Turmoil in financial markets, slower growth in high-income countries, and rising inflation have all adversely affected growth prospects for developing countries over the near term. Most countries have shown impressive resilience in this turbulent environment, and growth for developing countries as a group is expected to moderate from 7.8% in 2007 to a still strong 6.5% in 2008. However, vulnerable countries that depend on foreign capital flows are likely to experience a sharper slowdown. Moreover, despite strong production growth at the aggregate level, higher food and energy prices have caused real incomes to decline, significantly increasing the hardships faced by the very poor, particularly in urban centers.
A recent article in the Wall Street Journal noted that if one were to examine the historical performance of the S&P 500, one would find that the stock market is trading at the same level at which it was doing so nine years ago. Commodities markets, on the other hand, have been in a bull trend. Some of the major drivers that have contributed in this stupendous growth of commodity markets globally are
- Increasing influence of Asian demand, particularly from rapidly industrializing China and India
- Increase in commodities prices in international markets as a result of demand growth, reinforced by tight supply capacities, tense geopolitical conditions (especially with respect to the oil market) and intense speculative activity
- With the rise in prices of crude oil, metals and minerals, commodity prices reached record historical levels in nominal terms in 2006, which increased by more than 30% between 2005 and 2006 (and by 80% from 2000 to 2006).
- Numerous developing countries rely on commodities for export revenues, and commodity production and trade provide employment for more than 2.5 billion people worldwide.
- The considerable rise in prices has had an impact on incomes of developing countries. It is estimated that extra revenues resulting from commodity exports were around 6.7 percentage points of GDP for oil-exporting countries and about 3 percentage points for countries exporting mining products.
- Increases in demand from developing countries stimulated by a particularly vigorous commodity consumption per unit of GDP compared to that of developed countries, faster economic growth, and increasing population
- "Globalization" of securities and commodities markets
- Baby boomers are in the middle of their peak savings years and have been one of the major causes of huge inflows of money into the stock market and into mutual funds.
- The increased use of food crops for production of bio-fuels is an important factor that led to large increases in the prices of vegetable oils and grains in 2007, which in turn contributed to an overall 15 percent increase in the index of agricultural prices and a 20 percent rise in food prices.
- The prices of metals have increased more than other commodity prices over the last four years, largely because of an especially strong demand in China.
- Shortages of equipment and skilled workers have significantly increased development costs, and ore grades are deteriorating.
The report on “Indian Commodities Trading Market” offers an in-depth analysis of the Global Commodities Trading Market vis-à-vis the Indian Commodities Trading Market. It discusses the overall structure of the Global Commodities Market as well as Indian Commodities Market from an insider perspective and provides a comprehensive study on macro and micro factors driving the growth of this market.
The report furnishes up-to-date facts and figures following meticulous observation with an aim to provide you with real insights into the commodity trading market as it stands today; the knowledge one needs to stand out and make informed decisions. The expanse of such insights into the past and present scenario percolates down to every known commodity currently traded. A conscious effort has been made to provide an overview of all there is to know and know of in the volatile market whilst a detailed product-wise and segment-wise is used in conjunction to expand. Taking into account that Price and Risk being the key drivers of the market, the report presents an exclusive section which maps price growth trend behaviour, factors triggering such behaviour, tracking relative performance of commodities , effects on the market players directly or indirectly using composite indexes from leading sources, the use of various hedging tools such as forwards and options and the relative performance in comparison, the implication and significance of the various regulatory bodies, commissions and statutory acts to highlight a few.
