• An economist for Barclays Capital (ADR:BCS) estimates Japan’s economy will shrink at an annual pace of 12.1% this quarter, nearly a three-fold negative jump from the rate previously predicted. “Given the speed and the length of the contraction, this recession could be the most severe in the postwar era,” Barclays’ chief Japan economist Kyohei Morita said, Bloomberg reported. “We expect negative growth will continue for a fifth straight quarter to the April-June period of 2009.”

• U.S. holiday season shopping was the worst since at least 1970, with bottom lines plagued by low demand, heavy discounting and unfriendly weather, the International Council of Shopping Centers (ICSC) said yesterday (Tuesday). ICSC’s tally runs up to December 27, and its chief economist, Michael Niemira isn’t holding out for a miracle turnaround in the remaining days, Reuters reported.

• American Greetings Corp. (AM) said it will buy privately held rival Recycled Paper Greetings in a deal that includes restructuring Recycled Paper Greetings’ debt under a Chapter 11 reorganization process. American Greetings Chief Executive Officer Zev Weiss acknowledged his company was attracted to RPG’s witty, funny and fresh content, according to a news release.

• Consumer confidence hit an all-time low in December, with the Conference Board’s Consumer Confidence Index dropping to 38 for the month from a revised 44.7 in November. Rising layoffs and the deteriorating housing market were the biggest reasons for the decline.

• The Chinese government more than doubled the size of a bailout for China Eastern Airlines Corp. Ltd. (ADR: CEA), just weeks after announcing a plan to pump $440 million (3 billion yuan) into the carrier, the Financial Times reported. China Eastern said it would now receive more than 900 million (7 billion yuan) through a private placement of Hong Kong and Shanghai-listed shares to its state-owned parent company.

• Ukraine yesterday (Tuesday) paid in full for natural-gas imports from Russia for November and has made an advance payment for supplies in December after OAO Gazprom, Russia’s state-owned oil monopoly, threatened to cut off supplies to the country. The Ukrainian government instructed two state-run banks to provide the country’s energy company NAK Naftogaz Ukrainy with the funds, a day before a deadline, Bloomberg reported.

Source: Global Investment News Roundup Wednesday, December 31st, 2008

U.S. gas production is up 9% this year – a rate of increase not seen since 1984 – with most of that gain coming from natural-gas shale, particularly the Barnett Shale, a deposit that now produces 7% of the country’s gas supply. Indeed, there could be as much as 842 trillion cubic feet of retrievable gas in shale deposits throughout the United States alone, according to Navigant Consulting. That would support the current level of U.S. consumption for about 40 years.

“It’s almost divine intervention,” Aubrey K. McClendon, chairman and chief executive of the Chesapeake Energy Corporation (CHK), told The New York Times. “Right at the time oil prices are skyrocketing, we’re struggling with the economy, we’re concerned about global warming, and national security threats remain intense, we wake up and we’ve got this abundance of natural gas around us.”

Shale beds are a major part of the story. The Barnett – with reserves of 2.5 trillion cubic feet of natural gas, and as much as 30 trillion cubic feet of natural gas resources – was the first shale field to undergo major development, and has seen output increase tenfold since 2001. It’s just one of at least 24 shale beds in North America. The Haynesville in Louisiana and the Marcellus in Appalachia may be even bigger, but will require further development and won’t come online for another two to five years.

The vast potential of fields like these has only been unlocked recently with advances in the technology of horizontal drilling hydraulic fracturing. Horizontal drilling, or slant drilling, allows producers to drill laterally beneath cities and neighborhoods, and hydraulic fracturing is simply a method by which water is pumped into the rock to break the sediment and release the gas.

Some analysts are urging speculators and prospectors not to get too carried away, however, as there is still a great deal of uncertainty concerning how much natural gas the deposits actually hold. The U.S. Energy Department estimates shale-gas reserves at 125 trillion cubic feet, or roughly one-seventh the Navigant estimate. Of course, the government estimate is based on 2006 data and could increase.

