Walker sees four main possibilities, ranging from somewhat benign to extremely costly.
We summarize them quickly here.
- Scenario #1: EU sanctions get put into place starting July 1, resulting in 0.6 million of barrels per day coming off the market. In this case, Brent Crude would rise to about $130/barrel, though possibly less, since the embargo might make exemptions for some distressed buyers of Iranian oil, like Italy and Greece.
- Scenario #2: Full EU sanctions are put in place, plus there’s another 10% cut from other customers. In this case, we’d be talking about oil going to $138/barrel.
- Scenario #3: Iranian crude exports are halted entirely, perhaps as a result of an Israeli air strike. Then we’re talking about a loss of 2.5 million barrels per day of supply, and Brent Crude prices up around $205.
- Scenario #4: The complete shutdown of Iranian oil. This would require some kind of military action and wide internal upheaval. In this case, the world would lose 4 million barrels per day, and we’d see crude as high as $270 per barrel.
Read more: BI
- The 10 Countries That Would Get Screwed In An Iranian Oil Shutdown (businessinsider.com)
- What Happens if Iran Does Close the Strait of Hormuz? $440 Oil? (247wallst.com)
- Iran stops oil sales to British, French companies (mb50.wordpress.com)
- SHIPPING CEO: Iran Could Send Oil To $440/Barrel (businessinsider.com)
- Four Scenarios For Engaging Iran At The Strait Of Hormuz (businessinsider.com)
Woodside Petroleum Ltd., Australia’s second-biggest oil producer, faces delays at its liquefied natural gas projects because of challenges in obtaining funding, customers and regulatory approvals, UBS AG said.
The company may defer a decision on its proposed Browse LNG venture “materially beyond” the third quarter of 2012, Gordon Ramsay and Cameron Hardie, UBS analysts in Melbourne, wrote in a report dated Nov. 25. They cut their rating on the shares to “neutral” from “buy” after Woodside’s 2012 output forecast, which was less than estimated by UBS.
Chief Executive Officer Peter Coleman, who took control of Woodside in May, aims to develop an estimated A$75 billion ($74 billion) in LNG projects with partners including Chevron Corp. The company may sell stakes in its Browse and Pluto ventures in Australia to help fund the developments, he said Aug. 18.
Talks on how to develop the Sunrise LNG venture are at an impasse, and the delays may prompt partner Royal Dutch Shell Plc to focus on other opportunities, the analysts wrote.
Woodside fell the most in more than a year in Sydney Nov. 25 after saying production may range from 73 million barrels of oil equivalent to 81 million barrels next year, compared with a UBS forecast of 91 million barrels.
Shares of the Perth-based oil and gas producer extended their losses today, falling 2.3 percent to A$32.60 at the 4:10 p.m. close in Sydney. The benchmark index rose 1.9 percent.
- Petronet in Talks to Buy Capacity at US, Australia LNG Terminals (mb50.wordpress.com)
- Woodside 2012 production to rise 27% (news.theage.com.au)
- Asia Stocks to Watch: Australia’s gas ambitions face major hurdles (marketwatch.com)
- InterOil Seeks Strategic Partner for Papua New Guinea LNG Project (mb50.wordpress.com)
- Woodside Petroleum: To Shell or Not to Shell? (blogs.wsj.com)
- Soc Gen Says China May Look for US LNG Deals in Future (mb50.wordpress.com)
The deal marks China’s latest move to win influence over Western-owned energy assets to feed its fast-growing economy. It is also Sinopec’s major purchase in Brazil in just a year after it made a $7 billion purchase from Repsol for a 40 percent stake in its Brazil division.
“For Sinopec, there are not many opportunities to grow in the traditional domestic upstream oil and gas sector — overseas acquisition is an area to find growth,” said UOB Kay Hian analyst Yan Shi.
“It will benefit Sinopec on upstream reserves, and reduce risks in its money-losing downstream operation.”
Sinopec, Asia’s biggest oil refiner, expected the deal will expand its overseas oil and gas business operations and boost its oil and output growth.
