UPDATE-----------------------------JANUARY 31, 2009 SUNDAY
NEWS
Govt’s essential goods
import plan fails
The government’s plan to import essential commodities failed as it could not communicate with foreign governments in time and keep watch on the price fluctuation on the international market, commerce ministry officials said.
The government earlier planned to import six essential goods to prevent the rerun of its failure in meeting the demand in time of crisis.
The commerce ministry’s additional secretary Mustafa Mohinuddin on Friday said they could arrange for the import of only lentils from Nepal through the state-owned Trading Corporation of Bangladesh as part of the plan.
‘The Trading Corporation will import 15,000 tonnes of lentil from the Nepal Trading Corporation through international tender that was in the past week,’ he said.
He, however, said the lentil price quoted by the Nepalese trading corporation was higher than the price on the market.
Mohinuddin also said the import of palm oil from Malaysia failed because of huge cost in the import of good quality palm oil and the import of sugar from Brazil could also not be possible for increase in prices on the international market.
‘Import of essential goods from the neighbouring India will also be costly because of high prices compared with the prices on the domestic market,’ he said.
According to a commerce ministry’s report on the wholesale and retail market in Kolkata in the past week, prices of 16 essential goods but potato were higher than the prices in Bangladesh.
The 16 essential goods include rice, wheat, soya bean oil, lentils, onions, sugar, salt, red chilli, garlic, ginger and egg.
The retail price of potato on the Indian market was about Tk 9 compared with Tk 24 a kilogram in Bangladesh but the agriculture ministry on January 7 slapped a ban on potato import.
Bangladesh foreign missions in India, Malaysian, Nepal, Myanmar, Brazil, United States, Canada, Turkey and Australia were asked by the commerce ministry to send market reports on six essential goods — rice, sugar, soya bean oil, palm oil, lentils and onions.
The commerce ministry has also planned to communicate directly with foreign suppliers after a bitter experience in the past Ramadan when local importers ‘cheated’ the Trading Corporation in supplying sugar, edible oil and chick peas, the sources said.
The Prime Refinery failed to supply the agreed 12,500 tonnes of crude soya bean oil to the Trading Corporation.
A trading house owned by ruling party lawmaker Abdur Rahman Badi also did not supply chick peas imported from Myanmar and sold it on the local market for more money, sources in the commerce ministry said.
Local sugar suppliers also failed to supply 25,000 tonnes of sugar to the Trading Corporation for sales through its outlets during Ramadan.
The Trading Corporation is now planning to procure sugar in the state-owned sugar mills and soya bean oil from private company Prime Edible Oil Ltd, the sources said.
Former commerce secretary Suhel Ahmed Chowdhury told New Age the commerce ministry needed expertise to study global commodity market and procure essential commodities in time.
The Trading Corporation also needs to incorporate trade experts from the private sector, he said.
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Dutch govt keen to work in
local shipbuilding industry
]
The Netherlands Saturday expressed its keen interest to work together with Bangladesh for expansion of shipbuilding industry here at a time when the world’s shipbuilding industry faces setback due to the financial crisis.
The interest was shown at a ‘matchmaking seminar’ for ‘shipbuilding sector of Bangladesh and the Netherlands’ at a city hotel here, said a Dutch embassy press release.
Ananda Shipyard and Slipways Ltd and the Netherlands embassy jointly organised the seminar backed by Holland Marine Equipment, a Dutch business group.
Charge d’Affairs of the Netherlands embassy Doris Voorbraak spoke on the occasion. ASSL chairman Abdullahel Bari delivered the welcome speech on the occasion, joined by Dutch shipbuilding companies.
The seminar was aimed at introducing the Dutch companies to the Bangladeshi shipbuilding companies and exploring the area of cooperation.
Participating Dutch companies were Vuyk Engineering Groningen, Dagin Marine Technology, Heatmaster, Rubber Design, Winteb, Eurovalve, Neddeck Marine, HRP and Gea Bloksma.
In her speech, Voorbraak said the world’s shipbuilding industry might appear gloomy as orders are cancelled and the overall trade volume is down due to the global financial meltdown.
Bangladesh is perceived 15 per cent cheaper than its main components such as Vietnam mainly due to low labour cost, she said.
The Dutch companies are always eager to identify new business opportunities abroad, especially in the shipbuilding industry, which is strongly export focused, Voorbraak said.
She said the Dutch have a vast experience in shipbuilding sector which could be shared with Bangladesh for benefiting equally.
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WORLD
Davos ends with recovery warning
after banking bust-up
The world economy is recovering but remains fragile and dogged by huge deficits, top officials said Saturday at the end of a blue-chip Davos summit clouded by divisions over banking reform.
Asia is leading the resurgence after the worst crisis for decades with China eyeing double-digit growth, but the United States and Europe remain dogged by unemployment and the eurozone is grappling with a crisis over Greece.
‘The situation is better, but fragile,’ said International Monetary Fund chief Dominique Strauss-Kahn, adding: ‘We have to go ahead strongly in the financial sector reform, much more rapidly than has been done until now.’
‘The fiscal sustainability problem is going to be one of the biggest, maybe the biggest problem .... We’ll have to deal with this for five, six or seven years, depending on the country,’ he said.
The bust-up over US plans to curb risk-taking by banks again took centre stage on the last day of the World Economic Forum, with central bank chiefs huddling with finance ministers and officials, and top private bankers.
The meeting in the Swiss ski resort brought together British and French finance ministers Alistair Darling and Christine Lagarde, European Central Bank chief Jean-Claude Trichet and the heads of top private banks.
‘There’s going to be regulation, they (the bankers) understand that,’ said US Congressman Barney Frank, one of the few willing to talk after the closed-doors meeting.
Asked if the bankers present accepted the need for greater regulation, he said: ‘Frankly it doesn’t make any difference whether they did or not. They aren’t in charge of this.
‘The political leadership certainly in the United States is going to go ahead with tough, sensible regulation,’ he added.,
The banking issue has clouded the four-day Davos meeting, starting with French President Nicolas Sarkozy’s opening address in which he backed US President Barack Obama’s tough clampdown plans.
At the same time there has been cautious optimism about the outlook for global recovery after the near-meltdown of the last 18 months
Chinese and Indian delegates have trumpeted their country’s healthy growth rates of nearly nine and seven per cent respectively, and the United States hailed Friday’s unexpectedly-rosy 5.7 per cent GDP growth figure.
But unemployment remains a worrying problem in the United States and Europe, which both have a jobless rate of around 10 per cent, despite a return to overall growth.
‘What we’re seeing in the United States is a statistical recovery and a human recession,’ said Larry Summers, US President Barack Obama’s chief economic advisor, commenting on the jobless recovery phenomenon.
Warnings of a double-dip recession — where nascent recovery fades back into a new slowdown — have abounded in Davos as leaders mull exit strategies from huge stimulus packages agreed to prevent a full-blown Depression last year.
