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The collapse of Halliburton’s acquisition. Baker Hughes stays independent.

The collapse of Halliburton’s acquisition. Baker Hughes stays independent.

 

The financial earthquake has appeared on the international stock markets. One of the biggest fusions in oil industry in recent years has been canceled. American multinational corporations and oil field services providers Halliburton and Baker Hughes have abandoned their 28$ billion worth merger.

“Challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action,” said Dave Lesar, chief executive of Halliburton.

The U.S Justice Department has been getting dozens of alarming signals from antitrust regulators (agencies), oil companies and the European Commission for a long time . Basing on above information and evidence the U.S Justice  Department prepared a lawsuit last month to stop the merger, arguing it would leave only two dominate suppliers in business (it would create specific kind of a duopoly).

“The companies’ decision to abandon this transaction – which would have left many oilfield service markets in the hands of a duopoly – is a victory for the U.S. economy and for all Americans,” said U.S. Attorney General Loretta Lynch (May, 1 2016).

As a result of the deal’s failure, currently Halliburton is obliged to pay a 3.5$ billion breakup fee. This expense will affect on the employment market. Halliburton plans to cut more than 600 jobs to acquire funds for liabilities.

Read more:

http://www.bloomberg.com/news/articles/2016-05-02/halliburton-baker-hughes-abandon-28-billion-merger-agreement

http://www.reuters.com/article/us-bakerhughes-m-a-halliburton-idUSKCN0XS1KW

Picture:

http://www.bidnessetc.com/

South Africa: Shale gas as an opportunity for economic growth.

South Africa: Shale gas as an opportunity for economic growth.

The full spectrum of new and emerging technologies connected with the unconventional sources of energy give consecutive countries an opportunity to supply their domestic budget. For instance the Republic of South Africa is a state whose government gives the green light to companies looking to explore for shale gas under the semi-desert Karoo basin. Up to now five companies have applied for exploration permission. Among them are Royal Dutch Shell, Falcon Oil & Gas and Bundu Gas & Oil. Most probably, first explorations will have been started by the end of next year.

 “One area of real opportunity for South Africa is the exploration of shale gas”. said South Africa’s finance ministry (Mar 8, 2016). “Exploration activities are scheduled to commence in the next financial year. This will lead to excellent prospects of beneficiation and add value to our mineral wealth”

It is believed that deposit contains around 390 trillion cubic feet of technically recoverable gas reserves. Shell analysts predict that 50 trillion cubic feet can provide about $20 billion to the South Africa economy every year for 25 years.

Furthermore, additional source of financing will stimulate employment market and ensure about 700,000 jobs. Nevertheless, opponents claim that hydraulic fracturing will make an impact on environmental stability and expansion of pollution.

Sources:

www.reuters.com

www.colourbox.com

South Korea: A new chapter in the economic relations with Iran.

South Korea: A new chapter in the economic relations with Iran.

The lifting of nuclear-related sanctions on Iran allows this country to tighten international economic relations, especially with Asian countries. South Korea wants to increase imports of Iranian oil, mostly condensate, in order to overcome growing internal demand and ensure better conditions (lower prices) in comparison to Qatars’ one.

 “We will increase oil and natural gas (liquids) imports from Iran, especially Iranian condensate,” said South Korea’s trade and energy ministry (Mar 1, 2016).

Currently, South Korea is one of the largest importer of crude and a big buyer of condensate. Their industry uses a super light oil for production of fuels and petrochemicals. Iran is providing about 100, 000 barrels of oil a day to South Korea and executives predict to double that amount by the end of 2016.

Both countries plan to establish efficient payment systems to simplify trade of crude and condensate. Contract will be concluded between National Iranian Oil Company and South Korea’s SK Energy.

A new partnership in the economic relations among Iran and South Korea is essential for them. Financial contracts may generate workplaces, accelerate development of the chemical sector and additionally wipe out bad appearance of Iran as isolated and fundamentalist state.

Sources:

http://www.reuters.com/article/us-southkorea-iran-oil-idUSKCN0W40P8

http://www.windows10update.com/wp-content/uploads/2015/10/flag_south_korea.jpg

U.S. The hidden value of cheap gas.

U.S. The hidden value of cheap gas.

Technological developments in recent years have changed world energy market and allowed the revitalization of chemical and steel industry, especially in the U.S. The latest decline in global oil prices has accelerated expansion of chemical and manufacturing plants despite enhanced OPEC efforts to undercut it. The hidden value of cheap gas is more suitable for economy growth than for international mining companies. The U.S emergent economic development can be comparable to the Industrial Revolution which took place from the 18th and 19th centuries.

