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BQI $4.25 Oilsands Quest: What's in a Name?
by: Seymour Prophet posted on: May 07, 2008 | about stocks: BQI
On May 5th, Oilsands Quest (BQI) put out a press release detailing 6 new names for various parts of its acreage. Prior to the press release, the company primarily spoke only about its focus, in-situ oil sands project, Axe Lake, which resides on its Saskatchewan acreage. But now, the company has 6 new names, three of which further break down its Axe Lake project (Axe Lake 1, Axe Lake 2 and Axe Lake 3) and three names that refer to different areas of its Alberta acreage (Raven's Ridge 1, Raven's Ridge 2 and Wallace Creek).
On the surface, some may argue that the press release may not seem like a big event. However, I beg to differ. After more than 2 years of exploration and delineation drilling work, Oilsands Quest is on the cusp of securing its first joint venture partner on its Axe Lake project. The signing of a JV partner is a significant event in that a successful partnering would validate BQI's business model (which, in a nutshell, is to explore, delineate and partner various parts of its massive 753,000 acres of oil sands-bearing land). Perhaps more importantly, it would validate the attractiveness of BQI's oil sands acreage, which straddles the Alberta/Saskatchewan border.
So let's get to the question at hand and the title of this article, "What's in a Name?" Given that BQI has recently drilled 25 holes and shot 33 miles of seismic data on its Alberta acreage over the 2007/2008 winter drilling season, I believe that the new names signal that the company believes that it has material amounts of bitumen, or oil sands, on some of its newly-named land parcels. That could result in the company officially announcing a 2nd or 3rd discovery (in addition to Axe Lake) very shortly.
To add to that, I believe that the new names imply that the company will soon be providing investors a positive update from its recent drilling efforts, in particular, on its Alberta acreage (in its Raven Ridge 1 or Raven Ridge 2 areas). Up until now, the company has talked about only one particular oil sands project, Axe Lake, which resides on the Saskatchewan side of the border. That project received its name in January 2007, about a year after BQI began drilling the area and only 2 months before it was deemed by management to be holding about 1.3 billion barrels of oil sands resource (which was confirmed later by third party consultant, McDaniels in November 2007). Given that management has preliminarily estimated that its total Alberta acreage could hold up to 4.5 billion barrels, I would not be surprised to see a more specific estimate for the Raven Ridge area sometime soon.
So "What's in a Name?" My opinion is that it could be newly-identified discoveries and increases in oil sands resource estimates near term.
Disclosure: Long
Thanks! That explained a lot.
EGLE $34.42 Eagle Bulk Shipping shares leap after 1Q report, new charter
Wednesday May 7, 5:03 pm ET
Eagle Bulk Shipping shares jump after 1st-qtr profit soars, more lucrative charter deal signed
NEW YORK (AP) -- Shares of Eagle Bulk Shipping Inc. leapt more than 12 percent Wednesday, after the drybulk shipper reported soaring first-quarter earnings on higher charter rates and signed a vessel to a more lucrative contract.
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The company said its first-quarter earnings jumped 69 percent as it grew its fleet size and took advantage of strong demand for drybulk vessels, which haul cargo such as iron ore, coal, grain and fertilizer.
The results narrowly missed Wall Street's expectations. Analysts forecast earnings per share of 33 cents, while Eagle reported a per-share profit of 31 cents.
Also, the company said Wednesday it signed a one-year charter for one of its vessels at a daily rate 85 percent higher than its current contract. The new charter, for a 2002-built Supramax carrier, will begin in August. Supramaxes typically weigh about 52,000 deadweight tons and are some of the largest drybulk ships on the seas.
A key shipping index also accelerated Wednesday. The Baltic Dry Index, which measures drybulk shipping rates on 40 routes across the world, surged 249 points to close at 10,104 -- marking the first time the index has breached the 10,000 mark since Oct. 10 of last year. The index, which is managed by the Baltic Exchange in London, set an all-time high of 11,039 in mid-November.
Eagle Bulk shares rose $3.77, or $12.3 percent, to $34.42, after hitting as high as $35.38 earlier in the session. The stock's all-time high is $35.54.
RIG $157.40 Transocean 1st-qtr profit up sharply, tops Street
Wed May 7, 2008 12:55pm EDT
(Recasts first paragraph, adds details from conference call, analyst comment, updates share price)
By Anna Driver
HOUSTON, May 7 (Reuters) - Transocean Inc (RIG.N: Quote, Profile, Research), the world's largest oil and gas drilling contractor, said on Wednesday quarterly profit more than doubled on higher rates for its deepwater rigs and lower-than-expected expenses.
The company's results exceeded Wall Street expectations, but gains in its share price were held in check by weakness in the energy stocks and by expectations for increased costs in the second quarter, analysts said.
Record-high crude oil prices have created a boom in demand for floating rigs and drill ships that operate in the deepest waters. Drilling contractors have benefited as tight supplies have pushed daily rig rates above $600,000 in some cases.
"The deepwater market continues to be very good with near-term demand clearly in excess of supply, and new highs being established for dayrates and long-term contracts," Robert Long, Transocean's CEO, told analysts on a conference call.
First-quarter profit jumped to $1.19 billion, or $3.71 per share, from $553 million, or $2.62 per share, a year earlier.
Excluding one-time items, the company earned $3.80 a share. Analysts, on average, had expected $3.32, according to Reuters Estimates.
"The beat was mainly due to lower operating expenses," said Mark Urness, oilfield service analyst at Calyon Securities. "It's probably deferred maintenance, so it will come back later in the year. Still, it's still a good quarter."
Costs for the first quarter of 2008 benefited from the postponement of several shipyard and major maintenance projects to later in the year, according to the company.
"So net-net, it's not such a big beat," said John Derrick, co-manager of U.S. Global Investors' Global MegaTrends Fund.
On a conference call, Transocean said its operating and maintenance costs would be significantly higher in the second quarter, although overall costs for the year would stay within expectations.
Revenue soared 135 percent to $3.11 billion, boosted by Transocean's acquisition of smaller rival GlobalSanteFe Corp in November 2007.
Average daily rental rates, or dayrates for the Houston company's total fleet rose 15.6 percent to $229,000.
The increase in average dayrate was seen in all categories, primarily due to rigs starting new contracts at the higher dayrates, Transocean said.
Transocean shares edged up 84 cents to $158.69 in afternoon trading on the New York Stock Exchange. The stock outperformed the Philadelphia Stock Exchange index of oilfield service companies , which fell 0.5 percent. (Editing by Brian Moss)
Ormat Technologies Inc. Q1 2008 Earnings Call Transcript:
http://seekingalpha.com/article/76155-ormat-technologies-inc-q1-2008-earnings-call-transcript?source=yahoo
Yep yep yep. Let's wait and see.
BDI over 10.000 again, 10.104. ATH 11.039 last November 13th.
Re. my post yesterday: Is the housing market crunch fading? Take a look at AFN and IMB and RAS.
AFN
http://seekingalpha.com/article/72517-alesco-financial-gem-in-the-garbage-pile
Qatar plans giant ports
Wednesday, 07 May 2008
TWO giant sea-ports are coming up in opposite sides of the country – one in Mesaieed and the other in Ras Laffan.The Mesaieed facility, a green field project, is in the initial stages. The Customs and Ports General Authority has engaged the Singaporean firm of PSA as the project’s consultants.The firm is now conducting studies, Capt Abdulla al-Khanji, the director of Marine Services Department at the Customs and Ports General Authority (CPGA), told Gulf Times yesterday. The study will be completed by June.The port, to be located north of the current facility, will be a joint venture between the ports authority and the Singapore firm.
According to the current schedule, the first phase will be completed by 2014, the second phase by 2020 and the final phase by 2025.Each phase would have a capacity of 2mn TUs for container ships, Capt Khanji said. It would be 14 times bigger than the existing facility, he added.
Besides container berths, the port will also have berths for livestock and car containers. There will also be separate facilities for the Emiri Navy, supply vessels, Emiri yachts and other requirements.The port will be attached to the Economic Free Zone, proposed to be set up between Wakrah and Mesaieed.Capt Feisal Ahmed Saad, port manager at Ras Laffan Industrial City, told Gulf Times that the port in the north of the country, now being built, would be the largest, man-made facility in the world.
It would be “one of the largest port expansions in one phase in the world”, he added.
Talking about the size of the project, the official pointed out that the two breakwaters, now nearing completion, were around 10km long each. This part of the work alone is estimated to cost $2bn.
To make the breakwaters, the authorities had to import 22mn tonnes of rock, dredge 20mn tonnes of soil and use 25mn cubic metres of sand.In the first phase, there would be two berths for LNG ships, four liquid berths and two berths for containers. These berths are estimated to cost another $1.5bn.
Capt Saad put the total cost of the project at a staggering $30bn, to be spent over the next 30 years.
The whole facility will be spread over an area of almost as big as the Doha city itself.
The first LNG ship at the expanded port was expected to arrive by “late 2009”, Capt Saad said. However, ships bringing construction materials could arrive there even earlier.
The official said the existing port was doing extremely well and had won the Port Authority Award from the Seatrade Middle East and Indian Ocean for 2007. “We are working to maintain the same standard this year too,” the official said.
Source: Gulftimes
Natural Gas to Become New Global Energy Commodity
Wednesday, 07 May 2008
Natural gas is set to become the new global energy commodity due to market-changing pricing, contracts and emerging arbitrage opportunities. Michael Stoppard, Cambridge Energy Research Associates senior director for global gas, said at CERAWeek 2008 in Houston. "Momentous investment decisions finalized several years ago assure that liquefied natural gas (LNG) is set to become a more freely traded, flexible, worldwide commodity, and will reshape the global market's traditional pricing and contracting practices," he said.