France’s economy minister Lagarde said she followed a ‘three Rs’ principle — recovery, reform, and restoring public finances.
But she said timing was crucial.
‘Balancing between the recovery process that has to continue, the reform that needs to be maintained and the restoring of public finances is a tough line to draw,’ she said.
A top Chinese banker meanwhile said that Beijing could move on the sensitive issue of its currency’s exchange rate once other countries start to withdraw their stimulus packages.
China has been under fire for keeping the yuan weak against the dollar, a strategy which critics say is aimed at keeping Chinese exports competitive.
Once world leaders agree an exit strategy ‘‘China is ready... including various issues—liquidity issue, exchange issue,’ Zhu Min, deputy head of China’s central bank, told the Davos forum.
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Trade ministers downbeat
on WTO prospects
Trade ministers were skeptical on Saturday about the prospects of concluding stalled global trade liberalisation talks this year, with some blaming the United States for foot-dragging.
Ministers from about 20 major economies held informal talks on the sidelines of the annual World Economic Forum meeting in the Swiss ski resort of Davos, but Washington only sent a deputy ambassador and no political representative.
‘We would like to see the (Doha) round completed as soon as possible, but for that everybody will have to be there,’ European Union trade commissioner Benita Ferrero-Waldner said.
Brazilian foreign minister Celso Amorim told reporters: ‘We cannot expect more than that because of course one of the main partners is not represented at a ministerial level.’
‘We have come to a point when it is the question of political will,’ he said on arrival for the meeting.
Leaders of the G20 grouping of major economies, including President Barack Obama, agreed in Pittsburgh last September on the goal of wrapping up the Doha round of World Trade Organisation negotiations in 2010.
But there has been scant progress since then and many participants say domestic politics and the impact of the financial crisis and high unemployment in the United States and Europe have made chances of an early trade deal more remote.
‘All the indications are that it’s an incredibly controversial matter in the US Congress and I don’t think they have yet defined a sustainable approach to conclude the round,’ South African trade minister Rob Davies told Reuters on Friday.
Davies cited mid-term US congressional elections and Brazil’s presidential poll as among the political obstacles.
The long-running 153-nation talks collapsed in 2008 over a dispute between the United States, India and China on protection for farmers in developing countries. Other unresolved issues include cotton subsidies, trade in services and in environmental goods and services.
‘If I’m one of those who lives to be a 100, I hope we are not still trying to conclude the Doha trade round then,’ Australian trade minister Simon Crean joked.
WTO director-general Pascal Lamy told reporters he was encouraged that there had been no retreat into protectionism so far in the global recession, but the political momentum to make the final trade-offs needed in the Doha Development Round, launched in 2001, had still not materialised.
The Obama administration has said big emerging economies such as China, India and Brazil must open their markets more to make a global trade deal worthwhile for US business.
Swiss President Doris Leuthard chaired Saturday’s annual session, for which Switzerland had prepared a list of outstanding issues to be resolved, including her own country’s interests in protecting farmers and food and wine appellations.
But participants said the Swiss checklist was too detailed for ministers to engage on, and they would focus on the domestic politics of trade liberalisation, and on the impact of climate change negotiations on trade.
Senior officials are due to conduct a stocktaking exercise in late March to see if an outline WTO deal is possible this year, and participants said no one would want to put negotiating cards on the table at this stage.
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SPECIAL
ACI bonds subscription
begins today
ACI Pharmaceuticals is offering public a bond and IFIC Bank is coming up with its first mutual fund this week.
The subscription of ACI zero coupon bond begins today.
ACI Pharmaceutical has offered public the bond to raise over Tk 133 crore for product diversifications.
Of the amount, the company will raise over Tk 80 crore through private placement and the rest Tk 53 crore from public offering.
Zero coupon bond is a debt security that doesn’t pay interest but is offered at a discount rate, rendering profit at maturity.
ACI is offering the bond for Tk 3,743 and the investors will get back Tk 5,000 after four years with its maturity.
The investors can also convert 20 per cent of their bonds into the regular shares of the company on optional basis.
Investors, however, should submit application for a market lot of 5 bonds, costing 18,715. One can submit two applications, of which the second one should be under joint names.
The subscription offer will remain open until February 4 for the local investors, but the non-residence Bangladeshis can apply till February 13.
Besides ACI, subscription of the IFIC Bank First Mutual Fund will begin on February 7.
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RAK Ceramics to issue IPO under
book building method
RAK Ceramics (Bangladesh) Limited, a UAE-Bangladesh joint venture company, is going to issue an initial public offering under the book building method, said a news release.
‘The company will issue 3,45,10,000 ordinary shares of Tk 10 each under the modern system for IPO pricing,’ said the chairman of the company, Khater Massaad, at an IPO presentation programme at Hotel Radisson in Dhaka on Saturday.
RAK Ceramics (Bangladesh) managing director SAK Ekramuzzaman said, ‘It is expected to be the first public issue under the book building method in Bangladesh,’
The Securities and Exchange Commission in March last year introduced book building system for IPO pricing to attract big issues to stock market.
Under the system, the price of an IPO share will be determined through an automated bidding to be participated by different financial institutions and then that share will be opened for the IPO participation at that rate.
Khater said, ‘We have appointed IDLC Finance Limited as lead manager to the issue and BRAC EPL Investments Limited as joint manager to the issue for this purpose.’
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Chinese traders urged to
invest in Bangladesh
Bangladesh business leaders urged Chinese businessmen to invest in infrastructure development, engineering and technology, banking and insurance, education, IT and tourism sector in the country.
Chinese businessmen can import textile, cotton, PVC pipe and plastic, pharmaceuticals, readymade garments, leather and shrimp from Bangladesh.
Acting president of the Federation of Bangladesh Chambers of Commerce and Industry Abul Kashem Ahmed made the call at a meeting between business leaders of the two countries at FBCCI on Thursday, said a news release.
A five-member business delegation of China Council for the Promotion of International Trade led by Li Guohua, vice-president of Jilin Sub-Council of CCPIT attended the meeting.
Abul Kashem presided over the meeting attended by the directors of FBCCI and the representatives of different sectors.
Chinese delegation leaders emphasised upon promotion of cooperation in trade and technology between Bangladesh and China.
He invited Bangladeshi businessmen to import vehicles, chemicals, agricultural machineries and accessories and agro-based products from China.
Shamsul Alam, Anowar Hossain and Mahbub Islam Runu, directors of FBCCI and Iqbal Jamal Jewel and Mokhlesur Rahman, general body members of FBCCI also attended the meeting.
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WORLD
Struggling Wall Street
eyes jobs data
With Wall Street struggling to keep upward momentum, investors will keenly await a report on the US labour market in the coming week that could be a key driver of market action.
Friday’s data on US unemployment and job creation may provide clues on whether the economy, which is showing strong growth, can sustain its recovery.
