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Arabs Back Indirect Talks With Israel; U.S. Envoy Mitchell Heads to Region

March 3, 2010

By Alaa Shahine and Jonathan Ferziger March 4 (Bloomberg) — Arab states backed a U.S. proposal for indirect negotiations between Palestinians and Israel, a move that analysts said would let Palestinian leader Mahmoud Abbas sidestep his vow to avoid talks while Israel builds settlements. Arab foreign ministers meeting in Cairo agreed to give the talks four months to succeed and will call an emergency UN Security Council meeting if they fail, Arab League Secretary- General Amre Moussa said in a televised speech yesterday. Israeli Prime Minister Benjamin Netanyahu welcomed the Arab League decision to support the talks, his spokesman Mark Regev said. The U.S. said it “appreciated” the Arab League proposal, and announced that American envoy George Mitchell would fly to the Middle East in the next few days to consult with both sides. Secretary of State Hillary Clinton , commenting during a visit to Brazil yesterday, said she hoped the step would lead to the Palestinian state sought by the U.S. “This is a last-ditch attempt,” Moussa said of the new effort for talks. “I repeat: this is a last-ditch attempt.” Ministers approved the proposal even though Israeli policies make it likely that “indirect talks will not yield results,” he said. Israel-Palestinian talks have been frozen since Israel’s military offensive in the Gaza Strip in late 2008. U.S.-led efforts to revive negotiations have foundered on the issue of settlement construction, with the Palestinians demanding a cessation of all building and Israel agreeing to a partial halt. Helps Abbas “The only meaning of this decision is to cover Mahmoud Abbas,” said Moustafa El-Husseini, co-author of a book on the Arab-Israeli conflict called “The Dilemma of an Arab, the Dilemma of a Jew.” “Abbas had said no talks before a freeze on settlement construction, and now he wants to back down.” Mark Heller , a researcher at Tel Aviv University’s Institute for National Security Studies, also expressed skepticism. “I doubt it will produce any substantial breakthrough unless the U.S. is prepared to put a great deal of pressure on both sides,” he said. “This is a way for everybody to revive the appearance of a working peace process.” Getting the two sides talking again by any means is a necessary first step toward any peace accord, U.S. State Department spokesman Philip J. Crowley said. Water, Borders “We want to get these parties talking about the specific issues, not just the final-status issue,” Crowley said. “Until you get into a process it is almost impossible to make progress” on issues including water resources and borders, he said. The final-status issues include the political status of Jerusalem. Mitchell will meet both sides to assess their readiness to talk and work out a framework for the discussions, Crowley said. The mechanics of the indirect talks haven’t been established, and could involve the sides meeting in the same building or city, or in a more complex situation, Crowley said. Israeli and Palestinian positions on marking their common border are much closer than their positions on issues such as Jerusalem, which both sides claim as their capital, and on the right of Palestinian refugees to return to homes in Israel they left in 1948, said Aaron David Miller , a fellow at the Woodrow Wilson Center in Washington. “Proximity talks, or indirect negotiations held together by George Mitchell, are in reality the only way at the moment to go about resuming the peace process,” Miller said. American Role The approach could “provide a way for the parties to talk to one another through Mitchell on issues that could be bridged — territory and borders — and it could legitimize a U.S. role in negotiations over time,” Miller said in an interview. The decision to back indirect talks was taken by a special committee of foreign ministers that includes Egypt, Jordan, Qatar, Syria, Saudi Arabia, Bahrain and Yemen. Abbas said he would accept any decision by the committee. Nabil Abu Rudeineh , a spokesman for Abbas, said in a statement carried by the authority’s official Wafa news agency that the Palestinian leader “looked at the committee’s final statement and found out that it is accepted by both the Palestinian Authority and the Arab countries.” Regev said Israel hoped now “that it will be possible to move forward.” He declined to discuss details about the structure and content of the talks. Partial Freeze The administration of U.S. President Barack Obama has criticized Israel for building settlements and called for their halt to revive peace talks. Clinton praised Netanyahu for agreeing in November to a partial settlement freeze. Arab analysts including El-Husseini say the U.S. wants Arabs to compromise after failing to extract more concessions from Israel. “Netanyahu has swept the floor with Obama,” El-Husseini said. “Obama had upped the ante and couldn’t keep it.” Arab support for the plan wasn’t unanimous. Syrian Foreign Minister Walid Al-Muallem unsuccessfully tried to interrupt Moussa’s speech to express reservations about the agreement. “There was no consensus on the statement,” and the decision to restart talks should have been left to the Palestinians, al-Muallem said later when given the floor. To contact the reporter on this story: Alaa Shahine in Cairo at asalha@bloomberg.net

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New law to ‘clean up’ Qatar’s property market

March 3, 2010

03 Mar 2010 Qatar is to introduce a new law aimed at providing better regulation of the property and real estate markets, according to a report. The Peninsula says a draft of the law is with the co…

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Qatar’s Education City rail construction ‘to begin this month’

March 2, 2010

02 Mar 2010 Construction will begin this month on the rail network for Qatar’s flagship Education City project and is due to be completed in three years. The trains will help to reduce congestion a…

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Singapore’s GIC, Abu Dhabi Face $10 Billion Loss on UBS, Citigroup Stakes

March 2, 2010

By Elena Logutenkova and Yalman Onaran March 2 (Bloomberg) — It took the Government of Singapore Investment Corp. three days in 2007 to agree to prop up UBS AG , ailing from subprime losses. It may take a decade to recoup that investment of 11 billion Swiss francs ($10 billion). GIC, manager of more than $100 billion of the city-state’s foreign reserves , faces a paper loss of about 5.6 billion francs when it becomes the biggest shareholder of UBS on March 5, as shares of Switzerland’s largest bank trade at a third of the conversion price on notes it holds. Singapore isn’t alone among sovereign wealth funds facing losses from supporting banks in Europe and the U.S. in the credit crisis. More than $69 billion in investments by such funds has so far produced $20 billion in realized and paper losses, according to data compiled by Bloomberg. Hurt by their contributions to the health of the financial system and stuck with some of the investments for years, sovereign wealth funds may shy away from coming to the banks’ aid the next time. “Once burned, twice shy,” said Charles Whitehead , a finance law professor at Cornell University in Ithaca, New York, who has tracked the strategy of such funds. “If a weak bank came back to them again for capital in the next crisis, the sovereign wealth funds won’t be there.” European and U.S. bank chiefs made personal pitches to the funds during the height of the mortgage market meltdown. Marcel Ospel , then chairman of Zurich-based UBS, called GIC Chief Investment Officer Ng Kok Song , according to comments they made at the time. Talks began on Dec. 6, 2007, and by the evening of Dec. 9, GIC had committed to make its biggest single purchase at the time. ‘Long-Term Prospects’ Acknowledging that recouping the money might take longer than initially expected, Ng said in GIC’s annual report, published in September, that he still has “confidence” in the “long-term prospects” of the investment. GIC, which declined to comment for this article, will receive 230.7 million UBS shares for its mandatory convertible notes this week for 47.68 francs each. UBS shares closed yesterday at 14.98 francs. “The game turned out not as easy as it may have seemed,” said Florian Esterer , who helps manage about $55 billion, including UBS shares, at Swisscanto Asset Management in Zurich. “It will take probably more like a decade than three years” for UBS shares to return to 2007 levels. Qatar, Abu Dhabi There were some profitable deals too, such as Qatar and Abu Dhabi funds that waited until the depth of the crisis to invest in London-based Barclays Plc and Credit Suisse Group AG of Zurich. Yet one third of the winnings, which totaled $12 billion, resulted from a regulatory change rather than timing. After the U.S. government required troubled banks to have more common equity instead of weaker tiers of capital, Citigroup Inc. had to offer favorable prices for its preferred shareholders to convert to common. That led to windfall profits of $4 billion for Kuwait and GIC on investments that would have lost $9 billion under their original agreements. Abu Dhabi Investment Authority didn’t benefit because it didn’t buy preferreds when it came to the aid of New York-based Citigroup. So it may face a $4.8 billion paper loss when it is forced to convert its so-called equity units to shares starting this month at a price almost 10 times higher than the current value. Abu Dhabi filed an arbitration claim against Citigroup, which has the most writedowns and losses from the credit crisis, alleging the bank wasn’t forthcoming about its financial health when it was seeking capital. In a December statement, Citigroup said the claim is “without merit.” A spokesman for the Abu Dhabi Investment Authority declined to comment. More Due Diligence “One lesson that all investors, including the sovereign wealth funds, learned from this crisis is that you have to do the due diligence before investing,” said Rachel Ziemba , a senior analyst who tracks such funds at Nouriel Roubini’s RGE Monitor in New York. “The funds are already looking at fundamentals more closely. They’ll be more wary to take such big stakes in banks in the future.” The funds’ banking investments in the crisis diverged from their traditional strategy of taking smaller stakes in an array of companies, Ziemba said. The diverse distribution of stakes in close to 100 firms in the U.S. that the China Investment Corp. revealed in a regulatory filing last month is proof that they’re going back to their original goals, she said. CIC, Morgan Stanley In June, CIC increased its investment in New York-based Morgan Stanley by $1.2 billion, even though its first purchase was out of the money by about $2 billion on the $5.6 billion it put in the Wall Street firm. The fund took part in Morgan Stanley’s sale of new shares, saying it expects the investment bank to become more competitive. The equity units CIC bought in 2007 will convert to stock at $48 in August. Morgan Stanley shares closed yesterday at $28.19. CIC declined to comment. Sovereign wealth funds tend to support the companies in which they had invested in times of need, said Nuno Fernandes, professor of finance at IMD Business School in Lausanne, Switzerland, who has been studying the funds. Still, the recent losses “had huge implications internally, and the funds were criticized by their local constituencies. They will invest less in financials going forward.” Temasek Holdings Pte, a separate Singapore government fund that oversees more than $120 billion, sold its shares in Charlotte, North Carolina-based Bank of America Corp. for a $4.6 billion loss in early 2009. It had acquired the stock during the conversion of its stake in Merrill Lynch & Co. when the investment bank was bought by Bank of America. Surging Losses After the initial round of investments by the sovereign wealth funds in late 2007 and early 2008, banks and brokers announced more losses on their mortgage assets. And they kept going back to investors for more money. The dilutions since then and the losses — $1.25 trillion worldwide — may make it difficult for some bank shares to recover to 2007-08 levels. In the two years following GIC’s investment, UBS’s writedowns and losses from the credit crisis swelled almost threefold to more than $57 billion. UBS boosted the number of its shares by 98 percent since the end of 2007. Citigroup’s share count jumped almost six times in the same period. After UBS’s capital raising was announced on Dec. 10, 2007, it drew criticism from other shareholders. Profond, a Swiss pension fund, said it was treated unfairly by the bank because it wasn’t offered the same deal, which included a 9 percent interest payment on the mandatory convertible notes sold to GIC and an unidentified Middle Eastern investor. Swiss tabloid Blick christened UBS the “United Bank of Singapore.” “The majority of people at the end of 2007 expected this crisis to be a lot less severe than it in the end turned out,” said Dirk Hoffmann-Becking , a London-based analyst at Sanford C. Bernstein Ltd. To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net ; Yalman Onaran in New York at yonaran@bloomberg.net .

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Clinton Says Warning on Iran Army Control Was Message to Nation’s Leaders

February 16, 2010

By Indira A.R. Lakshmanan Feb. 17 (Bloomberg) — U.S. Secretary of State Hillary Clinton said her warning that Iran’s elite military force is assuming control of the Islamic republic was a message to Iran’s leaders and a call to other nations to back sanctions. Clinton, speaking yesterday in an interview with Bloomberg Television in Jeddah, Saudi Arabia, said her comments were “important for countries that are still evaluating” whether to support United Nations sanctions over Iran’s nuclear program. Those countries may believe Iran is “a democracy but for a flawed election,” she said. The secretary of state told a student audience in Qatar Feb. 15 that Iran’s political and religious leaders are being “supplanted” by the Revolutionary Guard Corps, which has played a key role in suppressing anti-government protests since the disputed presidential election in June. Iran is turning into a “military dictatorship,” Clinton said. It was one of Clinton’s bluntest critiques yet of the Persian Gulf nation as she seeks support among Iran’s neighbors for tougher sanctions to rein in its nuclear program. Iran’s Foreign Minister Manouchehr Mottaki rejected Clinton’s allegations of growing army influence yesterday, describing them as a “trick” intended “to divert public opinion in the region.” The UN is moving toward a resolution on fresh sanctions against Iran that “will be targeted at the Revolutionary Guard,” Clinton said. The Guards have “assumed greater and greater responsibility not just in the security sector and not just in the nuclear program, but in the economic and political arenas as well,” she said in the interview. Seeking Support Clinton ended a three-day trip that took her to Saudi Arabia and Qatar, oil- and gas-producing nations. The U.S. is seeking support from such countries to show Iran that its nuclear program is a concern for neighbors as well as Western countries. Iran’s President Mahmoud Ahmadinejad said last week that his country has enriched its first batch of uranium to 20 percent. The U.S. cast doubt on the claim, while saying such an enrichment target might point toward a weapons-development effort. Iran says the fuel is for use at a medical-research reactor in Tehran. Tensions over the nuclear program and protests in Iran, the second-largest oil producer in the Organization of Petroleum Exporting Countries, have helped push oil prices higher. Crude oil surged the most in more than four months yesterday, gaining $2.88, or 3.9 percent, to $77.01 a barrel on the New York Mercantile Exchange. Prices have more than doubled from a year earlier. Earlier Sanctions Iran is already subject to three rounds of UN sanctions, including a 2007 resolution freezing assets and banning travel for some individuals and companies affiliated with the Revolutionary Guards. The U.S. Treasury Department said Feb. 10 it would freeze assets of four companies and one individual linked to the Guards. The Guards have been central to the crackdown against Iranian opposition movements which say Ahmadinejad’s re-election to the presidency in June was rigged. At least 44 people have been killed in protests since the June vote, and thousands more detained. Iran’s government has also restricted communications on mobile phones and the Internet, including curbing access to Google Inc. ’s Gmail service. Clinton said in the interview that the State Department has funded technologies to help people evade Internet restrictions imposed by governments. “It is important for us to keep those lines of communication open,” she said. U.S. companies “are coming up with ways to circumvent obstacles on the Internet.” Meeting With King Clinton two days ago discussed with Saudi King Abdullah bin Abdel Aziz al-Saud the role his kingdom can play in overcoming Chinese concerns that sanctions on Iran would hurt its oil supplies. China, which has a veto on the UN Security Council, has resisted Western calls for tighter sanctions on Iran. “The Chinese are being made aware by many countries, not just the United States, of the real threat that a nuclear-armed Iran would present to this region,” which provides most of China’s oil, Clinton said yesterday in the interview. Saudi Arabia is the biggest oil supplier to China, and Iran is third, according to Chinese government statistics. China is Iran’s largest trading partner with bilateral trade of $29 billion in 2008, according to the Iran-China Chamber of Commerce. Russia joined the U.S. and France criticizing Iran’s nuclear work and said further enrichment of its uranium stock would cause “new concerns” about the intentions of its atomic program. “If Iran goes forward with this escalation, it would raise new concerns about Iran’s nuclear intentions,” the countries said in a one-page letter addressed yesterday to the International Atomic Energy Agency in Vienna. Israeli Prime Minister Benjamin Netanyahu ended a two-day visit to Moscow yesterday without public assurances Russia would support new sanctions against Iran or forgo a planned arms shipment to the Islamic republic. To contact the reporter on this story: Indira Lakshmanan at in Jeddah, Saudi Arabia, or ilakshmanan@bloomberg.net

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Clinton Says Warning of Iran Army Dictatorship May Boost Sanctions Support

February 16, 2010

By Indira A.R. Lakshmanan Feb. 16 (Bloomberg) — U.S. Secretary of State Hillary Clinton said her warning that Iran is turning into a “military dictatorship” may solidify support for sanctions against the Islamic republic’s nuclear program. Clinton, speaking in an interview with Bloomberg Television in Jeddah, Saudi Arabia today, said her comments are “important for countries that are still evaluating” whether to support sanctions, and that may believe Iran is “a democracy but for a flawed election.” Clinton said her comments were also a message to Iran’s religious and political leaders. Yesterday, she told a student audience in Qatar that those leaders are being “supplanted” by the Republican Guard Corps, which has played a key role in suppressing anti-government protests since June. It was one of her bluntest critiques yet of the Islamic republic, as she seeks support among Iran’s neighbors for tougher United Nations sanctions to rein in its nuclear program. The UN is moving toward a resolution on fresh sanctions against Iran, Clinton said in the interview. Clinton’s three-day trip took her to Saudi Arabia and Qatar, oil- and gas-producing nations. The U.S. is seeking support from such countries to show Iran that its nuclear program is a concern for neighbors as well as Western countries. Iran’s President Mahmoud Ahmadinejad said last week that his country has enriched its first batch of uranium to 20 percent. Iran says the fuel is for use at a medical-research reactor in Tehran. UN Sanctions Iran is already subject to three rounds of UN sanctions, including a 2007 resolution freezing assets and banning travel for some individuals and companies affiliated with the Revolutionary Guards. The U.S. Treasury Department said Feb. 10 it would freeze assets of four companies and one individual linked to the Guards. The Republican Guards have been central to the crackdown against Iranian opposition movements which say Ahmadinejad’s re- election to the presidency in June was rigged. At least 44 people have been killed in protests since the June vote, and thousands more detained. Iran’s government has also restricted communications on mobile phones and the Internet. Clinton said in the interview that the State Department has funded technologies to help people avoid Internet restrictions. Clinton yesterday discussed with Saudi King Abdullah the role his kingdom can play in overcoming Chinese concerns that sanctions on Iran would hurt its oil supplies. China, which has a veto on the UN Security Council, has resisted Western calls for tighter sanctions on Iran. Saudi Arabia is the biggest oil supplier to China, and Iran is third, according to Chinese government statistics. China is Iran’s largest trading partner with bilateral trade of $29 billion in 2008, according to the Iran-China Chamber of Commerce. To contact the reporter on this story: Indira Lakshmanan at in Jeddah, Saudi Arabia, or ilakshmanan@bloomberg.net

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Clinton Pushes Hard Line Against Iran, Says Evidence Grows of Nuclear Plan

February 14, 2010

By Indira A.R. Lakshmanan      Feb. 15 (Bloomberg) — U.S. Secretary of State Hillary Clinton , shoring up support in the Middle East for a hard line against Iran, said “evidence is accumulating” of that nation’s intention to produce nuclear weapons. The world has “little choice but to impose greater costs” on Iran to force it to rein in its nuclear program, Clinton said last night in remarks to the U.S.-Islamic World Forum in Doha, Qatar. She said the U.S. is working with allies “to prepare and implement new measures to convince Iran” to reconsider. Clinton is visiting Qatar and Saudi Arabia to build support for pressuring Iran and for urging Palestinians to return to peace talks with Israel. Clinton also used her speech to address concerns in the region that the U.S. has not done enough to make good on President Barack Obama ’s promise of improved relations with the Muslim world. Qatari Prime Minister Sheikh Hamad Bin Jasim Bin Jaber Al- Thani , speaking in a question-and-answer session following Clinton’s speech, said Iran has told its neighbors its nuclear program is for peaceful purposes. Iran has said its intention is to provide material for a medical-research reactor. The Qatari prime minister acknowledged that if fears over Iran’s intentions spur “a nuclear race in the region, it will be an unhealthy race for all.” He urged “direct dialogue between Iran and the United States” to resolve the impasse. Clinton replied that Obama made numerous overtures last year to engage Iran, with scant results. “Engagement has to be a two-way street,” she said. “It cannot be done alone in a room talking to yourself.” Referring to concerns by UN atomic energy inspectors that Iran has built a secret facility near Qom, she added, “We don’t want to be engaging while they’re building their bomb.” Turkey’s Possible Role Turkish Prime Minister Recep Tayyip Erdogan , also in Doha, said his country is willing to serve as the venue for a swap of Iran’s low-enriched uranium for fuel rods needed for the Tehran medical reactor. Iran rejected a similar offer last October by members of the UN Security Council. Erdogan said the UN’s International Atomic Energy Agency recently approached Turkey about being a neutral venue for such a deal. The U.S. is worried about the risk a nuclear-armed Iran would pose to Israel and other neighbors, as well as the possibility of a regional nuclear arms race. Clinton and other U.S. officials are trying to rally support in the Mideast and at the United Nations for sanctions to force Iran to halt the enrichment of uranium, which may be used to make a bomb. Other top U.S. officials visiting the region in the coming days include General David Petraeus , chief of the U.S. Central Command, and Mike Mullen , chairman of the Joint Chiefs of Staff. China’s Veto Power China, a veto-wielding member of the UN Security Council, relies on Iran as the third-largest source of its crude oil, according to official statistics, and has resisted pressure from the U.S. and Europe to back new penalties on Iran. The U.S. wants any new sanctions to target Iran’s Revolutionary Guard Corps, a military unit involved in nuclear and missile programs. Iran is subject to three rounds of UN sanctions, including a 2007 resolution freezing assets and banning travel for some companies affiliated with the Revolutionary Guards.      Addressing concerns about stalled Israeli-Palestinian peace talks, Clinton said the U.S. is disappointed that “we have not yet achieved a breakthrough” in a comprehensive Middle East peace. She said Arab states need to rally behind getting Palestinians to return swiftly to talks. “The United States stands ready to support the parties and play an active and sustained role in these negotiations,” she said. Frozen Peace Talks Peace talks have been frozen since late 2008, when Palestinians broke off a year of negotiations to protest Israel’s offensive in the Gaza Strip. Israeli leaders said that action was aimed at halting rocket fire by the Palestinian militant group Hamas.      U.S. mediator George Mitchell , who helped forge a peace agreement in Northern Ireland, is shuttling through the Middle East this week to get sides back to the negotiating table.      Efforts to restart talks have foundered on the issue of Jewish settlements in the West Bank. While Israeli Prime Minister Benjamin Netanyahu imposed a partial 10-month freeze on settlement building, Palestinians want a complete halt.      “We see the current Israeli settlement moratorium as a positive step, and we look for further steps,” Clinton said. “The United States’ policy on settlements has not changed: We do not accept the legitimacy of continued Israeli settlements.” She acknowledged concerns in the region about air travel restrictions on citizens of nations that prompt U.S. terrorism concerns, the U.S. failure to close the prison camp in Guantanamo by the start of this year, and the sense that efforts to improve relations with the Muslim world have been “insufficient or insincere.” The U.S. is determined to better relations with the Muslim world, she said, adding, “building a stronger relationship cannot happen overnight or even in a year.” To contact the reporter on this story: Indira Lakshmanan at in Doha, Qatar or ilakshmanan@bloomberg.net .

