Cantarell 'to decline by 14% per year'

Upstreamonline - Cantarell 'to decline by 14% per year': "Pemex chief executive Luis Ramirez Corzo said he expects production from the state-owned oil company's giant Cantarell field to decline by about 14% per year between 2007 and 2015.

Ramirez told Mexico's Senate Energy Committee that the annual decline of the field was equivalent to about 150,000 barrels per day, the Associated Press reported.

The field began declining in 2005 from record production of 2.13 million barrels per day in 2004.

Corzo said Cantarell was expected to produce an average of 1.8 million barrels per day this year.

He added Pemex was struggling to pay for deep-water exploration to replace the Cantarell output. Corzo added the company needed to invest at least $18 billion a year in exploration and production to maintain output of about 3.3 million barrels a day."

Make way for the Chinese giant

By Walter T Molano

The emergence of China as a global superpower occurred much faster than anyone imagined. China is the new giant on the block, with enormous resources at its disposal. An exporting powerhouse, China displaced the United States last year as the largest exporter to the European Union.

Chinese exports to the EU jumped 21% year on year in 2006, reaching 255 billion euros (US$336 billion), versus an 8% year-on-year increase in US exports, which totaled 176 billion euros. Chinese exports continue to expand aggressively, driving up shipping prices around the world. The Dry Freight Index on the Baltic Exchange was up 41% year-to-date, with no end in sight. The earnings from trade are becoming a headache for the Chinese central bank. International reserves recently passed the $1.3 trillion mark. China's current-account surplus is expected to reach $400 billion this year - representing 12.8% of gross domestic product (GDP). The heady expansion of the Chinese economy is putting it in a leadership position, allowing it to move to center stage in the global arena.

China is having a positive effect on the global economy, which in 2006 grew 5.4% year on year. Developed countries expanded 3.1% year on year, while non-Japan Asia grew more than twice as much - expanding 7.9%. China's GDP growth was 10.7% year on year and India expanded 9.2%. The Chinese effect on the developing world was remarkable. The former member states of the Soviet Union surged 7.7% year on year, sub-Sahara Africa expanded 5.7% and Latin America grew 5.5%.

The commodity boom is changing the economic landscape across the developing world. The volume of global trade rose 9.2% year on year in 2006, and emerging-market countries increased their international reserves by $738 billion. This explains the emerging-market boom. This is not a fad or a reflection of global liquidity. The $256 billion of net private inflows into the emerging markets reflect the credit strength of these economies and their ability to grow.

At the same time, the United States is withering away under the weight of its enormous debt load and various asset bubbles. The US economy grew an anemic 1.3% year on year during the first quarter of 2007. Unemployment is picking up and the dollar is collapsing. The unemployment rate in the US increased to 4.5% in April. Indeed, April saw the weakest pace of job creation in two years. The impact of the housing slowdown is starting to appear in the employment data. The tightening of lending standards is reducing the availability of mortgages, forcing further slowdowns in the construction sector.

The economic slowdown in the US is accompanied by serious concerns about the health of the financial sector. With more than $700 trillion in derivative contracts floating in the marketplace, and much of it tied to the mortgage market, an accident is definitely on the way. Some analysts attribute the steady rise in gold prices to concerns about a looming crisis in the US financial sector.

The changes in the global economic order are also realigning the planet's geopolitical structure. China is starting to set the tempo in the international arena. It has the indisputable lead in Africa, committing $20 billion over the course of the next three years to develop infrastructure and trade. It is shepherding the reconciliation between North and South Korea, easing tensions on its eastern flank.

The growing irrelevance of the multilateral institutions, such as the World Bank, International Monetary Fund and World Trade Organization, is providing a greater opportunity for China to exert a more prominent role without appearing to be a usurper of power. Fortunately, the changes are for the better, at least for most emerging-market countries. China's insatiable appetite for commodities is breathing new life across the developing world.