In the week to Friday, market action was choppy, sending the Dow Jones Industrial Average down 1.04 per cent to 10,067.33, as the market closed January with its worst performance in 11 months.
The technology-dominated Nasdaq composite slipped 2.63 per cent to 2,147.35 the broad Standard & Poor’s 500 index declined 1.64 per cent to 1,074.87.
Many analysts say the latest declines are the start of a ‘correction,’ which is usually a pullback of around 10 per cent that can take some of the froth out of the market, rather than an end to the bullish period.
‘The current correction is coming hard and fast, which is more typical of corrections than bear markets, which in the beginning tend to sneak down without much notice or fanfare,’ said Bob Dickey at RBC Wealth Management.
‘We expect the correction low will come over the next week or two... However, the Dow first may have to go below the psychological floor of 10,000 in order to trap more of the bears out in the cold.’
Fred Dickson, market strategist at DA Davidson & Co., said Friday’s report on US gross domestic product surging to a 5.7 per cent pace in the fourth quarter was a big positive for Wall Street.
The GDP data ‘report reinforces our assessment that the economy hit the bottom point of the recession late last summer and is slowly gaining traction,’ Dickson said.
‘In addition, the report reinforces the notion that the current stream of positive earnings reports hitting the tape this month are real and should be sustainable going into the first half of 2010. Bottom-line, this is bullish news for the stock market.’
Others noted that GDP was boosted by special factors such as inventory adjustment and that the economy may not be growing fast enough to create jobs.
Augustine Faucher at Moody’s Economy.com said it will take more time for the economy to get on a sustainable track.
Based on the latest data, he argued that ‘growth in the first half of 2010 will be below that needed to keep pace with an expanding labour force, and the unemployment rate will move higher, peaking at close to 11 per cent in the fall.’
The upcoming employment data thus becomes critical to the outlook for the economy and the markets, say analysts.
The consensus forecast calls for the report to show a net gain of 50,000 jobs, following a loss of 85,000 in December. That would be a big positive, although not enough to bring down the unemployment rate from its level of 10 per cent.
‘For the first time in a very long time, the consensus is expecting a gain in employment,’ said Gina Martin at Wells Fargo Securities.
Dean Maki at Barclays Capital said he expects the economy is gaining momentum, highlighted by strong business spending, that will translate into job growth.
‘We view this improvement in business fixed investment spending as a clear signal that a self-sustaining recovery is underway, as businesses are feeling confident enough to spend more,’ Maki said.
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WORLD
US electric carmaker Tesla plans
public stock offering
US electric carmaker Tesla Motors said on Friday that it plans an initial public offering of stock that could raise as much as 100 million dollars.
In a filing with the Securities and Exchange Commission and a statement, Tesla said the price range and exact number of shares had not been decided.
The Palo Alto, California-based automaker also did not set a date for the IPO.
Founded in 2003 by South African Elon Musk, a co-founder of online payments giant PayPal, Tesla specialises in environmentally friendly electric cars.
The Tesla Roadster, a high-performance sports car, costs more than $100,000 and can go nearly 250 miles (400 kilometres) on a single charge.
In its SEC filing, Tesla said it had sold 937 Tesla Roadsters to customers in 18 countries as of December 31.
Tesla is also making a ‘Model S’ five-passenger sedan powered by lithium-ion battery packs capable of between 160 and 300 miles (257 and 482 kilometres) per charge.
The Model S, expected in 2012, has an anticipated base price of around $50,000.
According to the documents filed with the SEC, Tesla has generated total revenue of $108.2 million since it was founded and has accumulated a deficit of 236.4 million dollars as of September 30.
The company said it had a net loss of 31.5 million dollars for the nine months which ended September 30, 2009.
German luxury carmaker Daimler took a 10-per cent stake in Tesla in May of last year and sold 40 per cent of its stake in July to Aabar Investments group of the United Arab Emirates.
Last year, Tesla received a 465-million-dollar loan from the US Department of Energy’s Advanced Technology Vehicles Manufacturing Incentive Program to help it build the Model S.
According to US press reports, Tesla would be the first auto company to go public since Ford did so in 1956.
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US-China economic ties
head into rocks
The United States’ economic relations with China are headed into the rocks, with Beijing’s new government procurement policy delivering a major blow, US experts said Friday.
‘I think we’re going to see the bilateral economic relations with the Chinese deteriorate over the next year or so,’ said Bill Reinsch, president of the National Foreign Trade Council.
The increasingly strained relations with China were mostly Beijing’s fault because the Chinese authorities have backed away from a market-oriented direction and resorted to more subsidies and investment restrictions, Reinsch said.
‘We’re going to head into a period of both sides testing the other,’ he said at a roundtable discussion hosted by the Washington-based business association.
Reinsch predicted that attacks against China’s economic policies ‘will escalate’ in Congress, especially as the country faces mid-term elections in November.
‘For a country like ours whose strength is innovation... being able to exploit your own intellectual property is absolutely critical to our future economic growth,’ said the head of the council, which represents more than 300 companies, including General Electric and Chevron.
The National Foreign Trade Council was among 19 groups this week that petitioned top US officials, including Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner, in a letter protesting China’s ‘indigenous innovation’ programs that they say shuts out American companies.
The latest Chinese policy, announced in November, requires that eligibility for Chinese government procurement is based on whether the products contain intellectual property that is developed and owned in China.
‘The Chinese government has promulgated a series of ‘indigenous innovation’ programs as part of a long-term plan that threaten to exclude a wide array of US firms from a market that is vital to their future growth and ability to create jobs here at home,’ the groups wrote.
‘We urge you to make this a strategic priority in our bilateral economic engagement with China.’
Growing trade frictions between the world’s largest developed and developing countries have produced a spate of new tariffs and finger-pointing in recent months.
John Stubbs, the head of the Global Innovation Forum, a GE-backed council project, said his group was created to ‘inform’ the political debate about the importance of intellectual property and intellectual property rights.
He said that China’s procurement policy ‘was top of the list’ for the forum’s so-called ‘brain trust’ of leaders, ranging from the Massachusetts Institute of Technology to the University of Pennsylvania’s The Wharton School.
The controversial policy hurts China, too, he argued.
‘It walls off the vast engineering community’ in China from cooperating and participating in joint research and development (R&D) projects on a number of issues.
Reinsch forecast a shift in investment patterns.
‘Over five years you’re going to see more and more investment going to India, Brazil and other places and not in China because people are just getting frustrated and tired and want to be someplace where there’s rule of law,’ he said.
Alan Wolff, a US ambassador who leads law firm Dewey & LeBoeuf’s international trade practice, cited a study by his firm that found that little of US semiconductor firms’ R&D investments went to China.
Wolff, a former US Trade Representative negotiator under the Carter administration in the 1970s, said investment went to central Europe, where he said there were a lot of good engineers and ‘not the concerns over intellectual property protection.’
