Europe's Big Oil Sees Output Fall

LONDON - When Europe's major oil companies reported quarterly earnings last week, headlines across national capitals once again excoriated the petroleum giants for soaring profits in the face of consumers anger at high fuel prices.

Yet the profits couldn't mask a trend that continues to trouble Wall Street and corporate boardrooms: Nearly every major oil company reported year-on-year oil and gas output declines, often in the double-digits.

Big Oil is throwing huge resources at the problem with more open embrace of unconventional petroleum developments, high-risk exploration in frontier areas and corporate restructuring. But even if these strategies work in some cases, there is little doubt that anemic petroleum output signals a long-term challenge confronting the sector.
The particulars varied across the sector. BP PLC's (BP) 11% output drop was fueled in part by the continued hit from its reduced activity in the U.S. Gulf of Mexico after last year's disastrous spill. Italian giant Eni's (ENI) production fell 15% due to its disproportionate exposure to war-ravaged Libya. Spain's Repsol YPF SA (REP.MC), whose output fell 17%, was affected by both Libya and the U.S. Gulf, as well as by labor unrest in Argentina. Norway's Statoil ASA (STO) saw a16% output decline largely on production outages and maintenance in its home market in the North Sea.

Oil giants are more vulnerable to operational problems in part because of their declining dominance over key resources. Whereas in 1973, independent oil firms controlled three-quarters of the world's reserves, they hold as little as10% today, according to some estimates. That has forced oil majors to rely to a greater extent on costly unconventional plays such as shale gas, deepwater exploration, and Arctic exploration.
Investment in conventional assets accounted for 63% of the majors' total capital expenditure between 2001 and 2005, research by Wood Mackenzie showed, with this proportion set to fall to 40% between 2011 and 2015.

Most European major oil companies posted a surge in quarterly profits last week, but their results were overshadowed by a trend that continues to trouble Wall Street and corporate boardrooms: Nearly every major oil company reported year-to-year oil-and-gas output declines, often in the double-digits.

Big Oil is throwing huge resources at the problem with more open embrace of unconventional petroleum developments, high-risk exploration in frontier areas and corporate restructuring. But even if these strategies work in some cases, there is little doubt that anemic petroleum output signals a long-term challenge confronting the sector.

Consolidation offers another way forward, yet few expect large corporate mergers between integrated oil giants in light of antitrust concerns and today's high oil prices. More likely is a deal akin to Exxon's purchase of U.S. unconventional gas specialist XTO, a major factor in Exxon's standout 10% rise in production in the quarter. Wood Mackenzie's Simon Flowers predicts more such "infill acquisitions," but says "large-scale acquisition is not likely in the near term."

Another possibility is the flowering of deals between private oil giants and emerging state-controlled firms like Brazil's Petrobras, Russia's Rosneft (ROSN.RS) and China's CNPC. BP's failed share swap and Arctic exploration deal with Rosneft was an example and illustrates the lengths to which companies are prepared to go to gain access to their potentially lucrative reserves.

Wall Street will likely push harder for some sort of tangible action from Big Oil in the coming months. The sector trades at a significant discount to the oil price itself, a factor that could sharpen calls for share buybacks and more special dividends. The recent move by ConocoPhillips (COP) to hive off its downstream business lifted the Texas company's share price and spawned questions for the rest of the sector. But so far, most of Conoco's peers have dismissed the idea as impractical in light of the advantages of the conventional integrated model.

Communist Workers League

Communist Workers League ,Kommunistisk Arbeiderforbund, was a small communist group in Norway. It was formed in 1972 by a group of Communist Party of Norway militants, who had either been expelled or left voluntarily. First KA oriented itself towards China, and later towards Albania.

KA published Den Røde Arbeideren (The Red Worker) annually in connection with May Day until 2005.

During the 1970s KA published Røde Fane (Red Flag).

In the spring of 2006 the group announced that it had dissolved itself.

Economy of Norway

Norwegians enjoy the second highest GDP per-capita (after Luxembourg) and fourth highest GDP (PPP) per-capita in the world. Today, Norway ranks as the second wealthiest country in the world in monetary value, with the largest capital reserve per capita of any nation. According to the CIA World Factbook, Norway is a net external creditor of debt. Norway maintained first place in the world in the UNDP Human Development Index (HDI) for six consecutive years (2001–2006) and then reclaimed this position in 2009 and 2010. Cost of living is about 30% higher in Norway than in the United States and 50% higher than the United Kingdom. The standard of living in Norway is among the highest in the world. Foreign Policy Magazine ranks Norway last in its Failed States Index for 2009, judging Norway to be the world's most well-functioning and stable country. Continued oil and gas exports coupled with a healthy economy and substantial accumulated wealth lead to a conclusion that Norway will remain among the richest countries in the world in the foreseeable future.

