Friday, July 18, 2008
A slew of energy developments in a handful of countries in South America has made headlines in the past day or so. For starters Venezuela and Ecuador made headlines this morning once again... this time for successful drilling and exploration in the Amazonian region. The newly established supply of crude will eventually be sent to the new refinery being build on the pacific coast.
Click here to access the full story from Rigzone.
Petrobras' Production Soars 3.3% More in June
Petrobras’ average oil and natural gas production abroad was 218,117 barrels of oil equivalent per day (boed) in June, 8.1%.
Added to the volume lifted from the domestic fields, Petrobras’ total production in June set a monthly record, topping out at 2,421,155 barrels of oil equivalent, 3.3% more than a year ago and 2.3% higher than May 2008.
Click here to access the full story from Rigzone.
Arduous Process of getting the Camisea facilities in Peru up and running
- Wood Snag 3-Year Maintenance Contract for Camisea Facilities
The Camisea Project comprises the exploitation The San Martin and Cashiriari fields natural gas fields, the construction and operation of two pipelines, one for natural gas (NG) and one for natural gas liquids (NGL) and the distribution network for natural gas in Lima and Callao. The pipelines wiII make NG and NGL available for domestic consumption and for export.
Natural gas wiII be transported to the main consumption center in Lima, where it will be used for residential and industrial purposes and to generate electricity, that will then be distributed nationwide through Peru’s existing transmission infrastructure (click here to read more about the Camisea Project)
Wood Group Production Facilities has been awarded a three-year, performance-based contract by Pluspetrol Peru Corporation to provide integrated maintenance services for the Camisea facilities in Peru. The Camisea project includes the largest natural gas field in the region.
Click here to access the full story from Rigzone
Shell to invest $300m in search for oil and natural gas in Peru
Royal Dutch Shell is ready to invest as much as $300 million in exploring for oil and natural gas in Peruvian waters as part of a agreement with BPZ Energy, executives from the two companies said Thursday.
In March, U.S.- and Peruvian-owned BPZ found an estimated 60 million barrels' worth of crude oil and 40 million cubic feet of natural gas in the same region off Peru's northern Pacific coast.
The accord announced Thursday calls for Shell to spend up to $300 million on exploration and - if reserves are found - exploitation of natural gas, while BPZ will put the same amount into searching for crude oil along with an additional $150 million to build an electric plant in the area.
Under the deal, BPZ will get 51.75 percent of any oil or gas produced and Shell will claim the rest.
Click here to access the full story from Rigzone
Geopark Grabs up Additional Petroleum Block in Chile
GeoPark Holdings Limited announced that the Ministry of Mining in Chile has awarded the Otway Block in southern Chile to a consortium consisting of GEOPARK (42%), Methanex Corporation of Canada (16%) and Wintershall Energia SA, a division of BASF Ag of Germany (42%).
The Otway Block is a large new attractive exploration area (5,992 square kilometers) located in the Magallanes region near GEOPARK's Fell Block operation in Chile. GEOPARK is the first and only private-sector oil and gas producer in Chile and the addition of the new Otway Block will further enhance GEOPARK's position as the premier private-sector oil and gas operator in Chile.
Click here to access a previous post in regard to GEOPARK's natural gas discoveries in the Magallanes Region -- published on South-South Cooperation on June 17th, 2008.
Click here to access the full article from Rigzone
Colombia to create oil price stabilization fund
Colombia's government is creating an oil price stabilization fund (FEPC) that will be used to cushion domestic oil prices from unexpected rises on international markets, government news agency SNE reported.
Congress has approved the fund, which is included in the national development plan and must go to the president for final authorization. The finance ministry would administer the fund, which would receive financing from the existing oil stabilization fund (FAEP) owned by state oil company Ecopetrol.
Click here to access the full story from Rigzone
Ecuador, Venezuela agree to build biggest oil refinery in South America, and.... on the Pacific Coast!
Chavez hopes to wean Venezuelan crude away from the US, where Venezuela currently runs seven refineries.
