partnerships with European counterparts. But, Putin’s Kremlin has regularly been critical of what it saw as EU obstacles to such partnerships. The political row that followed the purchase of a 5% stake in EADS is one memorable example. More recently, the negative political reaction to the proposal for Russia’s Gaz and Sberbank to invest in OPEL, General Motor’s German subsidiary, will convince many in the Russian government that little has changed.

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North Korea inspires its nation and army with nuclear explosion and missile launch
25.05.2009 Source: Pravda.Ru URL: http://english.pravda.ru/world/asia/107617-north_korea-0

North Korea made an official announcement of its second successful nuclear test on Monday. The North Korean News Agency reported that the underground nuclear explosion was performed within the scope of the measures to strengthen the nation’s nuclear deterrent forces. The test was conducted to defend the nation’s sovereignty, the state media said. South Korean and Russian authorities registered the explosion. The United States is investigating the information.

The state-run news agency reported that the new nuclear test inspired the population of the country to new achievements in labor.

“The successful nuclear test inspires our army and our people in their 150-day struggle for new economic achievements and strengthens the atmosphere of new revolutionary rise for building the new prosperous superpower,” the report from North Korean News Agency said.

South Korean seismographs registered the artificial 4.5-magnitude quake which testified to a possible nuclear test in the neighboring state. The President of South Korea called an urgent meeting of his ministers to discuss the latest events in North Korea .

Russian seismologists also registered a 5.5-6 magnitude quake in North Korea. Tectonic cataclysms were registered at the depth of ten kilometers. Russian specialists say, though, that such earthquakes are typical of North Korea.

North Korea launched a surface-to-air missile the same day, May 25, several hours after the above-mentioned nuclear test, RIA Novosti reports.

The single missile with a range of 130 km (81 miles) was fired from the Musudan-ri launchpad on North Korea 's northeast coast, South Korea’s Yonhap news agency reported. North Korea previously used the site a month ago when it launched a rocket with a satellite on board. The rocket subsequently crashes into the ocean.

Russia’s Foreign Affairs Ministry is currently investigating the information about North Korea’s nuclear test.

North Korea conducted its first nuclear test in October 2006. Russia immediately said that North Korea must come back to the Non-Proliferation Treaty and resume the six-sided talks regarding its nuclear program.

The Primorye Region in Russia’s Far East is the only region of the Russian Federation which borders on North Korea. The border is 18 km long. All special services of the region were monitoring the situation in October 2006, after the first nuclear test in North Korea. There was no increase in the radiation level registered.

The Japanese government will most likely demand an urgent meeting of the UN Security Council be held. South Korea and Japan believe that the Council must have a quick reaction to the second nuclear test. Most likely, Japan will seek more sanctions against North Korea .

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Canada's financial system still stable despite the crisis
26.05.2009 Source: URL: http://english.pravda.ru/business/finance/107622-Canada_financial_system-0

By David Hunkar

The IMF Country Report for Canada published Friday offers some unique perspectives on the reasons for the stability of Canada’s financial system since the credit crunch began. There have no been no failures of financial institutions, no large scale bailout of banks and the financial system did not undergo severe systemic pressures like it did in the U.S. and UK. Let's review some of the key points from this report.

1. Sound Supervision and Regulation: Regulators follow some of the best practices with respect to supervision of institutions including the new Basel principles for banking supervision. As a result writedowns by Canadian banks have been much smaller when compared to major-peer countries as shown in the chart below.

2. Strict Capital Requirements: Canadian banks’ Tier 1 Capital Ratio exceeds 7% which is higher than the 4% that required by the Basel Accord.

3. Leverage ratio: This is limited to just 5% of total capital or up to 20% maximum. U.S. banks on the other hand are allowed up to 33% based on their strength and sophistication.

4. Conservative lending policies: Canadian banks like their customers exhibit low risk tolerance and have very conservative lending policies. Also their domestic retail market is profitable and stable unlike in the US.

5. Conservative Residential Mortgage Markets: In the US, 25% of all mortgages are non-prime and 60% of mortgages are securitized. In Canada these numbers are just 5% and 25% respectively. In addition most of the mortgages in Canada have Loan-To-Value ratios of below 80%.

6. Periodic Regulatory Reviews: Since the financial sector is ever-changing with innovations and globalization, the federal authorities in Canada review the financial regulations every 5 years. It is not clear if a similar process exists in the U.S.

7. Cooperation among regulatory agencies: Officials of the various government agencies such as the Office of the Superintendent of Financial Institutions, Finance Canada, Bank of Canada, Canada Deposit Insurance Corporation, and the Financial Consumer Agency of Canada meet regularly as part of the Financial Institutions Supervisory Committee to discuss and exchange regulatory information. In the U.S., agencies such as the Office of Thrift Supervision, FDIC, Federal Reserve, etc. usually operate independently of one another. Inter-agency cooperation is non-existent for the most part.

8. Proactive response to financial strains: Federal authorities are proactive when it comes to dealing with financial strains to the system. The 2009 budget contains many provisions to support stability in the financial system.

As a result of the above reasons, all the top five Canadian banks have become strong and powerful among the banks in North America.

For example, the above table shows that Royal Bank of Canada had a market cap larger than Bank of America on April 1, 2009. And all five banks were well ahead of Citibank. Citibank used to have a market above $200B only a few years ago. Now if not for the government bailout, the bank would have failed. Some experts like Mark Patterson have said that many large U.S. financial giants are technically insolvent.

Overall despite being very close to the U.S. in terms of financial and economic linkages, Canadian banks have so far shown remarkable resilience during this crisis.

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Russian Church council calls for restriction on alcohol sales

Anton Denisov

16:2125/05/2009

MOSCOW, May 25 (RIA Novosti) - An international public forum, the 13th World Russian People's Council, has called for a ban on alcohol being sold in kiosks with sales restricted to shops only.

"We propose a total ban on the sale of alcoholic drinks, including beer, from kiosks, where any teenager can agree with the sales assistant about anything," a council participant, Archimandrite Tikhon, father superior of Moscow's Sretensky Monastery, said.

The Council is an international public and church organization and forum aimed at raising public awareness to some of the most pressing issues affecting society. It has gathered since 1993, and is led by the Patriarch of Moscow and all Russia.

Over 10,000 people, including representatives from Russia's traditional religions, authorities, public organizations, businesspeople, scientific and cultural figures, students and delegates of Russian communities from abroad met at the annual forum on May 21-23.

Russia's chief sanitary doctor Gennady Onishchenko, who also participated, said: "The chief task we have today is to tear young people away [from alcoholism]."

The Council also called for an increase in fines for those that sell alcohol to teenagers and to ban the production and sale of low-alcohol cocktails also known as alcopops.

According to the World Health Organization, 8 liters of alcohol is the maximum amount a person should consume per year. In Russia, according to various sources, the annual level of alcohol consumption is around 14-18 liters per person.