Galp’s primary assets in Brazil include four deep-water blocks of BM-S-11, BM-S-24, BM-S-8 and BM-S-21 in the Santos Basin, it said.
Sinopec expected it would receive 21,300 barrels of oil equivalent per day (boedp) in 2015 and production would reach a peak of 112,500 boedp in 2024.
Under the agreement, Sinopec’s wholly owned unit, Sinopec International Exploration and Production Corp (SIPC), will take new shares to be issued by Galp and assume shareholder loans, Sinopec Group said in a statement.
“Taking into consideration this investment and projected future capital expenditure, the total cash payout amounts to approximately $5.18 billion at closing,” Sinopec said.
The transaction must be approved by the Chinese government.
China’s outbound M&A deals this year totaled $37.6 billion, down from $54.1 billion last year, according to Thomson Reuters data.
The deal would help Galp, a newcomer to large-scale oil projects, to finance its stake in the development of massive oil fields in the deepwater region known as the subsalt region in Brazil–site of the largest oil discovery in the Americas in more than 30 years.
“This capital increase significantly strengthens Galp Energia’s capital structure, fully securing its funding needs for the future expansion and development of its upstream activities,” Galp said in a statement.
Sinopec’s overseas acquisition strategy is partly guided by the desire to build up scale in certain countries, including Brazil, said a company official who declined to be named.
Galp is a minority partner with Brazil’s state-run oil company Petrobras in key offshore discoveries, including the vast Lula field, formerly known as Tupi, as well as the Cernambi and Iara finds.
Sinopec Group is the parent of Hong Kong-listed and Shanghai-listed China Petroleum & Chemical Corp. The group does overseas upstream oil and gas investment and operations via its wholly owned unit SIPC.
By Judy Hua, Wan Xu and Ken Wills (Reuters)
- China’s Sinopec buys $5.2-billion stake in Brazil’s Galp (business.financialpost.com)
For readers of Wall Street research, we’re getting close to the most exciting time of the year: Forecasters will start making their big predictions for the coming year and beyond.
Of course, that will really start heating up in December, but it’s already beginning.
Recently UBS‘ economics team of Larry Hathaway, Paul Donovan, Andrew Cates, and Christine Li came out with their forecasts and themes for 2012 and 2013.
First, they identify three big themes:
- Sovereign stress: This means a range of things, not just the crisis in Europe, but also the emergence of groups like the Tea Party and Occupy Wall Street, which have coincided with a collapse in support for elected officials. Weak governments will wind up producing bad policies, which of course have all kinds of economic ramifications.
- Excess capacity: The world is beset with “swathes” of excess capacity, most notably seen via high unemployment in developed nations. Simple manufacturing capacity remains weak, which is a hindrance to growth and high wages, and it means that growth will be uneven. It also means inflation, mostly, won’t be much of an issue.
- An emerging world: As they put it, it’s the most obvious of the three. But the bottom line is that stronger balance sheets and better fundamentals will continue to bolster the emerging world.
Now, as for specific predictions for the economy in 2012 and 2013…
- Global GDP growth of 3.1% in 2012 and 3.4% in 2013.
- The eurozone will be in a recession in early next year. 2013 will see eurozone growth of just 1%.
- The US will avoid recession, growing 2.3% in 2012 and 2.7% in 2013.
- Emerging economies will engage in more monetary and fiscal stimulus, and maintain their trend growth rates.
- Central banks around the world will keep monetary policy very loose. The Fed will lift interest rates in the second half of 2013.
- The biggest downside risk is an intensification of the eurozone crisis.
- The biggest upside risk is much better coordinated global economic policy.
Anyway, as we said, this is just the tip of the iceberg for Predictions Season. We’ll be bringing you a lot more.
- UBS On The 3 Major Factors Impacting Global Growth (businessinsider.com)
- The Bleak Truth About The Latest Statements From The Fed (businessinsider.com)
- UBS Board to Focus on Postscandal Plan (online.wsj.com)
US President Obama has vowed he will push communist financial reform’s through before he leaves office. Draconian legislation like Dodd-Frank and the ridiculous Volker Rule are key to the communist agenda set by the current administration.