The joint 6.6 billion dollar project by state-run oil firms PDVSA, of Venezuela, and Petroecuador, of Ecuador, will refine 300,000 barrels of crude a day, saving Ecuador 3.0 billion dollars in oil imports a year, Correa said
Click here to access the full story from Mercopress
Thursday, July 17, 2008
Microfinance in focus: IDB to donate $4.3 billion to ACCION over the next 5 years -- ACCION's website now in Spanish
The Inter-American Development Bank (IDB) has committed $4.3 million to ACCION over the next five years to extend microfinance into rural Latin America. Around the world, the rural poor – often among the most impoverished – are under-served by microfinance.
ACCION will work with five of its long-term partners in Latin America – Banco Ademi in the Dominican Republic, CREDIFE in Ecuador, Financiera FAMA in Nicaragua, FINAMERICA in Colombia and Mibanco in Peru – to overcome barriers and explore new technological and methodological solutions. The project will provide financial services and training to the rural poor that are less expensive, better tailored to the client and easy to replicate.
ACCION website now in Spanish! / ¡La página web de ACCION ahora en Español!
The ACCION International website is now available in Spanish, providing information to Spanish-speaking microfinance enthusiasts about our mission and clients served, as well as our partners, products and services. Visit www.accion.org/espanol to see the new site.
The mission of ACCION International is to give people the tools they need to work their way out of poverty. By providing microloans, business training and other financial services to poor men and women who start their own businesses, ACCION's partner lending organizations help people work their own way up the economic ladder, with dignity and pride. With just a little capital, people can grow their own businesses. They can earn enough to afford basics like running water, better food and schooling for their children.
In a world where three billion people live on less than $2 a day, it is not enough to help 1,000 or even 100,000 individuals. ACCION’s goal is to bring microfinance to tens of millions of people – enough to truly change the world. We know that there will never be enough donations to do this. That's why ACCION has created an anti-poverty strategy that is permanent and self-sustaining.
To read more about ACCION International visit there website - http://www.accion.org
The consensus among Merrill Lynch, Barclay's and Credit Suisse is not pretty. All three firms are recommending their clients get rid of their assets in Argentine pesos, estimating that sooner or later the Argentina Central Bank will have to yield in the dispute over the US dollar in the local money market.
According to a survey from Bloomberg, a majority of analysts believe the US dollar will be costing 3.20 Argentine pesos at the end of the year from its current 3.05. But the main fear of analysts is a continuation of the current economic policies which could lead to a crisis “comparable to that of 2001/02”, when the Argentine economy melted, unless there is a massive correction of economic indexes (such as retail inflation), elimination of subsidies (mainly energy and transport) and increase in public utilities rates, among other issues to address.
Click here to read more on this story from Mercopress
Jim Rogers comments on commodities (Bloomberg LP)... Amazing how this guy alone can cause the market to move
Wednesday, July 16, 2008
Energy Minister Carlos Villegas announced the figure Tuesday during a press conference to discuss Petroandina's operating contracts, which the Bolivian Congress is set to vote on shortly.
According to Villegas, Petroandina will invest $242.2 million in the western Andean province of La Paz and another $646.1 million in central and southern Bolivia...................
Click here to access the full article from Rigzone
A meeting of 27 major Chinese Lead and Zinc producers took place in Shanghai yesterday. The producers agreed in Shanghai "the move would help improve the supply-demand relation so as to curb further price fall," as reported by the China Mining Association (CMA).
In Chinese yuan, the price of lead ingots has fallen 34% from 26,500 yuan/ton ($3,887 usd) to 16,500 yuan/ton ($2420 usd). Zinc ingots meanwhile have plummeted in price, falling by 53% from 33,360 yuan/ ton ($4,890 usd) to 15,650 yuan/ton ($2300 usd).
China's Nonferrous Metals Industry Association estimates domestic lead consumption shrank 50,000 tons in the period January-May, but stated new projects set to begin in Shaanxi, Hunan, Yunnan and Gansu provinces would help re-invigorate demand.