‘The Chinese policies have their own direct impact. Companies actually vote where they place their investments. There are negative aspects to these policies that have immediate costs,’ he said.
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Toyota chief apologises
for huge recall
Toyota Motor Corp President Akio Toyoda apologised for the recall of millions of vehicles around the world, Japanese broadcaster NHK reported, as the deepening recall crisis threatened to further damage its sales and delay an earnings recovery.
‘We’re extremely sorry to have made customers uneasy,’ Toyoda said on Friday on the sidelines of the World Economic Forum in Davos, Switzerland, a brief clip on NHK showed.
‘We plan to establish the facts and give an explanation that will remove customers’ concerns as soon as possible.’
Toyoda had been conspicuously silent since the top automaker’s recall of cars related to unintended acceleration spread from North America to Europe and China this week.
As of Saturday, the global recalls of Toyota cars and trucks had swollen to about 7.5 million vehicles, almost as many as it sold worldwide in 2009. Toyota has said the defective pedal was not used in any of its cars in Japan, Australia and Asia excluding China.
The total includes repairs for an issue involving floor mats becoming stuck under accelerator pedals.
Toyota has not recalled any cars in Japan, where it uses different suppliers.
With calls mounting for Toyoda to address the media on the escalating ordeal, the world’s top automaker had said it was studying some form of comment or action from headquarters.
A company source told Reuters a news conference may be held early next week, prior to Toyota’s announcement of third-quarter financial results on February 4, but that the company was still working on a final plan. The source did not say whether Toyoda, or another executive, would hold the briefing.
Toyoda, a family scion who took up his post last June, last commented publicly on the matter in October, when he expressed regret for the deaths of four people in a California crash linked to the defects last year.
He has vowed to revamp Toyota’s sprawling organisation to make problems at every level of operation more visible, as a rapid expansion over the last decade left it with too much production capacity when the economic crisis hammered car demand globally.
In an editorial, Japan’s Asahi Shimbun said on Saturday that Toyota was skirting the responsibility to allay Japanese customers’ anxiety over the safety issue, and that its brand image, crafted over years of effort, would be damaged.
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Chevron Q4 profit down
Chevron Corp posted a drop in quarterly profit on Friday, and its new boss said the second-largest US oil company had plenty of work to do on its own project line-up without making any big acquisitions.
Chief Executive John Watson also said there would be no refinery closures in the near term, despite a bad performance in the fourth quarter that weighed heavily on its bottom line.
Exxon Mobil Corp’s planned purchase of US natural gas producer XTO Energy cast the industry’s attention on how Exxon’s smaller rivals might respond.
Chevron’s anticipated 2010 production growth will not come anywhere close to the 9 per cent fourth-quarter increase, but Watson, who just took over the top job at the start of January, said the company’s long-term pipeline was very full.
‘We can see growth out through the rest of this decade, and so we haven’t been particularly needy, if you will, to do a large transaction,’ he told analysts on a conference call. ‘We haven’t felt that the opportunities that are out there compete with other things that we have in our portfolio.’
For one, the company will be spending heavily off the coast of Western Australia this year, with $3.5 billion of its $21.6 billion capital spending budget going toward construction of its massive natural gas operations there.
Meanwhile, fourth-quarter profit fell 37 per cent, as refining margins have suffered with pricier oil lifting costs even as the weak economy has shrunk fuel demand.
That weakness overshadowed a steep 9 per cent rise in oil and gas output in the quarter from new and expanded projects, which lifted proved reserves by 1.1 billion barrels.
‘It’s like trying to run at 40 miles per hour in a boat while dragging an anchor,’ said James Halloran, energy advisor at Financial America Securities in Cleveland.
Fourth-quarter profit fell to $3.07 billion, or $1.53 per share, from $4.9 billion, or $2.44 per share, a year before, with Chevron being hit by negative currency moves and a lack of derivative gains and a $600 million asset swap a year before.
The earnings figure was far short of the $1.70 per share analysts expected, according to Thomson Reuters I/B/E/S, hit by a steeper-than-expected $613 million refining, marketing and transportation loss, versus a year-ago profit of $2.1 billion.
Analysts were still encouraged by Chevron’s reserve replacement of about 112 per cent in 2009.
Watson, on his first call with analysts since becoming CEO, said it was ‘quite premature’ to talk of closing refineries, but he would seek cost cuts and aim for a 10 per cent-plus downstream return through the cycle.
Chevron will merge its chemicals arm with the rest of the downstream business, and retain a spending bias that will shift its focus over time to exploration and production, he added.
‘We have favoured upstream investment for more than the last decade. That has been a pattern I think you will see going forward,’ Watson said.
Chevron is looking for modest production growth of about 1 per cent this year, at 2.73 million barrels of oil equivalent per day, with output from new projects more than offsetting a base business decline of about 6 per cent.
Production at Chevron was 2.78 million boe per day in the fourth quarter, including 135,000 bpd associated with the ramp-up at Agbami in Nigeria, which commenced operations in the third quarter of 2008, and expansion at Tengiz in Kazakhstan.
The stock fell 1.02 per cent to $72.19 on Friday, in line with the Standard & Poor’s Energy index (.GSPE).
Earlier this week, ConocoPhillips posted better-than-expected earnings as the firmer oil prices offset its weak refinery performance.
Exxon reports fourth-quarter results on Monday.
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India 3G auction likely
to be delayed
India’s multi-billion-dollar auction of third-generation radio frequency aimed at giving mobile users faster Internet and other services may be delayed again, reports said Saturday.
The auction for four 3G slots was to be held in February.
The delay stems from a lack of space on the airwaves and would be the fourth postponement of the auction in the past year, local newspapers said.
The Times of India and other papers quoted unnamed government officials as saying the sale now would only take place in August or September as the defence ministry could not vacate the airwaves needed for the sale until mid-year.
The auctions for licences for 3G mobile phone services and WiMax wireless broadband services could raise 250 billion rupees ($5.39b) for the cash-strapped government, communications minister A Raja said last August.
Some reports estimate the proceeds could reach at least 350 billion rupees.
Introduction of 3G services would allow high-speed Internet, video downloads and other sophisticated services on mobile phones.
India, which has the most mobile users after China, with 525 million subscribers, is the largest economy in the world not offering 3G cellular services nationwide.
The communications ministry has sufficient airwaves to sell two 3G slots while the defence ministry has enough for two more.
But the defence ministry has said it cannot vacate the airwaves until an optical fibre cable network is built to connect key defence locations.
Such a network would take months to roll out.
The law ministry has said the auction should only be held when the radio frequency is available, the Daily News and Analysis and other newspapers reported.
The cash-strapped Congress government had been keen to hold the sale before the end of the current fiscal year in March to help plug a yawning fiscal deficit.
Failure to hold the sale could boost the deficit, now pegged at 6.8 per cent of gross domestic product for this year, by 0.6 percentage points, the Times said.
