Barclays Capital said global spending on production will shrink 12pc to $400bn in 2009.
Source: Telegraph

Guilherme Estrella found an undersea lake of oil that may transform Brazil’s economy forever. Now, the exploration chief for Petroleo Brasileiro SA is at the center of a debate over who will profit from it. At stake is how much of Brazil’s newfound riches will be controlled by the state and how much will end up in the pockets of Exxon Mobil Corp., Royal Dutch Shell Plc and other oil companies hungry for new sources of crude. Estrella wants to make Western oil companies little more than hired help for government-controlled Petrobras, as his company is known.

“Petrobras is our space program,” Estrella, a 66-year-old geologist and socialist, said in a Sept. 23 interview in Rio de Janeiro. “Within it, the company contains the Brazilian nationalist spirit.”

A $110 drop in the price of oil since July may make it tougher for Estrella to get his way. Economies around the world are foundering amid the worst financial crisis since the Great Depression, and it may cost $600 billion to develop Brazil’s deepwater oil deposits, which could be worth $3 trillion at current prices.

Estrella has a powerful ally in Brazil President Luiz Inacio Lula da Silva, whom he has known for more than a decade and whose 2002 election victory was partly driven by criticism of the country’s 1997 decision to end Petrobras’s oil monopoly.

Estrella left Petrobras in 1992 after refusing to enact government-mandated job cuts. He moved to the mountain town of Novo Friburgo near his native Rio de Janeiro and became head of the local chapter of the Workers’ Party.

‘Getulista’ Stepfather

Estrella’s stepfather was a “Getulista,” or supporter of nationalist leader Getulio Vargas. Vargas created Petrobras in 1953 with the cry “O Petroleo e Nosso,” which means, “the oil is ours.”

When Vargas committed suicide in 1954 amid calls by the military for his resignation, Estrella remembers his school principal telling students to go home because “something important has happened.” When he got there, he found his stepfather in tears.

Estrella, who got training as a geologist at the University of Brazil in Rio de Janeiro and the University of Texas at Austin, was asked to return to Petrobras when Lula came to power in 2003. He was confident that he could do in Brazil what he had accomplished in Iraq in 1976, when he and his colleagues found the Manjoon field, the world’s 19th-largest.

“We have never accepted that our work would not succeed,” Estrella said. “We know that this is a great country.”

Oil Hunter
Few people have been involved in the discovery of more oil than Estrella, said Gerrard Demaison, a former Chevron Corp. geologist who is president of Capitola, California-based Petroscience2000.

“This guy’s work was prophetic and essential for finding the oil Brazil has today and making Petrobras what it is,” Demaison, 76, said in a telephone interview. “I would put him alongside the great petroleum geologists of the last century.”

Pumping the oil from Brazil’s so-called pre-salt deposits may prove harder than finding the reserves. Much of the crude is located more than 160 miles offshore in waters 2 miles (3.2 kilometers) deep and under a layer of salt. Over the next 20 years, it will cost $600 billion to extract the oil, according to Gustavo Gattass, an analyst at UBS AG in Rio de Janeiro.

That’s why it makes sense to sell more leases to big oil companies, said Delcido Amaral, Estrella’s predecessor at Petrobras and one of his critics.

Tupi Discovery
“If he’d stick to geology, he’d be fine, but I’m afraid his political ideas and those of his allies are going to damage the industry and put the country’s energy future at risk,” said Amaral, now a senator. “We need investment.”

The discovery of the Tupi prospect, which Petrobras said in November 2007 may hold 8 billion barrels of recoverable oil equivalent, was a sensation. Petrobras shares soared 40 percent from the Tupi announcement through May, and the company surpassed Microsoft Corp. and General Electric Co. to become the world’s fifth-largest company by market value, according to data compiled by Bloomberg.

Since May, oil prices collapsed and investors shifted money out of emerging-market stocks, dragging Petrobras down to No. 35 on the list, the Bloomberg data showed. Petrobras, the top performer among the world’s 10 biggest oil stocks in this year’s first five months, has had the biggest decline in the group since then, losing more than half of its market value.

