Wednesday, October 29, 2014

Samsung Electronics Scales Back LED Lighting Business

Seoul. Samsung Electronics said on Monday that it will cease its light emitting diode (LED) lighting business outside of South Korea, scaling back what was identified as a key growth business four years ago.

LED, rechargeable cells for hybrid electric cars, solar cells, medical devices and bio-pharmaceuticals were five areas singled out by the Samsung Group in 2010 as new growth drivers for the conglomerate.

At the time, the group forecast the businesses would generate 50 trillion won ($47.5 billion) in annual revenues by 2020 for its affiliates including Samsung Electronics.

But Samsung Electronics has struggled to gain traction in the LED lighting market, failing to loosen the grip of established rivals such as Philips and Osram in advanced markets while facing mounting margin pressures from Chinese competitors in emerging markets.

“We will remain active in the LED industry through our LED component business,” Samsung Electronics said in an emailed statement, adding that it will focus on areas such as back-lighting for displays of consumer products like televisions.

Samsung Group affiliates have seen limited returns so far from the five new growth areas.
While Samsung SDI is supplying German premium automaker BMW with electric vehicle battery cells, Samsung companies have struggled to generate significant revenues form other businesses such as solar cells.

Analysts and investors have said developing or identifying new growth drivers will be a key test for Jay Y. Lee, heir-apparent of Samsung Group, as his father, group patriarch Lee Kun-hee, remains hospitalized following a May heart attack.

A Samsung Electronics spokeswoman said the revenue contribution of LED lighting to the company had been small. She declined to give specific figures.


SKKMigas Says Chevron Gas Project Set Back By Up to 2 Years

Jakarta. The target for full operation of the Indonesia Deepwater Development (IDD) gas project has been delayed by up to two years to around 2020, a senior official said, reducing the country’s prospects of remaining a major gas exporter.

The delay to the $12 billion ultra-deepwater IDD project comes as Indonesia scales back exports of liquefied natural gas and looks to future imports to help meet rapidly growing domestic demand. State energy firm Pertamina has signed deals to secure imports of LNG from the United States from 2018.

Chevron Corp said earlier this month it had made a final investment decision to go ahead with the first stage of the IDD project — the Bangka field — but delayed a decision on the second stage — the Gendalo and Gehem fields — while it reassessed its development plans.

The project includes the Bangka, Gendalo, Gehem, Gandang and Maha fields off eastern Borneo.

Upstream oil and gas regulator (SKKMigas) is currently working with Chevron to review new reserves estimates and development plans for the Gendalo and Gehem fields, SKKMigas Chairman Johannes Widjonarko told reporters. “Clearly the reserves will change.”

The adjustments could delay the project by “up to two years, if permits are processed quickly”, Widjonarko said, from an earlier target to start production in 2018.
Wells are currently being drilled at the Bangka field, which is scheduled to start producing in 2016, Widjonarko said.

Newly inaugurated Energy Minister Sudirman Said warned on Monday that Indonesia could enter a period of crisis unless energy issues were addressed seriously.

The performance of Indonesia’s new administration will be judged on how quickly it can make decisions on large oil and gas projects including IDD, said Pri Agung Rakhmanto, a member of a team that advised President Joko Widodo on energy matters prior to his inauguration.

“These need immediate decisions,” Pri said, referring to delays at IDD as well as the Masela Abadi project operated by Inpex and the Jangkrik field operated by Eni.
Chevron expects to produce a maximum of 1.1 billion cubic feet of natural gas and 47,000 barrels of condensate per day from the two fields in the second stage of IDD.

The Gendalo and Gehem field developments will involve two separate production hubs, each with its own floating production unit, subsea drill centres, gas and condensate pipelines, and onshore receiving facility.

Gas from IDD will be shipped via pipeline to Indonesia’s existing Bontang LNG plant for liquefaction.