Despite substantial delays in LNG projects, a slowdown in project starts, tougher upstream terms, joint-venture issues and spiraling costs, "the LNG armada has already set sail," said Stoppard. However, he added, current difficulties "raise major questions about the pace of growth of LNG beyond 2010 and its ability to deliver.
"They do not materially affect the growth story to 2010 which is "baked in,' based on momentous investment decisions made several years ago."
Due to investments, he predicts global liquefaction capacity will increase about 30%. to some 247 million metric tons during the next two years, up from today's 190 million metric tons.
Meanwhile, LNG shipping capacity will increase more than 50% by 2010, with a record 58 ships to be added to the existing fleet of 251 during 2008. In addition to allowing expanded arbitrage opportunities, abundant shipping capacity will allow for new market solutions, such as using ships not only to transport LNG but also as floating regasification and storage vessels.
Investment in regasification terminals is rising at a faster pace than the associated liquefaction-not surprisingly in view of the fact that regas represents only 10% to 15% of LNG supply-chain costs. For aggregators, surplus regasification is essential to being able to move shipments between regions as needed. Countries considering building new LNG import facilities include Brazil, The Netherlands, Pakistan and New Zealand.
As a result of these investments, global LNG supply will grow almost 33%, global LNG shipping capacity will increase more than 50% and utilization of LNG regasifi cation capacity in the Atlantic Basin will fall below 50%, all during the next two years, he said.
The new LNG supply will be much more flexible than the traditional LNG-trading structure. Before now, long-term contracts pre-sold to specific countries and end-users with fixed points of dispatch and delivery-rigid terms previously believed necessary to finance the large capital requirements of LNG producers and importers.
Recent changes in these contracts are not fully recognized because most supply continues to move under long-term contracts. However, many newer contracts are not dedicated to a specific market or end-user, but to an aggregator or merchant buyer who will seek to move the LNG to the market of highest value, much like most other commodities.
Stoppard estimates 40% of LNG supply facilities under construction are "non-dedicated" and flexible to trade. Most is either in the Atlantic Basin or the Middle East, with the Pacific Basin continuing to favor old-style LNG contracts.
Supported by the expansion of supply, shipping and regas capacity, the amount of flexible trade will double by 2010, and will transform thinking in the industry, although supply will remain in the hands of a relatively small number of key players, he said.
The bulk of the new supply will flow into the Atlantic Basin and, in particular, to North America, the world's largest gas market and the most open in terms of liquid trading hubs and accessible gas storage. With U.S. domestic gas production reaching a plateau, LNG imports into North America reached record levels in 2007, but the sharp step-up in imports will come in 2009.
"North America's increased role in LNG will challenge the pricing and contracting practices of old," Stoppard says. "Sales into North America will necessarily be short-term and involve more spotprice risk. A three-way accommodation will be needed to bridge the needs of the traditional Asian and Continental European clients focused on the long term, the security of supply with the market-based needs of North America and northwestern Europe, and the proliferation of scattered, small-market entrants."
The increased capacity of North American storage will also facilitate flexibility in the global market. Robert Ineson, CERA director of North American natural gas, said, "North America has over 4 trillion cubic feet of working storage capacity, which is already providing an important buffer against market swings around the world. This role is set to grow in the years ahead."
Stoppard said, "A growing and more flexible supply, available shipping capacity, the development of a network of regas portals to allow arbitrage to take place, and the bringing together of the great markets of Asia, Europe and North America will be the result."
Source: Red Orbit
GM folks. Why Crude Oil and Copper are on fire
Wednesday, 07 May 2008
Commodities are rallying, with oil leading the way. Crude oil rose $4 yesterday to trade a record above $120 a barrel at NYMEX. Crude has gained 22 percent since January alone. Energy costs have spurred inflation, depressed consumption, and distorted trade figures in nearly every G7 economy. Just as observers were starting to grapple with the idea of oil reaching $100 per barrel, it became apparent that $125 a barrel had nearly arrived.
Crude Oil has been supported by weakness in Dollar as well as strengthening of Dollar in recent times. As Crude oil is dollar denominated, weakness in dollar boost the appeal of Crude Oil. And when Dollar appreciates on positive economic data, Crude rises as it is assumed that growth in Consumption, manufacturing activity, etc will signal higher energy use.
Dollar Index made a record low on 17 March 2008 at 70.70. Crude had negative correlation with Dollar and had been rising through 5 years on weakness of Dollar and Crude also made a record high at $111.8 on same day. But ever since then correlation has become positive with Beta of 2, Dollar Index has risen 3.5 percent in 45 days and Crude Oil has risen 7 percent in same period.
Another commodity, which was in limelight yesterday, was Copper. Copper jumped as much as 44 cents, or 12 percent, to a record $4.2605 a pound in one hour, the highest ever on COMEX. The price was back below $4 around 45 minutes later.
More than 80 cents swing in copper within a matter of minutes was unbelievable. The move may have been exaggerated on a day when copper trade was thin globally, with the London Metal Exchange closed for a U.K. holiday.
Nobody could understand why there was such a volatility, whether there were some traders who may have been caught in a wrong-way bet on copper, triggering the surge or it was a combination of buy stops being activated above the contract record highs and a lack of selling with London closed.
Both these commodities are fundamentally not so strong, but Speculative and Technical buying could push the prices of Crude Oil to $130 a barrel at NYMEX and Copper to $5 a pound at COMEX.
Source: Commodity Online
Why Crude Oil and Copper are on fire
Wednesday, 07 May 2008
Commodities are rallying, with oil leading the way. Crude oil rose $4 yesterday to trade a record above $120 a barrel at NYMEX. Crude has gained 22 percent since January alone. Energy costs have spurred inflation, depressed consumption, and distorted trade figures in nearly every G7 economy. Just as observers were starting to grapple with the idea of oil reaching $100 per barrel, it became apparent that $125 a barrel had nearly arrived.
Crude Oil has been supported by weakness in Dollar as well as strengthening of Dollar in recent times. As Crude oil is dollar denominated, weakness in dollar boost the appeal of Crude Oil. And when Dollar appreciates on positive economic data, Crude rises as it is assumed that growth in Consumption, manufacturing activity, etc will signal higher energy use.
Dollar Index made a record low on 17 March 2008 at 70.70. Crude had negative correlation with Dollar and had been rising through 5 years on weakness of Dollar and Crude also made a record high at $111.8 on same day. But ever since then correlation has become positive with Beta of 2, Dollar Index has risen 3.5 percent in 45 days and Crude Oil has risen 7 percent in same period.
Another commodity, which was in limelight yesterday, was Copper. Copper jumped as much as 44 cents, or 12 percent, to a record $4.2605 a pound in one hour, the highest ever on COMEX. The price was back below $4 around 45 minutes later.
More than 80 cents swing in copper within a matter of minutes was unbelievable. The move may have been exaggerated on a day when copper trade was thin globally, with the London Metal Exchange closed for a U.K. holiday.
Nobody could understand why there was such a volatility, whether there were some traders who may have been caught in a wrong-way bet on copper, triggering the surge or it was a combination of buy stops being activated above the contract record highs and a lack of selling with London closed.
Both these commodities are fundamentally not so strong, but Speculative and Technical buying could push the prices of Crude Oil to $130 a barrel at NYMEX and Copper to $5 a pound at COMEX.
Source: Commodity Online
Hyundai Heavy Wins Oil Tanker Order at Record Price
Wednesday, 07 May 2008
Hyundai Heavy Industries Co., the world's largest shipbuilder, won an order for three oil tankers from Greece at a record price of more than $156 million each as rising crude prices spur demand. The Very Large Crude Carriers, or VLCCs, will be built for Marmaras Navigation Ltd., Ulsan, South Korea-based Hyundai Heavy said in an e-mailed statement yesterday. The ships will be delivered in the first quarter of 2011.
Ship prices are rising to records for a fifth year as shipbuilders pass on higher steel costs to customers and as demand for vessels to carry fuel and consumer goods outstrips supply. Shipyards have backlogs stretching into 2012, prompting them to increase production.
The price of a 300,000 deadweight-ton VLCC was $152 million at the end of March, 4.1 percent more than the $146 million at the end of last year, according to London-based Clarkson Plc, the world's largest shipbroker.
Crude oil traded near a record $120.36 a barrel in after- hours trading in New York today on speculation demand will rise during the peak summer driving season in the U.S. and ahead of the Beijing Olympics Games.
Hyundai Heavy is expanding capacity as it builds two of the world's largest docks and extends the length of existing ones in South Korea to meet demand. Operations on the new facilities are expected to start later this year.
Hyundai Heavy gained 1 percent to close at 366,000 won in Seoul. The stock has fallen 17 percent this year, compared with a 2 percent decline in South Korea's benchmark Kospi index.
Source: Bloomberg
How to drop your anchor. Not so easy.
Releasing powerful and visual fluke anchor design tool
Wednesday, 07 May 2008
To avoid or manage the consequences of dragging anchor when being installed on a congested seabed, particularly where the soil is layered, the anchor behaviour must be reliably predicted. To deal with this, DNV is launching DIGIN, a powerful fluke anchor design tool with a state-of-the-art graphical user interface. The devastating consequences of the hurricanes Ivan in 2004 and Katrina and Rita in 2005, together with other weather-related catastrophes, have led to a sharper focus on the reliability of the mooring systems of mobile drilling units.
“In the Gulf of Mexico, for example, many rigs are increasing their number of mooring lines and having their anchors upgraded. In Norway, the Petroleum Safety Authority (PSA) has increased its focus on the anchor installation tension at locations where anchor drag should be avoided because of congested seabeds (e.g. pipelines),” says Rune Dahlberg, senior principal engineer at DNV.
Joint development of DIGIN
Based on this reality, many companies in the oil industry have shown great interest in an existing, but internal, DNV version of the DIGIN software, a powerful design tool for fluke and plate anchors in clay. To make this tool available also to the industry, Dahlberg explains that a DNV Joint Industry Project was completed in early 2008. The result is now providing an external version of the existing DIGIN tool.
