Archive for the ‘central asia’ Category

Mongolia to profit from Chinese copper demand

flag of mongoliaMarc Faber, the Swiss-born, Thai-based investor known affectionately to many as “Dr. Doom,” remarked to Bloomberg recently that Mongolia is “torn between two lovers – China and Russia,” and is a country with huge potential. “The country is incredibly resource rich, another Saudi Arabia, next to the largest population in the world.”

Earlier this month Mongolia was approved for a $229.2 million stand-by loan from the International Monetary Fund to help the country stabilize its economy. “Mongolia has been severely affected by the global financial crisis through a sharp reduction in the prices of its main mineral exports, notably copper,” said IMF Deputy Managing Director and Acting Chairman Takatoshi Kato. “The authorities are committed to restoring macroeconomic stability and putting in place the conditions for strong and equitable growth.”

Today, however, copper prices rose to its highest in almost six months in London based on speculation that demand from China, the world’s largest buyer of the metal, would decrease inventories. According to Bloomberg,China’s 4 trillion-yuan ($590 billion) economic-stimulus plan spurred the first increase in manufacturing in six months and a sixfold surge in bank lending in March. “Only 2% of global copper reserves are in China, and they can still expect a strong industrial boom for the next couple of years,” remarked one analyst.

Mark Mobius, an emerging market fund manager for Templeton Asset Management, concurs. “We continue to see countries such as China form alliances to secure the long-term provisions of commodities,” Mobius said. “While in the short-term, the country will be impacted by the recent correction in commodity prices, a long-term uptrend in commodity prices will benefit Mongolia.” Additionally, the country has attracted roughly $1 billion of private equity in the past 24 months, according to Robert Lepsoe, its honorary consul.

Mongolia’s MSE Top 20 Index has fallen 8.7% this year, compared with the 5.8% drop in the MSCI Asia Pacific Index.

Heritage makes a move on oil in Kurdistan

oil donkeyHeritage Oil Plc, an independent upstream exploration and production company, provides the market with information in relation to the Taq Taq oil field in the Kurdistan Region of Iraq (“Kurdistan”) and an update on the proposed acquisition of Genel Energy International Ltd (“Genel”). Further to its announcement on 5 October 2009, Heritage issues this announcement in part to comply with its obligations under the FSA Disclosure and Transparency Rules in relation to the Taq Taq licence in which Genel has an interest.

Heritage (LSE:HOIL) understands that since 14 October 2009, all production from the Taq Taq oil field has been diverted into the local market. Production for export has ceased, in coordination with the other operators in the region, and export production is not expected to recommence until a payment mechanism is in place. Exports commenced on 1 June 2009, so far no revenue has been received for any exported production and none is expected until there is an agreement on the payment mechanism between the Federal Government of Iraq and the Kurdistan Regional Government.

According to Genel, the current gross production capacity of the Taq Taq oil field is approximately 35,000 bopd which is expected to increase to approximately 60,000 bopd by the end of December 2009 as new production facilities are completed. Average gross production for the Taq Taq oil field in September 2009, according to Genel, was 29,580 bopd, of which approximately 52% was sold into the domestic market, in part driven by the opening of the Erbil refinery in July. Current local demand for oil products in Kurdistan, as estimated by Douglas-Westwood Limited, an independent provider of business research and analysis, is approximately 130,000 bpd and this has historically been met through imports from neighbouring countries or other parts of Iraq.

Elections took place in Kurdistan at the end of July and a new government is in the process of being formed. A caretaker government is currently in place whilst the new Prime Minister forms his government, which is expected to be completed by early November. Heritage and Genel continue to monitor progress on the formation of the new government and expect formal approval of the proposed transaction once the new oil and gas committees are formally appointed, together with an understanding of the pricing and payment mechanism which is to be established for international sales from Kurdistan.

In addition, Heritage understands the FSA investigation previously disclosed continues and that the parties concerned are assisting with the FSA’s enquiries. Heritage confirms that discussions with Genel are continuing with the terms of the merger nearing formal agreement. Both sides remain committed to successfully completing the proposed transaction, however the transaction is taking longer to conclude than had originally been estimated. We hope the implementation agreement can be signed and the prospectus published before the end of the year.

Tony Buckingham, Chief Executive Officer, commented: “The understanding we have obtained in the past few months of the Genel assets and the domestic market for petroleum products in Kurdistan means that we remain committed to the Genel Energy merger.

It will create a leading company with oil production, exploration and refining capacity in the Kurdistan Region and is expected to generate significant value for shareholders as well as substantial tax revenues for the people of Iraq. The transaction is taking longer to conclude than both parties had originally planned, however we believe the implementation agreement can be signed and the prospectus published by the end of the year.”