Regardless of what remains to be discovered, Deutsche Bank AG (DB) analyst Shannon Nome said in a recent report that production from the eight largest shale fields could hit 6.6 billion cubic feet a day this year – or 11.8% of national gas production – and then rise to 14.5 billion cubic feet a day, or 23% of U.S. production, in the next three years.

A Bright Future for Natural Gas

A large domestic supply of natural gas would lower utility costs nationwide, reduce U.S. dependence on foreign oil, and help combat global climate change.

More than half of U.S. homes use natural gas for heating purposes, and with the cost of oil still substantially higher than it was a year ago, heating costs are expected to be 20% higher this year than they were in 2007. According to the Energy Information Agency, U.S. consumers will pay an average of $1,182 to heat their homes this year.

In recent months, however, increased natural gas production – spurred by the addition of shale sources – has actually caused gas prices to decouple from oil. Natural gas prices have plummeted 40% since early July, while the price of crude is down slightly more than 18%.

Additional natural gas resources would also ease U.S. dependence on foreign imports. The United States imported a record-high 4.6 trillion cubic feet of natural gas in 2007, at an estimated cost of $32 billion. And the government expects 2009’s figures to top that.

Natural gas is also the world’s cleanest fossil fuel, emitting 45% less carbon dioxide than coal and 30% less carbon dioxide than oil. That makes it an important transition fuel that could give solar, hydro, and wind-power technologies time to become more productive and efficient resources.

It can also be used in cars. General Motors Corp. (GM) already makes 18 models of cars and trucks that use compressed natural gas (CNG), and more could follow. One congressional bill, introduced last month, aims to make 10% of Detroit’s output CNG-compatible by 2018. It also offers a $90,000 tax credit to get 20,000 gas station owners to add CNG pumps.

Chesapeake Energy’s McClendon says the United States could convert 10% of its vehicles to CNG within eight years, and only increase overall natural gas consumption by 1%.

“Imagine if tomorrow you could announce a new energy plan that would in one stroke cut your constituent’s gasoline bill in half, reduce oil imports, improve our air quality, enhance national security, strengthen the dollar, reduce greenhouse gas emission and create tens of thousands of new jobs in the U.S.,” said McClendon.

Europe’s Shale Game

With so much at stake, and shale gas recovery booming in the United States, the movement is gaining significant traction in Europe.

“There’s a possibility that under our feet are the same kind of shale-gas deposits that you have in the United States,” Brian Horsfield, a professor of organic geochemistry at the GFZ German Research Center for Geosciences in Potsdam, Germany, told the International Herald Tribune. “There are many of the same types of shale formations in Europe.”

Next year, GFZ scientists will begin mapping possible shale-gas sites in Europe, and investigate the possibility of commercial recovery, with the Barnett as a standard. They aren’t alone, however, as OMV Aktiengesellschaft (OTC ADR: OMVKY), an Austrian energy company, has already been conducting tests of gas shale in the Vienna Basin. Royal Dutch Shell PLC (RDS.A, RDS.B) has also obtained exploration contracts for to sites in southern Sweden and Lane Energy Poland is exploring that country, IHT reports.

“The Europeans have to hope that these shales will do for them what eastern shales have done for the U.S. gas supply, which is to boost the main supply that is coming from the Gulf of Mexico,” said Don Hertzmark, an oil and gas consultant in Washington. “That would reduce the prices the Russians were able to charge the final consumers in Europe.”

Russia and its state-owned gas monopoly, OAO Gazprom, control more than 25% of Europe’s total gas supply. Even before its recent intrusion into Georgia, Russia was anything but a reliable supplier.

Last year, Gazprom threatened to cut off gas shipments to Belarus, and the energy giant followed through with similar threats against the Ukraine as recently as March.