DIGIN is integrated with DNV’s DeepC software package, which provides a number of new advantages. Using the modelling and program logistics facilities in this package, DIGIN now has an efficient graphical user interface for program input, execution, output and results in a ready-to-report format.
Heavy requirements
The requirements when designing and installing fluke anchors are to:
• Predict the drag distance for selected anchors and check that the project tolerance level is met
• Specify a required anchor installation tension which satisfies the governing safety criteria
• Identify and communicate the significance of different combinations of anchor size, fluke angle and installation tension in relation to the actual soil conditions.
In answer to these requirements, the new DIGIN program provides a scalable anchor database with ‘calibrated’ models of the most common fluke ‘and drag-in plate’ anchors, including the most recent types of deepwater anchors used by the industry, e.g. Vryhof Stevpris NG and Bruce Dennla Mk3.
Broad feature list
DIGIN investigates the behaviour of the anchors for a plane condition. It performs a stepwise penetration where equilibrium for each of the depth increments is calculated independently of the previous step. The penetration direction of the anchor at each depth increment is the basis for the penetration path.
The tool calculates the anchor line geometry from the fairlead to the anchor, which can either be a fixed point (padeye of a pile, suction anchor, plate anchor) or a fluke anchor. The anchor line can be divided into a number of segments with different properties.
The anchor is modelled as members further divided into elements for the application of interaction stresses and integration of these up to forces. The equilibrium for forces and moments is sought between anchor and anchor line. The anchor models in DIGIN were calibrated through back-fitting analysis of instrumented full-scale anchor tests, which also served as a basis for validation in the program.
Source: DNV
Keppel Fels snares $512m Ensco rig order
Wednesday, 07 May 2008
Keppel Fels (KepFels) has won a US$512 million contract for an ultra-deepwater semi-submersible drilling rig from oil drilling major Ensco. The Ensco 8504 will be the fifth semi-submersible being built by the KepFels for Ensco and is scheduled to be delivered in the second half of 2011. Keppel Corp owns KepFels through Keppel Offshore & Marine (Keppel O&M).
'We see the deepwater market as a significant catalyst for our future growth and expanding our deepwater fleet to meet the sustained market demand,' said Ensco chairman, president and chief executive officer Daniel Rabun. 'We are very pleased that all five of our new Ensco 8500 series semi-submersible rigs are being built by KepFels. Having constructed all our recent new-build jack-ups, KepFels has been the largest contributor in helping us create our premier rig fleet.'
Source: Sea Trade Asia
Baltic Index Rises to 4-Month High on Atlantic Vessel Shortage
Wednesday, 07 May 2008
The Baltic Dry Index, a measure of shipping costs for commodities, rose to a four-month high after a reported jump in exports from Argentina increased speculation about a shortage of vessels in the Atlantic. The index tracking transport costs on international trade routes advanced 274 points, or 2.9 percent, to 9,855 points, according to the Baltic Exchange in London. That's the highest since Dec. 14. Prices have advanced for four consecutive weeks, the longest winning streak since October.
``We've got people jumping over each other to pick up the ships that are available for May,'' Steve Rodley, co-manager of Global Maritime Investments Ltd.'s $278 million shipping hedge fund, said by phone from London. ``There have been good reasons all year why the market hasn't really taken off, but we've been pushing gunpowder further and further down the gun.''
Harvests in Argentina, the world's second-largest soybean exporter, have accelerated on dry weather and 67 percent of the crop was collected by May 2. Production may be disrupted if farmers act on threats to block highways to protest a new levy on overseas soybean shipments.
The farmers staged a three-week strike before suspending it for 30 days on April 2. It was the biggest anti-government protest since Argentina's financial crisis of 2001.
Prices for grains such as soybeans, corn, wheat, and minerals such as iron ore reached records this year, buoyed by demand and supply disruptions.
Hire Rates
Hire rates within the Baltic's benchmark advanced for every class of ship, including handymaxes, capable of hauling 50,000 metric tons, up to capesizes, which carry loads of as much as 170,000 tons. Rising prices for hauling coal and bulk commodities benefit shipping companies such as Navios Maritime Holdings Inc., Genco Shipping & Trading Ltd. and DryShips Inc.
Coal derivatives, or financial instruments used to bet on future prices, rose to a record. The fuel for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year advanced $2.50, or 1.8 percent, to $142.50 a ton as of 4 p.m. in London, according to ICAP Plc.
The contract is influenced by freight rates that can account for as much as half the price of delivered coal. ICAP has about 30 percent of the trade in coal derivatives.
Source: Bloomberg
12:53AM Ormat Tech beats by $0.07, misses on revs (ORA) 52.50 : Reports Q1 (Mar) earnings of $0.24 per share, $0.07 better than the First Call consensus of $0.17; revenues rose 12.5% year/year to $69.4 mln vs the $76.4 mln consensus.
InPlay briefing.com May 6,2008
It was "Capri", a 172.500 DWT Capesize, don't know the owner. The contractor was South-Korean.
Time charter (T/C) contracts seem to become longer and longer and leave fewer ships to the spot-market, hence high spot prices.
PDE $43.14 Pride International, Inc. Announces Agreement to Sell Platform Rig Fleet
Tuesday May 6, 6:55 pm ET
HOUSTON, May 6, 2008 (PRIME NEWSWIRE) -- Pride International, Inc. (NYSE:PDE - News) today announced that it has entered into a definitive agreement to sell its fleet of platform rigs and related equipment to Blake International, LLC for $66 million in cash. The platform rig fleet consists of eight units in the U.S. Gulf of Mexico, of which four are under contract, two units under contract in Mexico and two units previously retired from service. The sale is expected to close on or before July 15, 2008, subject to certain closing conditions.
The sale of the platform rig fleet is consistent with Pride's stated strategic direction to focus its offshore drilling operations in deepwater and other high specification assets.
Pride International, Inc., headquartered in Houston, Texas, is one of the world's largest offshore drilling contractors, operating a fleet of 64 rigs, including two deepwater drillships, 12 semisubmersible rigs, 28 jackups, 10 platform rigs, five managed deepwater rigs and seven Eastern Hemisphere-based land rigs. The Company also has three ultra-deepwater drillships under construction with expected deliveries in 2010 and 2011.
Dry bulk shipping: A ten year contract with dayrate USD 62.000!! Never heard before about this long t/c, and longer contracts usually are cheaper. This is really good price (includes bunker costs). FYI:
Cape 10-yr T/C USD 62,000!
Tuesday 6. may. 2008 fixtures (spot prices):
Capesize: +422 to 15.133 = +5072 USD to 183.124 USD/day
Panamax: +343 to 9464 = +2756 USD to 76.010 USD/day
Supramax: +83 to 5559 = +870 USD to 58.126 USD/day
Handysize: +72 to 2899
Stock Lobster. Did you see that WSJ article: "Housing Crisis is Over"? (my post little lower). What's your take? I'm just thinking about those dividend paying, downbeaten housingmarket stocks (JRT AFN IMB), you know. Time to buy?
Xanadu (divvy fan)
Is this true?
The Housing Crisis Is Over
By CYRIL MOULLE-BERTEAUX
May 6, 2008; Page A23
The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.
How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.
Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.
Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what's going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.
The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.
Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.
Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.
The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.
In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.
The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That's the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high – but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.
Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.
Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won't stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.
Many pundits claim that house prices need to fall another 30% to bring them back in line with where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.
Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today's house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.
This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.
When the rate of house-price declines halves, there will be a wholesale shift in markets' perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.
More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.
A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets' perception of risk related to housing, the financial system, and the economy.
We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.
Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in New York.
Milner. Another American junior company in offshore service business is DeepDown (DPDW.ob $0.86 now). Growing steadily. More good information about DPDW you will get from their iHub board. Take a look.
WEL - as well as DPDW - seem to be growing in their business. Slowly but steadily.
WEL $2.15 Boots & Coots Reports First Quarter Results
Monday May 5, 4:34 pm ET
Company Reports Second Consecutive Record Revenue Quarter
HOUSTON--(BUSINESS WIRE)--Boots & Coots International Well Control, Inc. (AMEX:WEL - News), announced net income of $5.1 million, or $0.07 per diluted share for the first quarter ended March 31, 2008, compared to $0.5 million, or $0.01 per diluted share for the same period last year. Revenues for the quarter were $45.0 million compared to $22.3 million for the first quarter of 2007. EBITDA (earnings before interest, income taxes, depreciation and amortization; see the reconciliation and rationale for this non-GAAP financial measure below) was $9.8 million, or 21.9% of revenues for the quarter compared to $2.7 million, or 12.3% of revenues for the first quarter of 2007.
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“Led by two international well intervention projects and higher international response activity, the first quarter generated record revenue for Boots & Coots,” stated Jerry Winchester, president and chief executive officer. “Our well intervention business increased 82% compared to the first quarter of last year, and the utilization rate on our hydraulic workover business increased sequentially from 42% at the end of last year’s fourth quarter to 50% by the end of the first quarter.”
“Our strategic initiatives have helped us increase Boots & Coots’ global presence and integrate the company’s service lines, such as expanding pressure control rental tools into our international locations as well as domestically in North and East Texas,” continued Mr. Winchester. “Additionally, a recovery project in offshore India should help maintain momentum in the well intervention segment in the second quarter.”
Business Segment Results
Well Intervention
For the quarter ended March 31, 2008, the Well Intervention segment generated revenues of $37.9 million and contributed EBITDA of $7.2 million, compared to revenues of $20.8 million and EBITDA of $2.4 million for the first quarter of 2007. The EBITDA margin was favorable due to increased activity partially offset by higher third-party costs associated with two international Safeguard projects.
