Global Ports Forum

Freight-Futures Trading Seen Plunging 53% After Shipping Rout

mobile.bloomberg.com/news/2012-09-20/freight-futures-trading-seen-plunging-53-after-shipping-rout.html

mobile.bloomberg.com/news/2012-09-17/iron-ore-ships-rebounding-as-china-spends-158-billion-freight.html

BHP could be saving the cash for new opportunities to buy cash-strapped on-going projects.

One example during the last CREDIT crisis:

” The offer by China in 2009 to inject $19 billion into the cash-strapped Anglo-Australian mining giant Rio Tinto could prove more significant than China’s 2005 bid for Unocal, which was thwarted by U.S. opposition.”

www.nytimes.com/2009/02/16/opinion/16iht-edbowring.1.20215477.html

Unusual times ahead!

Kind rgds

Thomas
Singapore

Australia declares resources boom is over

mobile.reuters.com/article/idUSBRE87M03220120823?irpc=932

“The resources boom is over,” said Aussie Resources and Energy Minister Martin Ferguson – the boom at the surrounding port will probably be over, as well.

BHP’s Port Hedland outer harbor plan will be on hold.

Olympic panic: is the mining boom at an end?

www.abc.net.au/news/2012-08-24/janda-mining-boom-or-bust/4219410

A contradictory view?

“Michael Janda says it’s unlikely Australia’s mining investment boom will come to an immediate thudding halt.”

Tony Hayward Loads Trucks With Kurdish Oil Awaiting Pipe: Energy

Tony Hayward, the former chief executive officer at BP Plc (BP/), is now loading a fleet of as many as 500 trucks a day while he waits for a new pipeline to carry oil from his fields in northern Iraq.

Since joining Genel Energy Plc (GENL) last year, Hayward has pushed the semi-autonomous Kurds to finish building a link to neighboring Turkey so he can find buyers outside the local market. Kurdish contractor Kar Group said it has completed 23 percent of the first 48-mile (77-kilometer) section of the line north to the border, though Turkey hasn’t said publicly it will take the oil.

Kurdish authorities, feuding with the central government over sharing oil revenue, plan in the next two years to complete the 175-mile export link that will start at a Genel-operated field and move as much as 1 million barrels a day, equal to a third of Iraq’s output now. Following Hayward into the region are Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX), bolstering the Kurdish plan to break Baghdad’s control of shipping crude from the landlocked territory that’s ruled itself since the U.S.-led invasion ousted Saddam Hussein in 2003.

“This will be a transformational development for companies operating in the region,” Hayward, who ran Europe’s second- biggest oil company until 2010, said in an e-mailed response to questions. “It will allow the direct export of crude oil production to Turkey and international markets and accelerate the monetization process for resources” in the Kurdish region.

Course for Independence

Iraq’s Kurds, who historically have resisted control by Arab-dominated central governments, are charting a course to independently develop oil reserves that the Kurdistan Regional Government calculates at 45 billion barrels — larger than BP’s estimate for the U.S. or Nigeria, Africa’s biggest producer.

The Kurdish region plans to increase output to 2 million barrels a day by 2019, Michael Howard, an adviser to Kurdistan Natural Resources Minister Ashti Hawrami, said in a June 10 phone interview. It has signed energy agreements with about 50 companies and plans to increase output to 1 million barrels a day by 2015 from about 300,000 barrels a day now, he said.

Kurdish authorities recognize production-sharing agreements, which give investors a share of any oil they may produce, whereas Iraq’s Oil Ministry offers only fee-based service contracts. This has attracted interest from investors such as Norway’s Statoil ASA (STL) that are unhappy with the central government’s contract terms for exploration and production.

Exxon Mobil Corp., Chevron Corp. and Total SA (FP) are flouting warnings by the government against seeking separate deals with the Kurds, whom Iraq’s Oil Ministry accuses of “smuggling” oil from the country.

Chevron Entry

Chevron, the second-largest U.S. energy company, said July 19 it will buy a majority stake in two Kurdish blocks. The Oil Ministry responded five days later by barring Chevron from doing business in the rest of Iraq. Similarly, the ministry punished Exxon for investing in the Kurdish region by excluding it from an energy-licensing round in May.