Reuters, Jakarta Globe

Cheaper Oil Gives Southeast Asia a Chance to Grow Better, Slash Subsidies

Jakarta. Rising risks of deflation in major economies have renewed worries about global growth, but sliding prices for oil and other commodities should boost most of Southeast Asia.
In much of the region, “consumers are going to feel a lot richer,” said economist Gareth Leather at Capital Economics. “The benefits to growth are quite significant.”

Since June, the price of a barrel of Brent crude has dropped by 25 percent to $86, which means big savings for Southeast Asia’s large oil-importing economies – Thailand, Philippines and Indonesia – though pain for net exporter Malaysia.

Anthony Jude, senior adviser to the Asian Development Bank’s energy section, said lower oil prices also give some countries “an opportunity to remove subsidies”.

For Thailand, whose economy has floundered for a year due to political turmoil and faltering exports, cheaper oil could mean faster growth. Its annual growth rate will rise 0.45 percentage points for every 10 percent fall in oil prices, according to Bank of America Merrill Lynch.

For Indonesia – Southeast Asia’s largest economy – cheap oil means the new president could rid the country of crippling energy subsidies relatively painlessly.
Elsewhere, central banks may be able to keep interest rates down for longer, although these will need to rise when the Federal Reserve starts hiking US levels, which many expect by mid-2015.

In addition to oil, there have been falls in global prices of some foodstuffs Southeast Asia imports such as wheat and soybeans, used to make tofu.

Where governments don’t stand in the way of falling prices, cheaper food and fuel should leave consumers with more disposable income.

This, in turn, should stimulate domestic consumption – which is pivotal when demand in large export markets such as Europe and Japan is stagnant, and worries persist about China – a big importer of Southeast Asia’s rubber, palm oil and other commodities.

Typically, food and energy have heavy weightings in Southeast Asian consumer-price indices, so lower prices have a big impact on headline inflation.

The Philippines, one of the region’s fastest-growing economies, raised its benchmark interest rate in July and September to dampen price pressures. But on Oct. 23, the central bank left rates on hold and pared its inflation forecasts, citing “easing pressures on commodity prices”.

Time for bold action?

Many Southeast Asian nations subsidize fuel prices. When governments don’t pass on lower global prices to consumers, subsidies become less costly.
Indonesia’s government, which spends around 3 percent of GDP on energy subsidies, should be able to spend savings on improving the archipelago’s dilapidated infrastructure.

President Joko Widodo has pledged stiff rises to gasoline and diesel prices. Some economists say now is the time to scrap subsidies altogether, as doing so when the gap between subsidized and market prices is small would be less painful for consumers.

An increase of just Rp 3,000 ($0.25) in the price of a liter of gasoline and diesel would “more or less eliminate retail fuel subsidies overnight,” said Daniel Wilson, an economist at ANZ bank.
Abolishing subsidies would have multiple benefits, including cutting Indonesia’s current account deficit, which makes it especially vulnerable to capital flight when US interest rates rise, and ending price distortions that discourage private sector investment in the domestic energy industry.

Thailand, where the army took power in May, also spends a lot on subsidies. It will seek to raise revenue by reinstating an excise duty on diesel without raising prices for consumers, said Santitarn Sathirathai at Credit Suisse. It could use part of the proceeds, equivalent to about 0.8 percent of GDP, to stimulate the economy, he said.

Not all good news

However, the low current oil price isn’t good news for all Southeast Asia.
Malaysia, as a net oil exporter, sees some loss of income. And because of declining dividends from state oil firm Petronas, Prime Minister Najib Razak’s government may have to cut spending to meet its targets to cut the budget deficit.

On Oct. 2, Najib’s government raised retail prices for petrol and diesel by about 10 percent as part of a plan to “rationalize” energy subsidies, which equal around 2.5 percent of GDP, and balance the budget by 2020.

For resource-rich Indonesia, weak global commodity prices are cutting earnings from the coal, rubber and palm oil it exports, so its trade balance isn’t seeing much improvement.

And Indonesia’s Widodo may find it harder to sell unpopular fuel-price hikes, much less the scrapping of subsidies, now that pressure on the budget has reduced.
Much of the recent decline in the price of oil is because of more supply, but if deflation were to grip the global economy as a result of slumping demand it would hurt export-led economies such as those in Southeast Asia.