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Voser’s Shell Restructuring May Signal Output Revival in Challenge to BP

January 31, 2010

By Fred Pals Feb. 1 (Bloomberg) — Peter Voser is using lessons from his two-year stint rescuing Swiss engineering company ABB Ltd. from near bankruptcy to turn around Royal Dutch Shell Plc by selling assets, cutting thousands of jobs and speeding up decisions. Not only has Shell suffered six years of falling output, it’s been overtaken as Europe’s biggest energy producer in terms of market value by BP Plc for the first time since 2006. Voser’s challenge at Shell is to take out layers of management while investing $28 billion this year to keep the company in the top league of oil majors. In recent years, Shell has struggled to maintain output levels because of lackluster exploration efforts and the company’s reluctance to do the major deals that helped rivals BP and Exxon Mobil Corp. bulk up. “Anybody can cut costs but it’s much harder to do so in a way to build a solid foundation for the future,” said Gary Steel , a senior executive at ABB who worked alongside Voser at the Zurich-based company in the early part of the decade. “For Shell he is doing absolutely the right thing, he’s taking out the bureaucracy.” Analysts say his efforts are paying off. In his first six months he merged units and cut about 5,000 jobs, including senior management posts. About 15 percent of Shell’s refining capacity was placed under review, while the company is also scaling back on expansion in Canadian tar sands. Of 40 analysts following the stock, 25 have “buy” recommendations and only five have a “sell,” according to Bloomberg data. The average target price calls for an 18 percent increase in the stock over the coming year. Operating Costs In an interview at the World Economic Forum in Davos last week, Voser, 51 and an avid mountain-hiker and skier, said he’s willing to cut more jobs to keep operating costs down and improve Shell’s performance. “Some of the consumption-driven demand is not coming back, so I’m rather more pessimistic for the first half of the year than I am maybe for the whole year or the second half,” he said. Voser, who succeeded Jeroen van der Veer , inherited the industry’s biggest spending program in 2009 in the middle of a global economic crisis that forced oil companies to delay some projects and cancel others. Voser’s efforts have yet to win over investors. Shell’s class-A shares are down 3.3 percent in the past year, compared with an 18 percent advance for London-based BP. Under Tony Hayward’s stewardship, BP has regained favor after projects came onstream and he tackled the refining problems that helped sour the last years of his predecessor, John Browne . On Track Hayward, who is more than two years into his own turnaround program, has already reversed a decline in output by ramping up the Thunder Horse platform in the Gulf of Mexico to more than 300,000 barrels of oil equivalent a day, and doubled a cost-savings target. Voser is confident that The Hague-based Shell will regain its title as the region’s foremost oil producer. “I have the clear objective to be the best,” he said in November. “It will take some time, but we’re on track to get there.” Voser’s priority is to revive production growth with new projects in Qatar and Malaysia after output fell below 3 million barrels of oil equivalent a day. Production has been falling for six straight years and is poised to decline for a seventh. Voser has already admitted that he’s no longer pinning his hopes on Nigeria, where Shell’s operations were plagued by militant attacks in recent years. Output Boost He expects natural gas to make up more than half of Shell’s production by 2012. Gas must get “much more on the agenda as its potential role is underestimated,” Voser said in Davos. So far, Shell has shied away from deals on the scale of Exxon Mobil’s $31 billion acquisition of XTO Energy Inc. “Production growth beyond 2012 will be his biggest challenge,” Gudmund Halle Isfeldt , an analyst at Oslo-based DnB Nor Markets, said in an interview. “He will be successful in simplifying Shell and the company has a higher cost-cutting potential than BP with a lot of overhead costs,” Isfeldt, who has a “buy” rating on the stock, said. Shell’s CEO has some way to go before matching his achievements at ABB, now the world’s largest builder of electricity networks. While chief financial officer of ABB from 2002 to 2004, he helped secure about $4 billion in asset disposals and trimmed debt after asbestos lawsuits and slowing demand threatened the company with collapse. The company returned to profit in the first quarter in 2004 after six consecutive quarterly losses. ‘Hard Restructuring’ “ABB had to go through a hard restructuring and that brought some success and Voser was part of that,” Thomas Lusetti, a senior fund manager at Verwaltungs- & Privat Bank in Zurich, said in a phone interview. Voser quit Shell in 2002 after two decades with the company when Judith Boynton became the first outsider to be appointed chief financial officer. Boynton was demoted in 2004 following a reserves scandal after the company was forced to slash its proven reserve estimates. Apart from two years at ABB, he’s worked at Shell in various positions since 1982. Voser has held finance and business roles for Shell in Switzerland, Argentina, Chile and the U.K. He graduated in business administration from the University of Applied Sciences in Zurich in 1982 and in April 2005 was appointed to the board of directors of UBS AG, a post he will leave this year. “New leaders should do new things,” Van der Veer wrote in “My A to B,” a collection of speeches, articles and letters published by Shell on his retirement. “We should make these changes work.” To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

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Gulf Gap in Davos Belies Booming Economies in Oil-Rich Saudi Arabia, Qatar

January 28, 2010

By Henry Meyer and Arif Sharif Jan. 28 (Bloomberg) — The program for this year’s World Economic Forum in Davos features no speakers from Qatar, Dubai or Abu Dhabi in any of the conference’s 230 events. Five spots are occupied by Saudis and four by Kuwaitis. “I think the absence of the Middle East is quite conspicuous,” said Ibrahim Dabdoub , chief executive officer of the National Bank of Kuwait, interviewed in the conference center in the Swiss village. “It’s a pity that Gulf involvement is so low.” Especially for anyone looking to make money. Six weeks after Dubai almost defaulted on $4.1 billion in debt, the region as a whole is set to prosper. Oil prices, which account for 75 percent of the revenue of the six monarchies in the Gulf Cooperation Council , have more than doubled from their February 2009 low of $34 a barrel. Saudi Arabia, Qatar and Abu Dhabi are spending $600 billion by the end of 2013 to build roads, railways and new cities while expanding energy and manufacturing. The GCC countries are forecast by HSBC Holdings Plc to post an average expansion of 4 percent or more in 2010, after no increase last year. That compares with projected growth of 2.7 percent in the U.S. and 1 percent in the 16-nation euro zone, according to the International Monetary Fund . Serious Opportunities “As a region I think we are on the cusp of some very very serious growth opportunities in the years ahead,” said Arif Naqvi , CEO of Dubai-based Abraaj Capital Ltd., the biggest private-equity company in the GCC, in an interview in Davos. “It is probably higher than in other parts of the world. There is liquidity and there is a desire.” The new spending may benefit Munich-based Siemens AG , Europe’s largest engineer, which said in November it is looking to win more contracts in Saudi Arabia to tap rising demand for power generation. Paris-based Total SA , Europe’s largest oil company, said Nov. 24 it is in talks with Qatar to build a petrochemical cracker, a fuel-processing plant. Emad Mostaque , a Middle East equity-fund manager in London for Pictet Asset Management Ltd., which oversees more than $100 billion, plans to add to Saudi shares that currently represent a third of his portfolio. Saudi Arabia’s benchmark Tadawul All Share Index jumped 28 percent in 2009, the best-performing of the Gulf markets , followed by Oman. “Saudi Arabia is where we see the most potential,” Mostaque said in a phone interview. He said he recently bought more shares in Riyadh Bank, Riyadh-based Saudi food producer Almarai Co. and Riyadh-based Saudi Basic Industries Corp. , the world’s largest petrochemical producer. Pipes and Building He plans to acquire stock in Jeddah-based Saudi Cement, Riyadh-based pipe manufacturer Saudi Arabian Amiantit Co. and Zamil Industrial Investment Co., a Dammam-based maker of building materials. The kingdom last year announced that it would spend $400 billion on projects including three new railway lines and six new industrial cities over five years. It is the largest stimulus package in the Group of 20 nations as a share of gross domestic product. This year, almost $70 billion will go to roads, railways, airports and other projects, a 16 percent increase over 2009. Crude prices, which have rebounded to about $75 a barrel, are likely to boost Saudi oil revenue in 2010 to $151.7 billion from $116.7 billion in 2009, according to EFG-Hermes. The Saudi 2010 budget was based on an average oil price assumption of $46 a barrel, according to Riyadh-based Banque Saudi Fransi. New Airport Qatar, which has the world’s third-largest gas reserves, is spending more than $100 billion over three years on projects including a new financial center and an airport. Abu Dhabi, the largest sheikhdom in the United Arab Emirates, is allocating $100 billion to such investments as a $40 billion project to build an island tourism and leisure destination. Abu Dhabi holds 8 percent of the world’s oil reserves. “Oil prices will be a very important driver of confidence in the region,” said Dubai-based Monica Malik , chief Middle East economist at EFG-Hermes, which forecasts an average price of $80 a barrel in 2010. The six Gulf Arab nations in the GCC supply about 20 percent of the world’s oil — two-thirds of that crude output in Saudi Arabia alone. Growth will be slower in the smaller Gulf nations of Oman and Bahrain, which have less oil wealth, and Kuwait, where political infighting is slowing spending programs, said Simon Williams , chief Middle East economist at HSBC. Less Risk In a sign of the economic disparity, investors see less than one-fifth the risk in Saudi Arabian bonds compared with Dubai’s, according to trading in credit-default swaps. The cost of protecting against Dubai government default stood at 473 basis points on Jan. 27, CMA Datavision prices show. Bond-default risk for Abu Dhabi was 138, for Qatar 97 and 83 for Saudi Arabia. The seven-member U.A.E. will grow by no more than 1 percent this year because of a continuing contraction in Dubai, the IMF forecast Jan. 26. Saudi Arabia will post growth of almost 4 percent, according to a Jan. 13 forecast by Banque Saudi Fransi. Qatar, which plans to raise its production of liquefied natural gas by 42 percent to 77 million tons by September, is expected to have GDP growth of 17 percent in 2010, according to a median forecast of analysts surveyed by Bloomberg in November to December 2009. The country is considering an investment in Petroleo Brasileiro SA , Brazil’s state-controlled oil company, Qatari Energy Minister Abdullah bin Hamad al-Attiyah said on Jan. 21. The next day, Brazilian Energy Minister Edison Lobao said Qatar may invest in a refinery joint venture with Rio de Janeiro-based Petrobras. Credit Squeeze The Gulf region as a whole suffered from a credit squeeze last year provoked by the global financial crisis. That, along with the sharp fall in oil prices from a peak of $147.27 a barrel in July 2008, led to the slump in 2009. Dubai, where real-estate prices have plunged 50 percent since their 2008 peak has fared the worst as it struggles under at least $80 billion in debt. Dubai World, one of three main state-owned holding companies, avoided default in December only with an infusion from neighboring Abu Dhabi that allowed it to repay a $4.1 billion Islamic bond. Bank lending elsewhere in the Gulf was also upset by the default of two Saudi family conglomerates. Eighty lenders, including BNP Paribas SA and Citigroup Inc. , are owed at least $15.7 billion by the two groups. Bank credit in Saudi Arabia declined 6.6 percent in the 11 months through November, 2009, central bank data shows. This year, government spending will remain the key driver of growth in Saudi Arabia as well as in most other Gulf economies as banks remain reluctant to lend, said John Sfakianakis , chief economist at Banque Saudi Fransi. In addition, Abu Dhabi has sovereign assets of about $426 billion, one of the world’s largest funds, according to RGE Monitor in New York. Saudi Arabia holds a fund of $358 billion, Qatar $75 billion and Kuwait has about $271 billion. To contact the reporters on this story: Henry Meyer in Dubai at hmeyer4@bloomberg.net ; Arif Sharif in Davos at asharif2@bloomberg.net

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Gulf Gap in Davos Belies Booming Economies in Oil-Rich Saudi Arabia, Qatar

January 28, 2010

By Henry Meyer and Arif Sharif Jan. 28 (Bloomberg) — The program for this year’s World Economic Forum in Davos features no speakers from Qatar, Dubai or Abu Dhabi in any of the conference’s 230 events. Five spots are occupied by Saudis and four by Kuwaitis. “I think the absence of the Middle East is quite conspicuous,” said Ibrahim Dabdoub , chief executive officer of the National Bank of Kuwait, interviewed in the conference center in the Swiss village. “It’s a pity that Gulf involvement is so low.” Especially for anyone looking to make money. Six weeks after Dubai almost defaulted on $4.1 billion in debt, the region as a whole is set to prosper. Oil prices, which account for 75 percent of the revenue of the six monarchies in the Gulf Cooperation Council , have more than doubled from their February 2009 low of $34 a barrel. Saudi Arabia, Qatar and Abu Dhabi are spending $600 billion by the end of 2013 to build roads, railways and new cities while expanding energy and manufacturing. The GCC countries are forecast by HSBC Holdings Plc to post an average expansion of 4 percent or more in 2010, after no increase last year. That compares with projected growth of 2.7 percent in the U.S. and 1 percent in the 16-nation euro zone, according to the International Monetary Fund . Serious Opportunities “As a region I think we are on the cusp of some very very serious growth opportunities in the years ahead,” said Arif Naqvi , CEO of Dubai-based Abraaj Capital Ltd., the biggest private-equity company in the GCC, in an interview in Davos. “It is probably higher than in other parts of the world. There is liquidity and there is a desire.” The new spending may benefit Munich-based Siemens AG , Europe’s largest engineer, which said in November it is looking to win more contracts in Saudi Arabia to tap rising demand for power generation. Paris-based Total SA , Europe’s largest oil company, said Nov. 24 it is in talks with Qatar to build a petrochemical cracker, a fuel-processing plant. Emad Mostaque , a Middle East equity-fund manager in London for Pictet Asset Management Ltd., which oversees more than $100 billion, plans to add to Saudi shares that currently represent a third of his portfolio. Saudi Arabia’s benchmark Tadawul All Share Index jumped 28 percent in 2009, the best-performing of the Gulf markets , followed by Oman. “Saudi Arabia is where we see the most potential,” Mostaque said in a phone interview. He said he recently bought more shares in Riyadh Bank, Riyadh-based Saudi food producer Almarai Co. and Riyadh-based Saudi Basic Industries Corp. , the world’s largest petrochemical producer. Pipes and Building He plans to acquire stock in Jeddah-based Saudi Cement, Riyadh-based pipe manufacturer Saudi Arabian Amiantit Co. and Zamil Industrial Investment Co., a Dammam-based maker of building materials. The kingdom last year announced that it would spend $400 billion on projects including three new railway lines and six new industrial cities over five years. It is the largest stimulus package in the Group of 20 nations as a share of gross domestic product. This year, almost $70 billion will go to roads, railways, airports and other projects, a 16 percent increase over 2009. Crude prices, which have rebounded to about $75 a barrel, are likely to boost Saudi oil revenue in 2010 to $151.7 billion from $116.7 billion in 2009, according to EFG-Hermes. The Saudi 2010 budget was based on an average oil price assumption of $46 a barrel, according to Riyadh-based Banque Saudi Fransi. New Airport Qatar, which has the world’s third-largest gas reserves, is spending more than $100 billion over three years on projects including a new financial center and an airport. Abu Dhabi, the largest sheikhdom in the United Arab Emirates, is allocating $100 billion to such investments as a $40 billion project to build an island tourism and leisure destination. Abu Dhabi holds 8 percent of the world’s oil reserves. “Oil prices will be a very important driver of confidence in the region,” said Dubai-based Monica Malik , chief Middle East economist at EFG-Hermes, which forecasts an average price of $80 a barrel in 2010. The six Gulf Arab nations in the GCC supply about 20 percent of the world’s oil — two-thirds of that crude output in Saudi Arabia alone. Growth will be slower in the smaller Gulf nations of Oman and Bahrain, which have less oil wealth, and Kuwait, where political infighting is slowing spending programs, said Simon Williams , chief Middle East economist at HSBC. Less Risk In a sign of the economic disparity, investors see less than one-fifth the risk in Saudi Arabian bonds compared with Dubai’s, according to trading in credit-default swaps. The cost of protecting against Dubai government default stood at 473 basis points on Jan. 27, CMA Datavision prices show. Bond-default risk for Abu Dhabi was 138, for Qatar 97 and 83 for Saudi Arabia. The seven-member U.A.E. will grow by no more than 1 percent this year because of a continuing contraction in Dubai, the IMF forecast Jan. 26. Saudi Arabia will post growth of almost 4 percent, according to a Jan. 13 forecast by Banque Saudi Fransi. Qatar, which plans to raise its production of liquefied natural gas by 42 percent to 77 million tons by September, is expected to have GDP growth of 17 percent in 2010, according to a median forecast of analysts surveyed by Bloomberg in November to December 2009. The country is considering an investment in Petroleo Brasileiro SA , Brazil’s state-controlled oil company, Qatari Energy Minister Abdullah bin Hamad al-Attiyah said on Jan. 21. The next day, Brazilian Energy Minister Edison Lobao said Qatar may invest in a refinery joint venture with Rio de Janeiro-based Petrobras. Credit Squeeze The Gulf region as a whole suffered from a credit squeeze last year provoked by the global financial crisis. That, along with the sharp fall in oil prices from a peak of $147.27 a barrel in July 2008, led to the slump in 2009. Dubai, where real-estate prices have plunged 50 percent since their 2008 peak has fared the worst as it struggles under at least $80 billion in debt. Dubai World, one of three main state-owned holding companies, avoided default in December only with an infusion from neighboring Abu Dhabi that allowed it to repay a $4.1 billion Islamic bond. Bank lending elsewhere in the Gulf was also upset by the default of two Saudi family conglomerates. Eighty lenders, including BNP Paribas SA and Citigroup Inc. , are owed at least $15.7 billion by the two groups. Bank credit in Saudi Arabia declined 6.6 percent in the 11 months through November, 2009, central bank data shows. This year, government spending will remain the key driver of growth in Saudi Arabia as well as in most other Gulf economies as banks remain reluctant to lend, said John Sfakianakis , chief economist at Banque Saudi Fransi. In addition, Abu Dhabi has sovereign assets of about $426 billion, one of the world’s largest funds, according to RGE Monitor in New York. Saudi Arabia holds a fund of $358 billion, Qatar $75 billion and Kuwait has about $271 billion. To contact the reporters on this story: Henry Meyer in Dubai at hmeyer4@bloomberg.net ; Arif Sharif in Davos at asharif2@bloomberg.net

