Monthly Archives: October 2011

A Grim Warning For The Global Economy..

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by Joe Weisenthal

From the OECD (via Bloomberg), a prediction of mediocre growth and a call for “bold action.”

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Bold decisions are needed from the G20 leaders meeting in Cannes this week to get the global economy back on track, said OECD Secretary-General Angel Gurría.
An important first step has already been taken with the debt and banking crisis rescue plan announced by EU leaders on October 26 2011, but these measures must be implemented “promptly and forcefully”, he added.
Presenting a special Briefing Note ahead of the Cannes Summit, Mr Gurría said without decisive action the outlook is gloomy. The OECD projects GDP growth to remain weak in the advanced G20 economies over the next two years while the pace of activity in the major emerging markets is likely to be lower than in the pre-crisis period.

The near-term outlook

  • Uncertainties regarding the short-term economic outlook have risen dramatically in recent months. A number of events, notably related to the euro area debt crisis and fiscal policy in the United States, are likely to dominate economic developments in the coming two years. In an “events-free” scenario and in the absence of comprehensive policy action to resolve current problems, real GDP is projected to grow by about 3.9% this year, 3.8% in 2012 and 4.6% in 2013 on average in G20 countries.1 This average masks a wide divergence among country groupings, and emerging-market economies are much more buoyant, despite some softening. In the euro area, a marked slowdown with patches of mild negative growth is likely. Growth is also projected to remain weak in the United States, with a gradual pick-up from 2012 towards the end of the projection period. Unemployment is set to remain high in many advanced countries.
  • A better upside scenario can materialize if the policy measures that were announced at the Euro Summit of 26 October are implemented promptly and forcefully. These measures go in the right direction and could help restore confidence and create positive feed-back effects that could trigger a scenario of stronger growth.
  • In contrast, the outlook would be gloomier if the commitments made by EU Leaders fail to restore confidence and a disorderly sovereign debt situation were to occur in the euro area with contagion to other countries, and/or if fiscal policy turned out to be excessively tight in the United States. OECD analysis suggests that a deterioration of financial conditions of the magnitude observed during the global crisis (between the latter half of 2007 and the first quarter of 2009) could lead to a drop in the level of GDP in some of the major OECD economies of up to 5% by the first half of 2013.
    Appropriate policy responses
  • To resolve the euro area crisis, it is important to clarify and implement fully and decisively the measures announced on 26 October to break the link between sovereign debt and banking distress, to deal with Greece, to ensure that the sovereign debt crisis does not spread to other European countries and to secure appropriate capitalization and funding for banks. Detailed information is needed on how the package will be implemented.
  • In the advanced G20 economies, interest rates should remain on hold or, where possible, be reduced; notably in the euro area. Central banks should continue to provide ample liquidity to ease financial market tensions. Further monetary relaxation, including through unconventional measures, would be warranted if downside risks intensify. In the emerging-market economies, the stance of monetary policy should be guided by the outlook for growth and inflation, which remains comparatively high.
  • Strong, credible medium-term frameworks for fiscal consolidation and durable growth are needed to restore confidence in the longer-term sustainability of the public finances and to build budgetary space to deal with short-term economic weakness. Those advanced economies with sounder public finances can provide additional counter-cyclical support.
  • Structural reforms are essential to boost the growth potential of G20 countries, to tackle high unemployment and to rebalance global demand. In view of weak growth in the near term and impaired fiscal positions in most advanced economies, priority should be given to reforms that offer comparatively strong short-term activity gains and facilitate longer-term fiscal consolidation.
  • In Cannes, G20 leaders will discuss an Action Plan with bold commitments for mutually reinforcing macroeconomic policies and structural reforms. In 2008, G20 leaders rose to the challenge with a clear and coherent plan and we avoided a second Great Depression. Today, the adoption and implementation of the Action Plan is just as imperative to restore confidence through decisive actions in specific countries and regions.

The projections reported in the Briefing Note are preliminary and will be updated in the OECD Economic Outlook No. 90 to be released on 28 November 2011.

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Gulf of Mexico: Vector Lands Cascade Chinook Field Job

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Vector Technology Groups Subsea Division has been awarded a contract by Technip Houston for a Subsea Pig Launcher rated at 15,000 PSI. Vector Subsea Engineering have been working closely with Petrobras and Total to complete the design for Cascade Chinook Field in the Gulf of Mexico.