Farmers’ incomes would be pinched and debtors would suffer as the size of their borrowings rises in real terms. Thailand, where private debt is high, demand weak and prices falling on a monthly basis, is at greatest risk of this “debt deflation,” said Santitarn.

“Lower oil prices would be a positive for the region as a whole,” said Leather of Capital Economics. “Thailand and Indonesia stand out as the two countries that have most to gain.”


Tuesday, October 28, 2014

India to supply Vietnam with naval vessels amid China disputes

(Reuters) - India will soon be supplying naval vessels to Vietnam, Prime Minister Narendra Modi said on Tuesday, the first significant military transfer to Hanoi at a time when it is embroiled in a territorial dispute with China.
The announcement came after Modi held talks with his visiting Vietnamese counterpart, Nguyen Tan Dung, during which the two sides agreed to modernize the Vietnamese military as well as raise Indian involvement in Vietnam's energy sector.
Both India and Vietnam have territorial disputes with China - India in the Himalayas and Vietnam in the South China Sea. New Delhi and Hanoi are beefing up defenses even as they ramp up commercial ties with China, the world's second-largest economy.
"Our defense cooperation with Vietnam is among our most important," Modi told reporters, adding it will be expanded.
Top of the agenda is the sale of four offshore patrol vessels that Vietnam wants to improve its defenses in the energy rich-South China Sea where it is locked in competing claims with China.
Talks on the naval craft have gathered pace since last month when India announced a $100 million credit line for defense purchases, an Indian government official earlier told Reuters.
"We will quickly operationalise the $100 million Line of Credit that will enable Vietnam to acquire new naval vessels from India," Modi said.
Vietnam wants the craft for surveillance off its coast and around its military bases in the Spratly island chain in the South China Sea where it is building a credible naval deterrent to China with Kilo-class submarines from Russia.
Claims by an increasingly assertive China over most of the South China have set it directly against U.S. allies Vietnam and the Philippines. Brunei, Taiwan and Malaysia also claim parts of the waters.
Beijing's placement of an oil rig in disputed waters earlier this year infuriated Vietnam but the coastguard vessels it dispatched to the platform were each time chased off by larger Chinese boats.
India and Vietnam called for peaceful resolution of the disputes in the region.
"They agreed that freedom of navigation and overflight in the East Sea/South China Sea should not be impeded and called the parties concerned to exercise restraint, avoid threats or use of force," a joint statement said.
The two sides also signed an agreement under which India's state-run oil exploration arm, ONGC Videsh Ltd, will enhance cooperation with PetroVietnam.
"The agreement underlines Vietnamese invitation to OVL to expand its presence in Vietnam and further consolidate cooperation in exploration and other areas between the two countries in energy sector," the joint statement said.
China has previously criticized India's cooperation with Vietnam in the oil and gas sector, saying its exploration activities off the Vietnam coast are illegal.
On Tuesday, responding to a question on India and Vietnam exploring oil together in the South China Sea, Beijing said it would have no problem so long as it was carried out in waters that were not disputed.
"China has indisputable sovereignty over the Spratly Islands and its adjacent waters. We have no objection to countries who want to carry out legitimate and lawful oil and gas cooperation in waters that we have no dispute over," Foreign Ministry spokesman Hong Lei said.
"But if such cooperation harms China’s sovereignty and interests, we will resolutely oppose it."