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NEWS
Govt’s essential goods
import plan fails
The government’s plan to import essential commodities failed as it could not communicate with foreign governments in time and keep watch on the price fluctuation on the international market, commerce ministry officials said.
The government earlier planned to import six essential goods to prevent the rerun of its failure in meeting the demand in time of crisis.
The commerce ministry’s additional secretary Mustafa Mohinuddin on Friday said they could arrange for the import of only lentils from Nepal through the state-owned Trading Corporation of Bangladesh as part of the plan.
‘The Trading Corporation will import 15,000 tonnes of lentil from the Nepal Trading Corporation through international tender that was in the past week,’ he said.
He, however, said the lentil price quoted by the Nepalese trading corporation was higher than the price on the market.
Mohinuddin also said the import of palm oil from Malaysia failed because of huge cost in the import of good quality palm oil and the import of sugar from Brazil could also not be possible for increase in prices on the international market.
‘Import of essential goods from the neighbouring India will also be costly because of high prices compared with the prices on the domestic market,’ he said.
According to a commerce ministry’s report on the wholesale and retail market in Kolkata in the past week, prices of 16 essential goods but potato were higher than the prices in Bangladesh.
The 16 essential goods include rice, wheat, soya bean oil, lentils, onions, sugar, salt, red chilli, garlic, ginger and egg.
The retail price of potato on the Indian market was about Tk 9 compared with Tk 24 a kilogram in Bangladesh but the agriculture ministry on January 7 slapped a ban on potato import.
Bangladesh foreign missions in India, Malaysian, Nepal, Myanmar, Brazil, United States, Canada, Turkey and Australia were asked by the commerce ministry to send market reports on six essential goods — rice, sugar, soya bean oil, palm oil, lentils and onions.
The commerce ministry has also planned to communicate directly with foreign suppliers after a bitter experience in the past Ramadan when local importers ‘cheated’ the Trading Corporation in supplying sugar, edible oil and chick peas, the sources said.
The Prime Refinery failed to supply the agreed 12,500 tonnes of crude soya bean oil to the Trading Corporation.
A trading house owned by ruling party lawmaker Abdur Rahman Badi also did not supply chick peas imported from Myanmar and sold it on the local market for more money, sources in the commerce ministry said.
Local sugar suppliers also failed to supply 25,000 tonnes of sugar to the Trading Corporation for sales through its outlets during Ramadan.
The Trading Corporation is now planning to procure sugar in the state-owned sugar mills and soya bean oil from private company Prime Edible Oil Ltd, the sources said.
Former commerce secretary Suhel Ahmed Chowdhury told New Age the commerce ministry needed expertise to study global commodity market and procure essential commodities in time.
The Trading Corporation also needs to incorporate trade experts from the private sector, he said.
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Dutch govt keen to work in
local shipbuilding industry
]
The Netherlands Saturday expressed its keen interest to work together with Bangladesh for expansion of shipbuilding industry here at a time when the world’s shipbuilding industry faces setback due to the financial crisis.
The interest was shown at a ‘matchmaking seminar’ for ‘shipbuilding sector of Bangladesh and the Netherlands’ at a city hotel here, said a Dutch embassy press release.
Ananda Shipyard and Slipways Ltd and the Netherlands embassy jointly organised the seminar backed by Holland Marine Equipment, a Dutch business group.
Charge d’Affairs of the Netherlands embassy Doris Voorbraak spoke on the occasion. ASSL chairman Abdullahel Bari delivered the welcome speech on the occasion, joined by Dutch shipbuilding companies.
The seminar was aimed at introducing the Dutch companies to the Bangladeshi shipbuilding companies and exploring the area of cooperation.
Participating Dutch companies were Vuyk Engineering Groningen, Dagin Marine Technology, Heatmaster, Rubber Design, Winteb, Eurovalve, Neddeck Marine, HRP and Gea Bloksma.
In her speech, Voorbraak said the world’s shipbuilding industry might appear gloomy as orders are cancelled and the overall trade volume is down due to the global financial meltdown.
Bangladesh is perceived 15 per cent cheaper than its main components such as Vietnam mainly due to low labour cost, she said.
The Dutch companies are always eager to identify new business opportunities abroad, especially in the shipbuilding industry, which is strongly export focused, Voorbraak said.
She said the Dutch have a vast experience in shipbuilding sector which could be shared with Bangladesh for benefiting equally.
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WORLD
Davos ends with recovery warning
after banking bust-up
The world economy is recovering but remains fragile and dogged by huge deficits, top officials said Saturday at the end of a blue-chip Davos summit clouded by divisions over banking reform.
Asia is leading the resurgence after the worst crisis for decades with China eyeing double-digit growth, but the United States and Europe remain dogged by unemployment and the eurozone is grappling with a crisis over Greece.
‘The situation is better, but fragile,’ said International Monetary Fund chief Dominique Strauss-Kahn, adding: ‘We have to go ahead strongly in the financial sector reform, much more rapidly than has been done until now.’
‘The fiscal sustainability problem is going to be one of the biggest, maybe the biggest problem .... We’ll have to deal with this for five, six or seven years, depending on the country,’ he said.
The bust-up over US plans to curb risk-taking by banks again took centre stage on the last day of the World Economic Forum, with central bank chiefs huddling with finance ministers and officials, and top private bankers.
The meeting in the Swiss ski resort brought together British and French finance ministers Alistair Darling and Christine Lagarde, European Central Bank chief Jean-Claude Trichet and the heads of top private banks.
‘There’s going to be regulation, they (the bankers) understand that,’ said US Congressman Barney Frank, one of the few willing to talk after the closed-doors meeting.
Asked if the bankers present accepted the need for greater regulation, he said: ‘Frankly it doesn’t make any difference whether they did or not. They aren’t in charge of this.
‘The political leadership certainly in the United States is going to go ahead with tough, sensible regulation,’ he added.,
The banking issue has clouded the four-day Davos meeting, starting with French President Nicolas Sarkozy’s opening address in which he backed US President Barack Obama’s tough clampdown plans.
At the same time there has been cautious optimism about the outlook for global recovery after the near-meltdown of the last 18 months
Chinese and Indian delegates have trumpeted their country’s healthy growth rates of nearly nine and seven per cent respectively, and the United States hailed Friday’s unexpectedly-rosy 5.7 per cent GDP growth figure.
But unemployment remains a worrying problem in the United States and Europe, which both have a jobless rate of around 10 per cent, despite a return to overall growth.
‘What we’re seeing in the United States is a statistical recovery and a human recession,’ said Larry Summers, US President Barack Obama’s chief economic advisor, commenting on the jobless recovery phenomenon.
Warnings of a double-dip recession — where nascent recovery fades back into a new slowdown — have abounded in Davos as leaders mull exit strategies from huge stimulus packages agreed to prevent a full-blown Depression last year.