Table of Contents
Section I: Commodities Trading – An Overview
1. How Commodities Market Evolved – Historical Perspective
2. How Commodities Trading Market Works
2.1 Involved Parties
2.2 Types of Contracts
2.3 Participants in derivative contracts
2.4 Trading Techniques in Commodities Market
2.4.1 Ready Delivery Market
2.4.2 Specific Delivery Market
2.4.3 Futures Market
2.4.4 Auction Market
2.5 Requirement & Benefits of Commodity Derivatives
Section II: Commodities Market – An Analysis
1. Global Commodities Market – An Overview
1.1 Commodities Trading vis-à-vis Role of Investment Banks
1.1.1 Barclays Capital Commodities - Profile
1.1.2 BNP Paribas Commodity Futures – Profile
1.1.3 Citi Global Commodities – Profile
1.1.4 DB Commodity Services LLC - Profile
1.1.5 Goldman Sachs Commodities – Profile
1.1.6 J.P. Morgan’s Global Commodities Group – Profile
1.1.7 Merrill Lynch Global Commodities (MLCI) - Profile
1.1.8 UBS's Commodities Group
1.2 Energy Trading vis-à-vis Energy Trading In-house Divisions
1.2.1 RBS Sempra Commodities
1.2.2 Chevron’s Supply & Trading
1.2.3 LITASCO (LUKOIL International Trading and Supply Company)
1.2.4 Koch Supply & Trading
1.2.5 AEP Energy Services (Subsidiary of American Electric Power Company, Inc.)
1.2.6 Duke Energy Trading and Marketing (DETM)
1.2.7 Shell Trading (US) Company
1.2.8 Reliant Energy Securities & Commodities Trading Center
1.3 Commodity ETFs and ETNs
1.4 Commodity Trading vis-à-vis Sovereign Wealth Funds (SWFs)
1.4.1 History of SWFs
1.4.2 Driving Factors, Issues, Trends & Opportunities
1.4.3 Sources of Capital
1.4.4 How & where the money is invested – Market Size & Projections
1.4.5 Fund Rankings: Largest Funds by Assets under Management
2. Global Commodities Market Analysis
2.1 Global Commodities Market Size & Forecast
2.2 Commodity Market Profiles – Quick Points (Profile, Producers, Consumers, Largest Markets, Price Performance & Top Companies)
2.2.1 Aluminium Market
2.2.2 Cocoa Market
2.2.3 Coffee Market
2.2.4 Copper Market
2.2.5 Cotton Market
2.2.6 Gold Market
2.2.7 Nickel Market
2.3 Global Commodities Indexes – Performance Analysis
2.3.1 Dow Jones - AIG Commodity Indices
2.3.2 Merrill Lynch Commodity index eXtra (MLCX)
2.3.3 S&P GSCI™ Composite Index
2.3.4 Reuters/Jefferies-CRB® Indices
3. Issues, Trends & Opportunities
3.1 Impact of higher commodity prices
3.2 Movement of oil prices
3.3 Performance of agriculture commodities
3.4 Companies turn to top derivatives dealers for help in hedging
3.5 Carbon to be the biggest global commodity market by 2012
3.6 Renewed interest from investors
3.7 More sophisticated tools & platforms
3.8 Investment banks are major players
3.9 ETFs, changing the equation of Commodities Investment
3.10 China – Major Demand Driver of Global Commodities
3.11 Macro-Economic Driving Factors
3.12 Factors affecting pricing of base metals
3.12.1 Lead (75% y-o-y growth)
3.12.2 Tin (66% y-o-y growth)
3.12.3 Zinc (40% y-o-y decline)
3.12.4 Nickel (4% y-o-y decline)
Section III: Indian Commodities Trading Market
1. Indian Commodities Market – An Overview
2. Indian Commodities Market Size – An Analysis
2.1 MCX vs. SENSEX – A Comparative Analysis
3. Indian Commodities Market – Performance Analysis
3.1 Aluminium Market – Future Contract Value (Jan 07 – Jul 08)
3.2 Coffee Market – Robusta Futures Contract Value (Jan 07 – Aug 08)