China has been expanding at such a rapid pace it was almost necessary for a price correction in commodities. Add to the recent trend of investing in commodities as a safe heaven or hedge against other currently more risky investments and you get a situation where commodity prices have risen beyond sustainable levels.
Despite China's robust economic growth and ever increasing demand for raw materials, Chinese demand alone is not enough to keep commodities at their current prices. However, as the largest contributor to global GDP in 2007, Chinese demand is a very important factor.
What to make of all this? A temporary correction in commodity prices at best... and by temporary I do mean a few months or a year at most. Zinc and lead will remain in high demand due to the fact a slowing global economy is not going to bring all projects in China or other emerging markets to a stand still. Second if prices continue to decline, supply will probably remain constrained because some miners will put off exploration or development of new mines due to lower prices which make them economically less viable. This will create a similar situation in the long term when demand recovers and the market realizes there is once again insufficient supply. Economics 101 teaches you when there are too many people chasing the same good, the price of the good will rise, and this will be the case with zinc and lead.
As commodity prices decline, China's miners and smelters may suffer, but government projects and domestic urbanization plans become cheaper. As noted above, prices have declined and new projects are being planned in certain provinces.
The provinces mentioned above are all relatively poor regions in China, lacking infrastructure and in desperate need of investment. Shaanxi is a poor region about 6 hours by bus from Beijing and is at the heart of coal production in China.
Yunnan is a province in South China which boarders Myanmar and is populated by over 20 of China's ethnic minority groups. One of China's strategies for keeping ethnic minorities happy is to ensure the regions where they live experience the benefits of China's economic growth. In recent years Yunnan has also emerged as a popular tourist destination. As the influx of both domestic and foreign tourists increase, so will investments in infrastructure and services.
Gansu is a province in western China and is home to a wide variety natural resources. There is extensive mining in iron, lead, nickel, zinc and other metals. Additionally, two of China's most important oil fields, Yumen and Changqing are located in this region.
Hunan province is located along the Yangtze River and is home to the industrial cities of Changsha, Zhuzhou and Xiangtan. All three cities are major centers of production which account for roughly 40% of the regions economic growth. Currently the three cities are in major need of improvements in their infrastructure and will need to import in the materials necessary to furnish the improvements because of a severe lack in local resources.
If you've been following China's development plan since the 90's, it is clear the central government has chosen a selective development strategy-- focusing on important economic zones and leaving others behind. This is all very important because it shows capacity for growth and development in China remain. This is especially true for the regions described above which until recently have been over-shadowed by the wealthy coastal regions where China's export and manufacturing centers are focused.
The recent earthquake in Sichuan Province, rising disparities between Eastern China and Western China, and the need alleviate pressure on major city centers will prompt Beijing to begin paying more attention to the regions it previously ignored. When this happens, Chinese commodity demand will rise and so will prices.
Zinc and Lead began their bull markets in late 2005 / early 2006. At their respective peaks, both had more than doubled in price in just a few years time-- see LME price charts from 2002 - 2008 below.
London Metals Exchange: Lead ($US/tonne)
Zinc and Lead suddenly had become hot commodities. In 2003, Peru, the world's number 3 producer of lead and zinc, exported $201.3 million worth of Lead and $528.7 million worth of Zinc. By 2005, Lead exports had risen $312 million and Zinc exports to $805 million.
Below I have included two charts of the major sectors in which Lead and Zinc are used in.
Tuesday, July 15, 2008
Net sales for the second quarter 2008 is expected to be in the range of $81.5-$82.5 million, which would be a 26%-28% increase compared to the prior year second quarter results of $64.5 million.
Net income for the second quarter 2008 is expected to be in the range of $7.3-$7.4 million, which would be a 33%-35% increase compared to the prior year second quarter results of $5.5 million. Second quarter 2008 diluted earnings per share is expected to be approximately $0.14 compared to $0.10 in the same period last year.
