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Triple Crunch Log                                                                                                            

BarCap to slash several hundred jobs in cost-cuts following a sharp fall in market activity in the second quarter. FT: “It is also likely to raise questions about BarCap’s aggressive expansion in recent years under the leadership of Bob Diamond. The investment bank generated more than 80 per cent of Barclays’ pre-tax profits in the first half of the year, in spite of a slowdown in activity amid volatile markets and fears of a sovereign debt crisis in Europe. … BarCap has added almost 4,000 staff since last June – bringing its total headcount to 25,500 – in its drive to join the ranks of the world’s leading investment banks. That growth, however, has come at a price, with first-half salary and bonus costs across the Barclays group running at nearly £5bn, £1bn higher than the same period in 2009. Most of that growth is attributable to BarCap.”699

India to list its state-owned coal mining company by October.  FT: “Indian companies have sold $17.5bn of shares in 93 deals this year, the highest value since 2007 when they offered $22.8bn of shares in IPOs, according to Dealogic, the data company. This year’s total makes India the second highest issuer of shares among emerging economies after China, whose companies have issued stock worth $85.5bn. The Indian government, which wants to divest stakes in state-owned companies to raise money to counter its rising fiscal deficit, has led the charge. …. Coal India claims to be the largest coal producer in the world, accounting for 85 per cent of Indian output. India has the world’s fourth largest coal reserves.”700

11.8.10. World equities slide as markets shun risk and investors seek safety of government bonds. The deteriorating outlook for economic growth, led by the US, is fanning an aversion for holding risky assets. Bond yields in Germany and the US touch record lows.

Youth unemployment hits record high, a report by the International Labour Organisation shows.  Young people worldwide continue to be hardest hit by recession. Of around 620 million economically active 15 to 24-year-olds, 81 million were unemployed at the end of 2009, the highest number since records began in 1991, the UN agency says. That put the global youth unemployment rate at 13%, up from 11.9% just before the global downturn in 2007.701

Tropical storm forces BP to halt relief well drilling. The bottom kill (pumping of cement to permanently seal the hole top and bottom) can only be started after the storm passes, in a few days time.702

BP revenues to secure $20bn fund for damages with US production revenues, which account for about a quarter of its annual output, as collateral. FT: “The deal provides the British oil group with some certainty by giving the US government an incentive to allow it to continue existing operations. … The company’s largest single-producing region in the US is the Gulf of Mexico, where it operates 89 producing wells and has a share in 60 others. No oil has leaked into the gulf since the well was capped on July 15, although BP is still trying to seal it permanently – the spotlight has fallen on compensation.” Public Citizen writes to the President: “The proposal would inhibit the government’s ongoing criminal probes of the company. The government would be reluctant to mete out harsh sanctions to BP – such as banning the company from federal leases in the gulf – if the victims’ fund relies on BP revenue from the gulf.”703

BP share price remains becalmed after closure of the Macondo disaster. FT Lex: “The group has announced a $32bn charge against the cost of the incident, a new chief executive from October 1, and plans to dispose of up to $23bn of assets on top of last month’s $7bn sale to Apache. The news on the scale of the damagee has been good, and the tide of reputation-sapping developments seems to have turned. BP can begin to reinvent itself. So why is its share price becalmed? … The price fell 54 per cent between April 20 and the trading low on June 25. Since then the stock has only regained about one-third of that. The rise since July 27, when BP announced the charge as well as Tony Hayward’s replacement by Bob Dudley, has been a paltry 4 per cent.”

Spill claims will test limits of BP’s liability, law experts claim. David Logan, professor at the Roger Williams University school of law: “It’s certainly going to put one person at the centre of a series of decisions that to some extent might shape the future of the oil and gas industry in the domestic waters of the US.” FT: “Mr Barbier’s appointment appears on the surface to be bad news for BP, which had tried to get the judge to recuse himself from the case because of his former holdings of bonds issued by Transocean, the Deepwater Horizon’s owner, and Halliburton, a contractor on the rig. Mr Barbier sold the holdings and declined to stand down on the grounds that the bonds did not represent an ownership interest, a decision backed by the Court of Appeals.”704

Mexico’s deep-water drilling: hopefully not in BP’s footsteps. In April 2011, Mexico plans to drill a well 2,600 metres deep in its part of the gulf: a well more than twice as deep as Pemex has ever drilled before, showing how much pressure the company is under to develop deep-water reserves. Cantarell once produced more than 2m barrels a day of crude; now it yeilds less than 600,000. FT: “And, other than deep water, no major possibilities are, shall we say, on the horizon. Development of the onshore Chicontepec basin, once hyped by Pemex, has so far produced dismal results.” A Mexican government official expresses doubt that if BP can hit trouble in Macondo, what price Pemex, drilling even deeper?705

IEA warns Gulf spill effect has put the oil industry’s ability to find enough new oil “on a knife edge.” “Some 30 per cent of existing global oil, and nearly 50 per cent of new supplies by 2015, needs to be sourced from offshore, much of it from deep water,” the IEA says in its monthly oil market report. “Operating and regulatory standards may be tightened, and sensitive frontier areas may see permitting delays.” The IEA adds that “fortunately” few oil-rich countries’ governments were considering blanket bans on deepwater development. “Greater detail on the impact of drilling restrictions in the Gulf has led us to hike our estimate of potentially ‘lost’ oil production to 60,000 barrels a day in 2010, rising to 100,000 b/d in 2011.” World oil demand in 2010 is forecast to average 86.6m barrels a day and 87.9m b/d in 2011, a small increase on earlier predictions.706

Eon warns German government to live up to election pledge to extend life of nuclear stations. FT: “Berlin wants to prolong the phase-out of nuclear energy beyond 2021 – the date set by the leftist coalition of Social Democrats and Greens a decade ago – and use windfall profits to speed up the introduction of renewable energy. But chancellor Angela Merkel’s Christian Democrats are split over whether to grant only limited lifetime extensions, from an average of 32 to about 40 years, or whether to raise the limit closer to the international average of 60 years.707

Widening Pakistan flood disaster dwarfs aid efforts, which have still reached only a tiny fraction of an estimated 14m people hit by the floods. FT: “Flying over Swat gives a glimpse of the scale: it is as if a giant

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