Oil, weak German data drag on stocks; Brazil sinks

(Reuters) - Global equity markets slipped on Monday, hit by weak German business sentiment and another decline in oil, while Brazil slumped after incumbent Dilma Rousseff narrowly won a second term over an opponent seen as more pro-business.
Major indexes on Wall Street ended mixed. The benchmark S&P 500 closed slightly lower after last week's big gains, hurt by another drop in energy shares as oil neared a four-year low. Disappointing data showing the pace of growth in the U.S. services sector slowed in October to a six-month low also sapped buying sentiment.
Government bond yields were lower after the business climate index in Germany, the Euro zone's largest economy, fell to its lowest level in almost two years.
"The global markets are pretty much reflecting what's going on in the overall economy," said Bernard Baumohl, managing director and chief global economist at the Economic Outlook Group in Princeton, New Jersey. "Europe is the epicenter of global weakness and Germany happens to be ground zero."
Brent crude oil futures pared early losses but were down 0.81 percent at $85.43 a barrel LCOc1, after Goldman Sachs cut its price forecasts. U.S. crude oil fell 0.4 percent to $80.71 a barrel, after hitting a low of $79.44 as signs of rising global supply threatened deeper price losses. [O/R]
MSCI's all-country world equity index .MIWD00000PUS was down 0.13 percent. The FTSEurofirst 300 index .FTEU3 of top European shares closed down 0.59 percent, erasing early gains. [.EU]
U.S. 10-year Treasury notes inched up 4/32 in price to yield 2.259 percent. Germany's 10-year note yield fell to 0.869 percent.
The dollar index .DXY, which tracks the greenback against a basket of six major currencies, fell 0.21 percent to 85.55.
Brazil suffered big losses after Rousseff defeated Aecio Neves this weekend. Brazilian stocks plunged 2.6 percent to seven-month lows .BVSP, with state-run oil company Petrobras down 12.3 percent, and banks' shares off 4 to 6 percent.
Brazilian 5-year credit default swaps rose 10 basis points and bond yields rose as investors attempted to protect against further losses. 11EML
The Dow Jones industrial average .DJI gained 12.53 points, or 0.07 percent, to 16,817.94, the S&P 500 .SPX lost 2.95 points, or 0.15 percent, to 1,961.63 and the Nasdaq Composite.IXIC added 2.22 points, or 0.05 percent, to 4,485.93.

On the upside, Europe's bank stress tests beat market expectations, with only one in five of the region's top lenders failing at the end of last year, and many have since repaired their finances, results released on Sunday showed.

BP posts slump in Russian income but raises dividend

(Reuters) - BP's (BP.L) third-quarter results took a hit from declining oil prices and a sharp drop in income from Russia as Western sanctions on Moscow led to a slump in earnings from the oil major's local partner, Kremlin-controlled Rosneft (ROSN.MM).
BP's overall profits were broadly in line with expectations at $3 billion but down nearly a fifth year-on-year. Its stock posted modest gains as investors welcomed a 5.3 percent year-on-year increase in dividends to 10 cents per share.

"Despite the positive financial results the company still faces two significant headwinds -- in Russia and liabilities over the 2010 Gulf of Mexico oil spill," said Iain Reid, analyst at investment bank BMO.
BP, a major investor in Russia through a 19.75 percent stake in state oil major Rosneft, said the fall of the rouble against the dollar RUB= had a significant impact on results.

Underlying net income from Rosneft for the quarter was $110 million compared with $808 million a year earlier.

The rouble has lost more than a fifth of its value since the start of the year as the Kremlin fights capital outflows and lower oil prices, while local businesses have been shut off from Western lending by sanctions.
The United States and the European Union hit Russia with economic sanctions over Moscow's intervention in Ukraine.

The latest sanctions hit long-term financing and joint projects with Western companies in the Arctic, and shale developments.

Rosneft is expected to post a quarterly loss and on Tuesday the company delayed publication of its third-quarter results by a day without explanation.

Unlike its rivals, BP has nearly no production in Russia outside Rosneft. Rival ExxonMobil (XOM.N), Royal Dutch Shell (RDSa.L) and France's Total (TOTF.PA) have all suspended joint shale oil and Arctic projects in Russia in recent months, jeopardizing plans by Moscow to sustain output and exports, key sources of revenue for the state budget.


Oil companies have seen billions wiped off their stock market values as crude prices dropped by 25 percent over the past four months to a four-year low of near $85 a barrel due to slowing global demand, particularly in China, and ample supplies.

The impact of the falling oil prices on BP was however limited as the third quarter finishes at the end of September.