Short of Cash
Irving, Texas-based Exxon Mobil, which had a $39 billion cash hoard as of Sept. 30, has fallen only 13 percent since the end of May. Petrobras, which plans capital spending of more than $22 billion a year, was forced to borrow from a state-owned bank last month because it was short of cash to pay taxes, according to the Energy Ministry.

Petrobras wasn’t alone in discoveries in the area around Tupi. Reading, England-based BG Group Plc, Galp Energia SGPS SA of Lisbon, Exxon Mobil, The Hague-based Shell and Hess Corp. of New York have leases nearby or stakes in Petrobras blocks.

An auction of more areas scheduled for the weeks after the Tupi announcement was called off. Since then, Brazilian leaders debated how to handle the development of the remaining two- thirds of the offshore reserves not yet leased.

Brazil has options other than its past approach of auctioning properties to the highest bidder, including production-sharing contracts that wouldn’t allow foreign companies to own the oil. Brazil also may create a new state oil company for the offshore prospects or increase its stake in Petrobras by giving fields to the company.

Making His Case
Estrella has made frequent visits in the past year to Brasilia, the nation’s capital, to consult with government officials discussing changes to oil rules and has made public comments on his preference for greater government control. He’s close to union officials who arranged protests against further sales of oil rights.

As a government committee’s review of oil-exploration rules dragged on, repeatedly missing deadlines to report conclusions, Estrella gained allies. Energy Minister Edison Lobao said there’s increasing support on the committee for reducing foreign access to Brazil’s hottest offshore oil prospects.

While promising to honor leases already sold to Exxon Mobil, Madrid-based Repsol YPF SA and other companies, Lobao said in a Nov. 13 interview that future exploration in the area around Tupi will likely be run by Brazil. Less promising areas will continue to be auctioned, he said.

“Foreign companies paid almost nothing for their concessions,” said Aloisio Mercadante, a Brazilian senator and an economic adviser to Lula. “Things have changed. There is less risk, and this country has every right to assert more control over its resources.”

Foreign Investment
Brazil needs foreign oil investment more than ever after the plunge in oil prices and tightening of credit markets, said Amaral, Estrella’s predecessor.

Marcio Mello, who with Estrella did a study on the geology of Brazil’s offshore oil regions, said he also sees the need for outside money.

“He’s a great geologist, one of the great oil hunters of all time, and he is an honest and decent man who pushes his people hard and has earned their respect,” said Mello, president of HRT Petroleum, a Rio de Janeiro consulting firm. “His political and economic ideas, on the other hand, are way out of date and not helpful.”

There are good reasons for BHP pulling the deal. The commodity markets have soured dramatically, hitting both groups’ cash flow prospects and removing the deal’s main, if unspoken, attraction – driving up prices in a bull market. Moreover, the divestments the EU hinted at would have been difficult to implement at a reasonable price when buyers are like gold dust.

But the crux is financing. Rio is saddled with $38bn (£25bn) of debt from last year’s top-of-the-market acquisition of Alcan, a Canadian aluminium producer. BHP has $6bn of net debt. So an identical fall in the enterprise value of both companies would hit Rio’s equity disproportionately hard. After Rio’s shares fell 35pc and BHP’s rose 13pc, both companies’ enterprise values were 3.6 times next year’s forecast ebitda. That makes one Rio share worth 1.4 BHP shares – far below the 3.4 BHP was offering.

BHP may have decided it would rather not be heavily geared as the world pitches into recession. Rio, though, is in a jam. It faces refinancing obligations of $9bn next year, which it should be able to meet through cash flows and existing short-term facilities. But if commodity prices keep falling – aluminium has plunged a third in three months – it will look increasingly uncomfortable.

With the deal scrapped, both sides have questions to answer. But those fired at Rio chief executive Tom Albanese may be the tougher. Albanese was spared a drubbing for his $38bn splurge on Alcan by a subsequent spike in the aluminium price, and the distraction of a bid from BHP. He has now lost both shields. By leaving its biggest rival in such a tight spot, BHP may have pulled off a sort of victory after all.