A Desperate Obama launched an onslaught against banks and Republicans this week for working to block financial reform and return America to prosperity, Obama, now one of the least popular Presidents in history, is yet again using a populist tone to cash in on public anger over Wall Street practices.
Obama is heading towards a 2012 election without hope of victory due to his inability to create jobs or spark a significant recovery even after spending a record amount during his office.
Obama already has a reputation for his anti-business stance starting with his harsh rhetoric about corporate compensation at the beginning of his term.
The US Communist party said of the 2008 election of Obama: Obama’s 2008 victory was more than a progressive move; it was a dialectical leap ushering in a qualitatively new era of struggle. Marx once compared revolutionary struggle with the work of the mole, who sometimes burrows so far beneath the ground that he leaves no trace of his movement on the surface. This is the old revolutionary ‘mole,’ not only showing his traces on the surface but also breaking through.
The old pattern of politics as usual has been broken. It may not have happened as we expected but what matters is that it happened. The message is clear: We can and must defeat the ultra-right, by uniting the broadest possible coalition that will represent an overwhelming majority of the people in a new political dynamic.
A look at the Obama Reforms
Since Barack Obama took office, $38 billion in new major regulations have been introduced, imposing an unprecedented burden on businesses, according to last month’s report by the Heritage Foundation.
An overly regulated environment is creating uncertainty — and uncertainty is perhaps the greatest obstacle for investing and hiring. The administration hastily introduced the 2,300 page Dodd Frank Wall Street Reform and Consumer Protection Act in the depths of the recession without fully understanding and studying the potential consequences of such unprecedented legislation.
To put the Dodd Frank bill in perspective, it is ten times the length of the Sarbanes-Oxley Act (66 pages) and the Gramm-Leach-Bliley Act (145 pages) combined. While a moderate level of regulation is necessary in large and vital sectors of the economy such as finance, housing, and healthcare, regulation is not the solution to the current economic problems that face the United States.
The administration must stop demonizing banks — as if they are not vital to the growth of credit and new business formation — and consider a moratorium on new regulations, an idea made popular by Presidential candidate Texas Governor Rick Perry.
Frank Keating in the Wall St Journal said “imagine a manufacturing company that deployed more than half of its work force as Occupational Health and Safety Administration (OSHA) compliance officers. Such a company would be unable to grow, let alone contribute to broader economic growth.
Yet banks across the country are feeling a similar pull on resources as the Dodd-Frank Act is implemented. Already federal regulators have issued 4,870 Federal Register pages of proposed or final rules affecting banks. Many more are still to come—for a grand total of more than 240 rules. And that’s on top of about 50 new or expanded regulations unrelated to Dodd-Frank that banks have had to absorb over the past two years.
Managing this mountainous regulatory burden is a significant challenge for a bank of any size. but for the median-sized bank—with 37 employees—it’s overwhelming. The cost of regulatory compliance as a share of operating expenses is two and a half times greater for small banks than for large banks.”
Mr Keating is not alone, Jamie Dimon has argued along the same line, “We’ve been through two stress tests, one at the Treasury, one at the Fed. I believe most of the banks passed the recent ones with flying colors,” Jamie Dimon, JP Morgan Chase & Co.’s chief executive officer, told Fed Chairman Ben S. Bernanke June 7. “Now we’re told there are going to be even higher capital requirements,” and “we know there are 300 rules coming. Has anyone bothered to study the cumulative effect of all these things?”
One month later, Dimon’s boldness has proven to be less an emblem of power than a cry of frustration. Global banking supervisors are poised to impose higher capital requirements that Wall Street complains will crimp profits, hamstring its fight against foreign rivals and damage the U.S. economy. And Dimon, 55, who kept JPMorgan largely clear of the subprime mortgage fiasco and helped stabilize the financial system in 2008 by acquiring Bear Stearns Cos. and Washington Mutual Inc., will face the same new strictures as the industry’s rogues.