3.3 Copper Market – Copper Futures Contract Value (Jan 07 – Jul 08)
3.5 Crude Oil Market – Crude Oil Futures Contract Value (Jan 07 - Aug 08)
3.6 Gold Market – Futures Contract Value (Jan 07 – Aug 08)
3.7 Chana (Chickpea) Market – Futures Contract Value (Jan 07 – May 08)
3.8 Nickel Market – Futures Contract Value (Jan 07 – Jul 08)
3.9 Zinc Market – Futures Contract Value (Jan 07 – Jul 08)
3.10 Lead Market – Price Performance (Jan 07 – Aug 08)
3.11 Cardamom Market – Futures Contract Value (Jan 07 – Jul 08)
3.12 Jeera (Cumin Seed) Market – Futures Contract Value (Jan 07 – Jul 08)
3.13 Lead Market – Futures Contract Value (Jan 07 – Jul 08)
3.14 Mentha Oil Market – Futures Contract Value (Jan 07 – Jul 08)
3.15 Natural Gas Market – Futures Contract Value (Jan 07 – Jul 08)
4. Government Regulations, Initiatives and Reforms
4.1 Setting up a Committee on Role of Futures Trading in 1993
4.2 Setting up of Forward Market Commission in 1953
4.3 Forward Contracts (Regulation) Act, 1952
4.4 Forward Contracts (Regulation) Amendment Bill, 2006
4.5 Forward Contracts (Regulation) Amendment Ordinance, 2008
4.6 Commodities Trading Tax
4.7 Import duty cut & export duty hike in Metals industry
5. Issues, Trends & Opportunities
5.1 Commodity Trends: Hurt by economic slowdown
5.2 Multi Commodity Exchange (MCX) launched currency futures trading
5.2 Hedging ban a slow political process to kill futures market
5.3 Commodity investment goes retail
5.4 Unresolved Issues and Future Prospects
5.5 Scrap now being considered a waste commodity
5.6 Commodity and Equity Markets have been moving in tandem
5.7 Indian Bt Cotton to hit market soon
5.8 Warehousing to take giant leap in India
List of Charts
Chart 1: Mode of Financing in Commodities Trading
Chart 2: Business Operations Model of a Trading Process in a Commodity Exchange
Chart 3: SWFs Market Projections (2007-2012)
Chart 4: Comparison of AUM of SWFs and Asset Managers, Private Equity and Hedge Funds ($ billions)
Chart 5: Sovereign Wealth Fund Deal Volume (1997-2007)
Chart 6: Sector-wise growth: Exchange trade of commodity derivatives by volume (03-06)
Chart 7: World’s leading Commodity Exchanges in developing countries – 2006 Contracts ($millions)
Chart 8: Major base metal commodity exchanges & emerging markets
Chart 9: Base Metal Price Trend – 2006 vs. Present Price
Chart 10: Cocoa Monthly Averages of Daily Prices (Oct 07- Oct 08)
Chart 11: ICO Indicator Prices - Annual & Monthly Averages (1998 to 2008)
Chart 12: Global Cotton Average Price Trend ("A" Index (cents/pound)) – 1988 -2008
Chart 13: Merrill Lynch Commodity index eXtra (MLCX) - Commodity Weightings
Chart 14: MLCX Weights as of January 2008
Chart 15: MLCXTR outperformance vs. SPGCCITR & DJAIGTR
Chart 16: Reuters/Jefferies CRB® Total Return Index: Jan 82 – Sep 08 (monthly close)
Chart 17: Forecast of China's Share of the Growth in Demand for Global Commodities- 2009
Chart 18: Types of Commodities Traded in India
Chart 19: MCX vs. SENSEX – Comparative Analysis (Jan 06-Sep 08)
Chart 20: India's Aluminium Futures Contract in Value (Rs. Crore) (Jan 07 – Jul 08)
Chart 21: India's Coffee Robusta Futures Contract in Value (Rs. Lakhs) (Jan 07 – Aug 08)
Chart 22: India's Copper Futures Contract in Value (Rs. Crore)
Chart 23: India's Crude Oil Futures Contract in Value (Rs. Crore)
Chart 24: India's Gold (1Kg) Futures Contract in Value (Rs. Crore)