"Growing underlying production of oil and gas and a good downstream performance generated strong cash flow in the third quarter, despite lower oil prices. This keeps us well on track to hit our targets for 2014," BP Chief Executive Bob Dudley said in a statement.

Full year capital expenditure, used mostly for new oil and gas exploration and development, will be trimmed to around $23 billion from previous guidance of $24 billion to $25 billion.

BP shares in London were up 0.3 percent at 431.5 pence by 4.12 a.m. EDT.

BP and other majors have managed to sustain healthy dividends over the past quarters mainly on the back of asset sales and lower spending, thus generating strong cash flow despite lower oil prices.

The increase in the dividend was largely due to BP being on track to achieving its goal of generating $30 billion of net cash flow in 2014, reaching $25.5 billion by the end of the third quarter.


BP maintained its $3.5 billion liabilities provision for the 2010 Gulf of Mexico rig explosion and spill, even after a U.S. judge last month found it "grossly negligent" and "reckless" in the disaster.

BP said it would appeal the ruling, which could add nearly $18 billion in fines to more than $42 billion in charges the company took for the worst offshore environmental disaster in U.S. history.

By the end of the third quarter, cumulative charges paid into the Deepwater Horizon Oil Spill Trust reached their allocated limit of $20 billion and any additional costs "will be charged to the income statement as they arise".


Oil and gas production excluding Rosneft was down 2.7 percent from a year earlier at 2.147 million barrels of oil equivalent, mainly due to the expiry of an exploration concession in Abu Dhabi. The decline was, however, offset by higher output from the Gulf of Mexico.

The third-quarter results included a $770 million writedown of Block KG D6, a gas field in India, "as a result of uncertainty in the future long-term gas price outlook" after India changed its gas pricing system.
BP said it expected fourth-quarter production to be "slightly lower".

Profits from BP's refining and retail business more than doubled in the third quarter to $1.5 billion due to stronger refining margins.

Monday, October 27, 2014

The Receding Mangrove Wall

As the cyclonic storm Hudhud ripped through India’s eastern state of Andhra Pradesh, home to two million people, at a land speed of over 190 kilometers per hour on Sunday, it destroyed electricity and telephone infrastructure, damaged the airport, and laid waste to thousands of thatched houses, as well as rice fields, banana plantations and sugarcane crops throughout the state.It is typhoon season here in Asia.

In Japan, where residents are still reeling from the impact of Typhoon Phanfone, Typhoon Vongfong brought another round of torrential rainfall and vicious winds this past weekend, adding to the long list of damages that countries in this part of the world are now calculating.
In India alone, the government has pledged $163 million in disaster relief, but officials say even this tidy sum may not be sufficient to get the state back on its feet. And for the families of the 24 deceased in Andhra Pradesh and the eastern state of Odissa, no amount of money can begin to compensate for their loss.

The ongoing calamity stirs memories of the deadly Typhoon Haiyan that claimed 6,000 lives in the Philippines almost exactly a year ago. While these tropical storms cannot be stopped in their tracks, there is a natural defense system against their more savage impacts: mangroves. 

And experts fear their tremendous value is being woefully under-appreciated, to tragic effect, all around the world.

For those currently gathered in Pyeongchang, South Korea, for the 12th Conference of the Parties to the Convention on Biological Diversity (COP 12), this very issue has been a topic of discussion, as delegates assess progress on the Strategic Plan for Biodiversity 2011-2020, and its 20 Aichi Targets, agreed upon at a meeting in Nagoya, Japan, three years ago.

One of the goals accepted by the international community was to improve and restore resilience of ecosystems important for adaptation to and mitigation of climate change.
On this front, according to the Global Biodiversity Outlook 4 (GBO-4), efforts have been lacking, with “trends… moving in the wrong direction,” and the state of marine ecosystems falling “far short of their potential to provide for human needs through a wide variety of services including food provision, recreation, coastal protection and carbon storage.”

Nowhere is this more visible than in the preservation of mangrove forests, with a single hectare storing up to 1,000 tons of carbon on average, the highest per unit of area of any land or marine ecosystem, according to the UN Environment Program (UNEP).