Response
For the first quarter of 2008, the Response segment generated revenues of $7.1 million and contributed EBITDA of $2.7 million, compared to revenues of $1.4 million and EBITDA of $0.4 million for the first quarter of 2007. During the 2008 first quarter, the Company experienced a higher level of international response activity, primarily in Africa.
Conference Call
Boots & Coots will discuss 2008 first quarter results via a conference call and Webcast tomorrow, May 6, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time). The dial-in number for the call is 866-831-6272, passcode ‘Boots & Coots’. To listen to the live Webcast, log on to www.boots-coots.com/investor/invest.htm and click on the ‘2008 First Quarter Earnings Webcast’ link. A replay of the Webcast will be available on the investor relations page of the Company’s Website within 24 hours of the call. The call will also be available for replay for 30 days by dialing 888-286-8010, passcode 76022451.
WEL $2.15 Boots & Coots Reports First Quarter Results
Monday May 5, 4:34 pm ET
Company Reports Second Consecutive Record Revenue Quarter
HOUSTON--(BUSINESS WIRE)--Boots & Coots International Well Control, Inc. (AMEX:WEL - News), announced net income of $5.1 million, or $0.07 per diluted share for the first quarter ended March 31, 2008, compared to $0.5 million, or $0.01 per diluted share for the same period last year. Revenues for the quarter were $45.0 million compared to $22.3 million for the first quarter of 2007. EBITDA (earnings before interest, income taxes, depreciation and amortization; see the reconciliation and rationale for this non-GAAP financial measure below) was $9.8 million, or 21.9% of revenues for the quarter compared to $2.7 million, or 12.3% of revenues for the first quarter of 2007.
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“Led by two international well intervention projects and higher international response activity, the first quarter generated record revenue for Boots & Coots,” stated Jerry Winchester, president and chief executive officer. “Our well intervention business increased 82% compared to the first quarter of last year, and the utilization rate on our hydraulic workover business increased sequentially from 42% at the end of last year’s fourth quarter to 50% by the end of the first quarter.”
“Our strategic initiatives have helped us increase Boots & Coots’ global presence and integrate the company’s service lines, such as expanding pressure control rental tools into our international locations as well as domestically in North and East Texas,” continued Mr. Winchester. “Additionally, a recovery project in offshore India should help maintain momentum in the well intervention segment in the second quarter.”
Business Segment Results
Well Intervention
For the quarter ended March 31, 2008, the Well Intervention segment generated revenues of $37.9 million and contributed EBITDA of $7.2 million, compared to revenues of $20.8 million and EBITDA of $2.4 million for the first quarter of 2007. The EBITDA margin was favorable due to increased activity partially offset by higher third-party costs associated with two international Safeguard projects.
Response
For the first quarter of 2008, the Response segment generated revenues of $7.1 million and contributed EBITDA of $2.7 million, compared to revenues of $1.4 million and EBITDA of $0.4 million for the first quarter of 2007. During the 2008 first quarter, the Company experienced a higher level of international response activity, primarily in Africa.
Conference Call
Boots & Coots will discuss 2008 first quarter results via a conference call and Webcast tomorrow, May 6, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time). The dial-in number for the call is 866-831-6272, passcode ‘Boots & Coots’. To listen to the live Webcast, log on to www.boots-coots.com/investor/invest.htm and click on the ‘2008 First Quarter Earnings Webcast’ link. A replay of the Webcast will be available on the investor relations page of the Company’s Website within 24 hours of the call. The call will also be available for replay for 30 days by dialing 888-286-8010, passcode 76022451.
We have the same problem in Finland. Screaming lack of skilled blue collar workers but too much academics, many of them unemployed now. That's the result of free university education. We import workers from Russia, Poland, Estonia, even from Philippines.
Raser to Hold Groundbreaking Ceremony and Press Conference for Utah Geothermal Power Project
Monday May 5, 8:45 am ET
Raser to Construct First Utah Geothermal Power Plant in 20 Years
Senator Orrin Hatch to Participate in Ceremonies for Renewable Energy Project
PROVO, Utah--(BUSINESS WIRE)--Raser Technologies, Inc. (NYSE Arca:RZ) announced today that they will hold a groundbreaking ceremony for beginning the construction phase of the first geothermal power plant built in Utah in 20 years. The groundbreaking ceremony in Beaver County, Utah will be followed by a press conference at the Energy and Geoscience Institute (EGI) building on the University of Utah campus in Salt Lake City, Utah. Senator Orrin Hatch, US Senator from Utah, has accepted Raser’s invitation along with state and county government officials to participate in the groundbreaking ceremony and press conference and will be available to discuss Utah’s efforts to reduce emissions from power production facilities and its efforts to meet the state’s newly legislated renewable portfolio standard to increase the amount of renewable power. The groundbreaking ceremony is scheduled for May 9, 2008, at the power plant project site in Beaver County at 11:00 a.m. local time. The press conference is scheduled for 2:00 p.m. local time at the offices of EGI on the University of Utah’s campus at 423 Wakara Way, Salt Lake City, Utah.
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Raser previously announced the initial results of drilling the geothermal production well on the site and stated that the results suggested sufficient heat and flow of geothermal fluids to produce the planned 11 megawatts of geothermal power. Raser also recently announced a power purchase agreement to sell the power produced by the plant to the City of Anaheim and anticipated delivery of the power before December 15, 2008.
“We are pleased with the progress we have made on this geothermal power project and anticipate the completion of the project within the next six months,” stated Brent M. Cook, Raser’s Chief Executive Officer. “Our geothermal power plant is designed to provide baseload renewable energy with virtually no harmful emissions. We have already begun to take delivery of the UTC power generation units and expect that the remainder will be ready once site preparations are completed.”
About Raser Technologies
Raser (NYSE Arca:RZ) is a publicly-traded, environmentally-focused technology licensing and development company operating in two business segments. Raser’s Power Systems segment is seeking to develop clean, renewable geothermal electric power plants and bottom-cycling operations, incorporating licensed heat transfer technology and Raser’s Symetron™ technology developed internally by its Transportation and Industrial Technology segment. Raser’s Transportation and Industrial Technology segment focuses on extended-range plug-in-hybrid vehicle solutions and using Raser’s award-winning Symetron™ technology to improve the torque density and efficiency of the electric motors and drive systems used in electric and hybrid-electric vehicle powertrains and industrial applications. Further information on Raser may be found at: www.rasertech.com.
Me too. IF they are so much simpler in their mechanism (as the article says), electric cars will be a boom because of that!
GM HYBR.OB $4.26 Hybrid Technologies Remains a Market Driver for the Evolution of the Electric Vehicle
With rising concerns of air pollution, and gas prices inching toward $4 a gallon, it’s no wonder electric powered vehicles are gaining popularity. Hybrid Technologies (OTCBB: HYBR) is a concept and brand development corporation utilizing lithium-powered technology to fuel its off road cars; more than $100 million of venture investments were made in the battery market last year – a market expected to flourish with the rising demand for electric vehicles (EVs).
While hybrid vehicles typically cost more than gasoline-fueled vehicles, they are generally more dependable. The cars require no oil change or tune ups, and have 1/10 less parts to maintain than a gas car; EVs have no engines, transmissions, spark plugs, valves, fuel tanks, tailpipes, distributor starters, clutches, mufflers or catalytic converters.
EVs produce 98 percent fewer pollutants than gas cars – only about 4 percent of electric generation is produced from oil, reducing emissions and the dependence on oil. Additionally, fuel cells consume four times the amount of electricity as EVs.
There arguments that EVs require more infrastructure and additional implementation costs; however, according to the U.S. Department of Energy, sufficient excess generating capacity exists each night to charge approximately 180 million EVs. This squashes the notion that massive investments will be required for new power generation and transmission infrastructure to support the rising EV trend.
Hybrid Technologies’ vehicles run an average of 80 mph, up to 120 miles. The LiV RUSH hits 0-60 in 5.9 seconds, takes up to 10 hours to charge, and is equipped with an LCD touch screen that displays the vehicles operations such as miles remaining, power consumption, each cells’ charge level, battery temperature, drive time, distance traveled and average speed. Hybrid Technologies’ line of products includes five cars and one all terrain vehicle running under the company’s LiV trademark, a British Embassy Mini Cooper, a chopper, moped and the “commanding cycle.”
Big names such as FedEx Corp. are also seeking green alternatives; the company recently announced it has tracked more than two million miles of revenue service from its fleet of hybrid-electric trucks. The trucks improve fuel economy by 42 percent, reduce gas emissions by 30 percent, and slash particulate pollution by 96 percent. The company currently has 170 hybrid vehicles on roads around the world.
According to Electric Vehicle Market Statistics, the EV industry hit $31.1 billion in global sales in 2005, and is expected to grow 7.3 times that by 2015. While gas vehicles still largely outnumber EVs on the road, more than 1,000 companies such as Hybrid Technologies are paving the way for a greener future with innovative developments.
Hybrid Technologies closed the week at $4.26, after spiking to $4.70 Wednesday morning.
NAT $35.72 Strong earnings, dividend up 136%!
Nordic American Tanker Shipping Ltd. (NYSE: NAT) - Announces Dividend and Earnings in respect of the 1st Quarter of 2008
Monday May 5, 4:39 am ET
HAMILTON, BERMUDA--(MARKET WIRE)--May 5, 2008 --
Hamilton, Bermuda, May 5th, 2008
Nordic American Tanker Shipping Ltd. ("Nordic American" or "the Company") today announced its results for the 1st quarter of 2008. The Company's results improved substantially in 1Q08 compared with the two proceeding quarters. Dividend for 1Q08 of $1.18 was 136% per share up on 4Q07 when the dividend was $0.50 per share. The strong spot market during 1Q08 produced time charter earnings equivalent to $46,600 per day for our vessels in the spot market - compared with an average of about $27,000 per day during 4Q07. The strong market has continued in the second quarter. So far in 2Q08 the spot freight rate level for our vessels is significantly higher than what we achieved for 1Q08. The Company has now declared a dividend for 43 consecutive quarters since the autumn of 1997 when our first three vessels were delivered.