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WTO Chief: U.S.-China Trade Friction Rising

January 22, 2010

GENEVA — Trade friction between the United States and China over everything from cars to chemicals will increase in the coming years as the world’s biggest importer and exporter buy and sell more of each other’s goods, the World Trade Organization’s director general said Thursday. Pascal Lamy said his institution was up to the task of ensuring that Washington and Beijing never get into an all-out trade war that could have devastating consequences for the global economy. The WTO will be challenged over the next two years as unemployment figures remain high and test the free trade credentials of world leaders, he predicted. “There is no risk of slipping into a trade war,” Lamy said in an interview with The Associated Press. Placing the U.S.-China relationship in a historical context, Lamy compared it with the tensions that existed between Washington and Tokyo in the 1980s and between the U.S. and Europe over different periods in recent decades. In these cases, disagreements increased as the value of their trade expanded, he said. But the international trade body with its negotiations and rules for settling legal disputes defused the tensions. The United States and China are engaged now in a series of trade spats over issues such as steel, poultry, patents and Hollywood films. Google’s threat to pull out of China over concerns about censorship and security also could sour relations between the two countries. “The question is not whether there is friction, the question is whether it is handled the right way,” Lamy said. The 62-year-old Frenchman, a former European Union trade commissioner, is now in his second term as director general of an organization that resolves international commercial disputes and negotiates new rules for export of farm produce, manufactured goods and services. In the 4 1/2 years since Lamy entered office, healthy economic growth has been replaced by a crippling global slowdown. Annual trade crashed by 10 percent after 16 years of uninterrupted growth. And the vision of a 150-nation deal to tear down trade barriers around the world has been partly replaced by the immediate challenge of preventing countries from erecting new obstacles to each other’s goods. Lamy credited the WTO’s close monitoring of countries last year for preventing a slide into global protectionism where countries break the rules to shield domestic jobs from foreign competition – pressure that was only natural, he said, as financial markets collapsed and whole economies teetered on the edge. “We are certainly not out of the woods on protectionism,” Lamy said. “The fundamental reason there is a protectionist impulse has to do with the job market. We know that unemployment will remain high this year, maybe even next year.” He didn’t elaborate, but some trade observers believe the danger could be even greater in 2010 as governments shift their focus to job creation plans from last year’s stimulus packages and financial bailouts. As governments try to make it easier on national companies to hire people, free-trade principles may be sacrificed along the way, with the ultimate risk being a worldwide descent into a trade war as happened during the Great Depression, the argument runs. Lamy has been pushing governments to complete what he says is the final lap of the Doha global trade round, which could add billions of dollars to the world economy. The negotiations launched in Qatar’s capital in 2001 aim to reach a binding treaty that would slash subsidies and cut tariffs in agriculture and manufacturing, including for new economic powerhouses like China, India and Brazil. But the talks are mired in disagreement. The round is already six years behind schedule, and even a completed accord would have to win parliamentary approval in most countries and Senate ratification in the United States. With unemployment over 10 percent and President Barack Obama’s Democratic Party showing weakness, it is unclear how committed the United States is to finishing the round. Lamy said he believed Washington was committed to a pledge it made with other countries last year to wrap up an agreement by the end of 2010. Whether the Americans would take on such a challenge in the current environment, he declined to answer. “That’s more a question for them, than a question for me,” Lamy said. “They tell me … they want to conclude the Doha round by the end of this year.”

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Qatar Considers Petrobras Stake as Emirate Taps Cash From Rising Output

January 21, 2010

By Robert Tuttle Jan. 21 (Bloomberg) — Petroleo Brasileiro SA is weighing a proposal by Qatar to take a stake in Brazil’s state-controlled oil producer as it seeks cash to develop offshore fields including the Americas’ largest discovery in three decades. “Petrobras is a big company and it has a lot of activities, so why not?” Qatari Energy Minister Abdullah bin Hamad al-Attiyah said today in an interview in the Qatari capital, Doha. “Now they will discuss it and evaluate it.” Qatar, holder of the world’s third-largest natural gas reserves, is deploying cash amassed from higher fuel sales to invest in companies across the globe, including a 17 percent stake in Volkswagen AG’s common shares last year. Petrobras is spending $174.4 billion through 2013 to boost output by more than half and develop offshore fields such as Tupi, the largest discovery in the Western Hemisphere since Mexico’s Cantarell. “Qatar has been less involved in visible energy sector purchases than other Gulf Co-operation Council countries, so this would be a new adventure,” Rachel Ziemba , a senior analyst at RGE Monitor in New York, which researches sovereign wealth funds, said today in an interview. “This shows a broader trend to looking toward Latin America.” A Qatari shareholding in Petrobras would be a “good achievement,” Al-Attiyah said. It’s “too early” to predict how big a stake Qatar might take in the company, he said. The energy minister’s comment came after Qatar’s Emir Hamad Bin Khalifa Al-Thani traveled to Brazil and met the country’s President Luiz Inacio Lula da Silva. Today, he is scheduled to travel to Venezuela and meet with President Hugo Chavez . A Rio de Janeiro-based Petrobras spokeswoman, who can’t be identified by name under company policy, declined to comment. Liquefied Natural Gas Qatar, also the world’s biggest producer and exporter of liquefied natural gas, has a moratorium on new development in its own North Field until 2014 and is using growing gas revenues to invest in energy projects abroad. The country plans to build two petrochemical plants, one in China and the other in Vietnam, with a combined value of $9.8 billion. The country also owns stakes in regasification terminals in the U.S., U.K. and Italy. Petrobras aims to increase total output to 3.7 million barrels a day by 2013, or 52 percent more than the 2.4 million barrels at the end of 2008. By 2020, the company expects to have more than doubled oil production to 5.7 million barrels a day. Pre-Salt Area The field lies in the so-called pre-salt area that runs 800 kilometers (500 miles) off Brazil’s coast, holding oil deposits beneath a layer of salt resting as deep as 3,000 meters (9,843 feet) beneath the ocean surface and another 5,000 meters below the seabed. Qatar, with a population of about 1.5 million people, has the second-highest per capita gross domestic product behind Lichtenstein, according to the U.S. Central Intelligence Agency World Factbook. Its economy is expected to grow 16 percent this year, the country’s Emir said Nov. 3, according to state-run Qatar News Agency. To contact the reporter on this story: Robert Tuttle in Doha at rtuttle@bloomberg.net

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Shard Builder Bets on London Rebound With Highest Office Rents Since 1980s

January 20, 2010

By Chris Bourke Jan. 21 (Bloomberg) — To win the cash he needed to build western Europe’s tallest building, Irvine Sellar told his Qatari investors that space in the London tower would fetch the highest office rents since the 1980s property boom. The Shard , due to open by the 2012 London Olympics, is one of the few towers to be built in London among a dozen conceived at the turn of the 21st century. Sellar aims to charge as much as 70 pounds ($114) a square foot for office space, about 60 percent more than even the best offices in the main financial district half a mile away, according to data compiled by Cushman & Wakefield , though that wasn’t the only attraction for Qatar. Named for its resemblance to a sliver of glass, the Shard will rise 310 meters (1,017 feet) from a site near London Bridge across the River Thames from the City of London. The 80-story building will include 13 luxury apartments with an estimated value of at least 15 million pounds each and a five-star hotel. “We won’t be pushing the market — the market will come to us,” said Sellar, 71, during an interview last week at his office in London’s Mayfair district. “Office rents reached 70 pounds probably 25 years ago in the City of London, so we’ve been there before.” First Tenant Transport for London, the operator of trains and buses in the city, has agreed to lease seven lower floors in the Shard. That leaves Sellar with about two thirds of the 600,000 square feet (56,000 square meters) of office space to fill in the tower and a similar amount in a building next door called London Bridge Place, due to be completed in 2013. Prime office rents in the City of London climbed for the first time in three years last quarter. Even so, Sellar may struggle to find companies prepared to pay 70 pounds a square foot for space on the tower’s upper floors, according to Alan Patterson , head of European research at AXA Real Estate Investment Management in London. “His problem is the short time-scale,” Patterson said by telephone. “If the tower was completing in three or four years, you could perhaps see it, but I think two years will be tight for him.” Sellar, born and raised in London, started out selling gloves made by his father at a market. In 1969, he opened his first clothing store on Carnaby Street, and spent the next decade creating a chain of 90 outlets across the country. Bell-Bottoms Mates by Irvine Sellar, as the shops were called, sold bell-bottom jeans, floral jackets and other trendy clothes and were the first boutiques in Britain to offer apparel for both men and women. At one time, there were seven stores on London’s Oxford Street alone, counting Judy Garland and George Harrison among their customers. “What they saw in it, quite frankly, was something I’ve never been able to see, because it wasn’t that great,” Sellar said. Sellar switched to real estate in the early 1980s because “property and retail go hand-in-glove,” he said. His company, Ford Sellar Morris, developed department stores and other commercial buildings for several years until a recession at the start of the next decade led to its collapse in 1991. Sellar lost 28 million pounds. Undeterred, he set up Sellar Property Group a year later, and has since completed projects including the Pompey Centre, a retail park in the southern English city of Portsmouth with space of 370,000 square feet. “You can throw me in the desert and I’ll find a way of making a living,” he said. Rich List Sellar Property Group owns real estate valued at 450 million pounds, according to Sellar. The company has 1 million square feet of developments in the pipeline, not including the Shard. Sellar’s 36-year-old son, James, is chief executive officer and together they were worth about 165 million pounds in 2009, according to the Sunday Times Rich List . That was 45 million pounds less than the previous year. The Shard was designed in 2000 by Renzo Piano , the Italian architect best known for creating Paris’s Pompidou Center of modern art with Britain’s Richard Rogers . Sellar had decided to redevelop a gray office block next to London Bridge station and flew to Berlin in March of that year to meet Piano for lunch. According to Sellar, the architect spoke of his contempt for tall buildings during the meal, before flipping over the restaurant’s menu and sketching an iceberg- like sculpture emerging from the River Thames. Phallic Symbols “Tall buildings are often phallic symbols, a symbol of the desire to show how powerful you are,” Piano said in a telephone interview. “But sometimes towers can be good as they save space and give space back to the city.” At that time, the U.K. was on the cusp of a five-year real estate boom that resulted in plans to build about a dozen towers in and around the City of London. Most of those that hadn’t been completed by the market’s peak in mid-2007 were shelved because banks had stopped lending. In 2008, Land Securities Group Plc stopped work on the London skyscraper known as the Walkie-Talkie and British Land Co. delayed construction of the tower nicknamed the Cheesegrater. No companies had agreed to rent space in the buildings. The global financial crisis pushed Britain into its longest recession on record, driving property values down by 44 percent from the top of the market and depressing rents. About 5 million square feet of offices were under construction in London without a tenant at the end of last year, according to a Cushman & Wakefield report published on Jan. 8. Diminishing Supply “The majority of this space is due onstream in the first six months of 2010, after which supply will start to diminish, placing rents under pressure,” the broker said. Office rents in central London may have already bottomed out and will probably recover before the rest of the country, the Royal Institution of Chartered Surveyors said in a report published today. The Shard also came close to being abandoned. Sellar sought permission to build the skyscraper months after the terrorist attack on New York’s World Trade Center in 2001 and said he only got through the approval process “by the skin of my teeth.” English Heritage , the official organization for archaeology, heritage and conservation in England, then opposed the tower, calling it “a spike through the heart of historic London.” The government approved the plans after a public inquiry, thanks in part to Ken Livingstone , the former Mayor of London who championed the tower from its inception. “From the moment I met Irvine, I realized he wanted a legacy that he’d be respected for,” Livingstone said in an interview. “He doesn’t actually need any more money.” Financing Challenge Sellar’s next challenge was to secure financing for the project. Credit Suisse Group AG had agreed to provide the money, only to pull out because of the credit crunch. Sellar then fell out with his original partners, real-estate investors CLS Holdings Plc and Simon Halabi , leaving the door open for Qatar to come on board. By then, Sellar was already in talks with four banks from the Arab emirate. After a year of negotiations, they each agreed to buy 20 percent of the equity, the same as Sellar. The developer’s stake was reduced from about a third. In October, the lenders sold their shares to the Qatar Central Bank . The governor, Sheikh Abdulla Bin Saoud Al-Thani, said in December that the Shard would be “a symbol of the close ties between Qatar and the United Kingdom.” Shangri-La Hotel The Qataris invested in a building that will have 44 elevators and eight escalators when it opens in May 2012. London’s first Shangri-La Hotel, operated by the Singapore-based company of the same name, will take up 19 floors and the Shard will also contain stores and restaurants. The best views will be from the luxury apartments near the top of the tower. These properties, which the developer estimates will be worth 5,000 pounds a square foot, will either be sold or rented out, James Sellar said in an interview. That would rival One Hyde Park , a 1 billion-pound luxury development in the more affluent London district of Knightsbridge. Apartments were sold for an average of about 5,700 pounds a square foot in 2008, according to Knight Frank LLP, one of the brokers that handled the transactions. A second wave of sales is scheduled for the second quarter. The Shard will dwarf Commerzbank Tower, a 259-meter high building in Frankfurt that’s been western Europe’s tallest since it was constructed in 1997. “We all have an element of ego,” said Irvine Sellar. “It’s just nice to leave a legacy and say, well that’s an achievement.” To contact the reporter on this story: Chris Bourke in London at cbourke4@bloomberg.net .

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JAL May Lose Passengers to ANA as Customers Worry About Service Worsening

January 19, 2010

By Chan Sue Ling Jan. 20 (Bloomberg) — Japan Airlines Corp ., Asia’s first flag carrier to file for bankruptcy, could lose passengers to All Nippon Airways Co. on customer concern that service standards will drop. JAL’s service has already suffered a “slight decline” in the past six weeks, said Edward Plaisted , chief executive officer of Skytrax , which ranks airlines globally on quality and currently rates the carrier four stars out of five. “Outside Japan, we do believe that the JAL situation will serve to drive more and more customers to using ANA,” Plaisted said in an e-mail interview. “In the past two to three years, JAL has simply not been able to keep pace with the quality change and quality improvements by their key rival.” Japan Air , also known as JAL, yesterday filed for the nation’s fourth-largest bankruptcy under a 900 billion yen ($10 billion) turnaround plan after four government bailouts failed to revive Asia’s most indebted carrier. JAL plans to cut 31 routes, 53 planes and almost a third of its workforce after winning state funds to help restructure. The carrier will ax 14 international routes and 17 domestic ones by the end of March 2013 while employment will drop by about 15,700 to 36,201 over the same period. “When you have a big group of people who have been living very well, and comfortably, and you cut that, there will be a lot of unhappiness,” said Jim Eckes , Hong Kong-based managing director of industry consultant Indoswiss Aviation. “Service for the next year or so may decrease.” “No Compromise” “We will maintain our standards of service and safety” JAL spokeswoman Yap Sze Hunn said. “We won’t compromise.” U.S. air travelers grew familiar with flying on airlines in bankruptcy during the past two decades as all of the major U.S. carriers except AMR Corp.’s American Airlines and Southwest Airlines Co. sought court protection. In September 2005, half of U.S. airline capacity was on airlines operating in bankruptcy. UAL Corp.’s United Airlines was under court protection for more than three years before its exit on Feb. 1, 2006. Delta Air Lines Inc. won support from bankruptcy creditors to rebuff US Airways Group Inc.’s hostile takeover bid in January 2007, emerged in April of that year and agreed to buy once-bankrupt Northwest Airlines Corp. less than 12 months later. U.S. Carriers Passengers in the U.S. have “gotten used to airlines going bankrupt and operating,” Michael Derchin , an analyst at FTN Equity Capital Markets Corp. in New York, said in an interview last week. All Nippon , also known as ANA, also has a four-star rating from Skytrax, whose top grade is five stars. Singapore Airlines Ltd., Qatar Airways, Asiana Airlines Inc. Cathay Pacific Airways Ltd., Malaysian Airline System Bhd. and Kingfisher Airlines Ltd. have the highest rating, according to Skytrax. ANA, Japan’s second-largest carrier, will have to “carefully evaluate” the profitability of routes JAL is giving up to decide whether to inherit them, President Shinichiro Ito said last week. The carrier is “highly concerned that the fair and competitive environment would not be secured under the financial support and injection of public funding,” it said in a statement. ANA gained 14 percent in the past two months while Tokyo- based Japan Air plunged 98 percent due to speculation shareholders will be wiped out in a bankruptcy filing. The shares fell as much as 60 percent to 2 yen today. Maehara’s Choice Not everyone’s planning to ditch JAL in favor of ANA. “There’s no difference in service,” said Yuuki Sakurai , who oversees the equivalent of $7.6 billion as chief executive officer of Fukoku Capital Management Inc. in Tokyo. “Even the captains come out to thank the passengers. They seem very eager to stick together through the tough times.” Seiji Maehara , Japan’s transport minister, said last week he will fly with JAL as much as he can to save the airline. Even so, JAL, with losses in three of the past four years, has struggled to fill planes amid the worst recession in six decades and domestic competition from bullet trains and low-cost carrier Skymark Airlines Inc . On domestic routes, JAL sold less than 68 percent of seats every month since November 2008. With the airline entering bankruptcy, some travelers have already made their choice. “I won’t fly with them as much,” said Chieko Niimi, an office worker in Tokyo, who flies every two or three months. “At least, not to begin with.” To contact the reporter on this story: Chan Sue Ling in Singapore slchan@bloomberg.net

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Sharapova Exits Australian Open as Murray, Roddick Ease Into Second Round

January 18, 2010

By Dan Baynes Jan. 18 (Bloomberg) — Maria Sharapova was eliminated from the Australian Open on the opening day of the Grand Slam tennis tournament, while women’s No. 2 seed Dinara Safina and U.S. Open champion Kim Clijsters eased into Round 2. Sharapova, the 2008 champion at Melbourne Park and seeded 14th this year, lost 7-6 (7-4), 3-6, 6-4 to fellow Russian Maria Kirilenko . Safina defeated Slovakia’s Magdalena Rybarikova 6-4, 6-4 to become the first player to advance. Sharapova, a three-time major champion, had reached the semifinals or better in her past four appearances at the Australian Open, while Kirilenko, ranked 58th on the WTA Tour, never has been past the fourth round. “It was just up and down in many areas, and just finished at the down level,” Sharapova said at a news conference. Sharapova made 66 unforced errors in the 3-hour, 22-minute match. The contest was 11 minutes shorter than the longest women’s singles match in tournament history and took place under a closed roof at Rod Laver Arena because of rain. “We’re good friends, so we always have tough matches,” Kirilenko said in a televised courtside interview. “I expected to have a good match. I came here quite confident.” Seventh-seeded Andy Roddick of the U.S. was among the early men’s winners, advancing in straight sets past Thiemo de Bakker of the Netherlands. No. 24 Ivan Ljubicic and 2007 runner-up Fernando Gonzalez also won. Showers, Flares Showers delayed the start of play on outside courts for 45 minutes and caused further disruptions in the afternoon, while police said they ejected 11 people because of disruptive behavior including possessing flares. Safina, last year’s runner-up, started her bid for her first major title under a closed roof at the Hisense Arena showcourt and needed 89 minutes to reach the second round. Clijsters, who’s won two of the five tournaments that she’s played since returning to the women’s tour after a two-year absence, needed half an hour less to ease past Canadian qualifier Valerie Tetreault 6-0, 6-4. Belgium’s Clijsters, seeded 15th, is rated the second favorite to win the women’s title behind defending champion Serena Williams . Rafael Nadal and Andy Murray are in action later today. Roger Federer , the top-ranked player on the ATP Tour and the pre-tournament favorite, begins play tomorrow. Nadal at Night Nadal, the men’s No. 2 seed from Spain, opens his championship defense against unseeded Australian Peter Luczak in the night session. Murray, a Scot seeded fifth, takes on South Africa’s Kevin Anderson. Murray is among those seeking his first Grand Slam title and enters the tournament after capturing an ATP World Tour-best six titles in 2009. He skipped this month’s Qatar Open to prepare in Australia for two weeks. Other leading players in action today include U.S. Open champion Juan Martin del Potro , the No. 4 seed, and seven-time Grand Slam champion Justine Henin . The Belgian is playing in her first major since the 2008 Australian Open after 20 months in retirement. To contact the reporter on this story: Dan Baynes at Melbourne Park at dbaynes@bloomberg.net

