Posts Tagged: bp

 

Reuters reports that a pipeline from the El Sharara field has been closed. The reason for the closure is unclear.

In the past week, even mildly bullish news has sparked some oil price squeezes.

Update: Now the report is that production was shut down because the pipeline was blocked.

 

 BP Plc today wrote down the value of its $7.2-billion investment in India’s oil and gas fields made in February 2011 by a little over 10 per cent.

Unveiling its third-quarter results on Tuesday, BP said it had written down the value of its investment in KG-D6 — the deep-water field operated by Reliance Industries in Krishna Godavari basin — by $770 million.

The oil behemoth attributed the charge to the “uncertainty in the future long-term gas price outlook following the introduction of a new formula for Indian gas prices”.

On October 18, the Narendra Modi-government approved a new formula that capped the gas price from deep-water fields at $5.61 per million British thermal unit (mBtu).

The new gas price will come into effect from November 1 but it won’t apply to Reliance Industries, which has filed for arbitration in a dispute with the government over the admissibility of certain cost recoveries on account of the huge shortfall in gas production from KG-D6 gas field. >> Read More

 

BP-CRASH

U.S. District Judge Carl Barbier in New Orleans ruled today that BP was “grossly negligent” in the 2010 Deepwater Horizon rig explosion and may face up to $18 billion in civil penalties, according to The WSJ. In addition, Transocean and Halliburton were found ‘negligent’ – a lessor offense – (fines up to $1,100 per barrel for ‘negligence’, $4,300 for ‘gross negligence’). This result comes 2 years after BP agreed to accept criminal responsibility for the disaster and to pay $4.5 billion in fines and restitution. BP quickly issued a statement that it will appeal the decision and believes the findings “are not supported by evidence at trial.”

As Bloomberg reports,

In a turning point after four years of legal wrangling over responsibility, U.S. District Judge Carl Barbier’s ruling laid the bulk of the blame on BP for the explosion, which killed 11 men and caused the largest offshore oil spill in U.S. history.

 

 

>> Read More

Emerging Markets -An Update

04 July 2014 - 6:08 am
 
1) China’s FX regulatory body, SAFE, announced additional reforms to its currency trading rules
2) The HKMA acted to defend the HKD peg for the first time since December 2012
3) The won continues to strength despite more North Korea threats and official pushback BOK
4) The news out of South Africa remains bad on the labor front
5) Violence is escalating again in Ukraine as the cease-fire breaks down
6) Argentina has missed a payment on restructured bonds coming due Monday June 30
Over the last week, Argentina (+4.3%), India (+3.0%), and Russia (+2.7%) have outperformed in the EM equity space in local currency terms, while Turkey (-1.8%), Poland (-1.6%), and Czech Republic (-1.3%) have underperformed. To put this in better context, MSCI EM was +1.1% over the past week.
In the EM local currency bond space, Sri Lanka (10-year yield -32 bp), Indonesia (-15 bp), and Korea (-10 bp) have outperformed over the last week, while Brazil (10-year yield +23 bp), Mexico (+15 bp), and Hungary (+14 bp) have underperformed. To put this in better context, the 10-year UST yield was +14 bp over the past week.
In the EM FX space, IDR (+1.5% vs. USD), COP (+1.4%), and KRW (+0.8%) have outperformed over the last week, while RUB (-1.9% vs. USD), ZAR (-1.6%), and BRL (-1.6%) have underperformed.
1) China’s FX regulatory body, SAFE, announced additional reforms to its currency trading rules. The new rules will allow commercial banks to set their own rates for non-bank clients (such as retail), instead of having to follow a set of pre-established directive. This should not change anything regarding the CNY fixing.

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 Oil exploration and production companies such as Reliance Industries and ONGC are expecting policy clarity and tax benefits from the first budget of the Modi government.

Most domestic upstream companies invested more in exploration overseas than in India because of the ambiguity over gas price and policy paralysis during the previous UPA government’s rule.

The explorers expect the tax holiday under Section 80-IB (9) of the income tax act to be extended to 10 years from seven years, from the year of commercial production.

This move, industry sources said, will encourage oil and gas exploration that requires heavy investments and involves risks as well as reduces the import bill.

Analysts said “in the initial few years there is hardly any profit to take advantage of the tax holiday. In the initial years, undertakings have larger expenditure to set off and, hence, the actual benefit of tax holiday does not flow to them”. >> Read More

BP signs $20bn LNG deal with China

18 June 2014 - 6:00 am
 

BP has signed a $20bn deal to supply China with liquefied natural gas over 20 years starting in 2019.