Highlights:
* The Board of Directors has declared a dividend of $1.18 per share
for the 1st quarter of 2008. The dividend is expected to be paid
on June 3rd, 2008, to shareholders of record as of May 23rd,
2008.
* Net income for 1Q08 was $0.78 per share based on the average
number of shares outstanding during the quarter - 29,975,312 -
the same number of shares issued and outstanding as of December
31st, 2007.
* In 1Q08 total offhire was 28 days related to planned drydockings.
* Our fleet now consists of 14 double hull suezmax tankers
including the two newbuildings to be delivered in 4Q09 and in
April 2010. In the autumn of 2004 the Company had three suezmax
tankers.
* We are now starting to see the income and cost benefits from
consolidation of the commercial and technical functions; a
development that can be expected to continue.
* The conversion of oil tankers into dry cargo vessels and into
vessels for the offshore oil industry has continued, thereby
moderating the growth in the world tanker fleet. Our two
newbuildings are on schedule with planned deliveries in 4Q09 and
April 2010. However, a general tendency of delays at some yards
can now be expected, dampening the supply growth of tanker
tonnage.
* In April the Company extended its $500 million Credit Facility by
three years - from September 2010 up to September 2013 - on the
same terms as agreed when the Credit Facility was established in
September 2005.
More of the French policy and economy. Click the link - it's a long story (read the comments):
http://www.economist.com/world/europe/displaystory.cfm?story_id=11289076
The European Union and Russia
Divide, rule or waffle
May 1st 2008
From The Economist print edition
The European Union cannot agree over how to deal with Russia. That suits the Kremlin just fine
SEEN from outside, one might imagine that the European Union (population 495m, GDP of $16.8 trillion) was a rather intimidating neighbour for Russia (population 142m, GDP of $1.3 trillion). Yet the reality is the other way round. In recent years Russia has played a canny game of divide and rule against the EU, building cosy bilateral relations with Germany and Italy especially, but also with Austria, Bulgaria, the Netherlands and Greece.
That makes other countries, and many Eurocrats, uneasy. They would like the EU to bargain more effectively with Russia, particularly over energy. But how? For now, the relationship is based on an outdated partnership and co-operation agreement (PCA), signed in 1997. Talks on renewing it are long overdue. But they show no sign of starting. Last year the obstacle was a Polish veto, prompted by a Russian embargo on Polish meat exports. But that was resolved after a charm offensive by Radek Sikorski, the Polish foreign minister, who was once a notable hawk on Russia.
Now talks on a new PCA are stymied again, this time because of a veto by Lithuania. The Lithuanians argue that the previously agreed negotiating position is too soft and too limited, given what they see as Russia's slide towards autocracy at home and aggression abroad. An EU foreign ministers' meeting in Luxembourg on April 29th ended in deadlock (though it did sign a deal that may clear the way for Serbia, a country wobbling into Russia's orbit, to become a candidate for membership).
Other EU countries are cross with the Lithuanians, accusing them of belated and clumsy diplomacy, and of posturing with an eye to a general election this autumn, in which the ruling coalition is lagging behind pro-Russian parties. The Poles, who agreed to drop their veto of a new PCA in return for a lifting of the meat ban, say they must honour their side of the deal they struck with Russia. Many west European countries also hope that the arrival of Dmitry Medvedev as Russian president could be a chance to put their relationship on a friendlier footing. In any case, the previous negotiating mandate has already been adapted to reflect, at least partly, Lithuania's desire for stronger language on energy (Russia has blocked an oil pipeline to Lithuania's refinery since 1996, claiming that it needs “repairs”).
Yet the Lithuanians want more. They demand explicit mention of Russia's relations with such neighbours as Georgia, citing the Kremlin's increasingly strong support for the breakaway enclaves of Abkhazia and South Ossetia. This week the Russians claimed Georgia was planning to invade Abkhazia and said they would boost their peacekeeping forces, promising to respond forcefully to any Georgian attack. The Georgians have retaliated by threatening to block Russia's application to join the World Trade Organisation. The Lithuanians see all this as an ominous threat to their own security. “We are in the front line. If Georgia goes, we are next,” argues a Lithuanian official.
The Lithuanians also want the EU to be tougher over justice. In particular, they complain that the Kremlin is not helping track down those responsible for a Soviet-backed attempted putsch in Lithuania in early 1991 that killed 14 people and for the execution of eight border guards shortly afterwards. “We have had 22 Litvinenkos and no co-operation from Russia,” says the official. His irritation may be understandable (Britain is also furious with the Kremlin for refusing to co-operate over the murder of a Russian exile with British citizenship, Alexander Litvinenko, in London in 2006). But an unwillingness from Russia to investigate such crimes is nothing new, and is therefore harder to portray as a sinister new twist.
Diplomats still hope to launch negotiations on a new PCA before the next EU-Russia summit in Siberia in June. Reopening discussion on the negotiating mandate may not help Lithuania: some countries want it to be softer, not tougher, says one foreign minister. And none of this seems to bother the Russians much. Their ambassador in Brussels, Vladimir Chizov, says his country would be delighted to deal with the EU if only it would decide what it actually wants. The impasse also makes it easier for national governments to justify doing bilateral deals with Russia. Italy made a barely veiled threat along these lines this week. Greece chose the same day formally to sign up to South Stream, a Kremlin-backed Black Sea pipeline that many see as a direct rival to the EU's own plans in the region. The outgoing Italian prime minister and former European Commission president, Romano Prodi, also said he had turned down (for now, at least) a Russian offer to head the South Stream consortium.
In practice a new PCA is unlikely to make much difference. Despite the obsolescence of the old one, trade between Russia and the EU has more than tripled since 2000. In negotiating a new one, Russia would, on past form, use its bilateral ties with big countries to get its way in what ought to be multilateral negotiations. And it is not clear that any new agreement will stick. Russia has explicitly said that it will not ratify the energy charter it signed in 1994, which would have required it to give third parties access to its gas pipelines. As Katinka Barysch, of the London-based Centre for European Reform, notes drily, “the Russians have a somewhat different approach to law, so whether you can aim to solve all problems with a legal document is open to doubt.”
Click the link to see the picture :) :
http://www.economist.com/world/europe/PrinterFriendly.cfm?story_id=11293629
Argentina
Cristina in the land of make-believe
May 1st 2008 | BUENOS AIRES
From The Economist print edition
Dashing hopes of change, Argentina's new president is leading her country into economic peril and social conflict
SHE romped to an easy victory in last year's presidential election by promising to maintain Argentina's impressive economic performance while easing its social tensions and rebuilding its foreign relations. Yet just five months after Cristina Fernández succeeded her husband, Néstor Kirchner, in the Casa Rosada, Argentina is worse off on all three counts. Already, her government looks in disarray. It has provoked a tax revolt by farmers. On April 24th, it lost its most important new face when Martín Lousteau resigned as economy minister over a policy disagreement. The price of Argentina's bonds has plunged as investors show little confidence in the government.
With the economy having grown at over 8% a year since 2003, when it began a vigorous recovery from an earlier financial collapse, Mr Kirchner basked in popularity. He was helped by record prices for Argentina's farm exports but pumped up the economy further, with dollops of public spending and an undervalued currency. He brushed off worries about inflation, strong-arming businesses into freezing prices and ordering an underling to doctor the consumer-price index.
During her campaign, Ms Fernández led some analysts to believe that she would be more moderate than her combative husband. But any such hopes have been quickly dashed. She has kept most of his ministers, his policies and his rhetoric. According to unofficial calculations, inflation has reached 25% (officially, it is 9%).
Ms Fernández shows little sign of curtailing the dash for growth at any price. Mr Lousteau's mistake seems to have been his intention to act on her campaign promise to restore credibility to official statistics. His replacement, Carlos Fernández, is a non-entity. In practice, Mr Kirchner himself seems still to be in charge of economic policy. “We don't want a cooling of the economy because that always brought us unemployment, poverty, exclusion and economic concentration,” he told a recent rally of the ruling Peronist movement.
But overheating and inflation are already bringing Argentines some of these woes—and if unchecked will in time bring all of them. The statistics agency has stopped releasing poverty figures. Using an independent estimate of inflation, the poverty rate has risen from 27% in 2006 to 30%, with 1.3m Argentines descending into poverty last year, according to calculations by Ernesto Kritz, a labour economist in Buenos Aires.
To tame inflation and stabilise the economy, the government needs to allow the peso to appreciate, curb spending growth and energy subsidies, and raise interest rates. The longer such measures are postponed, the more painful and unpopular they will be.
Ms Fernández is already in a weaker position than her husband was. Several recent opinion polls give her an approval rating of only 35%. Mr Kirchner used lavish fiscal transfers to buy the support of provincial governors and mayors. But it is getting harder for his wife to match that.
To compensate for Mr Kirchner's pre-election spending binge, in March she raised taxes on agricultural exports. Buoyed by record world commodity prices and a favourable exchange rate, farmers had hitherto grudgingly accepted the levies. But the tax increase, together with rising inflation, cut the profit margin on soyabeans to just 6%, for example. The farmers launched an unprecedented campaign of strikes, roadblocks and pot-banging protests in city centres.
Taken aback, Ms Fernández's response was tellingly authoritarian and unstatesmanlike. She accused the farmers of greed and, improbably, of seeking a military coup. Government rent-a-mobs of piqueteros (unemployed protesters receiving state welfare payments) were unleashed against the farmers and their supporters. That backfired. “Cristina managed to do in three weeks what Argentina's farmers couldn't over 50 years: unite them,” says Gustavo Martínez of Salvador University in Buenos Aires. The farmers suspended their protests to allow talks to take place. The government seems to be seeking a way to back down.