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Dubai Bond Risk Plunges by Most Since February After Abu Dhabi Pledges Aid

December 14, 2009

By Sarah McDonald and Abigail Moses Dec. 14 (Bloomberg) — The cost of protecting investors against Dubai defaulting on its debt tumbled the most since February after Abu Dhabi pledged $10 billion to help the emirate meet its obligations. Five-year credit-default swaps on Dubai’s debt fell 135.5 basis points to 405, according to CMA DataVision prices at 10:40 a.m. in London. The Markit iTraxx SovX Western Europe index of swaps on 15 governments dropped 8 basis points to 58.75, according to JPMorgan Chase & Co. Funds from Abu Dhabi, the capital of the United Arab Emirates and owner of the world’s biggest sovereign wealth fund, will help Dubai World unit Nakheel PJSC pay investors the $4.1 billion it owes on Islamic bonds maturing today. State-owned Dubai World roiled markets worldwide when it said Dec. 1 it was in talks with creditors to restructure $26 billion of debt. “A rally on Abu Dhabi’s support is clearly helping Asian and European credit this morning,” Puneet Sharma , head of credit strategy at Barclays Capital in London, wrote in a note to investors. Credit-default swaps on DP World Ltd. , the Middle East’s biggest port operator and a unit of Dubai World, fell 132 basis points to 439, according to CMA. Abu Dhabi slipped 8.5 basis points to 152, while Qatar dropped 9 to 99.5. The decline in default swaps tied to Dubai government debt was the biggest since Feb. 23, when the U.A.E’s central bank bought $10 billion of the Gulf state’s bonds. ‘Very Good News’ Abu Dhabi’s support for its neighbor “will no doubt be taken as very good news by the market,” Gary Jenkins , head of credit research at Evolution Securities Ltd. in London, wrote in a note. Credit-default swaps on European companies also fell on news of the Dubai bailout, with contracts on the Markit iTraxx Crossover Index of 50 mostly high-yield European companies slipping 10.5 basis points to an 18-month low of 473, according to JPMorgan. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 1.5 basis points to 79.25. The Markit iTraxx Financial Index of 25 banks and insurers decreased 2 to 77.5 and the subordinated debt index dropped 3 to 143, JPMorgan prices show. Default swaps on Greek government debt rose 8 basis points to 207.5, CMA prices show. The contracts fell at the end of last week after soaring to a nine-month high on concern the nation would have its credit rating cut because of rising debt. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a country or company fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros ($14.7 million) of debt from default for five years is equivalent to 1,000 euros a year. To contact the reporter on this story: Sarah McDonald in Sydney at smcdonald23@bloomberg.net Shelley Smith in Hong Kong at ssmith118@bloomberg.net

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Gulf States to Compete More for Money as Banks Balk After Dubai Debt Delay

December 13, 2009

By Camilla Hall Dec. 13 (Bloomberg) — The emirs, presidents and sheikhs of the six members of the Gulf Cooperation Council meet in Kuwait this week with the days of easy credit over following a year of debt defaults and deferred payments. Dubai World said Dec. 1 it was seeking to restructure $26 billion of borrowing, and the race to build financial centers and skyscrapers is now turning into a competition to convince banks simply to keep lending to the region, investors and economists said. The GCC annual summit starts today. “Financing will be harder to attract for all companies in and related to the Gulf in the next few quarters as international banks will be loath to have any association with regional corporates and governments, regardless of their stability,” said Emad Mostaque , who helps manage $100 billion at Pictet Asset Management Ltd. in London. While the global financial crisis forced bank bailouts across the western world, in the Gulf it has jeopardized plans to develop markets and forge closer economic ties. At the GCC’s meeting in Muscat on Dec. 30 last year, leaders approved a monetary union agreement, a step toward forming a Gulf single currency. Kuwait said last week that the project may take 10 more years to come to fruition. ‘Moral Hazard’ When the two Saudi family holding companies, Ahmad Hamad Algosaibi & Brothers Co. and Saad Group, defaulted on their Bahrain-based banking units earlier this year, the U.A.E. complained that there was no communication within the GCC. The perception that “the money was there and it would just be splashed around regardless of moral hazard or business viability has not been the case,” said Jane Kinninmont , an economist at the Economist Intelligence Unit in London. “If there’s less money to go around, there will be more competition between the Gulf states.” Qatar is building a $14 billion luxury residential project called the Pearl similar to Dubai’s palm-shaped islands. Saudi Arabia is trying to develop its own financial center in Riyadh that will challenge Dubai’s complex of banks including Deutsche Bank AG and Goldman Sachs Group Inc. “It’s healthy to develop competition,” Sheikh Hamad Bin Jabor Bin Jassim al-Thani , director general of Qatar’s General Secretariat for Development Planning said last week in Dubai. “We need to embrace where our strengths are and ensure that we focus around them at the initial stage.” Tallest Tower Saudi Arabia’s Kingdom Holding Co., whose chairman is Prince Alwaleed Bin Talal , started a $26.6 billion real estate project that will include the world’s highest tower, overtaking the U.A.E.’s Burj Dubai set to open Jan. 4. “Everyone’s been trying to build the biggest airport, the best tourist infrastructure,” said Kinninmont. “Everyone is trying to compete for the same territory.” Investor confidence has deteriorated as Kuwaiti investment firms Global Investment House KSCC and Investment Dar along with the two Saudi family holding companies defaulted. Global said Dec. 10 it signed an accord to restructure $1.73 billion. Dubai World, whose property unit is building the landmark palm-shaped islands, sought a “standstill” agreement with creditors. Dubai’s benchmark share index is down 22 percent since Nov. 25, while bond prices tumbled and the credit ratings for several Dubai companies were cut. ‘Top Pick’ Saudi Arabia, the Arab world’s biggest economy, is Mostaque’s “top pick” to emerge strongest. The kingdom’s central bank governor, Muhammad al-Jasser , has said that the economy is in recovery and it may avoid a contraction this year as oil prices rebound to what the world’s largest oil exporter deems a “fair price” of $75. Then there’s Qatar. The world’s largest exporter of liquefied natural gas “is a strong story,” according to Marios Maratheftis , a Dubai-based economist at Standard Chartered Plc. The Gulf state is forecasting economic growth of 9 percent this year and 16 percent next year. “The economies that have better balance sheet structures will recover a lot quicker,” said Ahmet Akarli , a London-based economist at Goldman Sachs. “Saudi Arabia has a healthier balance sheet, so does Qatar, even Abu Dhabi is in a good position but Dubai will drag the U.A.E. down.” To contact the reporter on this story: Camilla Hall in Dubai at chall24@bloomberg.net

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Crude Oil Tumbles for Longest Stretch in Six Years as Dollar Strengthens

December 11, 2009

By Mark Shenk Dec. 11 (Bloomberg) — Crude oil tumbled for an eighth day, the longest stretch in six years, as the dollar rose against the euro, curbing investor appetite for commodities. Oil fell to a two-month low after the greenback advanced on speculation the Federal Reserve will increase borrowing costs next year because of an improving economy. Prices have dropped 11 percent in eight days on the dollar’s strength and rising U.S. fuel inventories. “This move lower has been triggered by what’s happened in other markets,” said David Kirsch , an analyst with PFC Energy in Washington, an energy strategist to companies and governments. “Market sentiment has shifted, and is now focused on the weak fundamentals.” Crude oil for January delivery fell 46 cents, or 0.7 percent, to $70.08 a barrel at 12:12 p.m. on the New York Mercantile Exchange. Futures touched $69.46, the lowest since Oct. 8. Prices are up 57 percent this year. The dollar traded at $1.4597 per euro, up 0.9 percent from $1.4732 yesterday. The greenback touched $1.4586, the highest since Oct. 5. The common currency has dropped 2.6 percent against the dollar over the past month. “If the dollar continues to strengthen, we are going to see more of the financial interest leave commodities,” said Rick Mueller , a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Fuel supplies are very high in the U.S. and demand is weak.” Gasoline stockpiles climbed 2.25 million barrels to 216.3 million last week, the highest since April, an Energy Department report showed on Dec. 9. Supplies of distillate fuel , a category that includes heating oil and diesel, increased 1.62 million barrels to 167.3 million, leaving stockpiles 25 percent higher than the five-year average for the period. Trader Anxiety “For some traders there’s anxiety that distillate supplies won’t come down quickly, or at all,” Kirsch said. “There’s the possibility of a much stronger move downward in prices.” Crude oil stockpiles fell 3.82 million barrels to 336.1 million last week, the report showed. Inventories were 7.2 percent higher than the five-year average for the period. Supplies at Cushing, Oklahoma, where New York-traded West Texas Intermediate oil is stored, surged 8 percent to 33.4 million. “The continuing builds at Cushing are definitely having an impact on prices,” Mueller said. “These builds aren’t a big concern outside of the U.S., so Brent isn’t taking the same hit.” Brent crude oil for January settlement on the London-based ICE Futures Europe exchange fell 60 cents, or 0.8 percent, to $71.26 a barrel. Futures touched $71.02, the lowest level since Oct. 13. OPEC Meeting The Organization of Petroleum Exporting Countries will discuss production quotas at a meeting on Dec. 22 in Luanda, Angola. Last week Kuwait, Algeria, Libya and Qatar said in Cairo that they want the group to maintain its output target of 24.845 million barrels a day for the 11 members with quotas. Iraq has no production limit. OPEC achieved 58 percent of its pledged oil production cuts in November, down from 60 percent the previous month, as countries including Angola and Nigeria exceeded output targets, according to an International Energy Agency report today. Supplies from the 11 OPEC nations subject to quotas rose by 90,000 barrels a day to 26.61 million. “I don’t think OPEC ministers are going to do very much when they meet on Dec. 22 in Angola,” said Tim Evans , an energy analyst at Citigroup Global Markets Inc. in New York. “The IEA said all 11 members with quotas were producing above quota, so I don’t expect there to be any lectures behind closed doors on compliance. Everyone is doing it.” Nigerian Recovery A recovery in Nigerian oil production to the highest level in 15 months accounted for 60 percent of the increase in OPEC’s output in November, according to the IEA estimates. The success of a ceasefire with militants allowed the country to pump 1.98 million barrels a day last month, compared with 1.9 million barrels in October, the IEA said. “I’m expecting energy to fall through the first quarter and the first half of the second quarter,” said Bill Adams , chief energy trader at Intermarkt Investment Strategists, a risk management company in Zurich. “Capacity hasn’t tapered off in any meaningful way, and if Nigeria comes back online, there’s even more” supply coming onto the market. Oil may decline next week on speculation fuel inventories are sufficient to meet demand, a Bloomberg News survey showed. Seventeen of 40 analysts, or 43 percent, said futures will drop through Dec. 18. Twelve respondents forecast that oil will increase and 11 said prices will be little changed. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

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Dubai’s Fallout Makes Financing Tougher as Gulf States Compete for Money

December 11, 2009

By Camilla Hall Dec. 11 (Bloomberg) — The race between Gulf states to build the biggest airport, tallest skyscraper or glitziest hotel is turning into a competition simply to convince banks to keep lending to the oil-rich region. Emirs, presidents and sheikhs of the six members of the Gulf Cooperation Council meet in Kuwait next week with the days of easy credit over following a year of debt defaults and deferred payments. State holding company Dubai World said Dec. 1 it was seeking to restructure $26 billion of borrowing. “Financing will be harder to attract for all companies in and related to the Gulf in the next few quarters as international banks will be loath to have any association with regional corporates and governments, regardless of their stability,” said Emad Mostaque , who helps manage $100 billion at Pictet Asset Management Ltd. in London. While the global financial crisis forced bank bailouts across the western world, in the Gulf it has jeopardized plans to develop securities markets, create flourishing banking centers and forge closer economic ties. At the GCC’s annual meeting in Muscat on Dec. 30 last year, leaders approved a monetary union agreement, a step toward forming a Gulf single currency. Kuwait said this week that the project may take 10 more years to come to fruition. ‘Moral Hazard’ When the two Saudi family holding companies, Ahmad Hamad Algosaibi & Brothers Co. and Saad Group, defaulted on their Bahrain-based banking units earlier this year, the U.A.E. complained that there was no communication within the GCC. The perception that “the money was there and it would just be splashed around regardless of moral hazard or business viability has not been the case,” said Jane Kinninmont , an economist at the Economist Intelligence Unit in London. “If there’s less money to go around, there will be more competition between the Gulf states.” Qatar is building a $14 billion luxury residential project called the Pearl similar to Dubai’s palm-shaped islands. Saudi Arabia is trying to develop its own financial center in Riyadh that will challenge Dubai’s complex of banks including Deutsche Bank AG and Goldman Sachs Group Inc. “It’s healthy to develop competition,” Sheikh Hamad Bin Jabor Bin Jassim al-Thani , director general of Qatar’s General Secretariat for Development Planning said yesterday in Dubai. “We need to embrace where our strengths are and ensure that we focus around them at the initial stage.” Tallest Tower Saudi Arabia’s Kingdom Holding Co., whose chairman is Prince Alwaleed Bin Talal , started a $26.6 billion real estate project that will include the world’s highest tower, overtaking the U.A.E.’s Burj Dubai set to open Jan. 4. “Everyone’s been trying to build the biggest airport, the best tourist infrastructure,” said Kinninmont. “Everyone is trying to compete for the same territory.” Investor confidence has deteriorated as Kuwaiti investment firms Global Investment House KSCC and Investment Dar along with the two Saudi family holding companies defaulted on debt. Global said Dec. 10 it signed an accord to restructure $1.73 billion. Dubai World, whose property unit is building the landmark palm-shaped islands, sought a “standstill” agreement with creditors. Dubai’s benchmark share index is down 22 percent since Nov. 25, while bond prices tumbled and the credit ratings for several Dubai companies were cut. ‘Top Pick’ Saudi Arabia, the Arab world’s biggest economy, is Mostaque’s “top pick” to emerge strongest. The kingdom’s central bank governor, Muhammad al-Jasser , has said that the economy is in recovery and it may avoid a contraction this year as oil prices rebound to what the world’s largest oil exporter deems a “fair price” of $75. Then there’s Qatar. The world’s largest exporter of liquefied natural gas “is a strong story,” according to Marios Maratheftis , a Dubai-based economist at Standard Chartered Plc. The Gulf state is forecasting economic growth of 9 percent this year and 16 percent next year. “The economies that have better balance sheet structures will recover a lot quicker,” said Ahmet Akarli , a London-based economist at Goldman Sachs. “Saudi Arabia has a healthier balance sheet, so does Qatar, even Abu Dhabi is in a good position but Dubai will drag the U.A.E. down.” To contact the reporter on this story: Camilla Hall in Dubai at chall24@bloomberg.net

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Pimco Buying Abu Dhabi, Qatar Bonds After Dubai Triggers Slump, Gomez Says

December 9, 2009

By Wes Goodman and Bernard Lo Dec. 10 (Bloomberg) — Pacific Investment Management Co., which runs the world’s biggest bond fund, is buying the debt of Abu Dhabi, Qatar and Ras Laffan Liquefied Natural Gas Co., said Michael Gomez , co-head of emerging markets at the fund manager. The bonds fell after Dubai World, the state-run holding company, sought to delay payment on some of its debt, Gomez said. Dubai’s announcement on Nov. 25 spurred an increase in the cost of insuring government and company debt from default around the world. RasGas, a venture between state-run Qatar Petroleum and Exxon Mobil Corp., is one of Qatar’s two producers of gas. “We’re coming in and buying,” said Gomez, who is based at the company’s main office in Newport Beach, California, in an interview with Bloomberg Television. “In any selloff, we’ll be accumulating even more. We think they’re cheap.” Gomez also said China will allow the yuan to gain in 2010, reiterating comments from a report he posted on the Pimco Web site on Dec. 3. “More flexibility will be introduced into the currency,” he said. China has kept its currency at about 6.83 per dollar since July 2008 to help sustain exports. Pimco Total Return Fund, run by Bill Gross since its inception in 1987, may this month become the biggest mutual fund in the industry’s history, surpassing the record $202.3 billion reached by Growth Fund of America in 2007, according to researcher Morningstar Inc. Pimco is a unit of Munich-based insurer Allianz SE. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net .

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Pimco Buying Abu Dhabi, Qatar Bonds After Dubai Triggers Slump, Gomez Says

December 9, 2009

By Wes Goodman and Bernard Lo Dec. 10 (Bloomberg) — Pacific Investment Management Co., which runs the world’s biggest bond fund, is buying the debt of Abu Dhabi, Qatar and Ras Laffan Liquefied Natural Gas Co., said Michael Gomez , co-head of emerging markets at the fund manager. The bonds fell after Dubai World, the state-run holding company, sought to delay payment on some of its debt, Gomez said. Dubai’s announcement on Nov. 25 spurred an increase in the cost of insuring government and company debt from default around the world. RasGas, a venture between state-run Qatar Petroleum and Exxon Mobil Corp., is one of Qatar’s two producers of gas. “We’re coming in and buying,” said Gomez, who is based at the company’s main office in Newport Beach, California, in an interview with Bloomberg Television. “In any selloff, we’ll be accumulating even more. We think they’re cheap.” Gomez also said China will allow the yuan to gain in 2010, reiterating comments from a report he posted on the Pimco Web site on Dec. 3. “More flexibility will be introduced into the currency,” he said. China has kept its currency at about 6.83 per dollar since July 2008 to help sustain exports. Pimco Total Return Fund, run by Bill Gross since its inception in 1987, may this month become the biggest mutual fund in the industry’s history, surpassing the record $202.3 billion reached by Growth Fund of America in 2007, according to researcher Morningstar Inc. Pimco is a unit of Munich-based insurer Allianz SE. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net .