Mr. Zhenggang Wang, Chairman and Chief Executive Officer commented, “We are very pleased with our preliminary second quarter results, which exceeded our internal plan. Our sales growth benefitted from a net increase in new doors, healthy demand for electronic products in most of our key categories, a broader product selection from the prior year period as well as from certain, new consumer-oriented programs that focus on service and increasing awareness of our expanding portfolio of brands.
Our net income improved largely due to increased sales results, the exit from unproductive doors as well as a lower tax rate in the second quarter compared to the prior year. We also anticipate a sequential improvement in gross margin for the second quarter. Overall, we are encouraged with our second quarter performance and continue to work aggressively to further enhance our position in China’s electronic consumer industry,” concluded Wang.
This stock has in no shape or form been the best preformer in my portoflio, as a matter a fact it's been the worst preforming equity I've owned in the past year and a half. Nevertheless, I have remained patient and vigilent with this company knowing that when global financial markets finally begin to recover and Chinese equities and markets pick up once again... the mainstream investment community will once again take note China 3C Group.
CHCG is a sort of mini version of Best Buy, operating small electronic retail stores within larger retailers of China. CHCG currently has over 900 stores within stores in operation, and hopes with their recently agreement with Yongle, they will achieve their long time goal of having 1,000 stores in operation. Some of its retail partners include Carrefour (French), Bestbuy (US), Wal-Mart (US), Lotour (Chinese), Yongle (Chinese) among others.
*** Click on the links above to access articles describing CHCG's agreement with each particular company.
2008 was undoubebly a tough year for all equities. CHCH was no exception. After receiving a great deal of hype from articles published in the Wall Street Journal, Barrons and other financial publications; the stock failed to ever IPO and saw its share price plummit from around $8/ per share in the summer of 2007, to under $2/ per share this year.
I feel the stock is unfairly priced, with the market pricing in too high a risk factor on the equity. The company has virtually no liabailities (that means little or no debt), it slowed down the pace of opening its long time goal of 1000 + stores in order to consolidate its current operations, closing various stores throughout 2008 and focusing its energies on the more profitable operations.
CHCG also receives revenue from its distributions services to larger retails, which it is highly acredited for doing efficiently. With the backing of many well known foreign retailers, big names in China and continued profits this equity looks like a good play to me.
Although I don't condone any action on the part of readers, this is a micro-cap, speculative investment which could continue to preform badly if markets overall continue this bear market, which has been one of the major reasons this equity has failed this past year.
Energy in focus: Washington Post reports Russia has missed oil targets on many of its energy projects
Russia devised PSAs in the 1990s to lure foreign investment into some of its more difficult and inaccessible oil fields. Under PSAs, companies were able to recoup investment costs before sharing profits with the Kremlin. But such contracts fell out of favor with growing resource nationalism.
Click here to access the full article from the Washington Post
The energy consumption for every 10,000 yuan (1,429 U.S. dollars) of China's GDP stood at 1.16 tonnes of coal equivalent in2007, down 3.66 percent from the year 2006, the National Bureau of Statistics, National Development and Reform Commission (NDRC) and National Energy Administration under the NDRC said in a statement Monday.
Beijing saw the energy use per unit of GDP shrink 6.04 percent last year, the biggest drop among all provincial jurisdictions, as the Chinese capital strove for energy efficiency and clean environment ahead of the Olympics.
China has set a target of reducing energy consumption per unit of GDP by 20 percent and major pollutant emission by 10 percent by the year 2010 from the levels in 2005.
Click here to access the full article from Xinhua News
July 8, 2008 -- One Month to go until the opening ceremony of the Olympics -- Reuters
Monday, July 14, 2008
SINGAPORE, July 9 (Reuters) - India's Financial Technologies Group, operator of India's top commodities bourse, plans to launch a similar exchange in Singapore early next year, it said on Wednesday.