Another indication of the changing regulatory environment took place almost a month earlier and an ocean away. During a May 17 confirmation hearing on his appointment to a new British financial watchdog, Donald Kohn, a former Fed vice chairman, told British lawmakers he had abandoned his belief that bankers’ self-interest would keep markets safe.
“I placed too much confidence in the ability of the private market participants to police themselves,” he testified.
Today Financial Services Companies are under attack on Wall St
The Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, is expected to file suit against Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among other banks, the Times reported, citing three unidentified individuals briefed on the matter.
The suits stem from subpoenas the finance agency issued to banks last year. They could be filed as early as Friday, the Times said, but if not filed Friday it said the suits would come on Tuesday.
The government will argue the banks, which pooled the mortgages and sold them as securities to investors, failed to perform due diligence required under securities law and missed evidence that borrowers’ incomes were falsified or inflated, the Times reported.
Fannie Mae and Freddie Mac lost more than $30 billion, due partly to their purchases of mortgage-backed securities, when the housing bubble burst in late 2008. Those losses were covered mostly with taxpayers’ money.
The agency filed suit against UBS in July, seeking to recover at least $900 million for taxpayers, and the individuals told the Times the new suits would be similar in scope.
A spokesman for the Federal Housing Finance Agency was not immediately available for comment.
U.S. securities regulators have taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes.
The requests for proprietary code and algorithm parameters by the Financial Industry Regulatory Authority (FINRA), a Wall Street brokerage regulator, are part of investigations into suspicious market activity, said Tom Gira, executive vice president of FINRA’s market regulation unit.
“It’s not a fishing expedition or educational exercise. It’s because there’s something that’s troubling us in the marketplace,” he said in an interview.
The Securities and Exchange Commission, meanwhile, has also begun making requests for proprietary algorithmic trading data as part of its authority to examine financial firms for compliance with U.S. regulations, according to agency officials and outside lawyers.
Shayne Heffernan: Steps to Real Global Growth
The USA and Europe have failed to spark a sustained recovery despite trillions in poorly directed bailout funds, now the calls for Austerity calls and a new Tax push threaten to truly derail growth in the western world.
Political maneuvering and Financial Smokescreens like QE’s and Twists replaced real economic stimulus over the last 3 years since the 2008 financial crisis. They have all been proven failures, Social Programs and Discounted Institutional landing do not replace hard core spending. The United States Federal Reserve actions were 100% negated by Dodd-Frank and the ridiculous Volker Rule, Institutions were offered discounted lending, however new regulations made the use of the funds by Banks impossible.
So 3 years and trillions later a recession is still on the table, unemployment remains, and will remain at record levels.
Austerity is not a bad thing, however it needs to be directed towards the size and cost of Government, NOT aimed at the citizenry. Government and the cost of Government in the Western world remains too high, new and increasingly complicated legislation makes the cost of government drift higher.
Now in Europe and the USA we see calls for Austerity, Tax Hikes, Basel Bank Rules and More and More Legislation, an insidious combination that will pave the way for a lengthy recession in the West. It will also open the door to the East, Corporations and Individuals will depart overly onerous government and make their home in emerging markets, as wee have seen happen for the last decade.
The lack of Infrastructure spending in the USA and Europe is staggering when compared to the huge developments undertaken in China and South East Asia.
Shayne Heffernan: Steps to Real Global Growth
A Powerful Leadership like Theodore Roosevelt with his Panama Canal or the Dwight Eisenhower Road System, the USA and Europe need a leader that can unite the country behind some large Public Infrastructure Developments and end the political circus that plays out daily in the media.
In Europe and the USA there needs to be real spending by Government, Roads and Especially Rail offer a direct line to impact the economic growth of both regions. The USA should be developing a rail network that covers North America and links to the emerging markets in South America, Europe could be investing in high speed rail networks that reach directly into Asia.
Europe and Asia need to lower rates.
Governments must shrink, however possible, society can not afford the governments that have developed.
Dodd-Frank and Volker style legislation must be overturned.