France’s economy minister Lagarde said she followed a ‘three Rs’ principle — recovery, reform, and restoring public finances.
But she said timing was crucial.
‘Balancing between the recovery process that has to continue, the reform that needs to be maintained and the restoring of public finances is a tough line to draw,’ she said.
A top Chinese banker meanwhile said that Beijing could move on the sensitive issue of its currency’s exchange rate once other countries start to withdraw their stimulus packages.
China has been under fire for keeping the yuan weak against the dollar, a strategy which critics say is aimed at keeping Chinese exports competitive.
Once world leaders agree an exit strategy ‘‘China is ready... including various issues—liquidity issue, exchange issue,’ Zhu Min, deputy head of China’s central bank, told the Davos forum.
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Trade ministers downbeat
on WTO prospects
Trade ministers were skeptical on Saturday about the prospects of concluding stalled global trade liberalisation talks this year, with some blaming the United States for foot-dragging.
Ministers from about 20 major economies held informal talks on the sidelines of the annual World Economic Forum meeting in the Swiss ski resort of Davos, but Washington only sent a deputy ambassador and no political representative.
‘We would like to see the (Doha) round completed as soon as possible, but for that everybody will have to be there,’ European Union trade commissioner Benita Ferrero-Waldner said.
Brazilian foreign minister Celso Amorim told reporters: ‘We cannot expect more than that because of course one of the main partners is not represented at a ministerial level.’
‘We have come to a point when it is the question of political will,’ he said on arrival for the meeting.
Leaders of the G20 grouping of major economies, including President Barack Obama, agreed in Pittsburgh last September on the goal of wrapping up the Doha round of World Trade Organisation negotiations in 2010.
But there has been scant progress since then and many participants say domestic politics and the impact of the financial crisis and high unemployment in the United States and Europe have made chances of an early trade deal more remote.
‘All the indications are that it’s an incredibly controversial matter in the US Congress and I don’t think they have yet defined a sustainable approach to conclude the round,’ South African trade minister Rob Davies told Reuters on Friday.
Davies cited mid-term US congressional elections and Brazil’s presidential poll as among the political obstacles.
The long-running 153-nation talks collapsed in 2008 over a dispute between the United States, India and China on protection for farmers in developing countries. Other unresolved issues include cotton subsidies, trade in services and in environmental goods and services.
‘If I’m one of those who lives to be a 100, I hope we are not still trying to conclude the Doha trade round then,’ Australian trade minister Simon Crean joked.
WTO director-general Pascal Lamy told reporters he was encouraged that there had been no retreat into protectionism so far in the global recession, but the political momentum to make the final trade-offs needed in the Doha Development Round, launched in 2001, had still not materialised.
The Obama administration has said big emerging economies such as China, India and Brazil must open their markets more to make a global trade deal worthwhile for US business.
Swiss President Doris Leuthard chaired Saturday’s annual session, for which Switzerland had prepared a list of outstanding issues to be resolved, including her own country’s interests in protecting farmers and food and wine appellations.
But participants said the Swiss checklist was too detailed for ministers to engage on, and they would focus on the domestic politics of trade liberalisation, and on the impact of climate change negotiations on trade.
Senior officials are due to conduct a stocktaking exercise in late March to see if an outline WTO deal is possible this year, and participants said no one would want to put negotiating cards on the table at this stage.
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SPECIAL
ACI bonds subscription
begins today
ACI Pharmaceuticals is offering public a bond and IFIC Bank is coming up with its first mutual fund this week.
The subscription of ACI zero coupon bond begins today.
ACI Pharmaceutical has offered public the bond to raise over Tk 133 crore for product diversifications.
Of the amount, the company will raise over Tk 80 crore through private placement and the rest Tk 53 crore from public offering.
Zero coupon bond is a debt security that doesn’t pay interest but is offered at a discount rate, rendering profit at maturity.
ACI is offering the bond for Tk 3,743 and the investors will get back Tk 5,000 after four years with its maturity.
The investors can also convert 20 per cent of their bonds into the regular shares of the company on optional basis.
Investors, however, should submit application for a market lot of 5 bonds, costing 18,715. One can submit two applications, of which the second one should be under joint names.
The subscription offer will remain open until February 4 for the local investors, but the non-residence Bangladeshis can apply till February 13.
Besides ACI, subscription of the IFIC Bank First Mutual Fund will begin on February 7.
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RAK Ceramics to issue IPO under
book building method
RAK Ceramics (Bangladesh) Limited, a UAE-Bangladesh joint venture company, is going to issue an initial public offering under the book building method, said a news release.
‘The company will issue 3,45,10,000 ordinary shares of Tk 10 each under the modern system for IPO pricing,’ said the chairman of the company, Khater Massaad, at an IPO presentation programme at Hotel Radisson in Dhaka on Saturday.
RAK Ceramics (Bangladesh) managing director SAK Ekramuzzaman said, ‘It is expected to be the first public issue under the book building method in Bangladesh,’
The Securities and Exchange Commission in March last year introduced book building system for IPO pricing to attract big issues to stock market.
Under the system, the price of an IPO share will be determined through an automated bidding to be participated by different financial institutions and then that share will be opened for the IPO participation at that rate.
Khater said, ‘We have appointed IDLC Finance Limited as lead manager to the issue and BRAC EPL Investments Limited as joint manager to the issue for this purpose.’
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Chinese traders urged to
invest in Bangladesh
Bangladesh business leaders urged Chinese businessmen to invest in infrastructure development, engineering and technology, banking and insurance, education, IT and tourism sector in the country.
Chinese businessmen can import textile, cotton, PVC pipe and plastic, pharmaceuticals, readymade garments, leather and shrimp from Bangladesh.
Acting president of the Federation of Bangladesh Chambers of Commerce and Industry Abul Kashem Ahmed made the call at a meeting between business leaders of the two countries at FBCCI on Thursday, said a news release.
A five-member business delegation of China Council for the Promotion of International Trade led by Li Guohua, vice-president of Jilin Sub-Council of CCPIT attended the meeting.
Abul Kashem presided over the meeting attended by the directors of FBCCI and the representatives of different sectors.
Chinese delegation leaders emphasised upon promotion of cooperation in trade and technology between Bangladesh and China.
He invited Bangladeshi businessmen to import vehicles, chemicals, agricultural machineries and accessories and agro-based products from China.
Shamsul Alam, Anowar Hossain and Mahbub Islam Runu, directors of FBCCI and Iqbal Jamal Jewel and Mokhlesur Rahman, general body members of FBCCI also attended the meeting.
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WORLD
Struggling Wall Street
eyes jobs data
With Wall Street struggling to keep upward momentum, investors will keenly await a report on the US labour market in the coming week that could be a key driver of market action.
Friday’s data on US unemployment and job creation may provide clues on whether the economy, which is showing strong growth, can sustain its recovery.