Under the terms of the agreement, the UK oil and gas major will ship 1.5m tonnes of gas for Cnooc, the state-controlled Chinese energy group, per year

The annual volumes – equivalent to 72bn cubic feet – represent more than a tenth of the 13m tonnes imported last year by Cnooc, which is ranked as China’s leading and the world’s third largest LNG importer.

Bob Dudley, BP chief executive, said the deal would help China’s drive in switching more of its energy supply from coal to less polluting hydrocarbons.

“We are pleased to support China’s commitment to improving its air quality,” he said. The agreement was signed by company executives in London in the presence of David Cameron, UK prime minister, and Li Keqiang, Chinese premier. >> Read More

 

Eurozone bond markets have continued to come under pressure on Tuesday, pushing borrowing costs higher for the periphery in particular.

Portugal’s bond market suffered the most, with the benchmark 10-year yield climbing 10 basis points (bp) to a one-month high of 3.92 per cent – and sharply higher from a nine-year low of 3.43 per cent touched earlier this month.

Spain and Italy’s 10-year bond yields rose 4 bp and 7 bp to 3.04 per cent and 3.21 per cent respectively, while Greece’s climbed 5 bp to 6.66 per cent. But unlike in earlier sell-offs, the bonds of the eurozone’s “core” have also come under pressure on Tuesday.

The dip in European bond markets has baffled some analysts, who have expected yields to fall further as the European Central Bank prepares to ease monetary policy further in June – and possibly engage in outright “quantitative easing” later this year if inflation remains subdued. >> Read More

 

India’s lengthy election reached its final day on Monday, with the country’s financial markets hitting new highs on hopes of victory for pro-business opposition leader Narendra Modi.

But whoever becomes prime minister this Friday, the complex task of rebuilding trust with bruised global companies was underlined over the past week, as two major foreign investors began international arbitration appeals protesting against unfair treatment in Asia’s third-largest economy.

British oil major BP issued its challenge this weekend over a protracted gas pricing dispute, together with local partner Reliance Industries, the energy and petrochemicals conglomerate controlled by billionaire Mukesh Ambani.

BP’s move came just days after telecoms group Vodafone revealed last week that it had also filed an arbitration complaint in April, marking the latest stage of its seven-year battle with India’s government over a disputed $2.6bn tax claim. >> Read More

Russia: Economic Vulnerabilities

12 March 2014 - 13:15 pm
 

There is a common perception that Russia’s move on Crimea shows its strength.  A closer examination suggests it is more complicated that it may seem.   Like the bully at the school yard, the aggressiveness conceals weaknesses.  

Simply put, Russia felt threatened and for good reason.  The democratic coup in the Ukraine threatened a potentially strategic loss for Russia.  For months, it had been using both carrot and stick to pressure Ukraine, Moldova and Georgia from shifting more to the EU.  Reports indicate that Putin had drawn his own line on Ukraine and made it clear to the EU and US that Russia would not accept a Ukraine in unfriendly hands.   

Yanukovych was brought to heel and at the last minute embarrassed and frustrated the EU (and by extension, the US) and struck a deal with Russia.   A democratic coup toppled Yanukovych, and there are reasons to suspect that Europe and/or the US may have helped facilitate the political uprising.  Among the first acts, the new government abolished Russian as the second official language.   

There was a realistic fear (on the part of Russia) that the new government would move to retract the  2010 agreement that arguably was struck under duress, to renew and extend the Russia’s lease on the Sevastopol naval base.  The lease, first struck by Yeltsin was to expire in 2017.   Fisticuffs broke out in the Ukrainian parliament over the issue that eventually led to a 25-year extension of the lease.   >> Read More

 

The chances of Reliance Industries’ (RIL) partners BP and Niko Resources getting a higher price for gas from the D1/D3 fields in the KG-D6 block have taken a hit with the government modifying its affidavit in the Prashant Bhushan case in the Supreme Court.

While the earlier affidavit of February 20 quoted the Cabinet Committee on Economic Affairs (CCEA) as having decided “that Contractor (RIL, BP and Niko consortium) shall be allowed to sell the natural gas…at the revised price formula…on the basis of the Bank Guarantee (BG) provided by RIL…”, the new affidavit seeks to draw a distinction between RIL, BP and Niko.

The affidavit, filed on February 25, cites the original affidavit and instead of “Contractor (RIL, BP and Niko consortium)” simply talks of “Contractor” without now mentioning RIL, BP and Niko.

On the face of things, this should not make a difference since all the firms are defined as “contractor” in the production-sharing contract, but it matters since the oil ministry bureaucrats have taken the view that since only RIL is party to the arbitration with the government — the government has withheld payments to the consortium on grounds it was hoarding gas — only it could get the higher Rangarajan-formula-based price from April 1. >> Read More

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Technically Yours,
Team ASR,
Baroda, India.