Basel III Bank Rules must be withdrawn.
Europe and the USA must lower taxes and make it attractive to start business in the country.
The Volker Rule, Denounced
The UK business secretary’s strong public criticism of the Obama proposals reflects widespread frustrations among ministers at a “sweeping” overhaul that was conceived and announced to the world without consultation with the UK.
Lord Mandelson’s comments are especially unwelcome in the White House as they came on the day that the Obama administration sent legislative proposals to Capitol Hill that would create the so-called “Volcker rule”.
Under the Obama-Volker plan, which shocked financial institutions and countries world wide when it was announced in January, provides that bank be barred from proprietary trading and owning hedge funds.
Stressing that Britain’s preferred co-ordinated action on banking supervision, Lord Mandelson said: “President Obama’s proposals on banking regulation, I have to say, came as a bit of a surprise to people working on the G-20 agenda and it is important that we keep the multinational agenda firmly on track.”
He argued that the so-called Volcker rule was over ambitious. “Trying to apply sweeping rules about the structure, content and range of activities of banking entities is too difficult to do,” he said. “Whatever their size, whatever their range of activities, you need good regulation first. “It’s the principle and practice of regulation you have to focus on, not the size of banks,” he added.
The proposed “rule”, named after Paul Volcker, its chief architect and former chairman of the Federal Reserve, faces an uphill struggle in the US Congress, with Democrats and Republicans questioning why the President saw fit to drop in the proposal late in the regulatory overhaul.
Banks are lobbied furiously against the proposal, which is designed to prevent institutions that benefit from government guarantees over their deposits from engaging in risky activity.
In comments that echo those of Lord Mandelson, Charles Dallara, managing director of the Institute of International Finance, which represents the largest global banks, called on countries to work together to avoid “fragmenting” a regulatory reform process begun at the Group of 20. “Either the G-20 leaders believe that the G-20 framework is the way to go or they do not,” he said.
And so it continues, the good news is Obama has lost so much support that his chances of passing any legislation now is almost Zero.
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services. www.livetradingnews.com
- Too Big To Fail Under Dodd-Frank (baselinescenario.com)
- Obama chides banks, taps anger over Wall St – Reuters (news.google.com)
InterOil Corporation today announced that the Company has retained Morgan Stanley & Co. LLC, Macquarie Capital (USA) Inc. and UBS AG as joint financial advisors to assist InterOil with its soliciting and evaluating proposals from potential strategic partners in the liquefied natural gas (LNG) project currently being led by InterOil’s joint venture entity, Liquid Niugini Gas Limited.
The Company anticipates that these proposals will relate to obtaining an internationally recognized LNG operating and equity partner for development of the Project’s gas liquefaction and associated facilities in the Gulf Province of Papua New Guinea, together with a sale of an interest in the Elk and Antelope fields and in InterOil’s exploration tenements in Papua New Guinea.
InterOil has determined, in response to inquiry from potential LNG partners and in consultation with the Papua New Guinea Government, to engage in a formal partnering process. The considerable strengthening of the Asian LNG market, the increased interest in exploration and investment in Papua New Guinea, as well as the Company’s reservoir analysis and project design fundamentals lead the Company to believe that now is an attractive time to seek a partner.
The Company expects that successful completion of such a transaction will satisfy the objectives of complementing the Company’s planned LNG development capabilities with an internationally recognized LNG partner and generating a third party valuation for InterOil’s resources.
“We look forward to working closely with Morgan Stanley, Macquarie and UBS as they support us in this evaluation process and in reaching what will surely be a milestone for InterOil, its shareholders and Papua New Guinea,” said Phil Mulacek, Chief Executive Officer of InterOil.
- Paupa New Guinea: FLEX Updates on Gulf LNG Project (mb50.wordpress.com)
- InterOil, Pacific LNG sign supply deal with Noble Clean Fuels (mb50.wordpress.com)
- InterOil and Noble Sign Heads of Agreement on LNG Sale (prnewswire.com)
- Rudd to visit PNG (news.theage.com.au)