The Norwegian economy is an example of a mixed economy, a prosperous capitalist welfare state featuring a combination of free market activity and large state ownership in certain key sectors. The Norwegian welfare state makes public health care free (above a certain level), and parents have 46 weeks paid parental leave. The income that the state receives from natural resources includes a significant contribution from petroleum production and the substantial and carefully managed income related to this sector. Norway has a very low unemployment rate, currently 3.1%. 30% of the labour force are employed by the government, the highest in the OECD. 22% are on welfare and 13% are too disabled to work, the highest proportions in the world. The hourly productivity levels, as well as average hourly wages in Norway are among the highest in the world.citation needed The egalitarian values of the Norwegian society ensure that the wage difference between the lowest paid worker and the CEO of most companies is much smaller than in comparable western economies.citation needed This is also evident in Norway's low Gini coefficient. The state has large ownership positions in key industrial sectors, such as the strategic petroleum sector (Statoil and Aker Solutions), hydroelectric energy production (Statkraft), aluminium production (Norsk Hydro), the largest Norwegian bank (DnB NOR), and telecommunication provider (Telenor). Through these big companies, the government controls approximately 30% of the stock values at the Oslo Stock Exchange. When non-listed companies are included, the state has even higher share in ownership (mainly from direct oil license ownership). Norway is a major shipping nation and has the world's 6th largest merchant fleet, with 1,412 Norwegian-owned merchant vessels.

Referendums in 1972 and 1994 indicated that the Norwegian people wished to remain outside the European Union (EU). However, Norway, together with Iceland and Liechtenstein, participates in the European Union's single market via the European Economic Area (EEA) agreement. The EEA Treaty between the European Union countries and the EFTA countries– transposed into Norwegian law via "EØS-loven"– describes the procedures for implementing European Union rules in Norway and the other EFTA countries. This makes Norway a highly integrated member of most sectors of the EU internal market. However, some sectors, such as agriculture, oil and fish, are not wholly covered by the EEA Treaty. Norway has also acceded to the Schengen Agreement and several other intergovernmental agreements between the EU member states.

The Norwegian economy

The Norwegian economy is a prosperous bastion of welfare capitalism, featuring a combination of free market activity and government intervention. The government controls key areas, such as the vital petroleum sector, through large-scale state-majority-owned enterprises. The country is richly endowed with natural resources - petroleum, hydropower, fish, forests, and minerals - and is highly dependent on the petroleum sector, which accounts for nearly half of exports and over 30% of state revenue. Norway is the world's third-largest gas exporter; its position as an oil exporter has slipped to seventh-....................






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Norway Excludes 17 Tobacco Companies From Oil Fund

Jan. 19 (Bloomberg) -- Norway excluded 17 tobacco companies, including British American Tobacco Plc and Philip Morris International Inc., from its sovereign wealth fund based on ethical guidelines.

Altria Group Inc., Japan Tobacco Inc., Reynolds American Inc., Swedish Match AB and Imperial Tobacco Group Plc also were excluded and the shares have been sold, the Finance Ministry said today. The 2.6 trillion krone ($456 billion) fund bases its investment on ethical rules encompassing human rights, weapons manufacturing and the environment. The tobacco exclusion was proposed in April as part of an overhaul of the guidelines.

“It’s timely to exclude tobacco,” Finance Minister Sigbjoern Johnsen said in a statement. “It’s important that the ethical guidelines reflect at all times what can be considered to be commonly held values of the owners of the fund.”

The fund held 14 billion kroner in tobacco stocks at the end of last year, including a 4.8 billion kroner stake in British American. The fund owned 3.4 billion kroner in Philip Morris shares, according to the fund’s Council of Ethics.

“They had a holding but they no longer do,” Kate Matrunola, a spokeswoman at BAT, said by phone. “We don’t comment on individual shareholders if they have an investment below 3 percent.”



Investigating Others



“I don’t think it is for me or Imperial to comment on others investment decisions,” said Alex Parsons, a spokesman for Imperial Tobacco. Monica Montero, a spokesman for Philip Morris International in Switzerland, declined to comment, as did David Sylvia, an Altria spokesman in Richmond, Virginia, and David Howard, a spokesman for Winston-Salem, North Carolina- based Reynolds.

Philip Morris advanced 47 cents to $50.09 at 4:15 p.m. in New York Stock Exchange composite trading. Altria shares dipped 4 cents to $20.38.

The council said it will look into whether there are more companies in the fund that produce tobacco. “The council may submit additional recommendations based on its findings.”