Russian nuclear power plant builder Atomstroyexport will by mid-December meet Turkey's request for further information on the company's bid to build a power plant, a senior company official said on Friday.

Atomstroyexport, acting through a consortium with Russian power producer Inter RAO UES and Turkey's Ciner Group, is competing in a tender to build four nuclear reactors in Turkey.

"Turkey has requested additional information on the project that we proposed at the tender. They have asked for clarification of details, including on the reactor and the construction timeframe. We will answer the questions by December 15," the source told RIA Novosti.

The Turkish government was scheduled to declare the winner of the tender in October, but has yet to do so.

Atomstroyexport, established in 1998, has completed or is working on reactors in Iran, Bulgaria, Hungary, the Czech Republic, Slovakia, China and India.

Source: DESTINIA
Análisis vía

Repsol YPF SA advanced in Madrid trading on reports that OAO Lukoil is in talks to acquire a stake of just under 30 percent in Spain's largest oil company. Repsol gained as much as 2.2 percent and traded up 30 cents at 14.25 euros as of 9:13 a.m. local time. The stock outperformed the Dow Jones Europe Stoxx Oil & Gas Index, which fell 1.5 percent. Lukoil may purchase Sacyr's 20 percent stake in Repsol and an additional 9.9 percent of its shares on the open market, EFE reported yesterday, citing people it didn't identify. Lukoil would be required to make an offer for the whole company if it bought more than 30 percent, EFE said.

The overall stake would be worth 5.1 billion euros ($6.37 billion) if taken as a direct percent of the Spanish oil company's market value of 17 billion euros as of Nov. 19.

Sacyr, Spain's worst-performing stock this year, increased 3.9 percent to 6.75 euros in Madrid.

Dmitry Dolgov, a spokesman for Lukoil, Russia's biggest non-state oil producer, declined to comment. Nobody from Repsol was immediately available for comment.

Sacyr remains open to discussions on any of its assets, a Sacyr spokeswoman, who asked not to be identified in line with company policy, said today by telephone.

Repsol operates five refineries in Spain, three in Argentina and one in Peru. The energy company has holdings in another refinery in Argentina and two in Brazil, giving the company a total refining capacity of 1.23 million barrels a day, according to the Madrid-based company's Web site.

Italian Refinery
In June, Lukoil agreed to pay Italy's ERG SpA 1.35 billion euros for 49 percent in a new venture that will control the 320,000 barrel a day Isab refinery, storage tanks, and a 99- megawatt power plant in Priolo, Sicily. The Russian company also has refineries in Bulgaria and Romania.

OAO Gazprom, Russia's natural-gas exporter, said Nov. 14 that it's not interested in a 20 percent stake in Repsol. Spain's government is opposed to state-run foreign companies buying into its strategic industries, Deputy Prime Minister Maria Teresa Fernandez de la Vega said earlier the same day.

The Spanish government wouldn't stand in the way of a Lukoil bid for 29.9 percent of Repsol, Cinco Dias reported today. The administration would prefer Lukoil, rather than Total SA of France, purchase the stake, the Spanish newspaper said, without saying how it got the information.

Crude oil fell for a fifth day, approaching $50 a barrel, as the contracting world economy increases concerns that demand for fuels will slow.

U.S. fuel use during the past four weeks averaged 19.1 million barrels a day, down 7 percent from a year ago, an Energy Department report said yesterday. Equities declined with the MSCI Asia Pacific Index dropping for a fourth day while the Dow Jones Industrial Average yesterday fell to the lowest since March 2003.

``The big picture remains one of weak demand, economic concerns and a falling market,'' said Antoine Halff, head of energy research at Newedge USA LLC in New York, in an interview with Bloomberg Television. ``U.S. demand has really been collapsing and dragging the OECD demand as well and we might end up with a contraction in global demand growth for the year.''

Crude oil for December delivery fell as much as 97 cents, or 1.8 percent, to $52.65 a barrel on the New York Mercantile Exchange. It was at $52.75 a barrel at 2:36 p.m. Singapore time. Yesterday, futures touched $52.79 a barrel, the lowest since Jan. 23, 2007.