Separate deals between the Kurds and foreign investors are “illegal and illegitimate,” and Chevron “should feel ashamed about what it did,” the ministry said July 24 in an e-mailed statement. “These agreements grant the oil companies a large share of crude production and are thus a squandering of the national wealth.”

The Kurdish pipeline project resembles one that enables the United Arab Emirates to circumvent politically inspired shutdowns of oil exports. The U.A.E., also a member state of the Organization of Petroleum Exporting Countries, began shipping crude on July 16 through a pipeline from Abu Dhabi to the Indian Ocean port of Fujairah, bypassing the Strait of Hormuz, the transit corridor Iran threatened to shut earlier this year in response to sanctions on its nuclear program.

Revenue Dispute

DNO International ASA (DNO) is among companies pumping crude at Kurdish fields that have one main export route, the central government’s pipeline from the city of Kirkuk in northern Iraq to the Mediterranean port of Ceyhan, Turkey. A dispute over oil contracts and revenue-sharing prompted Kurdish authorities to halt flows into this network on April 1. Producers now must sell their oil locally or send small loads by truck into Turkey.

Kar Group expects to complete the Kurdish pipeline’s first section, linking the fields of Taq Taq and Khurmala, by the end of the year, the company’s project manager Besoon Jalizada said in a telephone interview on July 17. Kurdish authorities will probably seek bids for construction of the remaining part of the system, from Khurmala to the Turkish border, he said.

Pipeline Capacity

The first phase will have a capacity of about 200,000 barrels a day, a Genel official said on July 23, declining to be identified because the pipeline is being built and financed by Kurdish authorities and not Genel.

The pipeline plan “seems quite provocative,” Ivor Pether, a fund manager at Royal London Asset Management which oversees $60 billion of securities, said in a June 26 e-mail. “The risk is obviously that it may take a long time to agree how to divide the oil revenues, or even that the relationship between Kurdistan and Baghdad breaks down.”

The Kurds are seeking closer cooperation with Turkey amid a political impasse in Baghdad, where opposition groups accuse Prime Minister Nouri al-Maliki of abusing power. Al-Maliki and other Iraqi leaders have said they worry that the planned pipeline may make the Kurds economically self-sufficient and embolden them to seek independence.

Iraq has faced a series of violent attacks since the pullout of U.S. troops in December, including the killing of 115 people in a wave of nationwide bombings claimed by an Al-Qaeda affiliate group on July 25.

Turkey’s Role

Turkey, with its own restive Kurdish minority, is ready to work with Iraq’s Kurds on the construction of oil and natural- gas pipelines provided the central government in Baghdad agrees, Turkish Energy Minister Taner Yildiz said in an interview in Ankara on July 5.

At the same time, he said, the Turkish and Iraqi governments have committed to repair a link to Kirkuk from Basra in southern Iraq to help boost the amount of oil sent into Turkey through the established Kirkuk-to-Ceyhan network.

Hayward said he’s not surprised that Exxon, Chevron, Total or Eni SpA would be interested in Kurdistan. “This only serves to reaffirm our long-held belief in the enormous opportunities that exist,” he said.

To contact the reporters on this story: Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net; Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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Cnooc Hired U.S. Lobbyists Prior to Nexen Announcement

Chinese energy giant Cnooc Ltd. (883), whose efforts to buy a U.S. oil company in 2005 sparked an outcry over foreign ownership, hired two Washington lobbying firms just before announcing its plan to buy Nexen Inc. (NXY)

Cnooc, owned by the Chinese government and based in Beijing, agreed July 23 to pay $15.1 billion for Nexen, a Calgary-based company that operates in the U.S. portion of the Gulf of Mexico. It is Cnooc’s biggest North American deal since it walked away from Unocal Corp. under congressional pressure and the largest overseas acquisition by a Chinese company.

If approved, the Nexen takeover would mark the first time a Chinese company would be the operator of leases in the U.S. Gulf of Mexico, instead of a minority stakeholder. Nexen now operates 90 leases in the Gulf, where it’s the 29th-largest oil producer and 42nd-largest gas producer, according to the most recent operator ranking by the Interior Department from July 16.

The purchase of U.S. assets by foreign companies can be blocked on national security grounds.