Even in foreign policy, in which Mr Kirchner showed no interest, Ms Fernández has had little success. Her expressed desire to improve relations with the United States foundered on a complicated campaign-finance imbroglio. Last year customs officers at a Buenos Aires airport impounded $800,000 in cash being brought in by Guido Antonini Wilson, a Venezuelan-American who had arrived on a private plane rented by the Argentine government. Two days after Ms Fernández's inauguration, American prosecutors charged five men who they said threatened Mr Antonini, who lives in Miami, and claimed to have evidence that the money was for her presidential campaign.
The president seemed to blame the United States government, rather than its courts, for what she called “a garbage operation” against her. A planned visit to Europe last month was curtailed because of the farmers' protests. While foreign investment pours into neighbouring Brazil, Ms Fernández has done nothing to assure investors that they will enjoy predictable policies while she is in power. The government signed a contract this week for a $3.7 billion high-speed train from Buenos Aires to Córdoba, the first of its kind in Latin America, but it will be paid for with debt.
Ms Fernández still has plenty of time to correct her mistakes. She is blessed with a weak and divided opposition. Her husband has installed himself as president of the Peronist party, still Argentina's most formidable political machine. But the first couple's support is narrowing to not much more than the urban underclass organised by that machine.
After her bumpy start, Ms Fernández is being compared to Michelle Bachelet, the similarly hapless president of neighbouring Chile, with whom she is friendly. But at least Ms Bachelet is making her own mistakes. The suspicion in Buenos Aires is that Cristina is paying the price for her husband's pigheadedness, even if that is something she shares. “The Kirchners' golden age is over,” says Sergio Berensztein, a political consultant. “Now they'll have to get used to it.”
Sarkozy's difficult year
May 1st 2008
From The Economist print edition
The French are right to be disappointed in their president
A YEAR is a short time to achieve much in politics, but Nicolas Sarkozy, who was elected president of France 12 months ago, led the world to expect quick results. He set ambitious goals for how fast he would put France back to work. Writing before the election, he said that economic reforms should be enacted all at once, not sequentially; and that most of them should be pushed through in the first year, so that their benefits would come through before he had to face voters again.
Judged by his own standards, Mr Sarkozy's first year has been disappointing. After winning a strong mandate for change and a big majority in parliament, he started at the Elysée with characteristic fizz. But after a few symbolic battles, it all went flat. His reform agenda lost its focus, his fondness for compromise began to look like weakness, his highly publicised dalliance with (and later marriage to) Carla Bruni became a huge distraction—and his popularity slumped.
The story of the past year looks better abroad than it does at home. Mr Sarkozy promised to restore France to a central role in Europe and to mend its broken fences with America. Although his relationship with Germany's Angela Merkel has often been testy, he played a crucial part in helping her to resurrect the dead European Union constitution in the guise of the new Lisbon treaty. He has big plans for France's six-month stint in the EU presidency, which begins on July 1st, notably to press for a more potent European defence policy—though hopes that he might promote reform of the notorious common agricultural policy are fading (see article).
Across the Atlantic, France's image has been transformed from the bad old days of Mr Sarkozy's predecessor, Jacques Chirac. The new president has won kudos both for his decision to dispatch an extra battalion to Afghanistan and for his determination to overturn the legacy of another right-wing predecessor, Charles de Gaulle, by returning France to NATO's integrated military command. He has talked tough over Iran and been friendlier to Israel. And he has dropped Mr Chirac's kid-glove treatment of Russia and China. His foreign minister, Bernard Kouchner, a socialist who co-founded the charity Médecins Sans Frontières, has added a human-rights edge to a foreign policy too often blunted by commercial concerns.
Home is where their heart is
Yet it is what happens at home that matters most to France's voters. They picked Mr Sarkozy as their president because they realised that France needed a break with its past (in his word, a rupture). During the quarter-century of Presidents Mitterrand and Chirac, economic growth was mostly slower than Europe's average, unemployment (especially among the young) was consistently higher, public spending grew to over half of French GDP and the national debt rose faster than in any other big European country. Attempts at reform were stymied by trade unions and other vested interests, usually following the hallowed French tradition of taking to the streets.
Mr Sarkozy brought in some early reforms, including to universities and special pension regimes for public-sector workers. But as he acknowledged on television recently, he also made mistakes, and his reforms lost momentum (see article). Now he has embarked on a new round of changes, starting with the “economic modernisation” measures introduced this week by his finance minister, Christine Lagarde. The avowed aim is to increase competition and encourage entrepreneurship. Perhaps a fresh start will mean that Mr Sarkozy belatedly delivers the rupture that he once promised. But there are three reasons to doubt it.
The first is his loss of popularity. The polls released in the run-up to the anniversary were damning. He is the most unpopular first-year president in the history of the Fifth Republic, and his time in office so far is widely deemed to have been wasted. Presidential popularity matters, for in the French system an emasculated parliament has usually counted for less than the power of the street. If Mr Sarkozy sticks, as he must, to his more controversial reforms—to ports, schools, the labour market or the length of service needed for pensions, say—he is likely to have to face down strikes. Hostility towards him, which has increased not because of his reforms but thanks to his turbulent private life, will make that harder.
C'est l'économie, idiot
The second reason for concern is the economic outlook. So far Europe's economies have proved surprisingly resilient in the face of the credit crunch and an American recession. But the latest European Commission forecasts suggest growth is slowing sharply. The commission is also uttering dire threats about the resultant rise in France's budget deficit, so Mr Sarkozy will have little room for fiscal measures to sugar the pill of his more unpalatable reforms.
A skilful politician might exploit a slowing economy to give his reforms new wind, pointing out that hard times and a rising cost of living for ordinary folk strengthen the case for change. This is what Britain's Margaret Thatcher said in the early 1980s, when she insisted that the lady was not for turning. But nobody doubted the liberalising, free-market direction in which she wanted to push Britain, even if it took longer to get there than some now recall. This is not true of Mr Sarkozy—and here is the third reason for doubt.
The French president embodies a contradictory economic philosophy. In preaching reform and openly admiring the Anglo-American system, he seems to embrace liberalisation and more competition. But at the same time, he speaks loudly about protecting companies and jobs, and about the value of national champions. He may talk about intervention more often than he practises it, but his message is hardly likely to persuade France's hard-pressed (and cynical) voters of the merits of free markets.
One year on, in short, Mr Sarkozy has delivered less than he promised. There is little time for him to make up lost ground. Success is not impossible. But another bad year and he risks being written off as little better than Mr Chirac.
Angry China
May 1st 2008
From The Economist print edition
The recent glimpses of a snarling China should scare the country's government as much as the world
CHINA is in a frightening mood. The sight of thousands of Chinese people waving xenophobic fists suggests that a country on its way to becoming a superpower may turn out to be a more dangerous force than optimists had hoped. But it isn't just foreigners who should be worried by these scenes: the Chinese government, which has encouraged this outburst of nationalism, should also be afraid.
For three decades, having shed communism in all but the name of its ruling party, China's government has justified its monopolistic hold on power through economic advance. Many Chinese enjoy a prosperity undreamt of by their forefathers. For them, though, it is no longer enough to be reminded of the grim austerity of their parents' childhoods. They need new aspirations.
The government's solution is to promise them that China will be restored to its rightful place at the centre of world affairs. Hence the pride at winning the Olympics, and the fury at the embarrassing protests during the torch relay. But the appeal to nationalism is a double-edged sword: while it provides a useful outlet for domestic discontents (see article), it could easily turn on the government itself.
A million mutinies
The torch relay has galvanised protests about all manner of alleged Chinese crimes: in Tibet, in China's broader human-rights record, in its cosy relations with repellent regimes. And these in turn have drawn counter-protests from thousands of expatriate Chinese, from Chinese within the country and on the internet.
Chinese rage has focused on the alleged “anti-China” bias of the Western press, which is accused of ignoring violence by Tibetans in the unrest in March. From this starting-point China's defenders have gone on to denounce the entire edifice of Western liberal democracy as a sham. Using its tenets to criticise China is, they claim, sheer hypocrisy. They cite further evidence of double standards: having exported its dirtiest industries to China, the West wants the country to curb its carbon emissions, potentially impeding its growth and depriving newly well-off Chinese of their right to a motor car. And as the presidential election campaign in America progresses, more China-bashing can be expected, with protectionism disguised as noble fury at “coddling dictators”.
China's rage is out of all proportion to the alleged offences. It reflects a fear that a resentful, threatened West is determined to thwart China's rise. The Olympics have become a symbol of China's right to the respect it is due. Protests, criticism and boycott threats are seen as part of a broader refusal to accept and accommodate China.
There is no doubt genuine fury in China at these offences; yet the impression the response gives of a people united behind the government is an illusion. China, like India, is a land of a million mutinies now. Legions of farmers are angry that their land has been swallowed up for building by greedy local officials. People everywhere are aghast at the poisoning of China's air, rivers and lakes in the race for growth. Hardworking, honest citizens chafe at corrupt officials who treat them with contempt and get rich quick. And the party still makes an ass of the law and a mockery of justice.
Herein lies the danger for the government. Popular anger, once roused, can easily switch targets. This weekend China will be commemorating an event seen as pivotal in its long revolution—the protests on May 4th 1919 against the humiliation of China by the Versailles treaty (which bequeathed German “concessions” in China to Japan). The Communist Party had roots in that movement. Now, as then, protests at perceived slights against China's dignity could turn against a government accused of not doing enough to safeguard it.