“There are a number of funds out there that don’t invest in tobacco for ethical reasons,” said Chas Manso, an analyst at Evolution Securities Ltd. “The real issue is whether that’s a trend, whether an increasing number of investment funds pull out of tobacco investing. I don’t know the data on that.”

Cultivation of tobacco takes place mainly in the U.S., India, Brazil and China as well as in several African countries, the council said. The “extent of health hazardous child labor in tobacco cultivation in some countries can be large.” The Bill and Melinda Gates foundation also doesn’t invest in tobacco companies because they engage in “egregious” activities.



Smoking-Related Diseases



Tobacco use is responsible for almost 20 percent of deaths in the U.S., according to the American Cancer Society. Smoking accounts for 9 out of 10 lung-cancer deaths and about 30 percent of all cancer deaths, the society said on its Web site. It can also cause heart disease, aneurysms, bronchitis, emphysema and strokes, the society said.

Before today, the fund had excluded 29 companies, including Wal-Mart Stores Inc. The ministry is responsible for deciding whether to exclude any of the about 8,500 companies the fund invests in, based on recommendations from the Ethics Council. The finance ministry, which sets the fund’s guidelines, announces exclusions after the holdings have already been sold.

Souza Cruz SA, South Korea’s KT&G Corp., Universal Corp. VA, Vector Group Ltd., Lorillard Inc. and Alliance One International Inc. were also excluded.

Source:businessweek.com/

Norway Awards 38 Offshore Oil, Gas Blocks To 42 Companies

LONDON (Dow Jones)--The Norwegian ministry of petroleum and energy said Tuesday it has awarded 38 new oil and gas production licenses in the North Sea, Norwegian Sea and Barents Sea to 42 companies.

Most of the licenses are in mature areas where oil and gas has already been explored for or produced, the ministry said in a statement. "The main challenge in mature areas is that the expected sizes of discoveries are declining," it said.

"Small discoveries can often not justify a standalone development, but can be profitable with a tie-in. It is therefore important to discover and develop resources in these areas before existing infrastructure in connection to other fields is shut down," it said.

Operators of the new license blocks include Royal Dutch Shell PLC (RDSB.LN), Centrica PLC (CNA.LN), ConocoPhillips (COP), Dana Petroleum PLC (DNX.LN), E.ON AG (EOAN.XE), GDF Suez SA (GSZ.FR), Marathon Corp. (MRO), Nexen Corp. (NXY), OMV AG (OMV.VI), Repsol SA (REP) and Statoil ASA (STO).

Source:online.wsj.com/

Talks under way with Norway to seal EU fishing quotas

CRUCIAL talks began in Brussels yesterday to thrash out the vital quotas for Scottish fishermen in the North Sea this year.

The negotiations between the European Union and Norway to fix the quotas for many of the mainstay catches of Scotland's fishing fleet were plunged into chaos last month following the breakdown of talks in a row over fishing rights.

The NorwegiADVERTISEMENTans refused to agree on the carve-up of quotas within the North Sea in retaliation for the enforced closure of mackerel grounds in Scots waters to Norwegian pelagic trawlers.

The Norwegian government claimed that the ban was a clear breach of the bilateral fisheries agreement between Norway and the EU.

As a result of the breakdown in negotiations, Scottish trawlers have been banned from lucrative fishing grounds within Norwegian-controlled waters, while Norwegian boats are banned from fishing grounds off the Scottish coast.

This week's talks, however, are expected to end in an agreement on new catch limits for economically important species such as cod, whiting and haddock.

Ian Gatt, the president of the Scottish Fishermen's Federation, said: "We are fairly confident that an agreement between the EU and Norway will be reached this week, which will hopefully bring to an end the current period of uncertainty over the final quota levels for 2010.

"It will also enable Scottish boats to gain access to Norwegian waters and vice versa," Mr Gatt said.

Source:news.scotsman.com/

Norway offers 38 licences in mature areas

OSLO, Jan 19 (Reuters) - The Norwegian petroleum and energy ministry has decided to offer 38 offshore exploration licences in the 2009 round for predefined, mature areas on the Norwegian shelf, it said on Tuesday .

The production licences are distributed among the North Sea (25), the Norwegian Sea (10) and the Barents Sea (3). A total of 44 companies applied for production licences in APA 2009, the ministry said.

The ministry said in a separate statement that 43 companies have applied for blocks in the 21st oil and gas licensing round, which will be awarded in the spring of 2011.

(Reporting by Oslo newsroom)

Source:uk.reuters.com/

Calls for Norway to go more passive

The Norwegian Government Pension Fund suffered its worst year in 2008, losing NKr633bn (£69bn, $111bn, €77bn) or close to a quarter of its value. Critics likened it to gambling.