Cnooc’s takeover of Nexen will probably be reviewed more closely than other international deals, Iain McPhie, a lawyer at Squire Sanders LLP in Washington, said in an interview. “The Chinese just raise strategic issues that an acquirer from the United Kingdom and France don’t raise,” said McPhie, who’s not involved in this transaction.

U.S. Review

Cnooc and Nexen said in a July 24 filing with the U.S. Securities and Exchange Commission that they intend to put the deal to the Committee on Foreign Investment in the United States for review.

The committee, a division of the Treasury Department, has the power to impose conditions on foreign acquisitions, including the “extreme” step of forcing a divestiture of the U.S. assets, said McPhie, who has represented clients before the committee.

“We bought energy assets in the U.S. before and we have experience on how to get regulatory clearance,” Cnooc Chief Executive Officer Li Fanrong said on a conference call with reporters on July 23. Spokesmen for Cnooc and Nexen didn’t immediately respond to requests for comment on their efforts to get the deal approved in the U.S.

Wexler & Walker Public Policy Associates registered to lobby on behalf of Cnooc July 12. Its lobbyists include Bud Cramer, a former Democratic representative from Alabama, public records show.

Lobbyist Hired

In May, Cnooc hired Hill & Knowlton Strategies to lobby Congress on issues relating to the environment and natural gas, according to public records filed with the Senate.

Both firms are part of WPP Plc (WPP) in Dublin.

Allison Cohen, a spokeswoman for Hill & Knowlton, said the firm didn’t comment “on our clients or prospects.” A call to Wexler and Walker wasn’t immediately returned.

Hill & Knowlton employees have been lobbying Canadian government departments, ministers and officials for Cnooc, according to a website registry run by the Office of the Commissioner of Lobbying of Canada.

Cnooc, China’s largest offshore oil and gas explorer, hadn’t paid a firm to lobby Congress since its 2005 attempt to buy Unocal, according to public records. Unocal was eventually bought by San Ramon, California-based Chevron Corp. (CVX)

When it withdrew its Unocal bid, Cnooc said in an announcement that “unprecedented political opposition” to its proposed purchase was “regrettable and unjustified.”

Schumer Letter

Senator Charles Schumer, a New York Democrat, urged Timothy Geithner, who as Treasury secretary is the chairman of the committee on foreign investment, to withhold approval of the purchase until China agreed to provide U.S. goods with more access to Chinese markets, according to a letter sent today.

“It is rare that we have so much leverage to exert upon China,” Schumer said in a statement. “We should not let this window of opportunity pass us by.”

Schumer expressed overall support for the deal, saying it “will benefit the United States and help ensure the continued resurgence of our domestic energy sector.”

Nancy McLernon, chief executive officer of the Organization for International Investment, said the purchase by foreign companies of U.S.-based assets has become less politically charged since then.

“There is a widespread recognition of the value of foreign investment in the U.S.,” McLernon whose Washington-based group includes U.S. subsidiaries of Iberdrola SA (IBE) in Bilbao, Spain, and Tokyo-based Sony Corp. (6758), said in an interview.

Nexen’s other oil and gas assets include production in Nigeria and the North Sea, as well as oil-sands reserves at Long Lake, Alberta, where it already produces crude in a joint venture with Cnooc.

To contact the reporters on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net; Rebecca Penty in Calgary at rpenty@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net; Susan Warren at susanwarren@bloomberg.net

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Abu Dhabi Exports First Pipeline Oil Bypassing Hormuz

July 16 (Bloomberg) — Abu Dhabi started exporting its first crude from a pipeline that bypasses the Strait of Hormuz, shipping the fuel from the neighboring sheikhdom of Fujairah to a refinery in Pakistan.

The link, stretching from Abu Dhabi to Fujairah on the Gulf of Oman, began loading a shipment of about 500,000 barrels, Mohamed Al-Hamli, oil minister for the United Arab Emirates, said yesterday at the inauguration ceremony. International Petroleum Investment Co. spent $4.2 billion building the 423- kilometer (263-mile) link, Managing Director Khadem al-Qubaisi said at the ceremony in Fujairah.

Abu Dhabi, the U.A.E.’s capital and holder of more than 90 percent of its oil, built the export route for crude to avoid Hormuz, a narrow waterway carrying a fifth of the world’s traded oil that Iran has threatened to block in retaliation for sanctions targeting the country’s nuclear program. Construction costs were 27 percent higher than the $3.3 billion contract awarded to China Petroleum Engineering & Construction Corp. in 2008 and was delayed by 11 months.