Oil has dropped 64 percent since reaching a record $147.27 a barrel on July 11. Yesterday, December futures fell 77 cents, or 1.4 percent, to $53.62 a barrel, the lowest settlement since Jan. 22, 2007. The more active January futures contract was down 90 cents, or 1.7 percent, at $53.20 a barrel. December futures expire at the close of trading today.

``Everyone is looking at the demand and seeing it as a reason to sell,'' said Clarence Chu, a trader with options dealer Hudson Capital Energy in Singapore. ``People are looking at the Dow as an indication of how the economy is doing.''

Japan Exports Drop
In the latest evidence that the global recession is deepening, exports from Japan dropped at the fastest pace in almost seven years in October. Japan, the world's largest oil importer, fell into a recession last quarter.

Singapore will tomorrow confirm it entered a recession last quarter, joining Japan and Hong Kong. Gross domestic product in Asia's biggest oil-trading center declined at an annualized 6.3 percent pace from the second quarter, when it shrank 5.7 percent, according a Bloomberg survey.

Slipping oil and commodity prices caused the shares of explorers and producers to decline. Woodside Petroleum Ltd. fell 5 percent to A$32.25 in Sydney, its lowest price in three years. Cnooc Ltd. plunged 40 Hong Kong cents, or 7.2 percent, to HK$5.14.

U.S. Inventories
Oil prices also fell as U.S. crude inventories climbed because of declining demand for fuels. Crude-oil supplies rose 1.6 million barrels to 313.5 million barrels last week, the Energy Department said yesterday. Stockpiles were forecast to rise 1 million barrels, according to a Bloomberg News survey of analysts.

Gasoline inventories rose 539,000 barrels to 198.6 million barrels in the week ended Nov. 14, the report showed. Analysts surveyed by Bloomberg News were split over whether supplies of the motor fuel increased or declined.

U.S. fuel demand fell 5.2 percent in the first 10 months of this year, the biggest drop since 1981, the American Petroleum Institute said in a report yesterday.

Brent crude oil for January settlement fell as much as 97 cents, or 1.9 percent, to $50.75 a barrel on London's ICE Futures Europe exchange. It was at $50.80 a barrel at 2:44 p.m. Singapore time. The contract yesterday declined 12 cents to $51.72 a barrel, the lowest settlement since Jan. 11, 2007.

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Average UK prices dipped from 106.4p a litre in mid-October to 94.86p a litre in mid-November. The 11.54p drop comfortably beat the previous record fall of 7.9p between mid-August and mid-September this year and is the biggest monthly fall the motoring group has calculated since it started records in the early 1990s.

The fall in petrol prices is one of the main reasons why inflation dropped so sharply in October. It is the latest evidence that tumbling commodity prices around the world are finally feeding through to lower costs for consumers, but experts warn that price falls are subdued because of the plunging value of the pound.

Oil is bought in dollars but sold in sterling, which means consumers have failed to fully benefit from the 65 per cent fall in the price of oil in the summer, down from a high of $147.

Petrolprices.com, the price comparison website, also points out that there are still 124 forecourts around the country that are charging more than £1 a litre for unleaded petrol.

The garages are mostly in Scotland, Cumbria and West Midlands.

And while prices have dropped substantially in the last month, they are still higher than a year ago for diesel drivers.

Diesel prices fell 8.86p a litre in the last month - dipping from an average of 117.68p a litre in mid-October to 108.82p in mid-November. This compares to an average price of 105p a litre a year ago.

The AA said the big reduction in the price of petrol at the pumps had cut the cost of a 50-litre tank refill by £5.77 and reduced the monthly petrol cost of a two-car family by £24.73.

AA president Edmund King said: "Tesco set the momentum of big price falls with their 3p drop midway through October. However, Asda and Morrisons remain the cheapest supermarkets to buy petrol - on average almost a penny cheaper than their two bigger rivals.

"However, the reality is that with the value of the pound against the dollar dropping more than 13 per cent in the past month, some fuel stations would be charging close to 90p a litre."

Oil prices continued to fall today as a government report showed that gasoline prices in October plunged further than they ever have and home heating oil, natural gas, and liquefied petroleum gas fell substantially.