Chart 25: India's Gold (100g) Futures contract in Value (Rs. Crore)
Chart 26: India's Chana (Chickpea) Futures Contract in Value (Rs. Crore)
Chart 27: India's Nickel Futures Contract in Value (Rs. Crore)
Chart 28: India's Zinc Futures Contract in Value (Rs. Crore)
Chart 29: India's Lead Futures Contract in Value (Rs. Crore)
Chart 30: India's Cardamom Futures Contract in Value (Rs. Crore)
Chart 31: India's Jeera (Cumin Seed) Futures Contract in Value (Rs. Lakhs)
Chart 32: India's Lead Futures Contract in Value (Rs. Crore)
Chart 33: India's Mentha Oil Futures Contract in Value (Rs. Crore)
Chart 34: India's Natural Gas Futures Contract in Value (Rs. Crore)
List of Tables
Table 1: The Global Economic Outlook (2006-2010)
Table 2: Major Global Commodity Exchanges
Table 3: Major Asian Commodity Exchanges
Table 4: Major European Commodity Exchanges
Table 5: Commodity Traders – List of top banks, Financial Institutions & other top companies
Table 6: Fund Rankings: Largest Funds by Assets under Management
Table 7: Global Commodity Prices – Monthly & Yearly Averages (Jan 06 - Sep 08)
Table 8: Commodity Forecast Nominal Prices (2007-2020)
Table 9: World Cocoa Market Estimates (in million metric tons) – 2002-2008
Table 10: ICO Indicator Prices - Annual & Monthly Averages (1998 to 2008)
Table 11: Global Cotton Average Price Trend ("A" Index (cents/pound)) – 1988 -2008
Table 12: Comparison of Commodity Indexes
Table 13: Dow Jones AIG Total Return Performance %
Table 14: Dow Jones AIG Excess Return Performance %
Table 15: Dow Jones AIG Yearly Returns (1990-2008)
Table 16: DJGI AIG Commodity Index - Commodity Weightings
Table 17: Merrill Lynch Commodity index eXtra (MLCX) - Commodity Weightings
Table 18: S&P GSCI™ Components and Dollar Weights (%)
Table 19: S&P GSCI™ Index Values
Table 20: Commodity Exchanges in India
Table 21: Trend of Commodities in National Commodity & Derivatives Exchange (Oct 08)
Table 22: Trend of Commodities in Multi Commodity Exchange of India (Oct 08)
Table 23: Trend of Metals in Multi Commodity Exchange of India (MCX) and National Commodity & Derivatives Exchange (NCDEX) (Oct 08)
Table 24: Trend of Oil Commodities traded in NYMEX (Oct 08)
Table 25: Trend of Metal commodities traded in NYMEX (Oct 08)
Pages: 186
Showing posts with label Energy Sector. Show all posts
Showing posts with label Energy Sector. Show all posts
Thursday, November 13, 2008
Tuesday, July 29, 2008
N-deal spins off 100,000 new jobs
One of the spin offs of the India-U.S. civil nuclear deal coming through will be the creation of 100,000 new jobs for the 30-odd reactors that India hopes to set up to meet its nuclear power deadline of 20,000 MW by 2020, experts say. Congress MP Rahul Gandhi highlighted the fillip the deal is expected to give to employment generation and the energy sector. Interacting with students of Ravindra Bharati in Hyderabad on Saturday, Gandhi said: "The nuclear deal means millions and millions of jobs, and lights in the houses of the poor in this country."
Union Minister of State for Commerce and Power Jairam Ramesh, visiting the Department of Atomic Energy (DAE)'s Kalpakkam campus in Tamil Nadu, said: "Nearly 10,000 MW of nuclear power would be generated from indigenous reactors, 8,000 MW from light water reactors and 2,000 MW from Fast Breeder Reactors (FBR)."
