BP sells $1.8bln of assets to Russian JV TNK-BP

Photo: Reuters

LONDON/MOSCOW - BP has agreed to sell a package of oil and gas fields in Vietnam and Venezuela to its Russian joint venture TNK-BP for US$1.8 billion as the London-based oil major raises cash to pay for its Gulf of Mexico oil spill.

BP said in a statement on Monday that the assets represented reserves of 270 million barrels of oil equivalent and production of 40,000 barrels of oil equivalent per day.

The sale brings to around $11.5 billion the amount BP has agreed from asset sales in recent months. The company has a divestment target of $25 billion to $30 billion over the next 18 months.

Analysts said the price was in line with their valuations for the assets, which they added were not strategic for BP.

"This allows BP to high-grade its portfolio," Iain Armstrong, oil analyst at Brewin Dolphin said.

The deal also sees TNK-BP realize its ambition of growing outside Russia, where it is the third-largest oil producer.

"The acquisitions in Venezuela and Vietnam mark a milestone in TNK-BP's strategic expansion in the global energy market," said Mikhail Fridman, TNK-BP's executive chairman and one of the four Russia-connected billionaires who own the other half of TNK-BP.

The sale also represents the latest pull-back by big western oil companies from Venezuela.

In 2007 US oil giants Exxon Mobil and ConocoPhillips pulled out of Venezuela following socialist President Hugo Chavez's demand for majority control of oil projects, and in March this year Royal Dutch Shell said it and others were shunning the country's licensing rounds.

BP remains in talks with potential buyers for its interests on the North Slope of Alaska, including Prudhoe Bay, and Argentina-based Pan American Energy, sources familiar with the matter said.

The assets are worth around $7 billion and $7.5 billion, respectively, analysts said.

BP shares traded up 0.2 percent at 426 pence at 0915 GMT compared to a 0.1 percent rise in the STOXX Europe 600 Oil and Gas index.

TNK-BP, which produced 1.89 million boe per day in 2009, said it would use its own funds to finance the acquisitions and expects the transaction to be completed by first half 2011.

In Venezuela, the company will buy 40 percent of Petroperija and 26.6 percent of Bouqeronin oil field projects, majority owned by Venezuela's state-owned PDVSA oil company.

It will also acquire a 16.7 percent stake in the Petromanagas upgrader project, which processes tar-like Orinoco heavy crude into lighter synthetic oil that can be processed by traditional refineries.

In Vietnam, TNK-BP will acquire BP's 35 percent stake in an offshore gas condensate project; a 32.7 percent stake in the Nam Con Son gas pipeline and a 33.3 percent stake in the Phu My 3 power plant.

All three of these assets form an integrated gas and power project with a production capacity of 30,000 barrels of oil equivalent per day, on a working interest basis.

Asia braces for currency wars but options limited

Photo: AFP

SINGAPORE - Emerging Asia is braced for collateral damage in case of an all-out currency war between the world's most powerful economies, but regional governments have limited options, economists said.

The subject dominated annual International Monetary Fund talks in Washington at the weekend, but there was no consensus as the US and China wage an acrimonious dispute over Beijing's currency policies.

"I strongly hope that this will not escalate into an all-out war," said Cyn Young Park, a senior economist at the Asian Development Bank (ADB), voicing fears any conflict could derail the world's fragile recovery from recession.

"We are now at the stage where many countries have to maintain the recovery momentum and it is really counterproductive that we slip into protectionism, whether it is trade or financial," she told AFP.

Battered by the financial turmoil that began in 2008, the US, Japan and Europe are moving to weaken or cap their currencies in a bid to make their exports more competitive in the global market.

The war drums grew louder as the US, facing midterm elections next month, mounted a high-profile campaign to pressure China to allow the yuan currency to rise more rapidly against the dollar to correct trade imbalances.

As China dug in, Japan intervened in the market for the first time in six years to stem a sharp rise in the yen.

Emerging Asian economies are caught in the cross-fire. With Beijing keeping a tight rein on its exchange rate, their currencies have risen faster against the dollar than has the Chinese yuan, making their exports less competitive.

The US and Britain have also injected more money into their banking systems to stimulate growth.

But with growth in the US, Japan and Europe anemic, a large chunk of the money is heading to emerging markets, including in Asia, where it stands to gain better yields, said David Carbon, an economist with Singapore's DBS Bank.

According to the Washington-based Institute of International Finance, net private capital flows to emerging economies are projected to reach US$825 billion this year, or over $2 billion a day, up from $581 billion in 2009.

The massive inflow has been a key factor pushing Asian currencies higher. It has also led to steep gains in stocks and property prices, stoking fears of "bubbles" which could later burst if the money exits as fast as it has come in.

Pressure is now on Asian policymakers to limit the rise in their currencies and yet at the same time manage the effects of growing inflation, as well as the rising asset prices.

DBS Bank said that since January, Asian currencies have gained by 6.0 percent on average against the dollar, with the Malaysian ringgit and the Thai baht up the most at 9.0 percent.

Comparatively, the yuan appreciated by only 2.0 percent.

While market intervention remains an option, many central banks are preferring to keep their powder dry because of inflationary risks.

The Malaysian ringgit has been trading at a 13-year high against the dollar, but the central bank has said the strength in the currency reflects Malaysia's robust 9.5 percent economic growth rate in the first half of the year.

Bank Negara, the Malaysian central bank, said it would only intervene if there were any sudden or excessive movements.

A decision to intervene is not simple for the Reserve Bank of India, despite the rupee reaching over a two-year high against the dollar, as a strong currency is helping the central bank battle rising inflation, officials said.

South Korea is one country that is said by traders to have intervened repeatedly in the currency markets to put the brakes on the won's rapid ascent.

Thailand's central bank declined to say whether it intervened in the market after the baht hit a 13-year high against the dollar last week but dealers suspected it might have bought dollars.

In the Philippines, officials have expressed concern over the rise of the peso, but also admitted that the government had limited resources to help exporters deal with the problem.

"Policymakers in smaller Asian countries have to accept that they are powerless in the face of policy decisions made by the G3 (US, Europe and Japan) and China," said Manu Bhaskaran, head of economic research at consultancy Centennial Group Inc.

Their options include imposing capital controls and introducing measures restricting foreign investors' access to some assets, he said, citing Singapore's recent measures to cool down its property market.

But that risks setting off a round of beggar-thy-neighbor policies that jeopardizes the global recovery, analysts say. Battle will be rejoined at upcoming G20 meetings in South Korea.

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IMF raises $8 bln for loans to poor countries

Photo: Reuters

WASHINGTON - The International Monetary Fund said on Friday it had raised US$8 billion in new resources for poor countries from four donors, including China which has a growing presence in Africa.

The IMF said in a statement it had signed financing agreements with Britain, Japan, China and France as part of fund-raising efforts that would allow it to offer low-cost loans to the world's poorest countries.

In July last year the IMF unveiled a plan to help developing nations hard hit by the global financial crisis and recession by boosting lending by up to $17 billion through 2014. It also suspended interest payments on loan payments through the end of 2011 to temporarily free up resources for governments.

Funds for the effort have already been received from Norway, the Netherlands ($767 million) and Canada. The IMF is also raising money for poor countries by selling 403.3 tons of its gold holdings.

IMF lending to poor countries rose sharply to $3.8 billion in 2009 from $1.2 billion in 2008, and just 0.2 billion in 2007.

So far in 2010 commitments of $1.7 billion have been made to developing countries under the low-cost lending program.

The announcement on funds for poor countries comes days before a meeting of 140 world leaders at the United Nations to assess goals launched in 2000 to cut global poverty by 2015.

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