Remember the ides of May
Western businessmen and policymakers are pulled in opposite directions by Chinese anger. As the sponsors of the Olympics have learned to their cost, while consumer- and shareholder-activists in the West demand they take a stand against perceived Chinese abuses, in China itself firms' partners and customers are all too ready to take offence. Western policymakers also face a difficult balancing act. They need to recognise that China has come a long way very quickly, and offers its citizens new opportunities and even new freedoms, though these are still far short of what would constitute democracy. Yet that does not mean they should pander to China's pride. Western leaders have a duty to raise concerns about human rights, Tibet and other “sensitive” subjects. They do not need to resign themselves to ineffectiveness: up to a point, pressure works: China has been modestly helpful over Myanmar, North Korea and Sudan. It has even agreed to reopen talks with the Dalai Lama's representatives. This has happened because of, not despite, criticism from abroad.
Pessimists fear that if China faces too much such pressure, hardliners within the ruling elite will triumph over the “moderates” in charge now. But even if they did, it is hard to see how they could end the 30-year-old process of opening up and turn China in on itself. This unprecedented phenomenon, of the rapid integration into the world of its most populous country, seems irreversible. There are things that could be done to make it easier to manage—including reform of the architecture of the global institutions that reflect a 60-year-old world order. But the world and China have to learn to live with each other.
For China, that means learning to respect foreigners' rights to engage it even on its “internal affairs”. A more measured response to such criticism is necessary not only to China's great-power ambitions, but also to its internal stability; for while the government may distract Chinese people from their domestic discontents by breathing fire at foreigners, such anger, once roused, can run out of control. In the end, China's leaders will have to deal with those frustrations head-on, by tackling the pollution, the corruption and the human-rights abuses that contribute to the country's dangerous mood. The Chinese people will demand it.
http://www.economist.com/opinion/displayStory.cfm?story_id=11293645&fsrc=nwlbtwfree
GM Stuffit. Look, General Motors is betting on cellulosic ethanol (click the link to see readers' comments):
GM Enters Strategic Relationship with Mascoma for Cellulosic Ethanol
1 May 2008
Process
Mascoma is developing a Consolidated Bioprocessing process that results in a simpler, lower-cost pathway for cellulosic ethanol. Click to enlarge. Source: DOE BESC
General Motors Corp. and Mascoma Corp. have entered a strategic relationship to develop cellulosic ethanol based on Mascoma’s Consolidated Bioprocessing single-step biochemical conversion of non-grain biomass into low-carbon alternative fuels. (Earlier post.)
The relationship, which includes an undisclosed equity investment by GM, complements an earlier investment in Coskata, a cellulosic ethanol startup that uses a thermochemical syngas-to-ethanol process to make the fuel from non-grain sources. (Earlier post.)
Taken together, these technologies represent what we see as the best in the cellulosic ethanol future and cover the spectrum in science and commercialization. Demonstrating the viability of sustainable non-grain based ethanol is critical to developing the infrastructure to support the flex-fuel vehicle market.
—GM President Fritz Henderson
Mascoma Corporation was founded in 2005 to pursue the development of advanced cellulosic ethanol technologies based on work developed in Professor Lee Lynd’s labs at Dartmouth College across a range of cellulosic feedstocks. Lynd is one of the scientific founders of Mascoma, as is Professor Charles Wyman.
Mascoma is developing a Consolidated Bioprocessing (CBP) approach to cellulosic ethanol. CBP involves the use of a single microorganism or group of organisms to break down plant matter through a one-step conversion process of biomass into biofuels—a single-step cellulose-to-ethanol method. This lowers costs by limiting additives and enzymes used in other biochemical processes. Mascoma’s process consists of a mild pretreatment followed by the introduction of cellulose-utilizing and ethanol-fermenting microbes that both hydrolyze and ferment the sugars into ethanol.
Mascoma has raised significant equity from venture capital investments and secured more than $60 million in state and federal grants, including the recent awarding of a $26 million grant from the US Department of Energy.
Based in Boston, privately-held Mascoma is using proprietary microorganisms developed at the company’s laboratories in Lebanon, N.H., and is collaborating with research partners globally to identify and patent additional biomass-to-ethanol technologies.
Mascoma is one of the partners in the DOE BioEnergy Science Center (BESC). BESC, led by Oak Ridge National Laboratory (ORNL), is strongly focused on the fundamental understanding and elimination of biomass recalcitrance—the resistance of cellulosic biomass to enzymatic breakdown into sugars.
In November 2007, Mascoma acquired Celsys BioFuels, Inc., headquartered in Indianapolis, Indiana. Celsys was formed in 2006 to commercialize cellulosic ethanol production technology developed in the Laboratory of Renewable Resources Engineering (LORRE) at Purdue University. The Celsys technology is based on proprietary pretreatment processes for multiple biomass feedstocks, including corn fiber and distiller grains. (Earlier post.)
Mascoma is testing its CBP technology and expects to begin producing ethanol later this year at its demonstration plant under construction in Rome, NY. Mascoma also has partnered with The University of Tennessee to develop a switchgrass-to-ethanol pilot facility near Knoxville, TN, and is pursuing opportunities in the state of Michigan.
GM’s multi-dimensional involvement with Mascoma will include projects to evaluate materials and other fuels for specific engine applications as well as collaborating on Mascoma’s efforts to expand its commercialization projects globally, including promotion of increased biofuels distribution.
Resources
*
Introduction to Mascoma (October 2007)
http://www.greencarcongress.com/2008/05/gm-enters-strat.html#more
More oil to haul.
Petrobras Finds Make Stock Most Expensive Oil Company (Update2)
By Alexander Ragir
Enlarge Image/Details
May 2 (Bloomberg) -- The biggest oil discovery in the Western hemisphere in three decades and speculation about an even larger deposit turned Petroleo Brasileiro SA into the world's most expensive energy producer.
Petrobras, as the company is known, trades at 17.2 times profits after rallying 87 percent in the past year. The shares are twice as expensive as Russia's OAS Lukoil and Royal Dutch Shell Plc of the Netherlands, and 50 percent more than Exxon Mobil Corp., as investors focus on the Rio de Janeiro-based company's oil finds rather than its falling profits.
``You just never know when they're going to make the next announcement,'' said William Landers, who oversees $8.2 billion in Latin American stocks at BlackRock Inc. in Plainsboro, New Jersey, including shares of Petrobras. ``You don't want to be on the wrong side of that trade.''
The Brazilian government's controlling stake in Petrobras may add to the stock's allure on speculation the company will get favorable treatment in exploiting oil. President Luiz Inacio Lula da Silva's administration pulled 41 exploration licenses from an auction after Petrobras found the Tupi oil field Nov. 8, a discovery that caused the stock to jump 14 percent, the biggest rise in nine years. Tupi, 155 miles (250 kilometers) off Brazil's coast, may have 8 billion barrels of recoverable oil.
Petrobras shares rose another 5.6 percent on April 14 after the head of Brazil's oil agency said the offshore Carioca prospect may hold the equivalent of 33 billion barrels of crude, large enough to be the world's third-biggest field. Chief Executive Officer Jose Sergio Gabrielli said later Petrobras is still exploring to determine Caricoa's size.
Bovespa's Gain
The oil company helped lead Brazil's Bovespa to a 6.3 percent jump on April 30, making it the world's best-performing equity index this year among the 20 biggest markets, after Standard & Poor's assigned the country an investment grade credit rating. Petrobras added 1.9 percent to 43 reais today as the Bovespa increased 2.2 percent.
Petrobras, now the world's ninth-biggest company, with a market value of $248.3 billion, is still half the size of Exxon, the largest oil producer.
Fourth-quarter profit at Petrobras declined about 3 percent as costs increased faster than sales. The company produced an average 2.34 million barrels of oil, natural gas and natural-gas liquids a day in March, down from 2.35 million barrels a day the month before.
Petrobras isn't earning enough, said Saulo Sabba, who oversees Rio-based Maxima Asset Management's Maxima Participacoes FI em Acoes fund, the best performer among Brazil-based equity and hedge funds last year. Sabba said he's ``very underweight'' Petrobras.
Profits Delayed
``It needs to show production growth today,'' Sabba said. ``This is what's going to influence the results this year and next. To add a long-term position, I don't think this is the time.''
Roberto Koeler, who helps manage the equivalent of $3 billion in assets at Icatu Harford in Rio, has Petrobras as his largest holding even though he says the stock is overpriced. Petrobras's price-earnings ratio was 8.77 a year ago and below 5 in June 2004, according to data compiled by Bloomberg.
The company's valuation surpassed PetroChina Co.'s in November after shares of the Beijing-based oil company posted their biggest monthly retreat ever.
Lukoil, based in Moscow, and Royal Dutch Shell, based in the Hague, trade at 7.77 and 7.6 times earnings, respectively. Irvine, Texas-based Exxon's PE ratio is 11.60. The rest of the world's 10 largest oil producers are also cheaper than Petrobras.
Brazil's biggest company by market value looks less expensive relative to the oil it owns.
Barrel Price
Petrobras trades for the equivalent of 34.91 reais per barrel of proven reserves, or $20.58, according to Bloomberg data. That's cheaper than Exxon's $22.19 a barrel and Royal Dutch Shell's $23.80 per barrel of oil equivalent in reserve. Under this measure, Petrobras is still more expensive than BP and Lukoil, which fetch $14.75 and $4.71 a barrel, Bloomberg data show.
Pumping oil from the Brazilian discoveries, parts of which are 32,000 feet (9,800 meters) below the ocean's surface, will require boring almost twice as far down as the world's deepest offshore well.
``Once Petrobras has the technology to start production on these finds, then we can start looking at the fundamentals,'' Sabba said.
The potential profits make Petrobras a long-term investment and its price relative to potential earnings worth it, said Craig Shaw, who helps manage $6 billion in emerging-market assets at Harding Loevner Management in Somerville, New Jersey.
``It takes a long time to really find out what you got, but early indications are quite striking,'' Shaw said. ``It's a very good company as it stands, and when you throw in the potential of what may be found, yeah, that does add to the valuation.''