Thousands of engineers, technicians and scientists would be needed to run these establishments, he underlined. "India's 17 nuclear reactors have the capacity to generate 4,120 MW, but in 2007 they could produce only 1,800 MW due to lack of fuel," Ramesh said. By 2020, India is likely to import six light water reactors while six nuclear plants are under construction to beef up generation capacity, said Nuclear Power Corporation of India Ltd Technical Director S.A. Bhardwaj. The total expansion is valued at nearly $300 billion.
"India's Department of Atomic Energy employs about 70,000 experts today," M.R. Srinivasan, former chairperson of the Atomic Energy Commission, told the media at a function in Kalpakkam. The new nuclear power plants on the cards are expected to create at least a 100,000 new jobs in India, experts say. Not just in India, the nuclear deal is expected to give a fillip to the industry in the US also.
In 2007, Ron Somers, president of the US-India Business Council, supporting the Indo-US Nuclear Cooperation Agreement, said: "The deal would create 27,000 high-quality jobs a year for the next 10 years in the US nuclear industry." To strengthen research at universities, the DAE is providing grants for projects through the Board of Research in Nuclear Sciences. The DAE Graduate Fellowship Scheme for the Indian Institutes of Technology (IITs) has been in place since 2002 to promote collaborative research through postgraduate students.
IIT-Kanpur offers a course in nuclear engineering and technology, now IIT-Madras has also decided to offer a similar course from the 2009 academic session. The country's premier institute for nuclear studies and research - The Homi Bhabha National Institute - will provide the necessary guides and teaching staff. India has two hubs for advanced studies in nuclear technology - Mumbai and Kalpakkam. The Mumbai-based Bhabha Institute unifies 10 institutions, four premier centres and six autonomous institutes, each with a research-driven framework.
Bhabha Institute also includes DAE's top research institute, The Bhabha Atomic Research Centre where old horses of the '80s, the Cirus and Dhruva reactors, are still kept going. DAE's other research institute is the Indira Gandhi Centre for Atomic Research (IGCAR), which was set up in 1971.
"The IGCAR has an open door policy for any student keen on science," says institute director Baldev Raj."The IGCAR has tried to strike a balance between networking with institutions with expertise and collaborating with academia for harvesting fresh thoughts," he added. According to the Nuclear Energy Institute, 30 countries worldwide are operating 439 reactors for electricity generation and 34 new nuclear plants were under construction in 14 countries.
Sources: IANS and Silicon India
Union Minister of State for Commerce and Power Jairam Ramesh, visiting the Department of Atomic Energy (DAE)'s Kalpakkam campus in Tamil Nadu, said: "Nearly 10,000 MW of nuclear power would be generated from indigenous reactors, 8,000 MW from light water reactors and 2,000 MW from Fast Breeder Reactors (FBR)."
Thousands of engineers, technicians and scientists would be needed to run these establishments, he underlined. "India's 17 nuclear reactors have the capacity to generate 4,120 MW, but in 2007 they could produce only 1,800 MW due to lack of fuel," Ramesh said. By 2020, India is likely to import six light water reactors while six nuclear plants are under construction to beef up generation capacity, said Nuclear Power Corporation of India Ltd Technical Director S.A. Bhardwaj. The total expansion is valued at nearly $300 billion.
"India's Department of Atomic Energy employs about 70,000 experts today," M.R. Srinivasan, former chairperson of the Atomic Energy Commission, told the media at a function in Kalpakkam. The new nuclear power plants on the cards are expected to create at least a 100,000 new jobs in India, experts say. Not just in India, the nuclear deal is expected to give a fillip to the industry in the US also.