“This is just another example of Engineering strength” explains Chris Lee Vector’s Subsea Division Managing Director. “Our Engineering group has designed the launcher for a specific application for our client after a series of meetings to understand their issues” Delivery is planned for Q1 2012.

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Tullow Becomes Operator of New PSC Offshore Mauritania

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Tullow Oil plc (Tullow) announces that new Production Sharing Contract (PSC) arrangements have been agreed with the Government of Mauritania and its Joint Venture partners. These arrangements will enable the Group to progress the appraisal and development of existing discoveries and pursue exploration in a new contract area covering 10,725 square kilometers with Tullow as operator.

The new arrangements, reached through transactions with partners and PSC awards from the Government, result in the exploration areas of the PSCs previously known as PSC-Area A and PSC-Area B being replaced by a new, single Exploration PSC called C-10. Tullow will operate this new PSC with a 59.15% interest. The existing Banda, Tevet and Tiof discoveries have been ring-fenced under their original PSC terms and extensions of up to 18 months have been granted to allow appraisal and development activities to be completed. Petronas will continue to operate Chinguetti Field on the basis of the original equities.

Tullow will now work closely with the Government of Mauritania and its Joint Venture partners on the near-term commercialization of the existing discoveries and the initiation of a high-impact exploration programme. The development of the Banda gas and Banda oil rim discoveries will be prioritized and it is expected that the results of initial development studies will be presented to the Government in early 2012. The high impact exploration programme is expected to include a minimum of two wells over the next three years.

Following the various agreements with partners and the Government of Mauritania, Tullow has significantly increased its equity position in the region.

As a result of this increase in activity in Mauritania, Tullow expects to significantly enhance its presence in Nouakchott, with a strong focus on the development of local staff and local content wherever possible. Furthermore, Tullow will be looking to award a number of bursaries to suitably qualified students from Mauritania.

Commenting today, Aidan Heavey, Chief Executive, said:

“We are delighted to have agreed new PSC arrangements offshore Mauritania. As Operator of the Banda, Tiof and Tevet discoveries, we will now work closely with the Government of Mauritania to commercialize these important hydrocarbon resources. We have also identified significant new exploration potential in this acreage and look forward to applying the knowledge and expertise of similar geological plays gained from our successful Equatorial Atlantic exploration campaigns in West Africa and South America. While we have worked in Mauritania for many years, this is essentially an exciting new beginning for Tullow as we increase our equity and take on the operatorship in these highly valuable and prospective licenses.”

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Norway: STX OSV to Build 4 PSVs for Island Offshore

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STX OSV Holdings Limited (“STX OSV”), one of the major global designers and shipbuilders of offshore and specialized vessels, announced that it has secured new contracts for the construction of four Platform Supply Vessels (PSV) for Island Offshore. 

The combined value of all four contracts exceeds NOK 1 billion. The first two contracts are expected to become effective in November 2011, and the remaining two in January 2012. All four contracts are subject to financing approvals.

The vessels will be of Rolls Royce’s UT 717 CD design. The overall length of each vessel will be 84.3 meters with a beam of 17 meters, and the deadweight will be approximately 3800 DWT.

Deliveries are scheduled from STX OSV Brevik in Norway in the third and fourth quarter 2013 respectively for the first two vessels, and in the first quarter 2014 for the other two vessels. The hulls of the vessels will be delivered from STX OSV Braila in Romania.

The Island Offshore Group is a leading provider of services to the offshore industry managing a fleet of 20 high quality vessels with an average age of less than four years, currently operating in Brazil, Mexico, USA and in the North Sea. STX OSV has delivered more than 25 vessels to Island Offshore over the past ten years, and already has four vessels under construction for this long-standing client prior to securing the new contracts.

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Killing Energy, Killing Jobs, Killing America

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By Alan Caruba

America has been under attack since Barack Obama took the oath of office on January 20, 2009. The primary target has been the nation’s ability to generate energy for electricity and transportation, without which this nation will slide into Third World status and economic decline.

This appears to be the goal of this administration from the President to his Secretaries of Energy and Interior, to his Director of the Environmental Protection Agency. There is no other rational explanation for what they are doing.