“The pipeline will get used if they keep the price to load crude from Fujairah the same as loading from inside the Gulf,” said Robin Mills, head of consulting at Dubai-based Manaar Energy Consulting and Project Management. “It means that Abu Dhabi is just swallowing the cost of the pipeline, as it has been built for strategic reasons. If this was a commercial venture, they would have built it years ago.”

Political Maneuvering

An Iranian lawmaker, Mohammad-Hassan Asferi, said yesterday the pipeline’s limited capacity would keep it from obviating the need of regional suppliers to export most of their oil through the strait. The line is “propaganda and political maneuvering guided by the Western countries, especially the United States, which aims to reduce the strategic importance of the Strait of Hormuz,” according to state-run Press TV. Asferi serves on Iran’s national security and foreign policy committee.

The link can transport 1.5 million barrels a day of Murban crude from Habshan, a collection point for Abu Dhabi’s onshore oil fields, across a desert and mountains to Fujairah. The system can pump as much as 1.8 million barrels a day at periodic intervals, officials said yesterday. The U.A.E., the fifth- biggest oil producer in OPEC, pumped 2.61 million barrels a day in June, data compiled by Bloomberg showed.

The first oil exported from Fujairah is priced the same as Murban crude loaded inside the Gulf, three people with knowledge of the matter said this month. Abu Dhabi may later devise a separate formula including a premium to account for the cost of using the pipeline, said the people, declining to be identified because the matter is confidential. Abu Dhabi officials yesterday did not comment on pricing.

First Cargo

Abu Dhabi’s first export cargo from Fujairah is destined for Pak Arab Refinery Ltd., a joint venture between Pakistan’s government and IPIC, Al-Qubaisi said. IPIC owns a 40 percent stake in the plant, which regularly uses about 40,000 barrels a day of Abu Dhabi crude, of the 100,000 barrels it consumes daily, he said.

Abu Dhabi earlier shipped a test cargo from Fujairah to its own refinery at Ruwais, inside the Persian Gulf, said Abdul Munim Al-Kindi, general manager of Abu Dhabi Co. for Onshore Oil Operations. As the main oil producer at the emirate’s onshore fields, the company, known as Adco, will operate the pipeline and gradually ramp up capacity by year-end, he said. The network is designed to load tankers at three offshore buoys, he said. IPIC will likely charge Adco “a few cents per barrel” for use of the pipeline, Al-Qubaisi said.

Alternative Route

Al-Hamli, the oil minister, said the link gives buyers an alternative location from which to receive crude. It will allow them to fill very large crude carriers, or VLCCs, the largest class of tanker capable of carrying 2 million barrels of oil. Filling such vessels in the Gulf of Oman will reduce shipping traffic in Hormuz, he said.

“The pipeline is going to be beneficial because our clients will be able to lift bigger cargoes,” he said. “Currently you can only lift 1 million barrels a day from Ruwais. From Fujairah now our clients now can bring in VLCCs and lift more.”

IPIC’s al-Qubaisi said his company plans to $4 billion to $5 billion to build a refinery in Fujairah with a capacity of about 250,000 barrels a day to produce for local sale and export, further enhancing the port’s importance as a hub for the processing, storage and shipment of fuels. The company said in a bond prospectus in October the refinery would produce 200,000 barrels a day at a cost of about $3.5 billion.

IPIC is working with another state-owned investment fund, Mubadala Development Co., on a project for a terminal at the port for imports of liquefied natural gas. Fujairah is already among the world’s three biggest refueling ports for commercial ships, along with Singapore and Rotterdam. Fujairah is one of the U.A.E.’s seven sheikhdoms.