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Kuwait’s Sovereign-Wealth Fund Sells Stake in Citigroup for $4.1 Billion

December 6, 2009

By Fiona MacDonald and Poppy Trowbridge Dec. 6 (Bloomberg) — Kuwait Investment Authority, the nation’s sovereign-wealth fund, sold its stake in Citigroup Inc . for $4.1 billion after helping the U.S. bank boost capital amid the worst financial crisis since the Great Depression. The fund converted preferred securities of Citigroup that it purchased for $3 billion last year into common shares and sold them, making a profit of $1.1 billion, KIA said in an e- mailed statement today. The transaction “will be a confidence-booster,” said M.R. Raghu, head of research at Kuwait Financial Center, a Kuwait- based investment bank, in a telephone interview. “It looks to be good news, making a profit in these times.” Sovereign wealth funds are selling investments in financial stocks as they seek to reduce risk and address domestic criticism over investment priorities. The funds, fueled in part by oil revenue, had become sources of capital around the world for companies including Citigroup and Morgan Stanley , helping them to withstand the credit market seizure that followed the collapse of U.S. subprime mortgages. Singapore’s Temasek Holdings Pte , KIA and China Investment Corp. are among the sovereign funds that helped U.S. investment banks replenish more than $200 billion of capital. KIA and Temasek owned shares in Merrill Lynch & Co., which was bought by Bank of America in 2008 after the shares slumped 35 percent. Alwaleed Stake Saudi Arabia’s Prince Alwaleed bin Talal remains a shareholder in New York-based Citigroup, even after an 88 percent drop in its stock price during the past two years. Alwaleed has been among the company’s top shareholders since the early 1990s, when he helped rescue it from near-collapse. He said Dec. 1 that he expects 2010 to be a year of “stabilization” for the bank. Barclays Plc , Britain’s second-biggest bank, avoided a government bailout in part by selling 5.3 billion pounds ($8.7 billion) of stock and convertible notes to the Qatar and Abu Dhabi sovereign wealth funds. The bank’s Abu Dhabi investors made a profit of 1.46 billion pounds when they sold shares in the lender in June. Sovereign funds, together valued at about $3.2 trillion, operate as government-owned, special purpose investment vehicles. To contact the reporter for this story: Fiona MacDonald in Kuwait at fmacdonald4@bloomberg.net ; Poppy Trowbridge in London at ptrowbridge@bloomberg.net

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Natural Gas Glut Overwhelms Speculators as Market Defies Wall Street Rally

November 30, 2009

By Ayesha Daya Nov. 30 (Bloomberg) — When Qatar’s biggest natural gas shipment to the U.S. arrived this month, it signaled to Barclays Capital Inc. and PFC Energy that this year’s worst performing commodity investment won’t recover in 2010. Murwab, a Qatari liquefied natural gas tanker, carried the first shipment to the U.S. from the Persian Gulf nation since June 2008 . Its cargo, enough to heat about 9 million homes for a day, added to the largest gas inventories for this time of year since at least 1994, Energy Department data show. Rising supplies threaten to hurt the record-large $4.2 billion bet in the U.S. Natural Gas Fund LP , while traders hold 51 percent more options contracts to buy gas than they do to sell. The International Energy Agency warned of a glut that Qatar’s energy minister said may last until 2012. Wall Street’s consensus forecast for a 51 percent rise in U.S. gas futures to an average $6.09 per million British thermal units next year is too high, according to industry consultant Schork Group Inc. “We have more gas than we know what to do with in the U.S., we have more waterborne gas floating around the world’s oceans that doesn’t have a home,” Stephen Schork said in an interview from Villanova, Pennsylvania. Prices this winter will “gravitate toward, and remain closer to $4, rather than $7” for each million Btu, he said. U.S. imports of liquefied natural gas will rise 34 percent this year to about 470 billion cubic feet and another 40 percent in 2010, the Energy Department forecast on Nov. 10. Global LNG supply will exceed demand for a second year in 2010 as new projects from Qatar to Peru boost output, Sanford C. Bernstein & Co. said in a Nov. 23 report. Worst Performance Natural gas for January delivery dropped 0.7 percent to $5.155 per million Btu in electronic trading on the New York Mercantile Exchange at 3.27 p.m. in Singapore. Gas has slumped 8.3 percent this year, the worst performance among the world’s biggest exchange-traded commodities. Gas peaked at $13.69 in July 2008 and declined to a low of $2.409 in September 2009. Nikos Tsafos , a senior gas analyst at PFC Energy in Washington, predicts U.S. gas will average $5 next year because of rising domestic production and international supplies of LNG, gas cooled to liquid form for transport by ship. His projection is below the average $5.605 for 2010 monthly futures trading on the Nymex. “It is hard to see how prices can be much better than the current strip,” Tsafos said, referring to the average of each futures contract for delivery next year. Low prices will save money for the 57 million American households using gas for heat, who face bills of about $792 each this winter. Governments and energy companies such as London- based BP Plc are promoting gas, which emits about half as much carbon dioxide as coal, to temper global warming. Price Collapse New production in Qatar, which has the world’s third- largest gas reserves, is a legacy of decisions made years ago. As gas tripled between 2002 and 2008 and Qatar increased investments, the nation avoided locking in prices for about half of its new LNG in anticipation of further gains, according to consultant Wood Mackenzie Ltd. Instead, the global recession caused prices to collapse 25 percent last year. “Qatar has had to supply the U.S., even though the returns are absolutely awful, because it is the sink for cargoes that can’t go anywhere else,” said Tony Regan , a consultant with Singapore-based Tri-Zen International Ltd. and a former executive in Royal Dutch Shell Plc’s LNG business. “It’s the worst possible moment to increase production, because the world is in recession and prices are so low.” U.S. gas production rose last year to its highest since 1974 as the industry exploited extracted gas from new areas. ‘Acute Glut’ Reserves in the U.S. may be 39 percent higher than estimated just two years ago, reflecting improved yields of gas stored in rocks such as shale, the Potential Gas Committee, a non-profit group linked to the Colorado School of Mines, said in a June 18 report . An “acute glut” is looming during the next five years because of rising shale gas production in the U.S. and Canada, the Paris-based International Energy Agency said in its World Energy Outlook on Nov. 10. “There is downward pressure on prices next year,” said Biliana Pehlivanova , a commodities analyst at Barclays Capital in New York, who forecasts gas at $5.05 for 2010. “We see a slow drift lower.” A decline would be bad news for Oklahoma-based explorer Devon Energy Corp., which is betting on U.S. onshore gas production, as well as BP and Anadarko Petroleum Corp., the two biggest producers in the U.S., and countries that benefit from gas sales, such as Norway and Algeria. Exporters Meet Qatar will host a meeting of the Gas Exporting Countries Forum of 11 nations on Dec. 9 to discuss sagging world markets. Russia and Iran, which have the largest reserves, are competing to name the first secretary-general, a step in establishing a group that may one day match the price-setting clout that the Organization of Petroleum Exporting Countries has in oil markets. As the world’s most efficient producer, Qatar can profit at lower prices. The nation can pump 1 million Btu for as little as 15 cents, compared with about $4 for Russia and Norway, according to the IEA. Most costs are covered by so-called condensate, an oil-like petroleum that’s pumped along with natural gas and refined as if it were crude. Qatar then spends another $2.83 to liquefy that gas ready for shipping. Buyers Turned Away The country plans to increase annual LNG production capacity 43 percent to 77 million tons by the end of 2010. As prices rose from $2 in 2002, Qatar resisted signing long-term contracts with Kuwait, the United Arab Emirates and India, officials in the countries said at the time. Now, Qatar finds the spot market for excess supplies shrinking. “By 2013, 2012, the world will see more demand” than supply, Qatar Energy Minister Abdullah al-Attiyah said at a conference in Doha Nov. 7, calling the drop in demand “short- term.” Qatar has the right to divert cargoes away from the U.S. if it finds better prices elsewhere, he said in an interview. China may become the biggest market for Qatari gas, Fu Chengyu , president of China National Offshore Oil Corp., said in a Nov. 13 interview. Domestic gas companies were told to increase production and imports this month to ease shortages, China’s National Development and Reform Commission said in a Nov. 25 statement . Asia ‘Key Market’ Shell, which sells more LNG than any other company, sees Asia as its “key market” for growth, Chief Executive Officer Peter Voser said in a Nov. 26 interview in Zurich. “Any gas prices in Europe will actually have to compete with those prices in the Far East in order to get the gas to Europe,” Voser said. JPMorgan Chase expects a colder-than-normal winter will revive U.S. prices even as market is now “drowning in bearish psychology,” Lawrence Eagles , head of commodities strategy, said in a Nov. 24 note. The bank kept its 2010 price forecast unchanged at $5.94 a million Btu. Qatar is leasing import capacity at the Sabine Pass and Cameron terminals in Louisiana and Cove Point, Maryland, to sell excess cargoes to the U.S. Its $1 billion terminal under construction in Texas with ConocoPhillips and Exxon Mobil Corp. , called Golden Pass, is unlikely to open before the middle of next year, after a one-year delay, Exxon Mobil spokeswoman Margaret Ross in Houston said by e-mail on Oct. 7. The Murwab, carrying 216,000 cubic meters of LNG, arrived Nov. 4 at Sabine Pass, according to Qatar Gas Transport Co. and vessel tracking data compiled by Bloomberg. The last time Qatar sent a cargo there was in June 2008 when U.S. prices were more than double today’s level. Countries that bet on the U.S. market “lost their shirt” this year, Chakib Khelil , energy minister of Algeria, Europe’s largest LNG supplier, said Oct. 7 in Buenos Aires. To contact the reporter on this story: Ayesha Daya in Dubai on adaya1@bloomberg.net ;

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Qatar Plans $25 Billion Railway Network, Forms Venture With Deutsche Bahn

November 22, 2009

By Robert Tuttle and Anthony DiPaola Nov. 22 (Bloomberg) — Qatar, the world’s largest producer of liquefied natural gas, expects the construction of a railway system will cost 17 billion euros ($25.3 billion) as the Persian Gulf state seeks improved transport links with its neighbors. Qatari Diar Real Estate Investment Co. and German rail operator Deutsche Bahn AG formed Qatar Railways Development Co. today to build the network in three phases by 2026, Qatari Diar Chief Executive Officer Ghanim bin Saad al-Saad said. Financing and the budget for the project will be announced “very soon,” he told reporters in Doha. Qatari Diar is part of the country’s sovereign wealth fund. Gulf states are channeling crude-oil and gas earnings into railways and airports as they develop infrastructure to help economic development and attract foreign investors and tourists. Dubai, the second-biggest of seven sheikhdoms that make up the United Arab Emirates, in September opened the first metro system in the Gulf Arab countries. Oil-rich Abu Dhabi is conducting studies to build a rail system in the U.A.E. capital. Qatar’s rail network will integrate projects such as a high-speed link between the gas-rich emirate’s capital Doha and its airport, and a link with Bahrain via a causeway, the companies said in a statement. Qatar will also get passenger and freight links between Doha and the industrial cities of Ras Laffan and Mesaieed, freight lines to other countries and a metro system in the capital. Qatari Diar owns 51 percent of the rail company with Deutsche Bahn holding the rest. Saudi Plans Saudi Arabia, the largest Arab economy, is building a $5.3 billion rail line that can transport 3 million people between the Islamic holy cities of Mecca and Medina and is expanding Jeddah international airport. The country is spending $400 billion over the next five years to expand oil production, build infrastructure and create jobs. Iraq, holder of the world’s largest oil reserves, is seeking projects to repair and expand its southern sea ports. Yemen’s Ministry of Transport this month invited bids for a contract to manage construction of the country’s first railway, which will link the nation with its oil-rich Gulf neighbors. To contact the reporter on this story: Robert Tuttle in Doha at rtuttle@bloomberg.net ; Anthony DiPaola in Dubai at adipaola@bloomberg.net

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Qatar Bonds Gain After Largest Emerging-Market Debt Sale Is Oversubscribed

November 18, 2009

By Laura Cochrane and Haris Anwar Nov. 18 (Bloomberg) — Qatar’s bonds rose after the largest-ever sale of debt by an emerging-market government received $28 billion of orders, four times the amount issued. Qatar’s $3.5 billion of five-year bonds, half the total $7 billion sale, advanced to 100.2 cents on the dollar from an issue price of 99.87 cents, according to ING Bank NV data on Bloomberg at 5:05 p.m. in Doha. The emirate’s $1 billion of 30- year bonds rose 3 percent to 102.8 cents, according to prices provided by DZ Bank AG. “This is the largest debt deal from an emerging-market sovereign to date,” said Fabianna Del Canto , syndicate manager at Barclays Capital, a lead arranger for the sale, in London. “Qatar has firmly established itself as the premier borrower in the region.” Qatar, the world’s biggest exporter of liquefied natural gas, will use the bond proceeds to provide “contingency funding” for state-owned companies, pay for infrastructure projects, and invest in the international oil and gas industry, according to the bond sale prospectus obtained by Bloomberg News. The Persian Gulf emirate is spending billions of dollars diversifying its economy with acquisitions of stakes in London- based lender Barclays Plc and German carmaker Volkswagen AG. ‘Strong Appetite’ Middle East borrowers will sell as much as $18 billion of international bonds in 2010, Luis Costa , an emerging markets debt strategist at Commerzbank AG in London wrote on Nov. 11. Commercial Bank of Qatar, the country’s second-biggest bank by assets, sold $1.6 billion of bonds on Nov. 10. Dubai last month raised $1.93 billion through the biggest Islamic bond sale from the Gulf region this year, while Tourism Development & Investment Co., a state-owned developer of hotels in Abu Dhabi, raised $1 billion from a five-year Islamic bond issue. “There remains very strong appetite for the region,” said Neil Slee , director of debt syndicate for Eastern Europe, Middle East and Africa at Credit Suisse Group AG, which was one of the lead arrangers for the deal. “It’s a reflection of market confidence in the Qatari credit story” that it was able to close the largest-ever transaction from an emerging market issuer, he said. Qatar’s five-year bonds traded at a yield of 3.81 percent, compared with Dubai’s dollar-denominated Islamic bond with a similar maturity at 6.24 percent. Dubai Dubai, which suffered the worst in the Middle East from the global financial crisis, is struggling to refinance its debt after its government related companies earlier borrowed more than $80 billion to transform its economy into a tourist and financial services hub. Qatar is rated Aa2 by Moody’s Investors Service and AA- by Standard & Poor’s. Dubai is not rated. In addition to the five-year and thirty-year bonds Qatar issued $2.5 billion of 10-year bonds to yield 1.95 percentage points more than Treasuries. Qatar’s sale topped the $5 billion that Venezuela issued in October, according to ING Groep NV. Qatar’s benchmark DSM 20 Index was the third best performer in the world today, surging 2 percent at the close in Doha. The measure has gained 3.5 percent this year, compared with a jump of 74 percent in the MSCI Emerging Markets Index . Standard & Poor’s Ratings Services assigned an AA- rating to Qatar’s bond issue. “The ratings on Qatar are supported primarily by the country’s solid fiscal and external balance sheets, its prosperous economy and strong growth prospects, and its prudent long-term policies,” S&P’s credit analyst Véronique Paillat-Chayriguès wrote in a note today. Qatar Economy Qatar’s economy is expected to grow 9 percent this year and 16 percent next year, ruler Sheikh Hamad Bin Khalifa Al-Thani said on Nov. 3, according to state-run Qatar News Agency. The country is the holder of the world’s third-largest natural gas reserves and a member of the Organization of Petroleum Exporting Countries with 720,000 barrels a day of oil output. Qatar’s 2019 bonds are “cheap relative to ratings,” which is why he holds them, said Peter Eerdmans , head of emerging- market debt at Investec Asset Mangement Ltd. in London. The emirate’s 10-year paper is trading around 185 basis points above Treasuries and the “fair value” for sovereigns with rating in the AA- area is 100 basis point, Eerdmans, who overseas $950 million in assets, said in an interview. The low risk and the better prospects of cash flow generation are “alluring” investors to the Middle East credit where oil and gas producers are benefiting from a surge in crude oil prices, Commerzbank’s Costa said earlier this month. Oil last traded at $79.55 a barrel, up 78 percent this year. Barclays managed Qatar’s sale with Credit Suisse, Qatar National Bank SAQ, Goldman Sachs Group Inc. and JPMorgan Chase & Co., according to the prospectus. To contact the reporters on this story: Haris Anwar in Dubai at hanwar2@bloomberg.net Laura Cochrane in London at lcochrane3@bloomberg.net

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Yvonne R. Davis: The Challenge of Arab Unemployment — An Issue We Must Not Ignore!

November 16, 2009

The 10.2% unemployment rate in the U.S. has the citizenry completely disillusioned and vexed with our government. Despite the “Average Joe/Jane” outrage, a slight fall in jobless claims this month, a number of the unemployed live in neighborhoods with foreclosure signs over their heads. They hang on by their fingernails praying for economic relief. Never perhaps returning to the days of “good and plenty,” fear runs rampant with an aging “Super Power” population. According to the U.S. Census by 2030, 1 and 5 Americans will be 65 years and older. Our Nation’s fastest growing population is 85 and above.

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Saudi Consumer Prices Climb for 11th Month, Fuelled by Dollar’s Decline

November 15, 2009

By Camilla Hall Nov. 15 (Bloomberg) — Saudi Arabian consumer prices rose for an 11th month in October as oil increased in global markets and the dollar’s weakness added to the cost of imported food. Consumer prices were up 0.65 percent on the month, the same rate as in September, according to data on the Central Department of Statistic’s Web site today. Annual inflation eased to 3.5 percent, its slowest pace since 2007. Oil prices have increased 34 percent in the past year, and crude now trades at more than $75 a barrel after tumbling from a record $147.27 a barrel in July 2008. Saudi Arabia, the Arab world’s largest economy, plans to spend $400 billion over five years to boost oil production capacity and overcome the impact of the global financial crisis. “The data strengthens our view that the low point for Saudi inflation has already passed,” Simon Williams , an economist at HSBC Holdings Plc, said by e-mail. “Non-oil growth is beginning to recover and that will create some pressure on domestic prices. The dollar-driven weakness of the riyal will also add to the cost of food and other key imports.” Annual inflation is expected to average 4.6 percent next year, Banque Saudi Fransi said in a Nov. 12 report. Inflation averaged 1 percent from 1990 to 2007, Banque Saudi Fransi chief economist John Sfakianakis said. “Inflation is likely to stay at historically high levels,” he said. Saudi Arabia, Oman, Qatar, Bahrain and the United Arab Emirates tend to follow the U.S. Federal Reserve when setting interest rates because of their dollar pegs. This fueled price increases last year because of the need to match cuts in U.S. interest rates at a time when inflationary pressures were increasing. To contact the reporter on this story: Camilla Hall in Dubai at chall24@bloomberg.net

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Korea Pension Fund Will Buy HSBC Headquarters in London for $1.3 Billion

November 13, 2009

By Simon Packard and Seonjin Cha Nov. 14 (Bloomberg) — South Korea’s National Pension Service , the nation’s biggest investor, agreed to buy HSBC Holdings Plc’s London headquarters for 772.5 million pounds ($1.29 billion) as the fund boosts overseas assets. HSBC, Europe’s largest bank by market value, will remain at 8 Canada Square, a 656-foot (200-meter) tower in the Canary Wharf financial district, following the sale to Seoul-based NPS, according to a statement yesterday. Officials at the South Korean fund were not available for comment. The South Korea’s state pension fund plans to double its international assets to 15 percent of its total holdings by 2015, the fund said in July. This will include property acquisitions in the world’s major cities, the fund said in a Nov. 5 statement when it announced a 350 billion won ($302 million) purchase of London office buildings. “The London real-estate market has gone through a price correction since hitting the bottom in the first half of 2007 and profitability for investment has improved considerably,” the fund said in the Nov. 5 statement . NPS had 270 trillion won of assets at the end of September, including 3.05 trillion won worth of real estate holdings as of end of August, according to its Web site . Other sovereign wealth funds have bought commercial properties in London this year, taking advantage of lower prices and the pound’s weakness. On Nov. 4, Qatar agreed to purchase the U.S. embassy building in Mayfair for an undisclosed amount, while in June a fund controlled by Oman acquired a majority stake in an office building valued at 445 million pounds. Expensive Buildings The funds have focused on more expensive buildings on prime sites occupied by tenants with good credit ratings and long leases. The financial crisis has made it harder for real estate investors to obtain debt finance, particularly for larger, costlier properties. NPS this month spent 268 million pounds to buy 88 Wood Street in the City of London district and a 50 percent stake in 40 Grosvenor Place, near Buckingham Palace. Values of offices in the City of London, the U.K. capital’s main financial district, fell 50 percent from the market’s peak in July 2007 to Aug. 31, according to Investment Property Databank Ltd. The pound depreciated by 16 percent against a basket of other currencies in the two years ended June 30, Bank of England data show, making London real estate even cheaper for overseas investors. In the City, the rate of return for prime office buildings worth more than 125 million pounds declined 0.5 percentage point to 7 percent in the third quarter, according to Jones Lang LaSalle Inc. The rate of return falls as property values increase. London Appeal “This is testament to how attractive London is to outside investors,” James Young , a partner at Cushman & Wakefield Inc., said of HSBC’s deal with NPS. Young heads the broker’s City of London office. NPS is acquiring the headquarters building for an initial investment yield of less than 6 percent. HSBC will pay NPS an initial annual rent of 46 million pounds for the Canada Square building, where more than 8,000 people work. The lease runs for 17½ more years. Prospects for the central London office market may also be improving because the financial crisis stymied new development. As the supply of new buildings coming up for rent wanes, it’s helping halt a slide in rents. Rents in the Dockland areas of East London, where Canary Wharf is located, were about 37.50 pounds a square foot for prime office space in the third quarter, Chicago-based Jones Lang estimates. Record Price It’s the second time in two years that HSBC has divested the Canary Wharf building. The bank sold the skyscraper to Metrovacesa SA in June 2007 for 1.09 billion pounds, the highest price paid for a single building in the U.K. It then bought the property back in December 2008 for 838 million pounds, or a 250 million-pound profit, after the Spanish developer failed to refinance a loan from the bank. HSBC had said that if the London, Paris and New York buildings didn’t fetch the right price — either collectively or individually — it wouldn’t sell. The transaction announced today will allow HSBC to book a 350 million-pound gain in its 2009 accounts, the bank said in the statement. HSBC agreed last month to sell its Manhattan headquarters at 452 Fifth Ave. for $330 million in cash to a company controlled by Israeli investor Nochi Dankner . The bank is also in talks to sell 103 Avenue des Champs- Elysees near the Arc de Triomphe in the French capital. CB Richard Ellis Group Inc. and Linklaters LLP advised HSBC on the sale of the London property. JP Morgan Asset Management and Berwin Leighton Paisner advised NPS. To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net Seonjin Cha in Seoul at scha2@bloomberg.net

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Qatar’s economic growth to accelerate next year

November 4, 2009

04 Nov 2009 Emir Sheikh Hamad bin Khalifa Al-Thani has claimed that the rate of economic growth in Qatar is likely to accelerate during the following fiscal year. He said the country is set to enjo…

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Serena Williams Beats Sister Venus to Take Sony Ericsson Tennis Title

November 1, 2009

By James Cone Nov. 1 (Bloomberg) — Serena Williams , who will end the year as the top-ranked player in women’s tennis, beat her sister Venus in straight sets today to win the final of the season- ending Sony Ericsson Championships. Serena, 28, won 6-2, 7-6 (7-4) in Doha, Qatar, to claim her 35th title on the WTA Tour and a 13th victory in 23 matches against her 29-year-old sister. Serena, who also took the title in 2001, won all five of her matches at the eight-player event this week — including a group-stage matchup with Venus. In the opening set today, Serena broke in the third and seventh games, while the second set proved closer. She came through in a tie-break, taking the title with a forehand winner. Her other titles in 2009 came at the Australian Open and Wimbledon, the latter also in a final against Venus, who was ranked No. 7 by the WTA Tour ahead of this tournament. The Championships have been beset by injuries, including outgoing No. 1 Dinara Safina of Russia, who had to quit during her opening match because of an ankle injury. Denmark’s Caroline Wozniacki was yesterday unable to complete her semifinal against Serena Williams. To contact the reporter on this story: James Cone in London at jcone@bloomberg.net .