We are days away from the latest Environmental Protection Agency assault in the form of the “MACT” rule allegedly to reduce mercury and other emissions that the Federal Energy Regulatory Commission says will reduce electricity generation in America by about 81 gigawatts in the years ahead. A recent Wall Street Journal editorial said “this could compromise the reliability of the electric system if as much as 8% of generating capacity is subtracted from the grid.”

The Wall Street Journal reports that eleven Governors have written the EPA to ask that it delay the final rule in November. Twenty-five state Attorneys Generals have filed suit “to lift a legal document known as a consent decree that the EPA is using as a fig leaf for its political goals.”

As but one example, in Illinois, Ameron announced the planned shutdown of its Meredosia and Hutsonville energy centers, The Meredosia center generates 369 megawatts. The Hutsonville center has a generating capacity of 151 megawatts.

The EPA, even before the Obama administration, has been using the 1970 Clean Air Act to bludgeon the nation’s ability to access the energy resources required to generate electricity, primarily coal that provides 50% of such generation, and oil that fuels our transportation capability.

In late October, James J. Mulva, the CEO of Conoco-Phillips, addressed the subject of the growing discoveries of natural gas being found throughout the nation. “More than 600,000 Americans already explore, produce, store and produce natural gas, according to consultancy IHS Global Insight.”

At least 15 states now produce shale gas and others may join them,” noting that the largest shale area, the Marcellus which covers much of the Northeast” “already supports 140,000 jobs in Pennsylvania alone.”

The Obama administration, beginning with the president’s admitted goal of shutting down as much of the coal industry as possible, has demonstrated his intention of deterring the provision of energy. When the BP Oil rig exploded in the Gulf of Mexico, the administration imposed a moratorium on all drilling. The decreased production cost 360,000 barrels a day in addition to lost jobs related to oil drilling in the Gulf. Rigs that are needed to drill have since been moved to other sites around the world.

The U.S. is home to more than 150 billion barrels of conventional oil that has the capability of generating thousands of new jobs if access to it was permitted. The most immediate result has been the rise in the cost of gasoline at the pump. Two courts ordered that the moratorium be lifted.

Oil companies currently pay more than $30 billion a year in federal, state, and local taxes. Meanwhile the Obama administration has been wasting billions in loan guarantees to essentially useless solar and wind power companies, the latest of which, Solyandra, will cost taxpayers millions when the solar panel producer went belly-up. Others will follow.

Meanwhile, the President crisscrosses the nations demanding higher taxes on companies engaged in coal, oil and natural gas. When Jimmy Carter imposed a windfall tax on oil companies many ceased to explore for new sources here, moving their efforts to other nations. Today, by withholding the necessary permits to produce energy in Alaska, the Trans Alaska Pipeline System is operating at one third of its capacity.

A proposed pipeline from Canada still awaits approval and, on November 6th, led by the Sierra Club, the largest protest against its tar sands is expected to draw thousands to Washington, D.C. to join hands and circle the White House to ensure the Keystone XL pipeline is kept from providing the U.S. with the oil extracted. The proposed pipeline would reduce the U.S. dependence on Middle East oil. The U.S. already has more than 50,000 safely operating oil pipelines to support our transportation and other needs.

In January 2010, Thomas J. Pyle, president of the Institute for Energy Research, warned that the Obama administration “continues to embrace Washington-dominated, command-and-control energy policies focused on mandates, subsidies, and political favors—not market forces.” He criticized “subsidizing one form of energy,” wind and solar, “while restricting the exploration of another,” warning that it “will lead to several measurable outcomes, increasing energy prices across the board, fewer jobs, and a weaker footing in the global economy..”

Nearly two years later, that warning has come true with a vengeance.

Oil, coal, or natural gas, it doesn’t matter to an administration and a president determined to restrict the amount of energy Americans need for their present and future needs. The result, in part, has been a stalled energy sector and a contributing factor in an economy with an estimated 20 million unemployed or under-employed.

The losses in income taxes and the taxes paid by this industry sector, in addition to the hideous borrowing and spending by the Obama administration is doing enormous harm to America and yet Barack Obama wants a second term in office.

Little wonder that Americans fear for the future of the nation.

 

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