Their ability to store vast stocks of CO2 makes mangroves a crucial component of national and global efforts to combat climate change and protect against climate-induced disasters. Yet, experts say, they are not getting the attention and care they deserve.

A complex ecosystem

Mangroves, a generic term for trees and shrubs of varying heights that thrive in saline coastal sediment habitats, are found in 123 countries and cover 152,000 square kilometers the world over.

Over 100 million people live within 10 kilometers of large mangrove forests, benefiting from a variety of goods and services such as fisheries and forest products, clean water and protection against erosion and extreme weather events.

Mangroves provide ecosystem services worth $33,000 to $57,000 per hectare per year, says a UNEP study titled “The Importance of Mangroves: A Call to Action,” launched recently at the 16th Global Meeting of the Regional Seas Conventions and Actions Plans (RSCAP) held in Athens from Sep. 29-Oct. 1.

The report found that mangroves “are being destroyed at a rate three to five times greater than the average rates of forest loss.”

Emissions resulting from such losses make up approximately a fifth of deforestation-related global carbon emissions, the report added, causing economic losses of between $6 billion and $42 billion per year.

Besides human activity, climate change poses a serious threat to these complex ecosystems, with predicted losses of mangrove forests of between 10 and 20 percent by 2100, according to data released by the UNEP.

The situation is particularly grave in South Asia, which by 2050 could lose 35 percent of the mangroves that existed in 2000. In the period running from 2000 to 2050, ecosystem service losses from the destruction of mangroves will average $2 billion a year.

With their complex root system acting as a kind of natural wall against storm surges, seawater intrusion, floods and typhoons, mangroves act as an effective buffer for vulnerable communities, and also guard against excessive damage caused by various natural disasters.

This time last year, for instance, Cyclone Phailin, one of the strongest tropical storms ever to make landfall in India, damaged 364,000 houses, affecting eight million people and killing 53.

In October 1999, the devastating Odisha Cyclone touched landfall wind speeds of over 260 kilometers per hour, and took the lives of no fewer than 8,500 people, while wrecking two million homes and leaving behind damages to the tune of $2 billion according to official figures.

A mangrove impact study conducted in the aftermath of this storm, the strongest ever recorded in the Indian Ocean, found that the village to incur the lowest loss per household was protected by mangroves.

Scientists have found that mangroves can reduce wave height and energy by 13 percent to 66 percent, and surges by 50 centimeters for every kilometer, as they pass through the trees and exposed roots.

Mangroves crucial to regulating global warming

Speaking to IPS on the sidelines of the recently concluded RSCAP meeting, Jacqueline Alder, head of the freshwater and marine ecosystems branch at the UNEP’s Division of 

Environmental Policy Implementation, explained that a recent cost-benefit analysis in the South Pacific Island state of Fiji found a much higher financial success rate for planting mangroves than building a 1.8-meter seawall.

Having worked in countries with high mangrove cover — from India and the Philippines, to Indonesia and Papua New Guinea — Alder believes that “many policy makers are not aware of mangroves’ multiple benefits. They better understand the commercial value of timber from traditional forests, and hence accord it more importance.”

With high costs and low success rates associated with regeneration, mangrove protection is falling short of the Aichi Targets, experts say.

“Regenerating a hectare of mangroves costs a high $7,500 and is a dicey undertaking,” Jagannath Chatterjee of the Regional Centre for Development Cooperation (RCDC), currently working closely with coastal communities to regenerate mangroves in Odisha, one of India’s most cyclone-prone states, told IPS.

He blamed the destruction of the remaining mangrove forests on the “timber mafia,” alleging that cash crops are being planted in mangrove land.

With global warming rising at an alarming rate, the importance of mangroves in climate regulation cannot be ignored much longer. If all the carbon stock held by mangroves were to be released into the atmosphere as carbon dioxide, the resulting emissions would be the equivalent of traveling 26 million kilometer by car, 650 times around the world, according to calculations by the UNEP.

Inter Press Service, Jakarta Globe