To contact the reporters on this story: Anthony DiPaola in Dubai at ; Ayesha Daya in Dubai at

adipaola@bloomberg.netadaya1@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at

sev@bloomberg.net
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China ‘building up rare earth reserves’
By Wang Qian in Chenzhou, Hunan and Liu Yiyu in Beijing (14 July, 2012 10:26 AM)
China is spending billions of yuan buying domestically mined rare earth to build up its national strategic reserves, an official said on Friday.
Shi Yaoqiang, an official in the rare earth division of the Ministry of Industry and Information Technology, told China Daily that the nation started the purchasing program last year, mainly targeting heavy rare earth, without disclosing details such as the amount and the price.
But a senior official from Baogang Group, the parent of Baotou Steel Rare Earth Hi-Tech Co, China’s largest rare earth producer by output which is involved in the government purchase of the mineral, suggested the plan involves the purchase of around 6 billion yuan ($949 million) worth of rare earth.
Baotou Steel Rare Earth announced plans on Thursday to launch a rare earth trading platform on Aug 8 to better price the resource.
Speaking on the sidelines of a national conference on supervising rare earth development, in Chenzhou, Hunan province, Shi said: “China has adopted various ways of collecting rare earths, such as building strategic reserves and purchasing rare earths for national storage.”
Zhang Anwen, deputy secretary of Chinese Society of Rare Earths, added: “Rare earth storage is a strategy that many countries, such as Japan, have already been using to ensure the sustainable development of high-tech industries.”
Rare earths, which are used in the high-tech and defense sectors, are generally divided into two categories-light and heavy rare earth element groups.
The State Council, first suggested establishing a national rare earth strategic reserve system, combining the commercial stockpiling with national rare earth reserve bases, in May last year.
In 2011, China established 11 State-managed rare earth mining zones in Ganzhou, Jiangxi province – an area rich in heavy rare earth resources – covering an area of 2,500 square kilometers.
Rare earths cover a group of 17 elements, including scandium and yttrium, which are key components for modern-day technologies such as hybrid electric vehicles, liquid crystal display and other high-tech products.
China’s rare earth reserves account for about 23 percent of the world’s total but have been excessively exploited, according to a white paper issued by the Ministry of Industry and Information Technology last month.
As the world’s largest producer of rare earths, China provides more than 90 percent of supplies. Domestic reserves totaled 18.59 million metric tons in 2009.
Since 2007, China has toughened its rare earth production regulations in a bid to minimize the severe environmental impact caused by excessive exploitation.
The State Council has substantially increased environmental protection standards in the rare earth mining and smelting sector, and set a limit on exports last May.
Domestic demand for rare earths slumped last year after the government tightened controls over production and mining, as many plants closed down.
Rare earth prices have nearly halved from last year’s level as global demand weakens.

By Patricia Kuo
May 02, 2012 6:05 AM EDT

Trafigura Beheer BV, the world’s third-biggest oil trader, said it hired Christoph Gugelmann, Stefano Sabbadini and Philip Jan Kok for its Galena Asset Management unit to expand its commodity trade finance business.
Gugelmann, Sabbadini and Kok, previously with Bank of America Corp. (BAC), will join as credit portfolio managers at Galena in Geneva which is seeking to double funds under management to $4 billion by the end of 2013, Trafigura said in a statement.
The three people will be responsible for diversifying Trafigura’s funding sources to “liquidity rich but risk averse investors” such as pension funds, insurance companies, corporations and family trusts, according to the statement.
They will also develop new investment vehicles with an initial target to raise $1 billion, to complement Galena’s Commodity Trade Finance fund, which averaged an annual return of 7.9 percent since inception, Trafigura said. The fund started in the third quarter of 2010.
“By participating in the financing of commodity trading operations investors will be able to monetize the value of liquidity in a market that, until recently, has only been open to banks,” Pierre Lorinet, chief financial officer at Trafigura, said in the statement. “Notably this initiative will also provide distribution channels for those banks seeking to deleverage their balance sheets.”
Lending Declines
Bank lending to commodity and mining companies fell 31 percent to $143.9 billion this year from the same period last year, according to data compiled by Bloomberg. Citigroup Inc. Bank of America, JPMorgan Chase & Co. are the top lenders to the industries this year while last year JPMorgan was first, BNP Paribas SA was second and Bank of America third, the data show.
Gugelmann was previously head of the Europe, Middle East and Africa markets solutions group at Bank of America, Trafigura said. Sabbadini was head of EMEA credit and funding structuring and Kok was head of Netherlands sales at the Charlotte, North Carolina-based bank, it said.
To contact the reporter on this story: Patricia Kuo in London at pkuo2@bloomberg.net
To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net