In the week to Friday, market action was choppy, sending the Dow Jones Industrial Average down 1.04 per cent to 10,067.33, as the market closed January with its worst performance in 11 months.
The technology-dominated Nasdaq composite slipped 2.63 per cent to 2,147.35 the broad Standard & Poor’s 500 index declined 1.64 per cent to 1,074.87.
Many analysts say the latest declines are the start of a ‘correction,’ which is usually a pullback of around 10 per cent that can take some of the froth out of the market, rather than an end to the bullish period.
‘The current correction is coming hard and fast, which is more typical of corrections than bear markets, which in the beginning tend to sneak down without much notice or fanfare,’ said Bob Dickey at RBC Wealth Management.
‘We expect the correction low will come over the next week or two... However, the Dow first may have to go below the psychological floor of 10,000 in order to trap more of the bears out in the cold.’
Fred Dickson, market strategist at DA Davidson & Co., said Friday’s report on US gross domestic product surging to a 5.7 per cent pace in the fourth quarter was a big positive for Wall Street.
The GDP data ‘report reinforces our assessment that the economy hit the bottom point of the recession late last summer and is slowly gaining traction,’ Dickson said.
‘In addition, the report reinforces the notion that the current stream of positive earnings reports hitting the tape this month are real and should be sustainable going into the first half of 2010. Bottom-line, this is bullish news for the stock market.’
Others noted that GDP was boosted by special factors such as inventory adjustment and that the economy may not be growing fast enough to create jobs.
Augustine Faucher at Moody’s Economy.com said it will take more time for the economy to get on a sustainable track.
Based on the latest data, he argued that ‘growth in the first half of 2010 will be below that needed to keep pace with an expanding labour force, and the unemployment rate will move higher, peaking at close to 11 per cent in the fall.’
The upcoming employment data thus becomes critical to the outlook for the economy and the markets, say analysts.
The consensus forecast calls for the report to show a net gain of 50,000 jobs, following a loss of 85,000 in December. That would be a big positive, although not enough to bring down the unemployment rate from its level of 10 per cent.
‘For the first time in a very long time, the consensus is expecting a gain in employment,’ said Gina Martin at Wells Fargo Securities.
Dean Maki at Barclays Capital said he expects the economy is gaining momentum, highlighted by strong business spending, that will translate into job growth.
‘We view this improvement in business fixed investment spending as a clear signal that a self-sustaining recovery is underway, as businesses are feeling confident enough to spend more,’ Maki said.
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WORLD
US electric carmaker Tesla plans
public stock offering
US electric carmaker Tesla Motors said on Friday that it plans an initial public offering of stock that could raise as much as 100 million dollars.
In a filing with the Securities and Exchange Commission and a statement, Tesla said the price range and exact number of shares had not been decided.
The Palo Alto, California-based automaker also did not set a date for the IPO.
Founded in 2003 by South African Elon Musk, a co-founder of online payments giant PayPal, Tesla specialises in environmentally friendly electric cars.
The Tesla Roadster, a high-performance sports car, costs more than $100,000 and can go nearly 250 miles (400 kilometres) on a single charge.
In its SEC filing, Tesla said it had sold 937 Tesla Roadsters to customers in 18 countries as of December 31.
Tesla is also making a ‘Model S’ five-passenger sedan powered by lithium-ion battery packs capable of between 160 and 300 miles (257 and 482 kilometres) per charge.
The Model S, expected in 2012, has an anticipated base price of around $50,000.
According to the documents filed with the SEC, Tesla has generated total revenue of $108.2 million since it was founded and has accumulated a deficit of 236.4 million dollars as of September 30.
The company said it had a net loss of 31.5 million dollars for the nine months which ended September 30, 2009.
German luxury carmaker Daimler took a 10-per cent stake in Tesla in May of last year and sold 40 per cent of its stake in July to Aabar Investments group of the United Arab Emirates.
Last year, Tesla received a 465-million-dollar loan from the US Department of Energy’s Advanced Technology Vehicles Manufacturing Incentive Program to help it build the Model S.
According to US press reports, Tesla would be the first auto company to go public since Ford did so in 1956.
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US-China economic ties
head into rocks
The United States’ economic relations with China are headed into the rocks, with Beijing’s new government procurement policy delivering a major blow, US experts said Friday.
‘I think we’re going to see the bilateral economic relations with the Chinese deteriorate over the next year or so,’ said Bill Reinsch, president of the National Foreign Trade Council.
The increasingly strained relations with China were mostly Beijing’s fault because the Chinese authorities have backed away from a market-oriented direction and resorted to more subsidies and investment restrictions, Reinsch said.
‘We’re going to head into a period of both sides testing the other,’ he said at a roundtable discussion hosted by the Washington-based business association.
Reinsch predicted that attacks against China’s economic policies ‘will escalate’ in Congress, especially as the country faces mid-term elections in November.
‘For a country like ours whose strength is innovation... being able to exploit your own intellectual property is absolutely critical to our future economic growth,’ said the head of the council, which represents more than 300 companies, including General Electric and Chevron.
The National Foreign Trade Council was among 19 groups this week that petitioned top US officials, including Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner, in a letter protesting China’s ‘indigenous innovation’ programs that they say shuts out American companies.
The latest Chinese policy, announced in November, requires that eligibility for Chinese government procurement is based on whether the products contain intellectual property that is developed and owned in China.
‘The Chinese government has promulgated a series of ‘indigenous innovation’ programs as part of a long-term plan that threaten to exclude a wide array of US firms from a market that is vital to their future growth and ability to create jobs here at home,’ the groups wrote.
‘We urge you to make this a strategic priority in our bilateral economic engagement with China.’
Growing trade frictions between the world’s largest developed and developing countries have produced a spate of new tariffs and finger-pointing in recent months.
John Stubbs, the head of the Global Innovation Forum, a GE-backed council project, said his group was created to ‘inform’ the political debate about the importance of intellectual property and intellectual property rights.
He said that China’s procurement policy ‘was top of the list’ for the forum’s so-called ‘brain trust’ of leaders, ranging from the Massachusetts Institute of Technology to the University of Pennsylvania’s The Wharton School.
The controversial policy hurts China, too, he argued.
‘It walls off the vast engineering community’ in China from cooperating and participating in joint research and development (R&D) projects on a number of issues.
Reinsch forecast a shift in investment patterns.
‘Over five years you’re going to see more and more investment going to India, Brazil and other places and not in China because people are just getting frustrated and tired and want to be someplace where there’s rule of law,’ he said.
Alan Wolff, a US ambassador who leads law firm Dewey & LeBoeuf’s international trade practice, cited a study by his firm that found that little of US semiconductor firms’ R&D investments went to China.
Wolff, a former US Trade Representative negotiator under the Carter administration in the 1970s, said investment went to central Europe, where he said there were a lot of good engineers and ‘not the concerns over intellectual property protection.’