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It’s taken a while & it’s been an interesting experience, but am pleased to say that we released into public beta. For me personally, there have been a few challenges, “assisted” along the way by re-locating with my family from Switzerland to Slovakia.

The team at Connection Services who have designed & support the MSV platform have been excellent, especially when responding to an ever changing set of requirements. MyStockVoice started as this WordPress blog, where I could muse on my views on Emerging Markets & BRIC economies. A conversation with a friend who works in the City (London) encouraged me to look at doing something a little more. The original format, was a forum, then a newswire service & now it’s a fully fledged blog publication platform. So you can imagine how happy my colleagues at CSL were, when I tripped back every few months & said “right, this is what we are doing now”

Our aim at MSV is to provide an ever widening audience with value insights into what is rapidly becoming a major topic for hedge funds, investment managers & retail investors alike : BRIC & Emerging Markets. International stocks traded on US exchanges are becoming ever more popular, especially via Depositary Receipts (ADR,ADS,ADN) , for the more cautious or long minded, a number of ETF (Exchange Traded Funds) have sprung up to service the appetite to take part in these growing economies.

Covering all the major regions, MSV provides focussed channels into a variety of sectors & also specific categories for Macro Econmics, ADR & ETF investing. We are pleased to be working with some well established names from the investment community, along with faculties such as Knowledge at Wharton, the Economics Faculty at Beijing University, Skolkovo Business School in Moscow & Cranfiedl University in the UK.

Our strapline is “your community … your voice”  & to reflect this, we will be bringing our readers plenty of new unique content. Much of my time in the last two to three months has been spent contacting individual bloggers & also online media services that are based in the regions covered. In this way, we can present a “blend of thought”, that will allow our subscribers to formulate informed opinions on their own particular areas of interest.

So, enough jawing from me, but to close, Alex, Chris & myself would like to thank the team at CS & all the people that have had input into the project. We sincerely hope that you enjoy the MSV experience & are always open to new ideas, partnership opportunities & most of all feedback.

Many thanks


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EU pins hopes on Nabucco pipeline to disengage from Russian energy hegemony

nabuccoTurkey and four EU member states have signed a historic deal in Ankara allowing work to start on the Nabucco natural gas pipeline, which is aimed at allowing the European Union to tap directly into non-European gas reserves.

The Nabucco Intergovernmental Agreement that was signed by representatives of transit countries Turkey, Bulgaria, Romania, Hungary, and Austria, represents a huge symbolic step toward diversifying EU energy supplies. The project should carry gas reserves to Europe from the Caspian Sea region, Iraq, and the Middle East — and not from Russia, currently the EU’s biggest and most capricious supplier. At the ceremony, European Commission President Jose Manuel Barroso called Nabucco “a truly European project” that “will provide energy security to Turkey, to Southeast Europe, and to Central Europe.”

“I sincerely believe we are starting to confound the skeptics, the unbelievers,” Barroso said. “Some time ago people said that this project would not go ahead, that the negotiations seemed irrevocably blocked. Now we have an agreement and I believe this pipeline is now inevitable rather than just probable.”

EU officials insist Nabucco’s intention is not to pick a fight with Moscow, but they make no secret of the fact that Russia’s reputation as a supplier has taken a beating following repeated gas spats with Ukraine — and that finding reliable alternatives is now an EU priority.

The 3,300-kilometer Nabucco pipeline — which should run from eastern Turkey to the Austrian capital, Vienna — is expected to come online in 2014. When fully operational, it could carry 31 billion cubic meters (bcm) of gas annually and supply between 5-10 percent of the EU’s projected gas consumption in 2020.  Russia, the bloc’s largest external supplier, provided around one-quarter of the EU’s gas at the last reliable count.

“The consequences of the Nabucco project will reach far beyond simply laying down a pipeline and filling gas into it,” Hungarian Prime Minister Gordon Bajnai said in Ankara, hinting at the broad impolications for the 27-member EU. “This will have very significant, positive consequences in the economic, social, and political sense for all of our citizens.”

Nabucco has always been seen to have a political dimension, and Russia’s reliability as a provider has suffered in recent years, with many new EU member states distrustful of Moscow’s motives. But the European Commission’s energy spokesman, Ferran Tarradellas, told RFE/RL last week that moves to diversify EU energy supplies did not mean the bloc was turning its back on Russia.