The Singapore Mercantile Exchange will provide a platform for futures and options trading on precious metals, base metals, energy, agricultural commodities, currency pairs, carbon credits and commodity indices, the group said in a statement. .................
Chavez stated "Nations taking part in Petrocaribe initiative will now be required to pay just 40% of the bill within 90 days - down from the current 50%. The rest can be paid over the next 25 years at a fixed rate of 1% percent as long as oil prices are above US$100 a barrel.
"That could compensate for the horrible curve of the jump in oil prices," Chavez said. He added that 70 percent of payments may be deferred if oil reaches US$150 a barrel.
In this photo released by Miraflores Press Office, Venezuela's President Hugo Chavez speaks during the opening ceremony of the Petrocaribe Summit in Maracaibo, Venezuela, Sunday, July 13, 2008. President Hugo Chavez sought to expand an oil-supply pact that is delivering fuel to 17 nations, calling it a tool against poverty and dismissing opponents' accusations that he is giving away Venezuela's oil wealth.
Sounds really generous to me... Venezuela is unarguably of the wealthier Caribbean nations in the Caribbean, however it does remain a country with many economic problems. Calculating if such a long-term donation is even feasible is difficult to do. So many variables could arise in the next 25 years which could cause the cash flow from its oil accounts receivable ledger simply stop...
New government could come into power who don't honor the repayment. Alternative energy could leap frog and bring the price of oil down substantially. A new government could come into power in Venezuela and re-arrange the terms, leaving small Caribbean contries with little bargaining power against Venezuela: their provider of energy and also regional political and economic power.
No less the gesture as it stands is a nice one, and in reality there is just so much domestic investment that is possible given Venezuela's limited FDI and internal domestic capacities. Oil drills may be in shortage, but so is the industry as a whole since the PDVSA strikes. Given the set backs, PDVSA remains a relatively vibrant operation, turns a profit and even manages to give Chavez some diplomatic barganing chips by making Venezuela into a gracious, oil rich country which cares about its region and the poor of world... unlike the United States, which is a underlying point Chavez hopes to make through such efforts.
Sunday, July 13, 2008
Lula has moved onto his second destination, Indonesia, where he also made a good impression with with his Indonesian counter-part, President Susilo Bambang Yudhoyono.
Brazilian and Indonesian leaders agreed on Saturday the two nations could mutually benefit if they developed a framework in which to cooperate on biofuels. Brazil and Indonesia are home to much of the world's remaining tropical rain forest, which at the moment is shrinking due to expropriation, illegal timber operations and government/ private sector expansion--- many times into biofuels.
The two nations signed an agreement for Indonesia to send experts to Brazil to study its biofuel developments, said Indonesian President Susilo Bambang Yudhoyono.
"Brazil has been successful developing bioethanol and of course Indonesia can learn from the research and development," Yudhoyono stated at a news conference.
Both countries are big biofuel producers-- Brazil produces large amount of pure ethanol for both domestic use and export. Brazil does so through tapping into its huge sugar cane sector, mixing a sugar cane based fuel with gasoline to make a clean ethanol it fuels its automobiles with.
Indonesia, a former member of the OPEC cartel, is also the world biggest palm oil producer. Indonesia once mainted a surplus of oil, allowing it to export its surplus abroad in exchange for hard currency which it used to subsidize much of its state spending, and maintain price controls on goods ranging from food to gasoline.
Indonesia is now a net importer of crude oil. The country has naturally began exploring alternative energy options, one of which is to encourperate biofuel made from palm oil. The government hopes this will at least partially help to compensate for both increasing energy demand in Indonesia as population rises and society modernizes and also for its own decreasing domestic production.
Indonesia's government has set a goal of making as many petroleum based products as possible into a new blend petroleum biodiesal blend. The blend will use 2.5% biodiesal produced form domestic palm oil.
With the food crisis in full swing (read previous post on food crisis), many critisize the biofuel sector for being responsible for rising prices, since those crops otherwise would go to markets instead of factories to be made into fuel... Maybe, but that's over simplyfying the situation and leaving out the United States which has probably hurt poor people's diet much more substantially due to its use of corn to produce its ethanol.