Light, sweet crude for December delivery fell 56 cents to settle at $54.39 a barrel on the New York Mercantile Exchange. But there were signs that plummeting gas prices have begun to bring American motorists back to the pump.

MasterCard SpendingPulse reported today that even though consumption of gas for the weekend ended Friday was down 2.8 percent from a year ago, it the smallest year-over-year decline in more than two months. Americans used nearly 1 million more barrels per day of gas for the week than they did the previous week.

“Demand destruction has definitely subsided significantly,” said Michael McNamara, a vice president at MasterCard SpendingPulse.

The Labor Department reported to day that wholesale energy prices dropped by 12.8 percent in October, the biggest one-month fall since 1986. All types of fuel declined, with gasoline falling by a record 24.9 percent, also the biggest drop since 1986.

Home heating oil prices fell 9.6 percent, natural gas intended for home uses fell by 5.9 percent, and liquefied petroleum gas dropped by 27.6 percent, the biggest decline in more than three decades. Analysts noted that this is the time of year when energy prices bottom out.

“The first cold blast is a reminder that even if the economy is slow, we still have to heat our house,” said Phil Flynn, an analyst at Alaron Trading Corp.

Energy investors trade in technical ranges, however, and Flynn said if crude prices do fall below $50, oil could be in for another round of selling that could drop the price to $40 per barrel.

Outside of the Nymex trading pits, the remarkable decline in prices has played out at the corner gas station, with Texas, Minnesota and Colorado joining Ohio in the last week as states where average retail gasoline prices fell below $2, according to the Energy Information Administration.

Nationwide, retail gasoline prices in the U.S. fell for an 18th week since the July 4th holiday. Prices plummeted 15.2 cents, or 7.3 percent, to a national average of $2.072 a gallon, according to the IEA. Prices are down more than $1 from a year ago.

Prices at the pump fell nearly 2 cents overnight to $2.068 nationally, according to auto club AAA, the Oil Price Information Service and Wright Express. Prices have fallen almost 90 cents in the past month.

U.S. gasoline consumption for the week ended Friday was 9.03 million barrels a day, compared with 8.76 million barrels a day for the week ended Oct. 10, according to the MasterCard Spending Pulse report.

With high prices no longer as big of a concern and with no hurricane activity, it is mostly the weak economy that is keeping demand lower, McNamara said.

MasterCard’s report is based on aggregate sales activity in the MasterCard payments network, coupled with estimates for all other payment forms, including cash and check.

Some market analysts believe that crude prices are steadying with more investors comfortable buying oil in the mid $50 range. Crude prices have fallen 63 percent since reaching a record $147.27 in mid-July.

Oil markets had little reaction to the seizure by pirates of a Saudi supertanker loaded with $100 million in crude oil. The ship today was anchored within sight of impoverished Somali fishing villages. Never before have Somali pirates seized such a giant ship so far out to sea — and never a vessel so large.

The latest hijackings highlighted the vulnerability of even very large ships and the inability of naval forces to intervene once bandits are on board.

Many industry executives believe the fallout in the oil markets is likely to be short-lived.

The head of China’s biggest offshore energy producer said today he thinks oil prices are likely to return to a range of $70 to $80 per barrel, though he did not say when.

CNOOC chairman Fu Chengyu said a conference on Chinese business in Spain that the current price level is based on a panic, but would linger until confidence is restored in the market.

With ripples from the mortgage crisis still rippling across the glob, it is difficult to say when that may happen.

Another executive recently warned of a serious decline in demand in China.

China National Petroleum Corp., the country’s biggest oil company, has suffered a “fairly big impact,” its president, Jiang Jiemin, said in a speech Friday to employees, according to a transcript on the company’s Web site. Jiang gave no details.

“Especially since September, the impact is more obvious and prominent. Basically, it is reflected in such things as a sharp shrinking of consumer demand,” Jiang said, according to the transcript.

Many industry experts had looked to China and India to continue buying crude to fuel their booming economies, even if Western nations entered recession. There are growing indications that such emerging economies are still closely linked to the fortunes of Europe and the United States.