“Nabucco is going to make a contribution — it’s going to [deliver] gas from different sources, through different transport routes, and therefore it’s going to bring more security of supply, more freedom of choice to European markets,” Tarradellas said. “But this doesn’t mean that we’re not going to go on working with Russia. On the contrary, Russia is very likely to remain our main supplier of gas and Nabucco has never been a project against Russia.”  Tarradellas said the EU has been “very transparent with our Russian friends.”

Senior Russian officials have stated publicly that the EU’s efforts to lessen its energy dependence on Moscow are driven by “Russophobia.” Privately, EU officials argue that regardless of Russian objections, the bloc must look out for its own energy security. They point out that most eastern member states are wholly dependent on Russian gas.

“You know our history with Russia and Ukraine,” one senior European Commission official commented recently, alluding to the recurrent price disputes between the two countries which saw half of the EU’s member states suffer debilitating gas shortages as Russia turned off the taps in January. Briefing journalists in Brussels, the official intimated more than once that enhancing EU member states’ security of supply and lessening their reliance on Gazprom amount to the same thing. The benefits of Nabucco in this regard, he said, will be felt from “Greece to Hungary” and in the Western Balkans, and will extend as far as Poland, Germany, and France — all of which will have access to the gas transported to Europe via the pipeline.

Nabucco has long been hampered by a lack of commitment from both suppliers and investors. Searching for the initial 8 bcm of gas needed annually to start up Nabucco, EU officials are looking to Azerbaijan’s Shah Deniz II gas field, projected to go online in September, to provide the necessary start-up volumes. Azerbaijan’s recent 500 million cubic meter deal to sell gas to Gazprom does not appear to worry Brussels, where officials say the deal is just a small portion of Azerbaijan’s overall gas output. EU sources also say Azerbaijan’s government thinks that country could produce “far more” gas than the 8 bcm needed to make Nabucco viable. There is talk of a possible 30 bcm being available from Azerbaijan alone by 2015. Given the mounting geopolitical risks in the South Caucasus, however, EU decision-makers are exploring alternatives as well.

Should anything go wrong with the South Caucasus transit corridor, Iraq is said to be in a position to step in and supply the minimum 8 bcm needed annually. Iraqi Prime Minister Nuri al-Maliki was attending the Ankara signing ceremonies. The bloc is setting its sights much higher, hoping to reach beyond Azerbaijan to the massive reserves held by the Central Asian states.

Tarradellas also said Turkmenistan is the next natural target for Nabucco after Azerbaijan.”Turkmenistan has large reserves that have been proven, so probably it’s going to be the next country that is going to be an important player on the Southern Corridor project. We have also contacts with Kazakhstan and with Uzbekistan as possible future suppliers.”

Turkmenistan has at least one gas field with a proven capacity of 4 trillion-14 trillion cubic meters — enough to keep Nabucco operational at its currently projected levels for at least 120 years. The EU is working with Azerbaijan and the Central Asian countries to set up a Caspian Development Corporation (CDC), a commercial enterprise tasked with establishing transit routes — possibly a pipeline — across the Caspian Sea.

But Brussels is now playing down earlier promises extracted from Ashgabat to guarantee the EU 10 BCM a year. This was a “political commitment,” the official said on July 10. He said the Central Asian countries would always keep their options open until the last possible moment to maximize their bargaining power and commercial advantage with regards to all prospective buyers.

The Brussels-based official also described Nabucco’s main impact on Turkey in terms of reducing that country’s dependence on the current dominant supplier, Gazprom. Nabucco’s gas flow, the official said, will be reversible, enabling Turkey to switch at will from Russian supplies to gas coming from the North Sea, Algeria or Libya.

Should Nabucco fail to tap into the Central Asian gas reserves, prospects for its large-scale expansion will remain bleak. The EU source said there are “no great hopes” for the Pan-Arab Pipeline which connects to Turkey via Syria, as most of the Middle Eastern gas is expected to move south.
Iran, with its large reserves, is not a “desirable” partner for Nabucco in the current political climate, in the words of the EU official. He also underlined the fact that Iran presently imports gas.

Given that the South Caucasus Pipeline from Azerbaijan to Georgia can currently handle only 10 bcm a year, there exists an obvious transit bottleneck. Officials in Brussels say the capacity of the pipeline could be doubled but decline to comment further. “The EU has no preference” as to the location or contractors of any other prospective pipelines, said one senior source.

The bloc’s casual stance could undermine prospects for the White Stream pipeline project, to run under the Black Sea from Georgia to Romania, recently elevated to the status of a priority EU project. Officials say Nabucco with its current prospects will offer a “very good” rate of return at a low risk. The EU itself has agreed to bankroll 250 million euros of the estimated total cost of 7.9 billion euros.

This article first appeared in Radio Free Europe

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