Turkmenistan plans to begin production at the world’s second-largest gas field next year, a senior Turkmen official said, opening up new supply routes to Europe and Asia at the risk of Russian opposition.
The Central Asian nation plans to build two pipelines to carry gas from the Galkynysh field. One would run to Pakistan and India, and the other would cross the Caspian Sea en route to the European Union, easing the bloc’s dependence on Russian gas, Arab News reported.
“We can launch industrial output at Galkynysh next year,” the Turkmen government official, who declined to be named because he is not authorized to speak publicly on the matter.
“Right now, three gas-processing plants are being built, and two of them are certain to be ready in January or February,” he said on the sidelines of an energy conference.
Turkmenistan’s natural gas reserves rank fourth in the world behind those of Russia, Iran and Qatar, BP data shows.
Auditor Gaffney, Cline & Associates has estimated reserves at Galkynysh at between 13.1 trillion and 21.2 trillion cubic meters.
The field, named after the Turkmen word for renaissance, is better known by its previous title, South Iolotan.
It is being developed under a service contract by China’s CNPC, Dubai-based Gulf Oil & Gas Fze, London-listed Petrofac and a Korean consortium of LG International Corp. and Hyundai Engineering Co Ltd.
Western energy majors, frustrated by Turkmenistan’s apparent reticence to open up its prized onshore gas deposits, have cast doubts over the country’s ability to finance and operate such a field without foreign investment.
Douglas Uchikura, president of Chevron Nebitgaz B.V., the local unit of Chevron Corp., estimated the investment required by Turkmenistan to triple natural gas output by 2030 in the “tens of billions of dollars”.
India Launches Probe Against Wal-Mart
India is investigating Wal-Mart Stores Inc. over allegations it violated the country’s foreign exchange rules, a senior law enforcement official with knowledge of the matter, said.
A lawmaker has accused Wal-Mart of “clandestinely and illegally” investing $100 million in the multi-brand retail business of its wholesale joint venture partner, Bharti Enterprises, as early as 2010, before India allowed foreign companies to operate front-end stores, Times of India wrote.
“Yes, the Enforcement Directorate has initiated an investigation into the allegations against Wal-Mart,” said the official, who declined to be named.
Wal-Mart has denied the allegations since they first surfaced last month and said it is in compliance with Indian laws.
World’s Oldest Bank Reports Q3 Loss
Italy’s Banca Monte dei Paschi di Siena reported a loss of €47.4 million ($60.3 million) in the third quarter and of €1.664 billion for the first nine months of the year.
Analysts polled by Dow Jones had forecast a profit of €75.9 million and the bank posted a profit of €42.2 million in the third quarter last year.
The world’s oldest surviving lender, the Tuscany-based bank has been critically exposed to the eurozone debt crisis and was forced to accept a government bailout in June to pay off debt and shore up its capital.
Moody’s credit rating agency last month downgraded the bank to ‘junk’ status on worries that recapitalization plans will prove insufficient. The bank has also said it will reduce its workforce by 4,600 people by 2015.
Banca Monte dei Paschi di Siena, which was founded in 1472, is one of four European banks that failed to pass European Banking Authority stress tests.
Dark Clouds Over US Credit Rating
In 2011, the United States emerged from a damaging budget battle with a downgrade of its pristine triple-A rating for the first time in history. In 2013, it could be dealt even a bigger blow.
The battle over avoiding the so-called fiscal cliff is the first of a likely series of partisan confrontations in Washington in the coming year that, if not resolved, could cause more downgrades of the US credit rating.
“The rating is in the hands of policymakers,” said John Chambers, chairman of Standard & Poor’s sovereign rating committee, the agency that downgraded the United States in August 2011.
In interviews with Reuters since the Nov. 6 election, all three major rating agencies said cutting the US debt rating is highly likely if next year’s budget process replays 2011’s debt ceiling debacle or if the seemingly simple goal of cutting deficits goes unmet.