Even outside of Nymex, where the benchmark crude is West Texas intermediate, exporting nations both within OPEC and in places like Mexico and Russia are seeing massive declines in crude prices.

The U.S. is a major energy consumer and demand for gasoline and other fuels is plummeting fast.

In other Nymex trading, gasoline futures fell 3.78 cents to settle at $1.1368 a gallon. Heating oil fell 3.31 cents to settle at $1.7579 a gallon while natural gas for December delivery fell 1.7 cents to settle at $6.516 per 1,000 cubic feet. In London, December Brent crude fell 47 cents to settle at $51.84 on the ICE Futures exchange.

Agreements on cooperation to revive Italy's nuclear sector and give LUKoil a foothold in the European refining sector topped a slew of deals signed Thursday, overseen by President Dmitry Medvedev and visiting Italian Prime Minister Silvio Berlusconi.

But Berlusconi, renowned for impolitic and controversial statements, grabbed the most attention with comments about Barack Obama, describing the U.S. president-elect as "young, attractive and even suntanned."

Medvedev touted the day's agreements at a joint news conference after the talks as examples of productive cooperation between the countries.

"Our companies, energy and otherwise, feel comfortable working with each other," Medvedev said.

He also thanked Italy for its "balanced" response to Russia's actions in its brief, but intense conflict with Georgia in August.

"We believe that a measured and comradely position helped resolve one of the most complex crises of the recent period," Medvedev said.

Berlusconi responded by saying that Italy's position was based on hard facts, a reaction he said he hoped that he would see from the rest of the world as well.

The nuclear energy deal will involve Russia helping with the joint construction of third and fourth-generation reactors, Rosatom head Sergei Kiriyenko said after the signing ceremony. Leading nuclear powers are still mastering fourth-generation reactor technology.

"Italy faces the task of returning to a leading position in the European nuclear power industry," Kiriyenko said.

He said that Thursday's accord foresees cooperation in Russia, Italy and third countries, adding that it was "a question of three to five years."

"Because Italy hasn't been developing its nuclear industry for a long time, some of the expertise has remained, some hasn't," Kiriyenko said.

Italy mothballed its nuclear program following the Chernobyl nuclear disaster in 1986. Berlusconi made the return of nuclear energy part of his election platform earlier this year.The 1.35 billion euro deal finalized Thursday between LUKoil and Italian refiner ERG, meanwhile, will bring the oil major into the European refining business, CEO Vagit Alekperov said. Other agreements involved car, tire, cement and electricity producers.

Italy's Pirelli signed an agreement with Russian Technologies to produce tires in the Volga town of Samara. Russian Technologies chief Sergei Chemezov estimated the investment in the venture at 350 million to 450 million euros.

Russian carmaker Sollers, formerly known as Severstal-Avto, and Fiat agreed to set up assembly of low-cost cars in Russia, Sollers head Vadim Shvetsov said at the Kremlin, declining to elaborate. Sollers has produced Fiat vehicles since 2006.

Italian aerospace and defense company Finmeccanica, meanwhile, signed a string of deals with Russian state-controlled companies, including an agreement to provide new technology for the Russian rail sector.

Berlusconi provided backing in his statements for Medvedev's calls for a new international financial architecture in view of the current global financial crisis. Russia has already submitted proposals to its partners, including Italy, for review before a Nov. 15 summit in Washington, Medvedev said.

The two leaders also said no barriers remained to the signing of a new partnership agreement between Russia and the European Union.

Berlusconi's comments about Obama came as part of praise for the president-elect as someone with whom the Kremlin could work.

"I don't see problems for Medvedev in establishing good relations with Obama, who is also handsome, young and even suntanned," said Berlusconi, himself sporting a tan.

Berlusconi later defended the comment as a great compliment and castigated the media for having the vice of "not having a sense of humor," Italy's ANSA news agency reported.

Source: The Moscow Times By Anna Smolchenko

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Blogalaxia:Actualidad fotolog Technorati:UPDATE Bitacoras:HidrocarburosagregaX:Diario