Last of all, China is providing a bonanza of cheap manufactured goods to developing nations - fueling an unprecedented consumer frenzy. The Chinese behemoth is rapidly displacing the US as the world's main source of capital, manufacturing and commodity demand, leading to a decoupling of the waning North American giant from the rest of the marketplace.

Stocks are dead, long live commodities, says Rogers

Investment guru Jim Rogers says the rise of China and the change in the status of the US dollar as a reserve currency is having a profound impact on global demand.

Investment guru Jim Rogers believes that the bull market for stock and bond markets is over and says investors should get into commodities. There is a long-term bull market in commodities which will extend to 2014-2022, he told the Credit Suisse Asian Investment Conference in a keynote speech yesterday.

Rogers started the Quantum Fund with George Soros in 1973 and went on to make a fortune by the age of 37 before giving it up to become a best-selling author, lecturer and commentator, while maintaining his interest in investing.

His research indicated that the shortest commodity bull market lasted for 15 years while the longest was 23 years. advertisement



His own commodity fund index which he set up on August 1, 1998 has increased by 243% since then, whereas the S&P index over the same period has risen 43%. Furthermore he asserted that whenever commodities were in the ascendancy stocks and bonds were in decline, and vice versa.

He reckoned that the big bull market for bonds in the 1980s and 1990s peaked out in 2003 and "has been in the process of making a big top ever since".

"So I would urge all of you to go home and sell all your bonds. I know some of you are bond managers - I would go home and look for another job," he advised the audience.

It was the same for stocks, at least in the West. By all the classic valuations that had stood the test of time - price earnings ratios, dividend yields, price to book ratios – stock markets were overvalued. The current stock market environment is similar to that of the 1970s with big trading ranges, which some people were able to exploit successfully.

"But most people are not very good at this. They need to have a secular bull market when markets are rising all the time to make a lot of money," he warned.

There is widespread ignorance of commodities, according to Rogers, which is reminiscent of attitudes towards stocks and mutual funds some 30 years ago, This is reflected in the 70,000 mutual funds available to the public to invest in stocks and bonds compared with fewer than 50 commodity funds.

The changes in global demand were taking place against a backdrop of the rise of China and the change in the status of the US dollar as the world’s reserve currency.

"It is amazing how many people do not understand the rise of China - China is the next great country in the world," he said. "I know they tell you that they call themselves communists in China - but I tell you they are among the world’s best capitalists right now," he said.

China had come along way since Deng Xiaopings’s open door initiative in 1978, "but this has a long way to go," he said.

"If you see problems in China – get on the phone and buy as much of it as you can," he urged his audience.

Adding "it's something we need to understand because it is going to affect demand for lots of things and change the world as we know it."

The growth in demand for commodities, particularly oil, was due to the demand from mainly China followed by India. "This is just the beginning. The demand by Asia hasn’t even started yet," he said noting that China’s per capita consumption of oil was a fourteenth of that of the US and one tenth that of South Korea and Japan.

With many of the world’s major oilfields in decline, supply was tightening. Faced with the potentially huge increase in demand from China and India prices were destined to rise.

"If the price of oil goes to $150 they’ll be drilling for oil on the White House lawn," he quipped.

The shift in the US from being a creditor nation in 1987 to being the biggest debtor nation in history with debts of $13 trillion would also have major repercussions for global demand.

"What is terrifying to me is that our foreign debt increases at the rate of one trillion every 15 months," Rogers said. The upheaval that would accompany the change in the dollar’s reserve status would be similar to that which accompanied sterling’s change in status some 60 years ago.

Rogers said that as it was US policy to debase the currency there would come a time when Asian countries, which were among the world’s biggest creditors, would start to get out of dollars and put them into real assets that stood to appreciate such as oil, gold and other commodities.

The US dollar was currently being propped up by Asian central banks, which continued their support partly because it was government policy to do so, and partly from bureaucratic inertia.