Should that happen, it could have a detrimental effect on the country’s cost of borrowing and also shift some investment away from the United States.
In the absence of a sustainable, coherent medium-term vision for the US federal budget, which has produced deficits above $1 trillion in each of the last four years, the rating will fall. The fiscal cliff is one step in that process, but the possibility of a downgrade will still loom over Washington throughout the year.
“If no budget deal is reached in the early part of next year and the debt trajectory just continues to rise...then we’d be looking at a downgrade of a notch to Aa1,” said Bart Oosterveld, managing director at Moody’s sovereign risk group.
If Congress and the president can’t reach a deal to stabilize and eventually reduce the debt, now at $16 trillion, Moody’s will probably cut the United States’ current Aaa rating.
Fitch, meanwhile, said even a deal to avert the cliff might not be enough to save the country’s AAA rating.
Temporary measures to stave off the budget shock without a credible strategy for the years beyond could earn the country a downgrade, said David Riley, managing director for sovereign ratings at Fitch.
“We’re going to find out over the coming months if that (a compromise) will be the case or not. There isn’t that much time.”
Rating agencies will also be watching talks on raising the debt ceiling next year. S&P cut the United States to AA-plus from AAA on Aug. 5, 2011, blaming bitter debt debates that threatened to plunge the country into default and Republican obstruction during a process that was for years a formality.
2nd Recession Hits Eurozone
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Where Germany goes, France is likely to follow and economists expect its economy to shrink in the October-to-December period.
For all of 2012, the European Commission sees the eurozone contracting 0.4 percent, while growing just 0.1 percent in 2013. Business surveys point to difficult times ahead and the public’s backlash to austerity polices is growing.
Millions of workers went on strike across Europe on Wednesday to protest the government spending cuts they say are driving the region into a deeper malaise but which Germany and the commission say are crucial to healing the wounds of a decade-long, credit-fueled boom.
“We are now getting into a double dip recession which is entirely self-made,” said Paul De Grauwe, an economist with the London School of Economics. “It is a result of excessive austerity in southern countries and unwillingness in the north to do anything else.”
European leaders, who have benefited from a tenuous calm on financial markets in recent months, are likely to face additional pressure to ease the government austerity programs that have undercut growth in Southern Europe.
Economists at Nomura warned of “a depressionary environment in a growing share of the region”. In a note to clients, they said, “This negative loop has the potential to threaten the stability of the whole system.”
Some analysts had forecast a bigger decrease in output. But France registered a surprise uptick in growth and the Italian economy shrank less than expected, moderating the pace of decline across the region. Considered along with sagging factory output and business sentiment, though, the numbers on Thursday reinforced expectations that the eurozone as a whole could remain in recession well into next year.
“An end to the recession in the eurozone is still out of sight,” Christoph Weil, an economist at Commerzbank in Frankfurt, said in a note to clients.
But with unemployment in the eurozone at 11.6 percent and nearly 26 million people out of work, few dispute that the region is in a deep downturn.
“Leading indicators suggest that the eurozone recession will broaden and deepen in the current fourth quarter,” said Martin van Vliet, an economist at ING Bank.
The European Union, which includes 17 countries in the eurozone and 10 others primarily in Eastern Europe, managed to return to growth in the quarter as several countries, including Latvia and Lithuania, recovered strongly.
Growth for the bloc as a whole was 0.1 percent compared with the previous quarter, after a decline of 0.2 percent in the second quarter.
But in Western Europe, the economic decline spread to Austria and the Netherlands, which had been growing in previous quarters. The Austrian economy contracted 0.1 percent, while the previously healthy Dutch economy plunged 1.1 percent, catching economists off guard.
One reason for the decline was that Dutch consumers cut back on purchases of cars, illustrating how the crisis in the European auto industry is having a broader effect. Slower export growth and a decline in construction also had an effect, according to Statistics Netherlands, the official data provider.