Gazprom reduced natural gas deliveries to Ukraine by a full one-quarter in March after accusing the country of failing to pay $600 million in gas bills for the year. After Ukrainian officials failed to turn up for planned talks aimed at ending the supply dispute, Gazprom threatened to cut supplies by another 25%, reducing the total amount of natural gas to the Ukraine by half.

It was the second time in as many years Gazprom cut gas shipments to the Ukraine, which in 2006 installed a pro-Western government in Kiev.

Most recently, Gazprom offered to buy all of Libya’s oil and gas exports just as the former terrorist state was beginning to look like a viable alternative for Europe to diversify away from Gazprom’s dominance.

Virtually all of Europe would breathe a sigh of relief if major shale discoveries, like those found in the United States, were located somewhere on the continent.

“Shale is the most significant domestic natural gas find in 50 years,” Chris Ruppel, an analyst at the institutional brokerage firm Execution, told The NY Times. Ultimately, this could mean “the United States will become gas independent, and more industrially competitive versus Europe for gas-intensive industries such as chemicals, fertilizer, smelting iron and aluminum.”

Source: New Natural Gas Discoveries are a Boon for the U.S. Energy Sector

And now that Russia has formed a state-run grain trader, analysts fear that Moscow is expanding these bare-fisted tactics to its agricultural sector. The new enterprise –The enterprise, the Agency for the Regulation of Food Prices, will take control of 28 government-controlled assets, including storage depots, grain elevators, flour mills and export terminals. The agency will control between 40% and 50% of the nation’s cereal exports by 2011.

“The aim of creating the company is quite clear. As grain trade becomes attractive, bureaucrats are looking for ways of making some extra money using government resources,” a market source, speaking on the condition of anonymity, told Reuters.

With food-and-energy commodities trading at near-record levels – even prompting the leader of the United Nation’s World Food Programme to warn that soaring food prices have caused a “silent tsunami” of hunger to sweep the globe – Moscow’s move is viewed with equal measures of concern and moral ire.

However, it is not yet clear whether the Agency for the Regulation of Food Prices will enter the market as a regular commercial player or whether it will simply serve as another state-run resource monopoly akin to Gazprom – Moscow’s energy arm.

“The idea is to manage the assets more efficiently and to generate profit,” a second source told Reuters. While the source didn’t offer a timeframe, some reports suggest the new state-run firm could be up and running as soon as this fall.

As with energy, Russia has the natural resources to give it the muscle – and the leverage – to carry this off.

Russia’s farming industry collapsed alongside the Soviet Union in the 1990s, but soaring commodity prices and increased foreign investment have triggered a revival in the nation’s agricultural sector, particularly in the Chernozem, or “black earth,” belt – a tract of particularly fertile soil in southern Russia.

The region used to be known as the “Bread basket of the Soviet Union,” as its nutrient-rich, black soil produced enough grain to not only satisfy the nation’s domestic needs, but generate lavish export revenue as well.

Russia, the world’s fifth-largest exporter of cereals, exported nearly 13 million metric tons of grain in the 2007-2008-crop year, generating $3.5 billion in revenue. Moscow expects to export at least 15 million metric tons in the current 2008-2009 season, and have export levels reach 25 million metric tons in the next five years.

“Russia has this black soil – it’s another resource just like oil and gas,” Victor Nageyev chief agronomist at Heartland Farms, a company that has 75,000 acres of the fertile land in its portfolio, told Sky News. “The land, plus new technologies, should make Russia a world leader again in grain production and exports. Just like it was at the beginning of last century.”

The introduction of modern farming methods has already resulted in a 300% increase in production at Penza – the region currently being worked by Heartland Farms. If such methods were implemented across the entire Chernozem region, Russia could be producing 300 million metric tons of cereals annually, BBC News reported. That would make it the world’s third largest cereal producer behind the United States and China.