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Shell Doesn’t Expect `Quick’ Recovery in Demand After 62% Earnings Decline

October 29, 2009

By Fred Pals Oct. 29 (Bloomberg) — Royal Dutch Shell Plc , Europe’s largest oil company, reported a 62 percent plunge in third- quarter earnings and said a “quick recovery” in energy demand and prices is unlikely. Net income fell to $3.25 billion from $8.45 billion a year earlier, The Hague-based company said in a statement today. The shares slid the most in almost three months in London trading. Chief Executive Officer Peter Voser said the outlook “remains very uncertain” given forecasts that demand for crude will fall the most this year since 1980. Shell is cutting 5,000 jobs, equivalent to about 5 percent of its workforce, and has reduced operating costs by about $1 billion to counter a slump in demand for fuels to run cars and factories. “Shell reported a bad upstream result which was offset by a good downstream performance,” said Jason Kenney , an Edinburgh-based analyst at ING Wholesale Banking NV. “On a positive note, Shell is flagging big cost savings,” said Kenney, who has a “hold” rating on the stock. Shell will be followed by results for Exxon Mobil Corp. , the largest U.S. company, later today and Chevron Corp. tomorrow. Eni SpA, Italy’s largest energy company, today reported a 58 percent slump in quarterly profit to 1.24 billion euros ($1.82 billion). BP Plc, Europe’s second-biggest oil company, reported earnings that beat estimates earlier this week after beating its own cost-savings target by $1 billion. Shares Drop Shell fell as much as 3.7 percent in London trading and was down 65 pence at 1,846 pence as of 8:15 a.m. local time. The stock is up 2.4 percent this year, underperforming a 10 percent advance for BP. Excluding one-time items and inventory changes, Shell’s earnings were $2.62 billion, narrowly beating the $2.5 billion- median estimate of 10 analysts compiled by Bloomberg. It’s the third straight quarter that Shell has surpassed analyst estimates on this profit measure. Voser, who took over from Jeroen van der Veer in July, has already started to streamline Shell’s operations. Three units have been consolidated into two, focused on the Americas and the rest of the world, almost two years after a similar reorganization by BP. The company has already reorganized its management structure by cutting 20 percent of senior jobs to 600 positions. More employees have been asked to reapply for their jobs as part of the internal shake-up, Voser said earlier this month. Global oil demand will fall by more than 2 million barrels a day this year, Voser said in July. European gas consumption will drop by 5 percent, he said. Oil Drop The average gas price plunged 62 percent in the third quarter from a year earlier. U.S. oil futures, which touched a record $147.27 a barrel in July 2008, averaged $68.24 in the three months ended Sept. 30. Third-quarter production was little changed at 2.926 million barrels of oil equivalent a day with crude oil production falling by 2 percent and production up about 3 percent. Shell is tapping unconventional deposits from Qatar to Canada to revive production growth after six years of falling output. Record investment in 2009 let Voser expand an oil-sands venture in Canada and deepwater projects in the Gulf of Mexico and Brazil. Shell, the biggest non-state liquefied natural gas producer, in September decided to go ahead with the Chevron-led Gorgon LNG project in Australia. Production Forecast Shell aims to add 1 million barrels a day to capacity by the end of 2012, representing an average annual growth rate for oil and gas output of 2 percent to 3 percent between 2009 and 2012. That compares with growth of 1 percent to 2 percent at BP. Both estimates take into account the impact of natural field depletion. OAO Gazprom and Shell are increasing capacity at the Sakhalin-2 liquefied natural gas plant in Russia and are on target to ship about 55 fuel cargoes this year. Shell and Anadarko Petroleum Corp., the second-largest producer of natural gas in the U.S., in July said they made a discovery at the Vito exploration oil well in the Gulf of Mexico. Shell holds 55 percent of the project. Shell’s output is set to benefit from the amnesty declared by Nigerian President Umaru Yar’Adua for militants in the oil- producing Niger Delta, whose attacks have disrupted exports. Shut Plants Shell has been forced to shut plants in Nigeria, cutting oil production to 121,000 barrels of oil equivalent a day, down from 144,000 barrels in the first three months of the year, Shell said Oct. 13. In 2004-2005, Shell pumped as much as 1 million barrels a day from the West African nation’s fields along with its partners. In July, Shell started production at its BC-10 field in Brazil , which will have capacity of 100,000 barrels of oil equivalent a day. Refining margins, or profits from turning crude into fuels, slid about 57 percent in the third quarter from a year earlier, according to BP. Its Global Indicator Margin, a broad measure of refining profitability, declined to $3.42 a barrel from $8 a barrel. Shell reported its earnings under three business segments, upstream, downstream and corporate to underline its new management structure. To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

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U.S. Stocks Retreat as Housing Starts Report Overshadows Company Earnings

October 20, 2009

By Elizabeth Stanton Oct. 20 (Bloomberg) — U.S. stock futures rose as earnings at companies from Apple Inc. and Texas Instruments Inc. to Caterpillar Inc. beat analysts’ estimates, offsetting declines in consumer shares after housing starts trailed projections. Apple, Texas Instruments and Caterpillar climbed at least 2.6 percent in pre-market New York trading. DuPont Co. , the third-biggest chemical maker, advanced 1.8 percent and Pfizer Inc. , the world’s largest drugmaker, gained 2.9 percent after third-quarter profit topped analysts’ projections. Home Depot Inc. and Walt Disney Co. fell on the housing starts report. Futures on the Standard & Poor’s 500 Index expiring in December added 0.3 percent to 1,094.1 at 8:59 a.m. in New York. Earlier the contract rose as much as 0.7 percent. Dow Jones Industrial Average futures increased 0.2 percent to 10,035. Nasdaq-100 Index futures climbed 0.8 percent to 1,765. Asian shares also advanced, while European benchmarks erased gains. “We’re beginning to see a trend where profits are actually improving, and this is just the beginning of a recovery, so from the standpoint of the market this is good news,” William Dwyer , chief investment officer at MTB Investment Advisors Inc. in Baltimore, said on Bloomberg Radio. MTB manages $13 billion. “Technology is probably going to be the leader.” Earnings surpassed analysts’ projections at fifty-nine of the 71 companies in the S&P 500 that reported results since Oct. 7, including JPMorgan Chase & Co. and Google Inc. , according to Bloomberg data . Profit topped estimates at all but one of the 12 technology companies that released results. Earnings Watch More than 130 S&P 500 companies are scheduled to report this week, Bloomberg data show. The S&P 500 has rallied 62 percent from a 12-year low in March, closing at a one-year high yesterday, on signs the economy is emerging from the worst slump in seven decades. Crude oil fell from a one-year high above $80 a barrel after OPEC said it wouldn’t be comfortable with oil at $100. Apple advanced 6.3 percent to $201.82 in New York as back- to-school orders for iPhones, iPods and Macintosh computers fueled a 47 percent increase in fourth-quarter net income. Texas Instruments rose 2.6 percent $24.13. The second- largest U.S. chipmaker said earnings will be 42 cents to 50 cents a share this quarter on sales of $2.78 billion to $3.02 billion. Analysts predicted profit of 40 cents a share on revenue of $2.79 billion, according to the median estimate in a Bloomberg survey. Caterpillar, Pfizer Caterpillar climbed 6 percent to $61.30 after reporting a per-share profit of 64 cents. Analysts had estimated 5 cents, according to a Bloomberg survey. Pfizer gained 2.9 percent to $18.50 after posting adjusted third-quarter profit of 51 cents a share, beating the 48-cent average of analysts’ estimates compiled by Bloomberg. DuPont reported a third-quarter profit of 45 cents a share, beating analysts’ estimates of 33 cents, as job cuts and lower raw-material costs more than offset lower sales. The shares climbed 1.8 percent to $35.25. Companies in the S&P 500 will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates compiled by Bloomberg show. Disney and Home Depot retreated after the Commerce Department said housing starts rose 0.5 percent to an annual rate of 590,000 from a 587,000 pace in August that was lower than previously estimated. Permits, a sign of future construction, fell for the second time in the past three months. Barclays lost 5 percent in London. Qatar will first exercise warrants at 197.775 pence, the firm said today, after shares of Barclays almost quadrupled in the past eight months. The Doha-based arm of the Qatar Investment Authority would make more than 630 million pounds ($1 billion) on the transaction at today’s market price. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

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Barclays Drops as Eight-Month Stock Rally Takes Qatar to $1 Billion Profit

October 20, 2009

By Andrew MacAskill and Jon Menon Oct. 20 (Bloomberg) — Qatar will make about 633 million pounds ($1 billion) as it sells shares in Barclays Plc a year after it helped bailout Britain’s second-biggest bank. Qatar Holding LLC, the Doha-based arm of the Qatar Investment Authority, plans to exercise warrants to sell more than 379 million Barclays shares, the companies said today in a statement. Barclays fell as much as 5.5 percent. Barclays raised more than 5 billion pounds from Middle Eastern investors last year, triggering criticism from shareholders including Legal & General Group Plc who weren’t first given an opportunity to buy new stock. Barclays has surged since touching a March low, as it avoided government aid unlike Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. “It seems logical for the Qataris, having committed capital in the hour of need, to now take some money off the table,” said Michael Crawford , a fund manager at London-based LV Asset Management Ltd., which has about 7 billion pounds in assets, including Barclays stock. “It may take a few weeks for the market to absorb the extra stock; in any longer time period I don’t think it has any impact on the share price.” Barclays will receive about 750 million pounds from the transaction as Qatar pays 197.775 pence a share to exercise the warrants, the companies said. Qatar Holding is Barclays’s biggest shareholder. It retains a stake of more than 7 percent, plus about 379 million additional warrants, according to regulatory filings. The company sold 35 million Barclays shares in April. ‘Strategic Shareholder’ “The decision to exercise the warrants and dispose of the resultant shares forms part of Qatar Holding’s portfolio management program and does not impact on our current intention to remain a long-term strategic shareholder in Barclays,” Chief Executive Officer Ahmad Al-Sayed said in the statement. Barclays fell 4.6 percent to 364.6 pence as of 11:10 a.m. in London trading, after dropping to a low of 361 pence. The stock has quadrupled in the past eight months. Qatar, the largest investor in J Sainsbury Plc , may use proceeds from the sale to increase it holding in the U.K.’s third-biggest grocery chain, said Simon Maughan , an analyst at MF Global Securities Ltd. in London. “The thinking has to be that Qatar will keep its stake in Barclays where it is and place the remaining warrants into the market,” Maughan said. “This is to prepare the war chest for Sainsbury.” Barclays turned to Qatar Holding and Abu Dhabi’s royal family for funding last October rather than accept a U.K. government bailout after the collapse of Lehman Brothers Holdings Inc. Qatar also invested in Barclays in June 2008 as the bank sought to bolster capital and expand abroad. Abu Dhabi investors made 1.46 billion pounds when they sold more than 1.3 billion Barclays shares in June this year. Abu Dhabi still holds warrants exercisable for more than 758 million Barclays shares at 197.775 pence. To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net ; Andrew MacAskill in London at jmenon1@bloomberg.net

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RPT-PREVIEW-PE bigwigs meeting in Dubai, raising money a focus

October 11, 2009

(Repeats story moved Oct 9) * Super Return Middle East conference in Dubai next week * Blackstone’s Schwarzman, Carlyle’s Rubenstein to attend * PE firms more focused on raising money than investing * PE Mideast investments have dried up, may resume soon By Megan Davies NEW YORK, Oct 9 (Reuters) – As the top dogs of private equity gather in Dubai next week for one of the industry’s biggest events, the priority will be raising and retaining money from investors in the Middle East rather than spending it in the region. Just three investments have been made in the Middle East by private equity firms from outside the region so far this year, according to data from Thomson Reuters, and the aggregate value of those is negligible. That’s a stark contrast from the previous four years when there was a total $4.8 billion invested. Still, the amount invested by Middle East sovereign wealth funds in private equity funds remains high, with 69 percent of SWFs in Middle East and North Africa invested in the asset class in October, according to a report from London-based research firm Preqin, up from a 63 percent estimate in April. On Monday, private equity chiefs from the world’s biggest firms, such as Blackstone Group’s ( BX.N ) Stephen Schwarzman, Carlyle Group’s [CYL.UL] David Rubenstein and Providence Equity Partners’ Jonathan Nelson, convene in Dubai for one of the major industry conferences of the year, Super Return Middle East. They’ll join leaders of funds and banks such as Cairo-based private equity firm Citadel Capital; Saudi-based private equity firm Swicorp and Dubai-based Abraaj Capital. Looking for new investments in a region hard hit by the global economic downturn after a boom fueled by higher oil prices isn’t a priority. Much more time will likely be spent appealing for new funds and trying to keep existing investors happy. “The primary focus of most of the U.S. groups in the Middle East has been on the region as a source of capital,” said Josh Lerner, a Harvard Business School professor specializing in private equity. “It may change, but I don’t think it will change overnight.” Still, promising high returns on new buyout funds has become a tougher sell for U.S. and European private equity shops, which have taken writedowns on their portfolios and seen some failures of companies they own. Attracting money for new funds may not be as easy as it once was. “The last year has not been a pretty one for many of the sovereign funds,” said Lerner, who is speaking at the conference. “My guess is that we’ll probably see more focus on more emerging economies as opposed to necessarily investing in the U.S. or Western Europe — driven partially by anticipation of where the most attractive opportunities are likely to be.” As well as having sovereign wealth funds as investors in their funds, some private equity firms have them as stakeholders. Abu Dhabi bought a $1.35 billion stake in Carlyle Group in September 2007, and Blackstone has China Investment Corp as an investor. STILL CASH RICH But despite continued strong interest caution reigns, and the types of investments are changing. One U.S. investor, who declined to be named, said very few SWFs in the Gulf emirates are making commitments to private equity funds currently. That investor, however, said the attitude is more positive for making direct private equity investments and co-investing alongside PE funds, which gives them the ability to conduct due diligence on assets. They also have the ability to buy buyout fund assets at a discount on the secondary market — where investors sell their stakes in private equity funds. Part of the reason for less investment is that there’s less fundraising by the major private equity funds. If private equity firms can hold off launching a new fund in this environment, they will. Still, SWFs have been deploying cash into deals, with $22.5 billion invested worldwide this year so far, according to Thomson Reuters data. That includes large deals such as Qatar buying a 10 percent voting stake in Porsche plus most of the German sports car maker’s cash-settled options for a stake in Volkswagen ( VOWG.DE ). And the Middle East as a possible target for private equity investment is expected to pick up again by the year-end, as banks become more willing to lend and local governments pour money into transport, infrastructure and healthcare projects. A recent survey by Deloitte and Arbor Square showed that more than 47 percent of Middle Eastern and North African private equity firms surveyed expect activity to increase in the next 12 months. There is also interest from foreign investors. French bank BNP Paribas ( BNPP.PA ) said in September it may raise up to $300 million for a private equity fund active in the Gulf Arab region to tap opportunities arising from the financial crisis. Lerner said the big lesson for the region is that it isn’t insulated from the rest of the world. “If you think about the Super Return conference a year ago, there was still a sense of confidence that the Mideast was decoupled from the rest of the world — that the downturn wouldn’t affect them — and we all learnt a hard lesson about the extent to which things are coupled,” he said. © Thomson Reuters 2009 All rights reserved

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QR2.5bn real estate project deal signed

October 4, 2009

By Santhosh V Perumal Qatar General Insurance and Reinsurance (QGRI), Al-Sari Trading and Ezdan Real Estate are jointly developing a real estate project in Qatar with an investment of QR2.5bn, billed as the largest of its kind announced for the year. A

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T. Rex Samson, 66 Million Years Old, 40 Bony Feet Long, Seeks Caring Home

October 2, 2009

By Lindsay Pollock Oct. 2 (Bloomberg) — Samson is big, bony, really old and possibly female. He’s also not cheap. The 40-foot-long, 66-million-year-old Tyrannosaurus rex bears a price estimate of $6 million and forms the centerpiece of Bonhams & Butterfields 42-lot “Natural History” auction. It takes place tomorrow at the Venetian hotel and casino on the Las Vegas strip. The entire sale is estimated to fetch $8 million. “Because of its stature, it certainly belongs in some sort of institution,” said Thomas E. Lindgren, co-director of Bonhams natural-history department, of Samson. The skeleton is the third-most-complete T. rex ever excavated, Bonhams says. The sale was assembled after Lindgren received a call from the anonymous seller three months ago. Samson was discovered on a South Dakota ranch in 1987 and has changed hands since then. Samson is the first major T. rex specimen up for grabs since Sotheby’s 1997 auction of a T. rex skeleton dubbed Sue and similar in size. Chicago’s Field Museum acquired Sue for a record $8.36 million, which has remained the top price for a dinosaur, or any fossil, according to Lindgren. Sue is considered the largest and most complete T. rex skeleton ever excavated. Despite the masculine moniker, Samson is probably female, based on her robust size and the calcium build-up in her bones that occurs when female dinosaurs prepare to lay eggs, explained Lindgren. “In retrospect, the owner probably should have used Delilah,” said Lindgren. Crowd Pleasers Major dinosaur specimens are usually collected by natural- history museums in the U.S., Europe and Asia because they boost attendance. When the Field Museum unveiled Sue in 2000, lines formed around the block. The dinosaur collection of New York’s American Museum of Natural History is “by far the most popular attraction here,” said Mark Norell, chairman of the paleontology division. “It’s incredibly popular, and doesn’t seem to be slowing down.” Private collectors generally seek out smaller items, such as a dinosaur arm or tooth, which can be displayed in the home and cost in the low thousands. Bonhams’s sale includes the lower jawbone of a Triceratops, with a top estimate of $10,000. A 19- inch-long Triceratops vertebra is estimated at $1,500. High-profile collectors include Sheikh Saud Al-Thani of Qatar, Nathan Myhrvold , the retired Microsoft technology officer, and actors Nicholas Cage and Leonardo DiCaprio , according to dealers. ‘Jurassic Park’ The market for dinosaurs was moribund until the 1970s. “The whole dinosaur thing had gone out of vogue,” said Peter Larson, president of the South Dakota-based Black Hills Institute for Geological Research, a for-profit supplier of fossils and replicas. Larson, who led the team that excavated Sue, is consulting with Bonhams on the sale. Scientific discoveries in the 1970s spurred curiosity. “There was more interest in dinosaurs. Museums wanted to rejuvenate exhibitions and needed to increase attendance,” Larson said. Michael Crichton’s bestselling 1990 “Jurassic Park,’ and Steven Spielberg’s 1993 Oscar-winning film also boosted popularity. Prices rose steadily, although the recession has tempered museum buying, Larson said, and he expects more attention from private bidders. “I’m seeing limited interest from the scientific community,” he said. “Not so much because of the scientific importance but because of the short time to put together the financing.” To contact the reporter on the story: Lindsay Pollock in New York at lindsaypollock@yahoo.com ;