France grew more than analysts forecast, at 0.2 percent, because of increased exports and higher consumer spending. The Italian economy shrank 0.2 percent, which was less than expected and a less severe decline than in previous quarters. Foreign demand compensated for a decline in household spending in Italy, economists said.
There had been some signs in recent months that the eurozone, now in its third year of crisis, was beginning to stabilize. The exodus of money from Spain had stopped and borrowing costs for Spain and Italy have dropped out of the danger zone, thanks to a promise by the European Central Bank to intervene in bond markets.
Exports from some of the troubled countries have risen, as companies put more emphasis on foreign markets to offset poor demand at home.
Meeting Next Week
Eurozone finance ministers are expected to meet next week to consider whether to release the next installment of aid for Greece, which it needs to avoid defaulting on its debt.
Next month, European heads of government will hold a summit meeting to continue working on ways to make the common currency area more resilient, for example by pooling supervision of banks.
“It is essential that the period of relative calm on financial markets is preserved,” said Marie Diron, an economist who advises the consulting firm Ernst & Young. “This will necessitate further quick progress on key reforms, including securing Greece’s financing and moving towards a comprehensive banking union.”
But disputes remain on the future shape of the eurozone, and there is a risk that leaders will not move fast enough.
“The International Monetary Fund suggested that Europe should act to reduce Greece’s debt, insisting the fund itself was not prepared to contribute more to the country’s bailout. The IMF has already extended Greece’s rescue loan to four years from three years and lowered interest rates,” IMF Spokesman Bill Murray said at a regularly scheduled news briefing. “That’s the IMF contribution.”
Asked what Europe should do to reduce Greek debt, Murray declined to give specifics, but said, “presumably, that’s who has to take the action.”
“IMF Managing Director Christine Lagarde will cut short her Asia visit to attend a crucial eurozone finance ministers meeting on the Greek crisis on Tuesday in Brussels,” he said.
The meeting was announced by Eurogroup President Jean-Claude Juncker, who has clashed publicly with Lagarde over extending the country’s agreed debt-to-GDP ratio target of 120 percent by 2020.
Juncker says the target should be pushed back to 2022. Greece’s current level is an untenable 170 percent.
Japanese Deficit Bill Passed
Japan’s lower house passed a crucial deficit-financing bond bill that will allow Tokyo to pay for a huge chunk of this year’s public spending, and avoid its own fiscal cliff.
The bill, which was expected to win approval in the opposition-controlled upper house of parliament, was a key condition for Prime Minister Yoshihiko Noda agreeing to call the elections demanded by the opposition, AFP reported.
Noda had warned that large parts of Japanese public life would grind to a halt unless the bill was approved, allowing Tokyo to issue new bonds that would cover about 40 percent of its budget spending in the year to March.
The opposition had refused to green light the bill until Noda gave a specific timeline for calling elections, which a senior ruling party lawmaker confirmed Wednesday would be held on Dec. 16.
S. Korea’s FDI Down
South Korea’s foreign direct investment (FDI) dropped nearly 16 percent from a year earlier in the first nine months of the year due to a plunge in the amount of money poured into North American countries, the government said.
The country’s FDI in the January-September period came to $30.68 billion, down 15.6 percent from the same period last year, according to the Ministry of Strategy and Finance. In the third quarter ending Sept. 30, the amount grew 6.7 percent on-year to $9.64 billion, Yonhap News Agency reported.
The ministry attributed the drastic fall in the nine-month total to a 65.6 percent plunge in investment in North America.
“The country’s investment in the North American region from the first quarter and the third quarter dropped sharply due to the lack of any major development projects there,” the ministry said in a press release.
BP to Pay $4.5b
The British oil companya BP said it has agreed to pay $4.5 billion in fines and other penalties, and to plead guilty to 14 criminal charges related to the rig explosion two years ago that caused a giant oil spill in the Gulf of Mexico.