‘The Chinese policies have their own direct impact. Companies actually vote where they place their investments. There are negative aspects to these policies that have immediate costs,’ he said.
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Toyota chief apologises
for huge recall
Toyota Motor Corp President Akio Toyoda apologised for the recall of millions of vehicles around the world, Japanese broadcaster NHK reported, as the deepening recall crisis threatened to further damage its sales and delay an earnings recovery.
‘We’re extremely sorry to have made customers uneasy,’ Toyoda said on Friday on the sidelines of the World Economic Forum in Davos, Switzerland, a brief clip on NHK showed.
‘We plan to establish the facts and give an explanation that will remove customers’ concerns as soon as possible.’
Toyoda had been conspicuously silent since the top automaker’s recall of cars related to unintended acceleration spread from North America to Europe and China this week.
As of Saturday, the global recalls of Toyota cars and trucks had swollen to about 7.5 million vehicles, almost as many as it sold worldwide in 2009. Toyota has said the defective pedal was not used in any of its cars in Japan, Australia and Asia excluding China.
The total includes repairs for an issue involving floor mats becoming stuck under accelerator pedals.
Toyota has not recalled any cars in Japan, where it uses different suppliers.
With calls mounting for Toyoda to address the media on the escalating ordeal, the world’s top automaker had said it was studying some form of comment or action from headquarters.
A company source told Reuters a news conference may be held early next week, prior to Toyota’s announcement of third-quarter financial results on February 4, but that the company was still working on a final plan. The source did not say whether Toyoda, or another executive, would hold the briefing.
Toyoda, a family scion who took up his post last June, last commented publicly on the matter in October, when he expressed regret for the deaths of four people in a California crash linked to the defects last year.
He has vowed to revamp Toyota’s sprawling organisation to make problems at every level of operation more visible, as a rapid expansion over the last decade left it with too much production capacity when the economic crisis hammered car demand globally.
In an editorial, Japan’s Asahi Shimbun said on Saturday that Toyota was skirting the responsibility to allay Japanese customers’ anxiety over the safety issue, and that its brand image, crafted over years of effort, would be damaged.
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Chevron Q4 profit down
Chevron Corp posted a drop in quarterly profit on Friday, and its new boss said the second-largest US oil company had plenty of work to do on its own project line-up without making any big acquisitions.
Chief Executive John Watson also said there would be no refinery closures in the near term, despite a bad performance in the fourth quarter that weighed heavily on its bottom line.
Exxon Mobil Corp’s planned purchase of US natural gas producer XTO Energy cast the industry’s attention on how Exxon’s smaller rivals might respond.
Chevron’s anticipated 2010 production growth will not come anywhere close to the 9 per cent fourth-quarter increase, but Watson, who just took over the top job at the start of January, said the company’s long-term pipeline was very full.
‘We can see growth out through the rest of this decade, and so we haven’t been particularly needy, if you will, to do a large transaction,’ he told analysts on a conference call. ‘We haven’t felt that the opportunities that are out there compete with other things that we have in our portfolio.’
For one, the company will be spending heavily off the coast of Western Australia this year, with $3.5 billion of its $21.6 billion capital spending budget going toward construction of its massive natural gas operations there.
Meanwhile, fourth-quarter profit fell 37 per cent, as refining margins have suffered with pricier oil lifting costs even as the weak economy has shrunk fuel demand.
That weakness overshadowed a steep 9 per cent rise in oil and gas output in the quarter from new and expanded projects, which lifted proved reserves by 1.1 billion barrels.
‘It’s like trying to run at 40 miles per hour in a boat while dragging an anchor,’ said James Halloran, energy advisor at Financial America Securities in Cleveland.
Fourth-quarter profit fell to $3.07 billion, or $1.53 per share, from $4.9 billion, or $2.44 per share, a year before, with Chevron being hit by negative currency moves and a lack of derivative gains and a $600 million asset swap a year before.
The earnings figure was far short of the $1.70 per share analysts expected, according to Thomson Reuters I/B/E/S, hit by a steeper-than-expected $613 million refining, marketing and transportation loss, versus a year-ago profit of $2.1 billion.
Analysts were still encouraged by Chevron’s reserve replacement of about 112 per cent in 2009.
Watson, on his first call with analysts since becoming CEO, said it was ‘quite premature’ to talk of closing refineries, but he would seek cost cuts and aim for a 10 per cent-plus downstream return through the cycle.
Chevron will merge its chemicals arm with the rest of the downstream business, and retain a spending bias that will shift its focus over time to exploration and production, he added.
‘We have favoured upstream investment for more than the last decade. That has been a pattern I think you will see going forward,’ Watson said.
Chevron is looking for modest production growth of about 1 per cent this year, at 2.73 million barrels of oil equivalent per day, with output from new projects more than offsetting a base business decline of about 6 per cent.
Production at Chevron was 2.78 million boe per day in the fourth quarter, including 135,000 bpd associated with the ramp-up at Agbami in Nigeria, which commenced operations in the third quarter of 2008, and expansion at Tengiz in Kazakhstan.
The stock fell 1.02 per cent to $72.19 on Friday, in line with the Standard & Poor’s Energy index (.GSPE).
Earlier this week, ConocoPhillips posted better-than-expected earnings as the firmer oil prices offset its weak refinery performance.
Exxon reports fourth-quarter results on Monday.
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India 3G auction likely
to be delayed
India’s multi-billion-dollar auction of third-generation radio frequency aimed at giving mobile users faster Internet and other services may be delayed again, reports said Saturday.
The auction for four 3G slots was to be held in February.
The delay stems from a lack of space on the airwaves and would be the fourth postponement of the auction in the past year, local newspapers said.
The Times of India and other papers quoted unnamed government officials as saying the sale now would only take place in August or September as the defence ministry could not vacate the airwaves needed for the sale until mid-year.
The auctions for licences for 3G mobile phone services and WiMax wireless broadband services could raise 250 billion rupees ($5.39b) for the cash-strapped government, communications minister A Raja said last August.
Some reports estimate the proceeds could reach at least 350 billion rupees.
Introduction of 3G services would allow high-speed Internet, video downloads and other sophisticated services on mobile phones.
India, which has the most mobile users after China, with 525 million subscribers, is the largest economy in the world not offering 3G cellular services nationwide.
The communications ministry has sufficient airwaves to sell two 3G slots while the defence ministry has enough for two more.
But the defence ministry has said it cannot vacate the airwaves until an optical fibre cable network is built to connect key defence locations.
Such a network would take months to roll out.
The law ministry has said the auction should only be held when the radio frequency is available, the Daily News and Analysis and other newspapers reported.
The cash-strapped Congress government had been keen to hold the sale before the end of the current fiscal year in March to help plug a yawning fiscal deficit.
Failure to hold the sale could boost the deficit, now pegged at 6.8 per cent of gross domestic product for this year, by 0.6 percentage points, the Times said.
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