About NKr80bn of the losses were directly related to active management, which has prompted calls for a more passive investment strategy. In April, Norway’s finance ministry started a broad review on whether to continue active management of the NKr2,500bn fund, the world’s second largest sovereign wealth fund.

A new academic report – commissioned by the government in connection with the review – says the fund has been taking “appropriate” risks. But it recommended one notable change: incorporating systematic risk factors, such as volatility and liquidity, into the fund’s benchmark.

“Seventy per cent of Norway’s active management is explained by these additional risk premiums,” says Andrew Ang, a professor at Columbia Business School in New York and one of the report’s three co-authors. “It should be better understood and brought into the benchmark explicitly.”

This will be the backdrop for when about 150 invited experts gather in Oslo on Wednesday to give their views on how the fund should proceed.

The report, completed last month by experts at Columbia, Yale School of Management, and the London Business School, said “the fund is actually not an actively managed portfolio”. This is based on the observation that active returns – the difference between the fund’s actual returns and its benchmark – only constituted a small fraction of both the mean and the volatility of the total return.

“Overall . . . the returns on the fund are similar to those that could have been earned on a fund holding the benchmarks with additional, essentially passive exposure to these (systemic) factors,” the report said.

“The incremental contribution of active management has been slightly positive overall, with notable negative returns during 2008 and the early part of 2009.”

The report also found the fund’s pattern of risk exposures is appropriate for a long-term investor, and said active management could enhance the fund’s other aims, such as socially responsible investing.

Still, it recommends the fund change its benchmark, currently defined by geography and asset class, to include other factors such as volatility, liquidity, and credit risk. A factor benchmark approach would make it easier to monitor new asset classes, such as real estate, which was added to the fund in 2008.

The report could lead to changes via a White Paper in April whereby the additional risk premium is incorporated into the benchmark. That would mean lower performance fees for external managers, because it would raise the performance bar. It would also shift the responsibility from Norges Bank Investment Management, the manager of the fund, to the finance ministry, as asset owner, on how much systematic risk the fund takes.

This would all be ground-breaking, according to Mr Ang. None of the other large pension funds or SWFs incorporate systematic risk factors into their benchmark.

“This report is almost revolutionary,” says Lars Søraas, a Norwegian venture capital analyst and economist promoting passive management. “But you’ll have a problem explaining to the Norwegian people you’re going to have a volatility risk.”

NBIM has declined to comment on a possible “factor benchmark” ahead of this week’s seminar. Not surprisingly, it remains an advocate of active management. In a letter to the finance ministry last month, NBIM defended the strategy on the basis that investment opportunities vary over time and the benchmark portfolio would therefore never represent the “correct” portfolio at any time.

“A passive, uninformed approach to operational decisions is an alternative without a sound theoretical or practical justification,” said Svein Gjedrem, Norway’s central bank governor, and Yngve Slyngstad, NBIM chief executive, in a joint letter. Costs would be lower but they would not be able to achieve the benchmark return, they said.

Progress, Norway’s largest opposition party, is one of the fund’s critics on this subject. It lambasted the fund’s active management strategy following the heavy losses in 2008.

“Several experts have concluded that in the long run, you will not be able to beat the market,” said Christian Tybring-Gjedde, a Progress party finance committee member.
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Source:ft.com/

Norway - Foreign Minister Støre underlines importance of a new WTO Agreement

Concluding the Doha Round must be given top priority,” said Minister of Foreign Affairs Jonas Gahr Støre in Norway’s main statement at the WTO Ministerial Conference in Geneva today. The objective of the Conference is to review the status of the existing multilateral framework for international trade, and to discuss the global economic situation. A large number of countries, including Tanzania, which spoke on behalf of the least developed countries, advocated the conclusion of the Doha Round, as did Norway. Prior to the Conference, a group of 110 developing countries had agreed on the importance of a rapid conclusion of the Doha Round on the basis of the draft agreement of 2008. 

“I made it clear that Norway is prepared to go the last mile, provided we can find satisfactory solutions for Norwegian agriculture. And I am confident that we will do so,” said Mr Støre. In his statement, Mr Støre also emphasised the importance of bringing the next generation of issues onto the WTO agenda, once the Doha Round has been concluded. “It is important that workers’ rights are included in the WTO discussions, and that coherence between what is done in the WTO and what is done at the ILO is ensured. Climate change issues also need to be dealt with. But this will not be possible before the Doha Round has been successfully concluded,” Mr Støre added. Minister of Agriculture and Food Lars Peder Brekk also took part in the Ministerial Conference, and in addition the Norwegian delegation included members of the Storting and representatives of civil society Source: isria.com/