However, analysts fear that if Russia does return to its prominent role as a global food supplier, a state-run monopoly like the Agency for the Regulation of Food Prices could use its exports as political leverage – the same way Gazprom has used its energy exports, to meddle in European politics.

Russia’s Export Leverage

Gazprom, which controls 25% of Europe’s gas supply, has routinely jacked up prices and cut off supplies to the region as a means of exerting political leverage over its customers.

Last year, Gazprom threatened to cut off gas shipments to Belarus, and the energy giant followed through with similar threats against the Ukraine as recently as March of this year.

Gazprom reduced natural gas deliveries to Ukraine by a full one quarter in March after accusing the country of failing to pay $600 million in gas bills for the year. After Ukrainian officials failed to turn up for planned talks aimed at ending the pair’s supply dispute, Gazprom threatened to cut supplies by another 25%, reducing the total amount of natural gas to the Ukraine by half.

It was the second time in as many years Gazprom cut gas shipments to the Ukraine, which in 2006 installed a pro-Western government in Kiev.

About 80% of Russian gas supplies to Europe pass through the Ukraine, which puts Naftogaz of Ukraine in a position to siphon off supplies intended for other customers throughout Europe. In January 2006, Russia cut supplies to Ukraine completely for a period of three days, causing gas volumes across Europe to fall, as Ukraine scrambled to satisfy its demand.

Most recently, Gazprom offered to buy all of Libya’s oil and gas exports just as the former terrorist state was beginning to look like a viable alternative for Europe to diversify away from Gazprom’s dominance.

A member of the Organization of Petroleum Exporting Countries, Libya produces 1.7 million barrels of oil each day. The country had total proven oil reserves of 41.5 billion barrels in 2007, and about 53 trillion cubic feet of proven natural gas reserves. Its oil and gas industries earned Libya more than $40 billion in revenue in 2007.

Prior to its offer to buy Libya’s gas exports, Russia agreed to write off $4.5 billion in Libyan Cold War-era debt in exchange for military and civilian contracts for Russian companies. A memorandum of cooperation between Gazprom and Libya’s state energy conglomerate National Oil Corporation (NOC) was one of ten trade, investment and political agreements reached during then-president Vladimir Putin’s two-day visit to Tripoli.

Stroytransgaz OAO, another Russian company, is in talks to build a network of natural gas pipelines on the Mediterranean coast of Libya.

Source: Moscow Seizes Control of Agricultural Exports

• Wells Fargo Co. (WFC) stock jumped 32% after the nation’s fifth largest bank raised its dividend by 10%, from 31 cents a share to 34 cents. The company reported second-quarter profit fell 22% as more customers defaulted on loans, but the dividend hike was enough to answer any questions concerning the company’s stability.

• Light, sweet crude for August delivery fell $4.14 to settle at $134.60 a barrel on the New York Mercantile Exchange yesterday (Wednesday) after sinking as low as $132 earlier in the day. Over the past two days crude prices have dropped $10 a barrel.

• The National Association of Home Builders/Wells Fargo housing market index fell in July to a record low of 16, down from 18 in June, the Associated Press reported. The index has been on a downward trajectory since May, as tighter lending standards, rising mortgage defaults and fear about the housing market’s future have sidelined buyers.

• Russian energy giant OAO Gazprom accused Belarus underpaying for gas deliveries and threatened to go to court if the situation is not rectified, Thomson Financial reported. “If the Belarussian side continues to fail to honour its obligations to pay in full for Russian gas, Gazprom reserves the right to start court proceedings,” Gazprom said in a statement.

• Shares of Gannett Co. Inc. (GCI), the largest U.S. newspaper publisher, tumbled yesterday (Wednesday) after the publisher announced a 36% decline in second-quarter profits from the same period the year prior, Bloomberg News reported. Shares shed 78 cents, a decline of 4.5%, to close at $16.57.

