Archive
Reuters blog archive
from Breakingviews:
Russian economy could lose in state energy grab
By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
It may be tempting to view Vladimir Putin’s drive to reassert state control over Russia’s energy sector as comeuppance for the oligarchs who benefited from the looting of the country’s natural resources in the 1990s. But restructuring the industry around two national champions, Gazprom and Rosneft, is ultimately bad for competition. International oil companies may benefit from greater opportunities to bring their expertise to Russia, but investors ogling opportunities in the shifting landscape should apply a hefty Kremlin discount.
Assimilation is proceeding rapidly, led by Rosneft. The state-controlled group will become the world’s largest listed crude producer once it completes its proposed $55 billion acquisition of TNK-BP - the country’s third-biggest oil company - from UK-based BP and a gaggle of billionaire oligarchs. Last week Rosneft scored a coup in the gas market, hardly its traditional stronghold, when it beat Gazprom’s smaller rival Novatek to an $80 billion deal to supply a big Russian utility. That’s a lot of business flowing to the state. The shares of privately owned Novatek fell 8 percent on the news.
There’s a cold logic to what Putin is doing. With production at many mature Soviet-era fields topping out, Russia is looking to the offshore Arctic and other hard-to-reach places for oil and gas. Exploiting those opportunities requires international expertise. So Rosneft has hired professional managers from Western oil majors and struck exploration and development deals with the likes of Exxon, Statoil, and Eni. It has even accepted BP as a strategic investor with seats on its board, while keeping the future of Russian oil exploration firmly under Kremlin control.
from Breakingviews:
Rosneft buy may leave Russian oil industry wanting
By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Rosneft will become the world’s biggest listed crude producer following its $55 billion swoop on Russia’s third-biggest oil company. Igor Sechin’s new behemoth also expects to generate $3 billion to $5 billion of cost synergies from scooping up its smaller rival. If Rosneft can apply TNK-BP’s oilfield know-how to improve production at its own fields, the cost and revenue benefits of the Russian oil shake-up could indeed climb high.
from Global Investing:
Baton passing to the emerging markets consumer
Is there a change of sector leadership underway within emerging markets?
For years, commodities and energy delivered world-beating returns to emerging market investors. Yet in recent years there are signs of a shift, says Todd Henry, equity portfolio specialist at T.Rowe Price.
With the China tailwind no longer as strong as before demand for oil and metals will not be as robust as in the past decade, Henry says. But in China as well as elsewhere, disposable incomes have risen as a result of the fast economic growth these countries experienced in the past decade.
from The Great Debate:
‘Energy independence’ is a farce
It can be hard to find areas of agreement between the presidential candidates on economic or domestic policy. Tuesday night's debate, though, revealed one exception: energy policy. Alas, what it also revealed is that both President Obama and Governor Romney are making their policies based on a false premise, and they are pandering to Americans' ignorance instead of telling them the truth.
The second question in the debate at Hofstra University came from audience member Phillip Tricolla, and was directed to Obama: "Your energy secretary, Steven Chu, has now been on record three times stating it's not policy of his department to help lower gas prices. Do you agree with Secretary Chu that this is not the job of the Energy Department?" The premise that the Energy Department can lower gas prices is incorrect. But Obama chose not to confront Tricolla with the hard truth -- that global economic forces have put gasoline prices on a long-term upwards trajectory, and that trajectory is beyond our government's control.
from Breakingviews:
U.S. energy boom spurs economic vs political clash
By Christopher Swann
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
America’s energy boom is spurring a clash between the realms of politics and economics. Meaningful exports of oil have been banned for almost a century. But with output surging and crude fetching a 20 percent discount at home, producers want to ship it overseas. BP, Royal Dutch Shell and four others have applied for limited licenses to do just that. Unblocking trade could benefit everyone.
from The Great Debate:
The U.S. cannot afford to tax energy producers more
Gasoline prices are at all-time highs. As a result, energy policy concerns echo in boardrooms and family rooms across the U.S. At a recent House Energy Committee hearing on “The American Energy Initiative,” Harold Hamm, the top energy adviser of Republican presidential candidate Mitt Romney, warned that President Obama’s proposed repeal of the energy tax provisions for oil and natural gas producers (including a manufacturing tax deduction that all U.S. manufacturers receive) would decrease drilling activity by 40 percent. Can the U.S. afford that?
President Obama wants to end the right of major U.S.-based oil companies to deduct tax payments they make to foreign governments for their overseas operations. He also wants to end tax credits that are allowed to every oil and gas company. Romney wants to protect American competitiveness by keeping the tax benefits intact for oil companies. Let’s look deeper at the energy industry and the taxes energy companies pay.
from Breakingviews:
Indian power sector bailout is a good first step
By Andy Mukherjee
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
India’s electricity distributors have become zombies. The industry’s $35 billion debt overhang, equivalent to 2 percent of the country’s GDP, means it has few resources to invest in transmission and distribution. The result is massive underinvestment that chokes off economic growth - 11 percent of power demand is unmet - and causes crippling grid failures like the ones that plunged most of the country into darkness in July.
from The Great Debate:
Ending renewable energy’s villainy
The Republican and Democratic National Conventions mark the beginning of the end for the 2012 presidential campaign and – one hopes – the end of a regrettable chapter in American politics: a time when supporting real economic growth by encouraging American entrepreneurs became less important than throwing political punches.
For the better part of a year, politicians have paid lip service to aiding entrepreneurship, arguing that to pull our economy out of a recession we need to support small businesses and growing industries. Despite this, one sector filled with entrepreneurship and successful companies has been maligned, ignored, and in some instances vilified (Solyndra being the most prominent example). What’s so wrong with the U.S. solar, wind, biofuels and other clean, renewable energy industries?
from Breakingviews:
Coal’s slide poses broader risks for Indonesia
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Coal’s slide poses a problem for Indonesia. As the biggest exporter of coal used for generating power, the country’s fortunes might seem directly tied to China and India’s economic slowdown. In fact, exports account for only a sliver of GDP. The bigger risk is that falling demand spooks foreign investors, undermines a provincial boom, and hurts poor workers.
from Breakingviews:
BP’s path to Macondo settlement just got harder
By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Macondo is back. After March’s $7.8 billion settlement with Gulf Coast fishermen and other private plaintiffs, a deal with the U.S. government over civil and potential criminal liability for the 2010 Gulf of Mexico disaster seemed to be in reach for BP. It probably still is - the two sides are still in talks ahead of a civil trial in January. But sharp rhetoric in new filings by U.S. government lawyers is a reminder that the UK oil major faces a tough path to securing a favourable outcome. The market’s reaction - wiping $5 billion off BP’s market value - looks appropriate.
