Feb 22, 2011

BP in Indian energy sector

UK oil giant BP and Indian company Reliance Industries have announced a "transformational" strategic oil and gas partnership in India.The deal is expected to result in a total combined investment in India of $20bn, according to the companies' joint statement.

The companies will form a 50:50 joint venture for sourcing and marketing energy in India.

The deal gives BP a 30% stake in 23 oil and gas blocks owned by its new partner including 19 off India's east coast.

In return, the UK firm will pay $7.2bn (£4.4bn), plus up to a further $1.8bn in future performance-related payments.

"This is a clear reflection of the way in which believe that the energy industry is developing," said BP's chairman, Carl-Henrik Svanberg.

He said that the company predicted global energy consumption would rise by 40% between now and 2030, with most of the growth coming from emerging markets such as India.

"This has huge significance for India's economic development," said Reliance's Mukesh Ambani, noting that BP's investment would constitute the single largest foreign direct investment in India's history.

He noted BP's strong position in the natural gas business, which is expected to be the main energy source exploited via the partnership.

BP chief executive Bob Dudley noted that the hydrocarbon fields involved are comparable in size to the UK North Sea.

Alibaba executives resign for failure in fraud controlling

Two executives at Alibaba, China's largest e-commerce group, have resigned after a rise in fraudulent sales.

The firm said an internal investigation had discovered more than 1,000 fraud cases in both 2009 and 2010.

The pair, chief executive David Wei Zhe and chief operating officer Elvis Lee Shi-Huei, were not involved in the frauds but were taking responsibility for a "systemic breakdown".

The company has paid out $1.7m (£1.1m) as a result of the claims.

Most trades involved offering popular consumer electronics at bargain prices with a low minimum order value to entice buyers, Alibaba said in a statement.

The average value of the fraudulent claims was less than $1,200.

Alibaba's chairman and founder, Jack Ma, said the company had picked up a spike in the number of fraudulent transactions conducted on its site by so-called China Gold Suppliers members.

These members undergo more rigorous checks on their reliability and are supposed to be the most trustworthy on its site.

Alibaba said some supervisors and sales managers had either intentionally or negligently allowed fraudulent online "storefronts" to be created, which had let 2,326 suppliers trade without authentication and verification measures.

The company said 100 of its sales representatives, out of a sales workforce of 5,000, had been fired for alleged involvement in the scam.

It also said that Mr Lee and Mr Wei had made efforts to address the problem, but were resigning to take responsibility for a "systemic breakdown in our company's culture of integrity".

Alibaba's new chief executive will be Jonathan Lu Zhaoxi, who is currently chief executive of the unlisted online retailer Taobao.

Oil price touches $105.2 marking 3 years highest

Brent crude had jumped 2.6% by late afternoon to $105.2 a barrel, its highest level since before the 2008 financial crisis.

European energy companies are evacuating some staff from the country, which is a major oil and gas producer for the European market.

Sources said, the price of oil has risen in response to the ongoing turmoil in Libya for last five days.

Meanwhile shares in Italian oil firm ENI - which is active in Libya - ended Monday trading 5.1% lower.

The Italian company said on Monday that its operations were unaffected by the violence.

Italy buys about one-third of Libya's oil and gas exports, making it the country's biggest customer by far.

ENI has been buying gas from Libya for decades, and is at the centre of a close political relationship between the two countries, according to one analyst.

In 2008-09, the Libyan government had considered buying an up-to-10% stake in ENI, although the investment did not go ahead.

Some 13% of the company's revenues come from Libya, and 30% from North Africa as a whole, meaning the firm is highly exposed to instability in the region.

Although market concern about the firm is focusing on the short-term impact of the unrest, the analyst said there were also fears that a change in regime could lead to the Libyan assets of ENI and other foreign investors being expropriated.

The Italian firm said it was bringing home its employees' families and non-essential personnel, and was "further reinforcing the security measures for its people and plants".

ENI is not the only foreign oil company affected by events in Libya.

Shares in Austria's OMV - another European firm that has been active in Libya for many years - ended the day down 4.2%.

OMV, along with Royal Dutch Shell, BP, France's Total and Norway's Statoil, have all said they are repatriating some or all of their non-local staff.

Both BP and Shell are only involved in exploratory preparatory drilling in the country, and neither is currently producing oil there. BP said it had suspended its onshore operations.

The UK Foreign Office has already advised that those without a pressing need to remain in the country, should leave by commercial means if it is safe to do so, as has the US.

Meanwhile Turkey has already begun flying its 3,000 or so citizens in the country home.

Commodities markets are worried about more than just Libya, with the threat of unrest escalating in Iran - the second biggest oil producer in the Organisation of Petroleum Exporting Countries (Opec).

There is nervousness that even Opec's biggest producer, Saudi Arabia, may yet succumb to instability, although the autocratic regime there has yet to witness any protests.

Oil supplies in Libya and elsewhere have yet to be significantly disrupted by any of the events in the Middle East.

However, the head of the Al-Suwayya tribe in eastern Libya is reported to have said they will attempt to stop oil exports to Europe if oppression of protesters by the Gaddafi regime continues.

Strikes by workers have already shut down the Nafoora oilfield, which is operated by a subsidiary of the Libyan state-owned oil company, and protests have also closed the Rus Lanuf oil refinery, according to local news sources.

"I think markets are more twitchy than they normally would be, mainly because there isn't a huge amount of over-capacity in the market and therefore any interruption to supply from a major producer could see prices spike considerably higher," said Nick McGregor, oil analyst at Redmayne Bentley.

Opec is thought to have an additional 4.7 million barrels-per-day available, compared with Libya's exports estimated at 1.5 million.

Oil production is essential to the Libyan economy, with oil output accounting for 95% of export receipts and 25% of the country's economic output.

Feb 21, 2011

233 killed in Libya

Human Rights Watch says at least 233 people have been killed in Libya since last Thursday, 17 February 2011 in the the ongoing protest against Colonel Muammar Gaddafi's rule in the country.

The US, UK and French governments are among those condemning the harsh treatment of protesters.

But Italy, the former colonial power in Libya, has close business links to Tripoli and voiced alarm at the prospect of the Gaddafi government collapsing.

"Would you imagine to have an Islamic Arab Emirate at the borders of Europe? This would be a very serious threat," said Foreign Minister Franco Frattini.

The head of the Arab League, Amr Moussa, described the protesters' demands as legitimate, calling it a "decisive moment in history" for Arab nations.