• Struggling Sprint Nextel Corp. (S) is an attractive takeover target for Korea-based SK Telecom Co. Ltd. (ADR: SKM). The two mobile carriers are a good technological fit and Sprint is hurting for cash, while SK Telecom is looking to expand its presence in the United States, BusinessWeek reported.

• Executives from Time Warner Inc.’s (TWX) AOL unit met with Microsoft Corp. (MSFT) yesterday (Wednesday) to discuss a possible merger. Microsoft is seeking alternatives after Yahoo! Inc. (YHOO) shunned its buyout bid. While the two firms have been in ongoing discussions for some time now, the chances of reaching a deal remain less than certain, MarketWatch reported.

• Delta Air Lines Inc. (DAL) stock jumped over 25% yesterday (Wednesday) despite announcing a $1 billion quarterly loss. The Atlanta-based carrier was profitable before special charges, Reuters reported, causing shares to gain $1.24 to close at $5.91.

Source:  Global Investing Roundups Thursday, July 17th, 2008

“Libya positively evaluated Gazprom’s proposition to buy all future volumes of gas, oil, and [liquefied natural gas] designed for export at market price,” Gazprom said in a statement after the meeting.

A member of the Organization of Petroleum Exporting Countries, Libya produces 1.7 million barrels of oil each day. The country had total proven oil reserves of 41.5 billion barrels in 2007, and about 53 trillion cubic feet of proven natural gas reserves. Its oil and gas industries earned Libya more than $40 billion in revenue in 2007.

Years of political isolation have left the country under-invested (only a quarter of Libya’s oil reserves are covered by exploration agreements), but since dismantling its nuclear weapons initiative, Libya has been courted by a large crowd of energy players, each with their own interest.

Gazprom, which controls 25% of Europe’s gas supply, is looking to strengthen its position as a supplier by seizing control of a possible alternative. Western interests are seeking to diversify away from the unreliable Gazprom, which has routinely jacked prices and cut off supplies to the region as a means of exerting political leverage over its customers.

Last year, Gazprom threatened to cut off gas shipments to Belarus, and the energy giant followed through with similar threats against the Ukraine as recently as March of this year. It was the second time in as many years Gazprom cut gas shipments to the Ukraine, which in 2006, installed a pro-Western government in Kiev.

Now that Libya has emerged as a possible alternative to Russian supplies, President, and former Gazprom chief, Dimitry Medvedev is picking up where Prime Minister Vladimir Putin left off in attempting to corner the market.

In April, a month before Putin vacated the office of presidency, he made a final stop in Libya where he agreed to write off $4.5 billion in Libyan Cold War-era debt in exchange for military and civilian contracts for Russian companies.

A memorandum of cooperation between Gazprom and Libya’s state energy conglomerate National Oil Corporation (NOC) was one of ten trade, investment and political agreements reached during President Putin’s two-day visit to Tripoli.

By May, acting president Medvedev had already made two trips to Central Asia hoping to secure business in a gas-rich region that includes Azerbaijan, Turkmenistan, and Kazakhstan.

Medvedev “wants to use Russia’s largest conglomerates as a tool of foreign policy,” Nick Day, chief executive officer of Diligence LLC, told Bloomberg News. “What he’s looking to do is to buy oil, gas and mineral resources around the world.”

With that leverage “you can stop states from joining NATO, and you can act as a counterweight to the U.S.,” Day said.

Both the Ukraine and Georgia are trying to secure membership in the North American Treaty Organization. Gazprom doubled the amount Georgia pays for natural gas in 2006 as the country’s newly elected President, Mikhail Saakashvili, declared his intention to boost ties with the West and join NATO.

“The Kremlin wants Gazprom to be a dominant force in global energy, and the dominant force in global gas,” Chris Weafer, chief strategist at UralSib Financial Corp. told Bloomberg. “Tying up gas resources in Central Asia and Africa is part of that.” The plan is for Gazprom to dominate “in every corner of the planet,” he said.

Source: Gazprom Keeps the Heat on Europe by Pressing Libya