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Report: Abu Dhabi and Qatar to lead GCC’s solid growth recovery

September 29, 2009

Report: Abu Dhabi and Qatar to lead GCC’s solid growth recovery

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Report: Abu Dhabi and Qatar to lead GCC’s solid growth recovery

September 29, 2009

Report: Abu Dhabi and Qatar to lead GCC’s solid growth recovery

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Lehman Brothers Owes $4.3 Billion for London Headquarters at Canary Wharf

September 24, 2009

By Peter Woodifield and Linda Sandler Sept. 24 (Bloomberg) — Lehman Brothers Holdings Inc., the securities firm that filed the biggest bankruptcy in U.S. history, owes its London landlord $4.3 billion in rent and charges, according to a claim filed by Canary Wharf Group Plc . Under its lease agreement, Lehman must pay $2.6 billion for future rent and $1.65 billion in taxes, maintenance, insurance, services and wear and tear, according to a Sept. 17 claim filed with administrator Epiq Bankruptcy Solutions LLC. The document doesn’t specify the period covered. Lehman, Canary Wharf Group’s largest tenant, occupied more than 1 million square feet (93,000 square meters) of office space at 20-25 Bank Street in 2003 on a 30-year lease. The London property developer’s Heron Quays units filed the biggest single claim among more than 16,000 creditors against the bank, which failed in September 2008, before the Sept. 22 court- imposed deadline. John Garwood , company secretary of Songbird Estates Plc , which controls Canary Wharf with a 61 percent stake, declined to comment. Songbird is buying 56 million shares from Commerzbank AG for 112.5 million pounds to lift its stake to 69 percent. Songbird today said it will raise 895 million pounds in a share sale to pay off a loan from Citigroup Inc. and fund projects. New York-based Morgan Stanley, the sixth-biggest U.S. bank by assets after converting from a securities firm, is a tenant at Canary Wharf as well as a part owner of the East London office park. Morgan Stanley has a 12 percent stake in Songbird. Other shareholders include Qatar Holding LLC, China Investment Corp., British Land Co. and New York investor Simon Glick . Lehman creditors worldwide might file more than $1 trillion in claims and will probably have trouble validating them, said Harvey Miller , the bank’s lead bankruptcy lawyer. ‘Grossly Inflated’ “Many of the claims that will be filed or have been filed may be grossly inflated,” Miller said in an Aug. 31 e-mail. “That is generally what happens when you compel claimants to file proofs of claims” as required by the bankruptcy court. The Bank Street building accounted for about 16 percent of Songbird’s rental income last year. Lehman’s lease covers 13 percent of the space owned by Canary Wharf, according to Songbird’s annual report. American International Group Inc., the U.S. insurance company that had to be rescued by the U.S. government, has insured Lehman’s rental payments for up to four years after Lehman defaults. So far, the rent has been paid, according to Songbird. Canary Wharf Group owns 16 of the 30 buildings on the 97- acre estate in east London’s Docklands. Barclays Plc, the U.K.’s second-biggest bank, leases 970,000 square feet from the group. Nomura Move Nomura Holdings Inc., which bought Lehman’s operations outside the U.S. last year, leases 350,000 square feet in the building for its own employees. Nomura plans to relocate 3,500 people from Canary Wharf next year to Watermark Place in the City of London, the main financial district. The largest overall claim against Lehman, for at least $48.8 billion, was filed by Wilmington Trust Co. as indenture trustee for various Lehman senior notes. More claims may have been filed and not yet posted, and claims related to certain Lehman securities aren’t due until Nov. 2, according to court papers. To contact the reporters on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net . Linda Sandler in New York at lsandler@bloomberg.net .

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Exxon Mobil Plans Chemicals Expansion in Bet Chinese Demand Will Increase

September 22, 2009

By Joe Carroll Sept. 22 (Bloomberg) — Exxon Mobil Corp. , the world’s biggest maker of chemicals used in plastic bottles, is boosting investment in Asian plants on expectations Chinese demand will increase faster than sales of gasoline and diesel. China’s appetite for chemicals such as paraxylene and polyethylene is climbing 10 percent a year and will continue to expand for at least the next 15 years, said T.J. Wojnar , the senior vice president who oversees Exxon Mobil’s worldwide chemicals business. India probably will be the major driver of global demand a decade from now, he said. Irving, Texas-based Exxon Mobil is evaluating whether to form a joint venture with Qatar to process the Persian Gulf nation’s natural gas into chemicals for export to China, Wojnar said yesterday in an interview in Houston. A new plant in Fujian, China, that began production this year will be followed by an expansion at the company’s Singapore complex in 2011. “We continue to think about opportunities in China,” said Wojnar, who returned from a visit to the company’s Singapore plant earlier this week. “More than half of the world’s petrochemical growth is going to be in China, so there’s definitely room for more facilities to be built out there.” Wojnar said he and Chief Executive Officer Rex Tillerson have been monitoring chemicals sales in recent weeks to discern whether the global economy is headed for recovery. So far, the signals are inconclusive. Orders Stalled “My chairman’s been asking me that because we’re all looking for signs,” Wojnar said. “The data’s very cloudy on that.” Manufacturers outside of China reduced chemicals orders in 2008 and early 2009, relying on inventories to feed their factories as the recession slowed sales and the credit crisis made cash more scarce, Wojnar said. About six months ago, that trend began to reverse as manufacturers boosted orders to rebuild chemicals stockpiles, he said. In China, Exxon Mobil’s biggest chemicals market outside the U.S., demand for products used to make DVDs, beverage bottles and car headlamps didn’t decline when the rest of the world slumped, Wojnar said. Chemicals use in the world’s most populous nation is being driven by expanding personal incomes and the desire to use lighter, cheaper materials for food containers, auto parts and building materials, he said. Spending Priorities “There’s a lot more opportunity to invest directly in China or in countries where you might export to China,” Wojnar said. “The GDP is growing higher, but fundamentally, there’s a lot more opportunity to compete against other products, like metal and wood and like cotton, which is being replaced by polyester.” Exxon Mobil rose 33 cents to $69.90 at 10:03 a.m. in New York Stock Exchange composite trading. Before today, the stock had dropped 13 percent this year. Exxon Mobil, the world’s largest maker of gasoline and diesel, spent $1.59 billion to expand chemicals output in this year’s first six months, exceeding oil refining as the company’s second-largest area of capital expense. Oil and natural-gas exploration and production was the largest at $9.27 billion. Wojnar said the company would only consider buying plants that can be connected directly to Exxon Mobil oil refineries . The company integrates plants so byproducts of the refining process can be turned into chemicals when fuel demand and prices are low, he said. Shift to Chemicals For example, in the past three weeks, Exxon Mobil has diverted more vacuum gasoil from its refineries to chemicals units to produce ethylene and polyethylene as faltering gasoline demand made it less profitable to turn the byproduct, known as VGO, into fuel, Wojnar said. “Vacuum gasoil is in surplus so we’re running a lot of VGO” through chemical plants, he said. “It’s just given us more opportunities to choose from. The feed cost is lower for this particular component.” Vacuum gasoil along the U.S. Gulf Coast fell 6.4 percent in the past four weeks to $1.80 a gallon yesterday, according to data compiled by Bloomberg. Prices dropped 40 percent in the past year. To contact the reporter on this story: Joe Carroll in Houston at jcarroll8@bloomberg.net .

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OPEC Agrees to Maintain Production Quotas as Oil Trades Above $71 a Barrel

September 9, 2009

By Fred Pals and Ayesha Daya, Sept. 10 (Bloomberg) — OPEC said it will keep oil production quotas unchanged, banking on a recovery in the world economy to maintain prices near today’s $71 a barrel. The Organization of Petroleum Exporting Countries agreed to maintain total production quotas at 24.845 million barrels a day, and will urge members to adhere to their targets, OPEC Secretary-General Abdalla El-Badri in a press briefing. It’s the third time this year group has met without revising the figure. “Holding production was the prudent thing to do,” Jason Schenker , president of Texas-based consultancy Prestige Economics LLC, said in an interview in Vienna. The producer group, which accounts for about 40 percent of global crude supply, had been expected by analysts and most ministers to keep output unchanged after prices rallied. Oil has gained 61 percent this year, last month reaching the $75 level identified by Saudi King Abdullah as satisfactory for consumers and producers. Crude oil advanced for a fourth day. The contract for October delivery traded up 31 cents, or 0.4 percent, at $71.62 a barrel on the New York Mercantile Exchange as of 1:52 a.m. Vienna time. “This $65 to $75 range seems amenable to both producers and consumers,” Schenker said. “If they’d cut when production is above quotas, and prices are amenable, it may not have been received well.” Three-Hour Talks Algerian Oil Minister Chakib Khelil and Qatari Energy Minister Abdullah bin Hamad al-Attiyah confirmed the decision as they left OPEC’s headquarters at about 1 a.m. Vienna time today, after closed door talks lasting three hours. OPEC agreed late last year to cut production targets by 4.2 million barrels a day after prices crashed more than $100 a barrel from a record set in July 2008. Oil dipped to $32.40 in December before recovering this year. In the past five months, production has risen from the 11 OPEC members bound by quotas. The 11 members bound by quotas pumped 26.055 million barrels a day in August, according to estimates in a Bloomberg survey, which indicates quota compliance of about 71 percent. Compliance with existing production quotas is improving and prices may rise further by the end of the year, Algeria’s Khelil said. Late yesterday, Ali al-Naimi , the oil minister for Saudi Arabia, OPEC’s biggest producer, told reporters “we are enjoying a good, fair price” for oil, so any slippage in compliance with production quotas is not a concern while prices are “perfect.” Expected Result Ministers from several OPEC member states including Kuwait and Venezuela had said this week they didn’t expect any change in allowed production volumes. Quotas were last changed in December. All 26 analysts surveyed by Bloomberg News last week also forecast no change in quotas. Only Saudi Arabia, Kuwait and Qatar pumped less than their target last month, according to Bloomberg estimates. Iran, Angola and Venezuela were the biggest quota busters. Iraq is the only OPEC member which does not have production limits. “Everybody should adhere to his production allocation,” OPEC’s el-Badri said. There are “positive signs” oil demand will pick up in 2010, he added. OPEC will meet next in Luanda, Angola, on Dec. 22, and again in Vienna on March 17 next year, the group said. To contact the reporters on this story: Fred Pals in Vienna at fpals@bloomberg.net . Ayesha Daya in Vienna at adaya1@bloomberg.net

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Exxon May Miss 2% Production Growth Target as European Gas Demand Shrinks

September 9, 2009

By Joe Carroll Sept. 9 (Bloomberg) — Exxon Mobil Corp. , the largest U.S. oil company, may not meet its 2 percent production growth target this year amid shrinking European demand for natural gas, said Senior Vice President Mark Albers . The Irving, Texas-based company still plans to boost oil and gas output by an average of 2 percent to 3 percent annually during the next half decade, Albers told analysts today during an energy conference in New York. “This year’s production in particular has been impacted by lower European gas demand driven by the global recession,” Albers said during his presentation. “However, our projects, base production and work programs remain on track to deliver the anticipated growth in capacity as we enter next year.” Exxon Mobil began production earlier this week at a liquefied-natural-gas facility in Qatar and has eight other projects scheduled to commence output this year. Chief Executive Officer Rex Tillerson is spending $79 million a day to find untapped reserves and construct floating oil platforms after production fell in 2008 to the lowest since the 1999 acquisition of Mobil Corp. Exxon Mobil fell 23 cents to $70.42 at 1:59 p.m. in New York Stock Exchange composite trading. The shares have dropped 12 percent this year. To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net

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OPEC Set to Maintain Quotas After Raising Oil to Saudi Arabia’s $75 Target

September 6, 2009

By Grant Smith and Ayesha Daya Sept. 7 (Bloomberg) — OPEC’s success in raising oil from a five-year low in December to a 53 percent gain this year will probably persuade ministers to maintain production quotas after this week’s meeting. Reducing shipments beyond record cutbacks last year would endanger the global economic recovery, the Organization of Petroleum Exporting Countries’ president said last week. Oil rose to $75 a barrel on Aug. 25, the price Saudi Arabian King Abdullah says is fair for consumers and producers. “OPEC countries will be pleased by the price, which they could not have anticipated back in January,” said Edward Morse , the head of economic research at LCM Commodities LLC in New York. “They won’t seriously consider deepening or extending the cuts at this stage. OPEC has taken a lot of oil out of the market, and it’s going to clear the market up.” Ministers from Kuwait, Libya, Qatar and Iraq have in the past three weeks made similar comments to OPEC President Jose Maria Botelho de Vasconcelos , signaling they support existing quotas. All the 26 analysts surveyed by Bloomberg News predicted four days ago the group will maintain its production target at 24.845 million barrels a day at the Sept. 9 meeting in Vienna. OPEC supplies about 40 percent of the world’s oil. Oil futures have risen to $68.02 a barrel this year on the New York Mercantile Exchange, recovering from a five-year low of $32.40 in December. “OPEC is very aware the economic recovery is in the very early stages and that they need to be careful about that,” said Mike Wittner , head of oil market research at Societe Generale SA in London. “If they cut quotas they’d risk pushing the price up too far, too fast.” Oil Recovers OPEC members have shipped more oil onto the market since April to capture the rise in prices. Saudi Arabia, OPEC’s largest exporter, and other Persian Gulf states are pumping near or below their specified allocation. Countries from Iran to Venezuela are exceeding their production targets to maintain government revenue, and the states will be encouraged to comply with their agreed limits, an official from a Persian Gulf OPEC member said Sept. 2. The 11 members bound by targets have increased total production , leaving their compliance rate with the 4.2 million barrel-a-day reductions agreed upon last year at about 70 percent. They supplied 26.055 million barrels a day last month, 1.2 million barrels a day more than the limit, according to Bloomberg estimates. “I expect them to make a valiant effort to reduce the level of cheating that I believe has grown by more than half a million barrels since March,” said Adam Sieminski , chief energy economist at Deutsche Bank AG in Washington. Stockpiles Rise Stockpiles in the world’s most advanced economies equal about 62 days of consumption, according to the Paris-based International Energy Agency. OPEC ministers have said they want to lower stockpiles to between 52 and 54 days of demand. “The producer group will undoubtedly express nervousness at the high level of inventory in the system,” Lawrence Eagles, the global head of commodities research at JPMorgan Chase & Co. in New York, said in a Sept. 3 note. “They are not only correct to be biting their fingernails, but may also be forced, in short order, to tighten compliance.” Oil surged fivefold in five years before peaking at $147.27 in July of last year. In the same period, OPEC oil production rose 23 percent to a record 32.775 million barrels a day. As the financial crisis spread, fuel demand and oil prices collapsed. December Pact OPEC responded with three production cuts totaling 4.2 million barrels a day. At its Dec. 17 meeting in Oran, Algeria, the group agreed to lower output by 2.2 million barrels a day, extending curbs announced in September and October. At subsequent meetings in March and May, ministers decided to hold quotas steady as Saudi Arabian Oil Minister Ali al-Naimi said OPEC was willing to see oil prices below its desired level to help the global economy. King Abdullah said in November that $75 was a price that balanced the interests of oil producing and consuming nations. “We have been seeing slowly a much reduced variation of oil prices,” OPEC President Botelho de Vasconcelos, who is also Angola’s oil minister, said last week in an interview in Luanda. “This is a sign that the world economy is recovering. Everything shows that they will keep output unchanged.” Ministers will gather for this week’s meeting at the group’s headquarters at 9:30 p.m. because the summit falls during the Muslim holy month of Ramadan. Companies Lose Lower quotas hurt foreign oil companies working in OPEC countries, such as Paris-based Total SA , which pumps oil in Angola. “Unfortunately we are losing a good amount in production,” Total Chief Executive Officer Christophe de Margerie told reporters last week in Paris. “They’re often less-profitable barrels than what we produce in other countries so the impact on profit is less.” While OPEC implements the steepest supply cuts in its history, some producers outside the group have bolstered market share to fill in the gap. Non-OPEC suppliers, including Russia and Brazil, will collectively raise daily output this year by 350,000 barrels to 51 million barrels a day, according to the IEA. The group’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The group is scheduled to meet again in late December in Luanda. To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net Ayesha Daya in Dubai adaya1@bloomberg.net

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OPEC Probably Will Leave Output Quotas Unchanged Next Week, Survey Shows

September 3, 2009

By Grant Smith and Mark Shenk Sept. 3 (Bloomberg) — OPEC will probably leave production quotas unchanged for a third time when it meets in Vienna next week, while urging members to complete record supply cuts announced in late 2008, a Bloomberg survey showed. Oil has gained 54 percent this year, last month reaching the $75 level identified by Saudi King Abdullah as satisfactory for consumers and producers. The rebound in prices may have weakened the Organization of Petroleum Exporting Countries’ determination to drain excess inventories from the market. All of the 26 analysts surveyed by Bloomberg News before OPEC’s Sept. 9 summit predicted the organization will maintain its target of at 24.845 million barrels a day. Jose Maria de Botelho Vasconcelos , OPEC President and Angolan oil minister, said yesterday the group would hold its current course to avoid higher oil prices derailing the global economic recovery. “Things are proceeding as OPEC would like them to with prices around $70 a barrel,” said Leo Drollas , deputy director of the Centre for Global Energy Studies in London. “If they tighten the taps prices could go much higher and bring the recovery grinding to a halt.” Ministers from Algeria, Iraq, Kuwait, Libya and Qatar have signaled in the past three weeks that they support the existing quota. Oil traded at about $69 a barrel on the New York Mercantile Exchange today. The 11 members bound by the quota system, all bar Iraq, have collectively increased production for the past five months, leaving their compliance rate with the 4.2 million barrel-a-day reductions agreed last year at about 70 percent. Those 11 states supplied 26.055 million barrels a day last month, according to Bloomberg estimates, compared with a ceiling of 24.845 million. Spending Commitments While most members in the Persian Gulf are pumping around or below their specified allocation, other countries with higher domestic spending commitments such as Iran, Nigeria and Venezuela are over-producing. This has frustrated the group’s bid to reduce stockpiles held in the world’s most advanced economies in the Organization for Economic Cooperation and Development. Inventories in OECD nations equated to about 62 days worth of consumption in June, according to the International Energy Agency. OPEC ministers have said they would like to lower stockpiles to between 52 and 54 days worth of demand. Reaching the goal will take another year if the organization maintains current output and refrains from flouting quotas any further, according to Societe Generale SA. ‘Erode Overhang’ “If they can hold the line on crude production and minimize upward output creep, then as long as the global economy continues to recover demand growth will erode the inventory overhang,” the Paris-based bank’s head of oil research Mike Wittner said. OPEC hasn’t invited non-members who sometimes attend such as Russia and Oman to the Sept. 9 meeting. Ministers will gather at the group’s headquarters at after dark at 9:30 p.m. because the summit falls in the Muslim holy month of Ramadan. The group’s two earlier meetings this year were in March and May. Bloomberg surveyed 26 oil analysts in London and the U.S. this week. OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. After next week’s gathering the group is next scheduled to meet in December in Luanda, Angola. To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net