Steel sector.

The American steel industry has been facing up to the impact of the global crisis since 2007. Internal markets have struggled to stay profitable among stagnant domestic demand, low prices and increasing Chinese imports.

Asian countries, principally China and Taiwan have been offering cheaper labor and sufficient amount of the raw materials for many years. The U.S domestic production of steel decreased 11 percent between 2007 and 2013, while Chinese production during that period increased 57 percent.

Unconventional sources of energy has enabled the American steel industry to get  back on track. The largest companies have made diversifications and established appropriate investments. A titan of industry Nucor Corp spent $750 million in an iron-ore devices in St. James Parish, Louisiana. Simultaneously, influential Austrial steel maker Voestalpine invested about $634 million in a new factory.

Currently, market analysts predict that new investments can provide about 1 million new jobs by 2035. “Low natural gas prices are spurring new manufacturing investment and creating jobs” said Katherine Miller, a Nucor spokeswoman.

Chemical sector.

The chemical sector was another branch of an American industry which was modernized. The hydraulic fracturing of shale formation has led to a rapid growth of chemical plants mainly in Louisiana and Texas. Modern factories have used natural gas to produce a wide variety of products including plastics and liquid fuels. “Plants use natural gas like a bakery shop uses flour”, said Dan Borne, president of the Louisiana Chemical Association.

The most influential chemical companies such as: Du Pont, Dow Chemical, Eastman Chemical or Westlake Chemical have boosted their production and prepared ground for foreign funds.

According to The American Chemistry Council 238 U.S chemical companies have declared money for new projects. Investment spending in the industry increased 64% from 2010 to 2014, to $34 billion. The ACC assumes spending to rise another 37% by 2018.

This jump in industrialization will stimulate stock market and provide higher employment . However, too high environmental degradation and revolution in energy policy can cut optimistic expectations.

In conclusion.

To sum up new technologies, low gas prices and considered diversifications can  make a great influence on an American society. New plants will generate not only profit but also workplaces. In spite of all the advantages, government and companies can’t forget about environmental challenges and their future impact on safety standards and health.

Sources:

http://www.forbes.com/sites/kensilverstein/2015/05/10/flood-shale-gas-spilling-into-communities-across-america/#22918c41ed83

http://e360.yale.edu/feature/natural_gas_boom_brings_major_growth_for_us_chemical_plants/2842/

Shale Revolution Accelerates Chemicals Industry

http://www.smh.com.au/business/shale-gas-revolution-a-major-boost-for-us-steel-sector-20130101-2c4co.html

http://www.ft.com/intl/cms/s/0/4dacb6a0-10f8-11e5-9bf8-00144feabdc0.html

http://www.micromotionblog.com/wp-content/uploads/2015/09/iStock_000023984130_Small.jpg

Saudi economy against ongoing “oil war”

Saudi economy against ongoing “oil war”

Current geopolitics has drastically changed the situation in Saudi economy. This middle-east country is more and more burning their foreign reserves to ensure economic stability and monetary flexibility.

Last two years indicated that hydrocarbon’s price is not depending on actual supply and demand but essentially on political relations. Tense situation in the Eastern Europe (international sanctions during the Ukrainian crisis) and Syrian Civil War have enforced cuttings in oil branches especially in OPEC countries.

Saudi Arabia, as an oil-addicted state, was forcefully touched by declining prices. After many years of high spendings, their budget deficit has reached $98 billion (15 % of Gross Domestic Product) and if oil value determines near $30 a barrel, deficit will probably rise to $180 billion.

Saudi internal market and monetary policy were modified due to a new, tougher situation. “If anything happens to the riyal exchange peg, the consequences will be dramatic. There will be a serious loss of confidence,” said Khalid Alsweilem, the former head of asset management at the Saudi central bank.

In spite of ministerial claims, fuel’s prices have raised by up to 80% (December 30, 2015) including a 50% revision of the most generally sold petrol to 0.90 riyals per litre.

Near future is going to be nasty for the Kingdom of Saudi Arabia and entire OPEC unless they agree to cut crude production and eliminate the global oil surplus. The U.S plans to sell millions of barrels of crude oil from Strategic Reserve can make crisis deeper and establish a new playmaker in the international fuel’s arena.

Sources:

http://www.telegraph.co.uk/finance/economics/12071761/Saudi-riyal-in-danger-as-oil-war-escalates.html

http://www.bangkokpost.com/news/world/810468/in-global-oil-price-war-saudis-blink-first