To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.
Last Updated: May 2, 2008 17:39 EDT
Volatile industry? Tanker rates from $44.300 on April 3 to $148.000 today. That's the shipping world.
Good divvys coming .1-2Q
Iran Doubles Oil Stored in Tankers, Bolstering Rates (Update3)
By Alaric Nightingale
Enlarge Image/Details
May 2 (Bloomberg) -- Iran, OPEC's second-largest oil producer, more than doubled the amount stored in tankers idling in the Persian Gulf, sending ship prices higher as demand for some of its crude fell, people familiar with the situation said.
The 10 tankers hold at least 20 million barrels of oil, equal to about 5 days of the country's output, said the people, who asked not to be identified because the information isn't public. Rates for tankers have more than tripled since April 8, based on data from the Baltic Exchange and ship-fuel prices.
While oil rose to a record $119.93 a barrel on April 28, Iran has a glut of its sulfur-rich crude as refineries that can process the fuel shut down for maintenance. The discount on Iranian Heavy crude compared with Oman and Dubai petroleum has more than doubled since the start of the year, according to data compiled by Bloomberg.
``There's not much demand for heavier crudes such as those from Iran,'' said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. ``It's the peak of the refinery maintenance season in Asia, and Iran also sells oil to Europe and the Mediterranean, where some refineries are having turnarounds,'' or seasonal shutdowns for repairs, he said.
Freight derivatives that traders use to bet on, or hedge, swings in the benchmark price for shipping oil to Asia climbed 2.5 percent to the equivalent of about $100,500 a day for May cargoes as of 10:08 a.m. in Oslo, according to Justin King, a broker of the contracts at Imarex NOS ASA.
Available Supertankers
Iran's use of ships for storage cut the supply of available supertankers, owned by companies including Hamilton, Bermuda- based Frontline Ltd. and Euronav NV, based in Antwerp, Belgium. The number of double-hull very large crude carriers, or VLCCs, available to rent within the next 30 days dropped to 28 from 56 a month ago, according to Paris-based broker Barry Rogliano Salles.
Frontline, the world's biggest operator of VLCCs, climbed 13.5 kroner, or 4.8 percent, to 297 kroner in Oslo. The shares earlier rose to a record 298 kroner. Euronav, Belgium's largest tanker owner, advanced 34 cents, or 1.3 percent, to 26.74 euros.
The benchmark tanker rental rate for voyages to Asia from the Middle East is $148,000 a day, compared with $44,300 on April 8, according to prices from the London-based Baltic Exchange and a formula from Oslo-based RS Platou Shipbrokers A/S.
Iran previously stored its Soroush and Nowruz heavy crudes in state-owned tankers because the sulfur content made the fuel too difficult for refiners to process. Previous buyers of the oil include SK Corp., South Korea's biggest refiner, and Reliance Industries Ltd., India's biggest company by market value.
Processing Capacity
Limited domestic processing capacity in Iran requires the country to import about 40 percent of its gasoline because national refineries can't make enough. Lighter crude with less sulfur is costlier as it yields more profitable products such as gasoline.
Iran typically keeps two or three supertankers on standby to deliver crude, Per Mansson, a tanker broker at Nor Ocean Stockholm AB, said by phone. ``There's a lack of on-land storage and this enables quick supply'' to buyers in Europe and Asia, he said.
Soroush and Nowruz crudes contain about 3.5 percent sulfur. Syria's Souedieh, at 3.9 percent, is the only grade in the Middle East with more, according to data from New York-based Energy Intelligence Group.
Crude oil for June delivery rose $3.03, or 2.7 percent, to $115.55 a barrel as of 11:36 a.m. on the New York Mercantile Exchange.
Heavy Crude
The discount for Iranian Heavy crude relative to lighter Omani and Dubai oil is at $3.25 a barrel, compared with $1.49 in December, data on Bloomberg show. Saudi Arabia is the largest producer in the Organization of Petroleum Exporting Countries.
The VLCCs, each designed to ship about 2 million barrels of crude, have been idling at either Kharg Island in the Persian Gulf or the nearby Soroush terminal for at least a week, according to AISLive data compiled by Bloomberg.
State-owned National Iranian National Iranian Tanker Co. is also hiring vessels in the single-voyage, or spot, market for contracted shipments for the national oil company, the people said. Normally, the shipping line would use its own vessels, they said.
The following is a list of VLCCs whose last reported location was Kharg Island or the Soroush terminal and when they were due to arrive. It normally takes 24 hours to 48 hours to load a cargo of crude and set sail.
Ship Name Expected arrival Last reported
in Iran destination
Noor Dec. 15, 2007 Kharg Island
Najm Feb. 20 Kharg Island
Hengam March 11 Kharg Island
Nesa March 28 Kharg Island
Noah April 2 Kharg Island
Huwayzeh April 3 Kharg Island
Damavand April 11 Kharg Island
Hoda April 14 Kharg Island
Daylam April 23 Kharg Island
Nabi April 24 Soroush Terminal
To contact the reporter on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net
Last Updated: May 2, 2008 11:40 EDT
Iran Doubles Oil Stored in Tankers, Bolstering Rates (Update3)
By Alaric Nightingale
Enlarge Image/Details
May 2 (Bloomberg) -- Iran, OPEC's second-largest oil producer, more than doubled the amount stored in tankers idling in the Persian Gulf, sending ship prices higher as demand for some of its crude fell, people familiar with the situation said.
The 10 tankers hold at least 20 million barrels of oil, equal to about 5 days of the country's output, said the people, who asked not to be identified because the information isn't public. Rates for tankers have more than tripled since April 8, based on data from the Baltic Exchange and ship-fuel prices.
While oil rose to a record $119.93 a barrel on April 28, Iran has a glut of its sulfur-rich crude as refineries that can process the fuel shut down for maintenance. The discount on Iranian Heavy crude compared with Oman and Dubai petroleum has more than doubled since the start of the year, according to data compiled by Bloomberg.
``There's not much demand for heavier crudes such as those from Iran,'' said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. ``It's the peak of the refinery maintenance season in Asia, and Iran also sells oil to Europe and the Mediterranean, where some refineries are having turnarounds,'' or seasonal shutdowns for repairs, he said.
Freight derivatives that traders use to bet on, or hedge, swings in the benchmark price for shipping oil to Asia climbed 2.5 percent to the equivalent of about $100,500 a day for May cargoes as of 10:08 a.m. in Oslo, according to Justin King, a broker of the contracts at Imarex NOS ASA.
Available Supertankers
Iran's use of ships for storage cut the supply of available supertankers, owned by companies including Hamilton, Bermuda- based Frontline Ltd. and Euronav NV, based in Antwerp, Belgium. The number of double-hull very large crude carriers, or VLCCs, available to rent within the next 30 days dropped to 28 from 56 a month ago, according to Paris-based broker Barry Rogliano Salles.
Frontline, the world's biggest operator of VLCCs, climbed 13.5 kroner, or 4.8 percent, to 297 kroner in Oslo. The shares earlier rose to a record 298 kroner. Euronav, Belgium's largest tanker owner, advanced 34 cents, or 1.3 percent, to 26.74 euros.
The benchmark tanker rental rate for voyages to Asia from the Middle East is $148,000 a day, compared with $44,300 on April 8, according to prices from the London-based Baltic Exchange and a formula from Oslo-based RS Platou Shipbrokers A/S.
Iran previously stored its Soroush and Nowruz heavy crudes in state-owned tankers because the sulfur content made the fuel too difficult for refiners to process. Previous buyers of the oil include SK Corp., South Korea's biggest refiner, and Reliance Industries Ltd., India's biggest company by market value.
Processing Capacity
Limited domestic processing capacity in Iran requires the country to import about 40 percent of its gasoline because national refineries can't make enough. Lighter crude with less sulfur is costlier as it yields more profitable products such as gasoline.
Iran typically keeps two or three supertankers on standby to deliver crude, Per Mansson, a tanker broker at Nor Ocean Stockholm AB, said by phone. ``There's a lack of on-land storage and this enables quick supply'' to buyers in Europe and Asia, he said.
Soroush and Nowruz crudes contain about 3.5 percent sulfur. Syria's Souedieh, at 3.9 percent, is the only grade in the Middle East with more, according to data from New York-based Energy Intelligence Group.
Crude oil for June delivery rose $3.03, or 2.7 percent, to $115.55 a barrel as of 11:36 a.m. on the New York Mercantile Exchange.
Heavy Crude
The discount for Iranian Heavy crude relative to lighter Omani and Dubai oil is at $3.25 a barrel, compared with $1.49 in December, data on Bloomberg show. Saudi Arabia is the largest producer in the Organization of Petroleum Exporting Countries.
The VLCCs, each designed to ship about 2 million barrels of crude, have been idling at either Kharg Island in the Persian Gulf or the nearby Soroush terminal for at least a week, according to AISLive data compiled by Bloomberg.
State-owned National Iranian National Iranian Tanker Co. is also hiring vessels in the single-voyage, or spot, market for contracted shipments for the national oil company, the people said. Normally, the shipping line would use its own vessels, they said.
The following is a list of VLCCs whose last reported location was Kharg Island or the Soroush terminal and when they were due to arrive. It normally takes 24 hours to 48 hours to load a cargo of crude and set sail.
Ship Name Expected arrival Last reported
in Iran destination
Noor Dec. 15, 2007 Kharg Island
Najm Feb. 20 Kharg Island
Hengam March 11 Kharg Island
Nesa March 28 Kharg Island
Noah April 2 Kharg Island
Huwayzeh April 3 Kharg Island
Damavand April 11 Kharg Island
Hoda April 14 Kharg Island
Daylam April 23 Kharg Island
Nabi April 24 Soroush Terminal
To contact the reporter on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net
Last Updated: May 2, 2008 11:40 EDT