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BP’s `Giant’ Tiber Discovery May Signal Oil Revival in U.S. Gulf of Mexico

September 2, 2009

By Joe Carroll Sept. 2 (Bloomberg) — BP Plc’s discovery of the biggest U.S. oil find in three years may spur an exploration revival in the Gulf of Mexico, a region thought by some industry executives to be played out after output slumped. London-based BP said today it identified a “giant” prospect called Tiber more than six miles (9.7 kilometers) beneath the surface of the Gulf. The find confirms there are more large reservoirs of crude off the coasts of Louisiana and Texas, said Matt Snyder , lead analyst for Gulf of Mexico research at consulting firm Wood Mackenzie Ltd. in Houston. “This is definitely good news for the Gulf,” Snyder said. “When a supermajor like BP uses a term like ‘giant’ to describe a discovery, people sit up and take notice.” The announcement brings new attention to a region where offshore oil exploration was pioneered more than six decades ago. The former Kerr-McGee Corp. drilled the world’s first commercial oil well out of sight of land in the Gulf of Mexico. It struck crude in October 1947, Daniel Yergin , chairman of IHS Cambridge Energy Research Associates Inc., wrote in “The Prize,” his book on the industry’s history. The region has lost favor among some producers. Exxon Mobil Corp., the biggest U.S. oil company, hasn’t emphasized Gulf of Mexico exploration because most discoveries haven’t been large enough to justify the expense, Chief Executive Officer Rex Tillerson told reporters in March 2008. Exxon Looks Elsewhere The Irving, Texas-based company paid $8.6 million for rights to explore 17 blocks in last month’s federal auction of Gulf leases. Tillerson is focusing his $20 billion drilling budget on places such as Brazil and Qatar that he believes will yield bigger returns. BP, whose partners at Tiber are Petroleo Brasileiro SA and ConocoPhillips , said its discovery may hold 3 billion barrels of crude and natural gas. Of that total, the companies may be able to extract the equivalent of 450 million barrels of oil, said Leta Smith , a director at IHS Cambridge in Houston. At current prices, that amount of oil would be worth more than $30 billion. Tiber is BP’s second discovery in three years in a geological formation in the Gulf known as the lower Tertiary, which consists of a layer of rocks created 24 million to 65 million years ago. It’s the 18th discovery to date in the lower Tertiary, which is deeper than any existing producing fields. BP Chief Executive Officer Tony Hayward is spending $115 million a week in the U.S. to find new prospects and boost output. Before Tiber begins pumping oil, Hayward’s scientists must figure out how to coax crude from delicate seams of stone where temperatures can exceed 250 degrees Fahrenheit (121 Celsius), said Smith, a former Amoco Corp. geologist. Six Miles Below Seabed Tiber was drilled 250 miles southeast of Houston in 4,132 feet (1,259 meters) of water, reaching almost 31,000 feet beneath the seafloor. The total length of the drill stem from the floor of the rig to the terminus of the well was more than a mile longer than Mount Everest is high. BP , which operates Tiber and owns a 62 percent stake, plans more wells to assess the expanse and characteristics of the field, according to a company statement. BP said it doesn’t yet know if Tiber will prove commercially viable. If future tests confirm the field holds the equivalent of 450 million barrels of recoverable oil and gas, Tiber will be the largest U.S. find since at least August 2006, when BP discovered Kaskida, another lower Tertiary prospect. “This proves it’s a very prolific trend,” said Chris Ross , a vice president specializing in oil at consulting firm Charles River Associates in Houston. “That’s good news for people with leases and good news for the U.S.” Chevron’s Jack Geologists and engineers didn’t know if oil that far beneath the seafloor could be tapped until 2006, when Chevron Corp. completed the first successful test well at those depths. The well, drilled into Chevron’s Jack prospect about 175 miles southwest of the Louisiana coast, showed that energy companies could keep a hole open down to 60 million-year-old rocks amid shifting layers of salt and blistering temperatures. Other discoveries in the same formation as Tiber and Jack include Buckskin, which Chevron announced in February, as well as Great White, Silvertip and Tobago, which comprise the Royal Dutch Shell Plc -led Perdido project scheduled to commence production next year. BP and Chevron also own stakes in Perdido. “The question is what is the quality of the reservoir, what is the quality of the oil, whether it will flow and what will be the cost of getting it out,” said Ross, a former BP chemist. “A lot of technology has yet to be developed that will be necessary to exploit this discovery.” Gulf Output Slows Oil production in federal waters of the U.S. Gulf fell 9.8 percent last year to 1.15 million barrels a day, the lowest since 1997, as new finds failed to keep pace with declining output from fields discovered in the 1970s and 1980s. Production in the region peaked in 2003 at 1.56 million barrels a day, according to the Energy Department in Washington. Even before announcing the results of the Tiber well, BP was laying the groundwork to expand its search for crude in the Gulf. The company was the high bidder last month in a U.S. government auction of leases on a pair of blocks in Keathley Canyon, the same area that includes Tiber, according to the federal Minerals Management Service. BP paid $28.1 million and $5.1 million, respectively, for the rights to explore the blocks, according to the MMS, which oversees oil production in federal waters. Petroleo Brasileiro paid $9.1 million in the Aug. 19 auction to explore a separate Keathley Canyon block, MMS data showed. To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net .

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Commercial Jet Market Still Awaits Rebound as Orders Fall, EADS Chief Says

September 1, 2009

By Andrea Rothman Sept. 1 (Bloomberg) — The market for commercial jets has yet to recover and airlines may be less inclined to take new aircraft in the next year or two as they grapple with the decline in global traffic, the head of Airbus SAS’s parent said. “The market isn’t dead, we have some campaigns, but it’s not extremely active, that’s clear,” European Aeronautic, Defence & Space Co. Chief Executive Louis Gallois said in an interview in Paris. “It’s not like two or three years ago.” Airlines may struggle to keep taking planes next year and in 2011 because of balance sheets weakened by falling traffic, Gallois said. Airbus has so far only secured half of the 300 planned orders it has earmarked for this year, indicating the worst for the industry may not yet be over. The dearth of orders this year is one indicator a recovery isn’t yet under way, even amid some signs the global economy is emerging from recession, Gallois said. The Toulouse-based company’s planned 2009 contracts compare with 777 in 2008 and 1,458 a year earlier. This year, Airbus intends to deliver more than the 483 airplanes it handed over in 2008, its record year. Planning beyond the first few months of 2010 remains difficult, Gallois said. “In the beginning of a crisis, airlines try to preserve orders, time schedules for deliveries because they don’t want to change their planning — they want to keep an edge against competition,” Gallois said. “At the end of the crisis, sometimes, they have to take difficult decisions, they are increasingly short of money.” Lower Demand Among airlines that have cut capacity is British Airways Plc, Europe’s third-largest carrier. The London-based company said July 3 that it will delay A380 double-decker planes from Airbus and park Boeing Co. 757s next year to conserve cash. Boeing has said it expects to deliver 480 to 485 jets in 2009, about the same as Airbus, before cutting production beginning June 2010 to match lower demand as the recession forces airlines to trim spending. Boeing hasn’t issued a specific target for orders in 2009 or deliveries in 2010. Cutbacks in 2010 will involve dropping output of the Boeing 777 by 29 percent to five planes a month, and postponing planned increases in the 747 and 767 programs. The Seattle-based planemaker hasn’t cut its monthly output of single-aisle planes. Boeing also said on Aug. 12 that customers’ financing options may expand next year, after a “manageable” 2009. Boeing had its debt rating cut by Standard & Poor’s Ratings Service in July, in part because of concern that customer financing needs may increase in 2010. Sales Campaigns With more than 3,500 planes in its current backlog — planes ordered but not yet delivered — Airbus has more than seven years’ production work, Gallois said. Still, new orders are a key indicator for a recovery, he said. “Certainly we are interest in orders for securing our future, but above all we’re interested in them because it’s a sign that the crisis is behind us,” Gallois said. China will be the most important market for the future, accounting for 20 percent to 25 percent of the world market within five years, Gallois said. Demand for commercial aircraft in recent years has come most from the Gulf region and Asia. While Asia has increased its weight in Airbus’s backlog, some of the biggest single orders have come from Mideast carriers such as Emirates Airline and Qatar Airways. Emirates is the largest customer for the A380, with 58 orders of which 54 are outstanding. The airline is also the top customer for Airbus’s A350, with 70 on order. Old Jets The U.S. industry, which kept out of the market for the last five years, has the oldest fleets in the world, and will need new planes and eventually return to the market, he said. Only one or two carriers are likely to place any orders of significance in the next year, Gallois predicted. What looks like a recovery to some may turn out to be only the first reprieve from another dip, Gallois said, as the industry undergoes a cycle that matches the shape of a W. “We’ll see,” Gallois said. “It’s difficult to have a firm assessment and we have to be ready to face all scenarios”. To contact the reporter on this story: Andrea Rothman in Paris at aerothman@bloomberg.net

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S&P 500 Approaches 200-Month Moving Average in Warning: Technical Analysis

August 27, 2009

By Robert Tuttle Aug. 27 (Bloomberg) — A decline in the Standard & Poor’s 500 Index below its 200-month average would probably signal an additional slump of as much as 6.5 percent, according to Chicago-based Technical Analytics Inc. The measure finished at 1,028.12 yesterday. That’s 1.2 percent more than 1,015.58, its average close on the 26th day of the past 200 months, according to data compiled by Bloomberg. Falling below that level would presage a drop to about 990, said Al Bicoff , the president of Technical Analytics. If that is breached, the S&P 500 might slip to 950, he added. The S&P 500 plunged 25 percent from the start of the year through March 9 before rallying 52 percent in the steepest advance since the Great Depression. The index has traded higher than its 200-day moving average since July 13 and rose 17 percent above it yesterday, the most since April 1999. That distance has increased the importance of the 200-month average, which is less studied by analysts, Bicoff said. “You have to look at the bigger picture now,” Bicoff said. “You are way above the 200-day now. The 200-day doesn’t have any significance at these price levels.” The S&P 500’s current 200-month moving average is also significant because it’s near 1,014.14, the so-called 38.2 percent retracement level for the bear market that began in October 2007, Bicoff said. Fibonacci analysts, who use a system pioneered by 13th-century mathematician Leonardo Pisano, make forecasts based on how an index performs when it recovers 38.2 percent or 61.8 percent of a retreat. To contact the reporter on this story: Robert Tuttle in Doha, Qatar at rtuttle@bloomberg.net .

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U.A.E., Qatari Shares Advance as Oil Climbs to 10-Month High; Emaar Gains

August 23, 2009

By Vivian Salama Aug. 23 (Bloomberg) — United Arab Emirates and Qatari shares gained as oil rose to its highest level since October as equity markets rallied on speculation the global recession may be easing. The Dubai Financial Market General Index climbed 2.5 percent, the most since Aug. 18. Abu Dhabi’s index added 1 percent and Qatar’s DSM 20 Index increased 2.3 percent, the most since July 26. “This is a huge reversal,” said Akram Annous , deputy fund manager at Al Mal Capital PSC, citing oil prices of about $65 a barrel a week ago. “Investors are buying on the fact that last Monday, the concept was that markets were going to collapse, but then the U.S. flipped its nose up and turned things around.” Oil, which surged 1.9 percent to $73.89 a barrel, and the Standard & Poor’s 500 Index, which also climbed 1.9 percent, were at their highest levels since October after July existing- home sales in the U.S. increased more than expected. The rise in oil prices from a December low of $32.40 has helped Gulf markets bounce back from the worst financial crisis since the 1930s, pushing Saudi Arabia’s and Dubai’s indexes up 19 and 13 percent this year, respectively. The six nations of the Gulf Cooperation Council together supply about 20 percent of the world’s oil. Emaar Properties PJSC , the U.A.E.’s largest developer, advanced 4.3 percent to 3.15 dirhams, the highest level since Aug. 16. Abu Dhabi National Energy Co., the state-controlled power and oil producer known as Taqa, climbed 1.8 percent to 1.66 dirhams, its highest level since Aug. 16. Taqa signed an agreement with OAO Gazprom, Russia’s gas export monopoly, for gas storage services at the Bergermeer storage site in the Netherlands. Qatar Telecom QSC , which provides phone services from North Africa to Asia, gained 4.1 percent, to 144 riyals, the most since July 15. The company said its $1.5 billion of so-called forward-start loans are in general syndication. Saudi Arabia’s Tadawul All Share Index fell 0.8 percent to 5,706.68 at 1:56 p.m. in the kingdom. Oman’s MSM30 Index added 1.7 percent, while the Kuwait Stock Exchange gained 0.5 percent. Bahrain advanced 0.4 percent. To contact the reporter on this story: Vivian Salama in Dubai vsalama@bloomberg.net

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Qantas’s Joyce Leans on Budget Background to Cut Costs as Air Travel Sags

August 20, 2009

By Robert Fenner and Shani Raja Aug. 20 (Bloomberg) — Qantas Airways Ltd. ’s Alan Joyce , who founded the carrier’s low-cost unit before becoming chief executive officer, aims to slash A$1.5 billion ($1.2 billion) in costs at Australia’s biggest airline without hurting its brand. Joyce outlined Qantas’s most ambitious savings program since 2004 yesterday after the airline posted its first loss in six years. He said he could do it without depriving passengers of in-flight magazines, food or blankets on long-haul flights . “We don’t see an impact on what we deliver to the customer,” 43-year-old Joyce said in an interview. “In fact we are going to invest in more lounges and new aircraft types.” His challenge will be to merge the service quality of a premium airline with the efficiency of a budget carrier without denting the 89-year-old company’s image. Qantas faces rising competition for business-class passengers from Singapore Airlines Ltd. and Cathay Pacific Airways Ltd. after premium travel demand plunged 21 percent in June. “They don’t want to open themselves up to eliminating the difference between the Qantas brand and others,” said Angus Gluskie , who manages about $300 million at White Funds Management Pty. in Sydney. “They need to be smart about what they target.” Four Star Carrier Qantas shares have risen 14 percent since Joyce, the former head of its Jetstar discount carrier, succeeded Geoff Dixon in November and stepped up efforts to reduce costs. The carrier fell 1.9 percent to A$2.64 at the close of trading in Sydney. The stock has risen less than 1 percent this year, compared with an 18 percent rise in the benchmark S&P/ASX 200 index. Joyce, posting his first full-year results for the airline as CEO, yesterday said he will deliver a third of the A$1.5 billion in savings this year, cutting fuel use by reducing taxi times, flying more direct routes and using new planes such as the Airbus SAS A380. He expects to deliver the savings while expanding business- class amenities and a loyalty program to retain corporate customers, his most profitable clients. Qantas carries a four-star rating from London-based Skytrax Research , ranking alongside All Nippon Airways Co. and British Airways Plc. It trails behind five-star airlines including Cathay, Singapore Air and Qatar Airways Ltd. “It’s important for airlines to keep their brand in place, to keep the premium end of the market,” said Peter Harbison , executive chairman of the Centre for Asia Pacific Aviation, an industry consulting company. “The brand is very important at the moment.” Jetstar Joyce sees immediate savings valued at about A$100 million from renegotiating contracts with suppliers and vendors including computer-services providers. Information-technology spending, currently 3.8 percent of annual revenue for the Qantas-branded carrier, will move closer to the 1 percent Jetstar spends, Joyce said. Jetstar yesterday posted a 4.9 percent rise in earnings to A$107 million as budget-conscious passengers switched from Qantas’s full-service carrier. It was the only part of company’s flying operations to grow passengers, sales and earnings in the past year. The budget carrier today said it will add a new route on Dec. 15 from Singapore to Phuket, Thailand, and additional flights from Singapore to Manila. It also intends to fly to mainland China, it said in a statement. The Qantas unit has copied Jetstar by adopting touches such as charging passengers a fee to book an exit-row seat with extra leg-room. Joyce now also plans to introduce text-message check- in for Qantas, allowing customers to go straight to the gate, reducing the need for staff at counters. For other cost-saving measures, Joyce will need the cooperation of airports and air-traffic controllers. These include reducing the amount of time planes spend on the tarmac with their engines running and flying more direct routes using new satellite-navigation systems. “It gives a good customer outcome because it gets customers there faster and more than likely on time,” Joyce said. “By working with air-traffic control and working with the airports we can leverage technology like that.” To contact the reporter on this story: Robert Fenner in Sydney rfenner@bloomberg.net ; Shani Raja in Sydney at sraja4@bloomberg.net .

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Qantas’s Joyce Uses Budget Background to Cut Costs Without Damaging Brand

August 19, 2009

By Robert Fenner and Shani Raja Aug. 20 (Bloomberg) — Qantas Airways Ltd. ’s Alan Joyce , who founded the carrier’s low-cost unit before becoming chief executive officer, aims to slash A$1.5 billion ($1.2 billion) in costs at Australia’s biggest airline without hurting its brand. Joyce outlined Qantas’s most ambitious savings program since 2004 yesterday after the airline posted its first loss in six years. He said he could do it without depriving passengers of in-flight magazines, food or blankets on long-haul flights . “We don’t see an impact on what we deliver to the customer,” 43-year-old Joyce said in an interview. “In fact we are going to invest in more lounges and new aircraft types.” His challenge will be to merge the service quality of a premium airline with the efficiency of a budget carrier without denting the 89-year-old company’s image. Qantas faces rising competition for business-class passengers from Singapore Airlines Ltd. and Cathay Pacific Airways Ltd. after premium travel demand plunged 21 percent in June. “They don’t want to open themselves up to eliminating the difference between the Qantas brand and others,” said Angus Gluskie , who manages about $300 million at White Funds Management Pty. in Sydney. “They need to be smart about what they target.” Shares Rise Qantas shares have risen 14 percent since Joyce, the former head of its Jetstar discount carrier, succeeded Geoff Dixon in November and stepped up efforts to reduce costs. The carrier’s shares rose 9 cents, or 3.5 percent, to A$2.69 yesterday in Sydney, their highest level since Nov. 11. The stock has gained 2.3 percent this year, compared with an 18 percent rise in the benchmark S&P/ASX 200 index. Joyce, posting his first full-year results for the airline as CEO, yesterday said he will deliver a third of the A$1.5 billion in savings this year, cutting fuel use by reducing taxi times, flying more direct routes and using new planes such as the Airbus SAS A380. He expects to deliver the savings while expanding business- class amenities and a loyalty program to retain corporate customers, his most profitable clients. Qantas carries a four-star rating from London-based Skytrax Research , ranking alongside All Nippon Airways Co. and British Airways Plc. It trails behind five-star airlines including Cathay, Singapore Air and Qatar Airways Ltd. “It’s important for airlines to keep their brand in place, to keep the premium end of the market,” said Peter Harbison , executive chairman of the Centre for Asia Pacific Aviation, an industry consulting company. “The brand is very important at the moment.” Immediate Savings Joyce sees immediate savings valued at about A$100 million from renegotiating contracts with suppliers and vendors including computer-services providers. Information-technology spending, currently 3.8 percent of annual revenue for the Qantas-branded carrier, will move closer to the 1 percent Jetstar spends, Joyce said. Jetstar yesterday posted a 4.9 percent rise in earnings to A$107 million as budget-conscious passengers switched from Qantas’s full-service carrier. It was the only part of company’s flying operations to grow passengers, sales and earnings in the past year. The Qantas unit has copied Jetstar by adopting touches such as charging passengers a fee to book an exit-row seat with extra leg-room. Joyce now also plans to introduce text-message check- in for Qantas, allowing customers to go straight to the gate, reducing the need for staff at counters. For other cost-saving measures, Joyce will need the cooperation of airports and air-traffic controllers. These include reducing the amount of time planes spend on the tarmac with their engines running and flying more direct routes using new satellite-navigation systems. “It gives a good customer outcome because it gets customers there faster and more than likely on time,” Joyce said. “By working with air-traffic control and working with the airports we can leverage technology like that.” To contact the reporter on this story: Robert Fenner in Sydney rfenner@bloomberg.net ; Shani Raja in Sydney at sraja4@bloomberg.net .

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