It also probably angers a country like Brazil. Brazil is home to the most fertile land of any country on the planet, yet its agriculture industry is inhibited because of agricultural subsidies from the developed world-- a point Lula continuously tries to make well known.
Another factor Indonesia has been keep to point out itself is the fact richer nations should also be responsible for their own forests (Canada and the US in particular), which also account for large stores of carbon and act like sponges to soak up greenhouse gases just as tropical forests do.
"No one wants to preserve our forests more than we ourselves but the most polluting countries they must start to discuss more seriously how to cut greenhouse gas emissions," said Lula on Saturday to Indonesian Press.
Click here to access a article on this topic from the Economictimes.indiatimes.com
Although originally questioned for being a bit too far to left for the likings of the United States, Lula and his administration have prooven to be quite good at managing the macro economy. Add to that the incredible strides Lula has made in the international areana.
He has successfully promoted Brazil as the leader of the fight between developing contries and developed counries over farm subsidies.
His presidency has successfully brought inflation under control and made the Brazilian Real one of the best preforming currencies against the US $ in the world as of recent.
He has forged strategic ties with a wealth of countries which Brazil previously had little or no exchange with-- Vietnam and Indonesia being two recent examples.
Brazil has joined the ranks of China, India and Russia in what is now referred to as the BRIC contries-- the largest and potentially most influential developing countries in the world.
The list goes on... note however, there also exist many scandels, political mishaps and growing problems; such as the growing income disparity and extremly high crime rates in its major cities. No less Brazil has not done so bad.
Click here for direct access to original post.
Recent CNBC interview where I discuss the removal of many of China's subsidies and the potential for factory closures during the months surrounding the 2008 Beijing Games.
The Chinese Economy in focus -- developments on growing agricultural deficit, slowing auto imports, and lower than expected export growth...
BEIJING, July 13 (Xinhua) -- China's trade deficit in agricultural products rocketed 14.3 times on the year-earlier level to 7.57 billion U.S. dollars in the first five months of this year, sources with the Ministry of Agriculture said on Sunday. ......................................
The five months saw the nation's net cereal exports decline drastically and trade deficit in animal by-products increase rapidly.
Between January and May, China exported 1.19 million tons of cereals, down 76.6 percent from the year-earlier level, but imported 911,000 tons, up 14.2 percent. The net exports stood at 276,000 tons, down 93.5 percent. .....................................
China's auto import growth slows down in first five months
BEIJING, July 13 (Xinhua) -- Growth in China's auto imports slowed down in the first five months of this year, thanks largely to a compulsory coding system for standardizing vehicle purchase from abroad, according to General Administration of Customs. ........................................
Upon the tightened control, China's auto imports in April declined 7.5 percent from March level to 37,000 units, and in May, went further down 18 percent from April level to 31,000 units.
The customs said between January and May, China bought 171,000 motor vehicles from abroad, a growth of 59 percent on the same period of last year. The arrivals were valued at 6.26 billion U.S. dollars, up 74.9 percent. The import growth rate, however, was 15.7 percentage points lower than the first quarter level.
The total imports included 71,000 motor vehicles bought from Japan, up 100 percent, and 57,000 from the European Union, up 54 percent. The growth rates were 19 percentage points and 13 percentage points, respectively, lower than the first quarter level. ......................................
Shock as China's Export Growth Falls John Garnaut Asia Economics Correspondent
CHINESE export growth has slowed to its lowest rate in at least five years, raising new risks for the world economy.
China's export volumes grew just 7 per cent in the year to June - down from sustained growth rates above 20 per cent before the middle of last year - and they are likely to fall further as key markets in the United States and Europe continue to deteriorate.
"It's signaling that by the end of the year we'll have zero export growth," said Stephen Green, an economist with Standard Chartered Bank in Shanghai. ...............................