In 2007, Ron Somers, president of the US-India Business Council, supporting the Indo-US Nuclear Cooperation Agreement, said: "The deal would create 27,000 high-quality jobs a year for the next 10 years in the US nuclear industry." To strengthen research at universities, the DAE is providing grants for projects through the Board of Research in Nuclear Sciences. The DAE Graduate Fellowship Scheme for the Indian Institutes of Technology (IITs) has been in place since 2002 to promote collaborative research through postgraduate students.
IIT-Kanpur offers a course in nuclear engineering and technology, now IIT-Madras has also decided to offer a similar course from the 2009 academic session. The country's premier institute for nuclear studies and research - The Homi Bhabha National Institute - will provide the necessary guides and teaching staff. India has two hubs for advanced studies in nuclear technology - Mumbai and Kalpakkam. The Mumbai-based Bhabha Institute unifies 10 institutions, four premier centres and six autonomous institutes, each with a research-driven framework.
Bhabha Institute also includes DAE's top research institute, The Bhabha Atomic Research Centre where old horses of the '80s, the Cirus and Dhruva reactors, are still kept going. DAE's other research institute is the Indira Gandhi Centre for Atomic Research (IGCAR), which was set up in 1971.
"The IGCAR has an open door policy for any student keen on science," says institute director Baldev Raj."The IGCAR has tried to strike a balance between networking with institutions with expertise and collaborating with academia for harvesting fresh thoughts," he added. According to the Nuclear Energy Institute, 30 countries worldwide are operating 439 reactors for electricity generation and 34 new nuclear plants were under construction in 14 countries.
Sources: IANS and Silicon India
Tuesday, June 5, 2007
Top 25 Supply Chain Models
AMR Research released its annual Supply Chain Top 25 report. The report identifies the top 25 manufacturers and retailers that exhibit superior supply chain capabilities and performance. The companies in this report demonstrate excellence across basic metrics related to execution - return on assets, revenue growth, and inventory turns - and are recognized by their peers and AMR Research as supply chain leaders. In this year's list, Nokia, Apple and P&G are at the top three of the list. Others in the list of top 25 include Motorola (12), Johnson & Johnson (14), Nike (18), GSK (20) and HP (21). AMR Research analysis also shows that supply chain leadership translates into stronger market performance. Consistently, the Supply Chain Top 25 as a whole has outperformed the Dow Jones Industrial Average, the S&P 500, and the NASDAQ.
Following is the list of Top 25 Companies with Best Supply Chain Models:
To read the entire article, please visit:
http://www.amrresearch.com/Content/View.asp?pmillid=20450
Following is the list of Top 25 Companies with Best Supply Chain Models:
To read the entire article, please visit:
http://www.amrresearch.com/Content/View.asp?pmillid=20450
Monday, April 30, 2007
Now Mittal is eyeing the Oil Industry
Excerpts sourced from Wall Street Journal
Lakshmi Mittal, the global steel business giant, is setting his sights on another elemental commodity: oil. Some of the strategic initiatives by him in the recent times validate this statement:
# In the past year, the London mogul's private investment company, Mittal Investments, has joined with India's state-owned Oil & Natural Gas Corp. for several overseas joint ventures in oil field exploration.
# It also has teamed with large oil firms in Russia and France to develop reserves in Africa and Asia.
# Last year in Nigeria, ONGC and Mittal successfully bid for promising and sought-after oil-exploration acreage. Part of their pitch: a commitment to invest some $6-billion (U.S.) to build, among other things, a refinery, a power plant and a railroad in the country.
# Mittal Investments holds a 48.02-per-cent stake in two joint ventures – ONGC Mittal Energy Ltd. and ONGC Mittal Energy Services Ltd. – while ONGC owns a 49.98-per-cent stake in those ventures, with the balance held by investment firm SBI Capital Markets Ltd.
# Has teamed with Russia's OAO Lukoil Holdings and Total SA of France, paving the way for more deals in Africa and Central Asia. Mittal Investments also is getting into oil refining, recently announcing a $720-million investment for a 49 per cent stake in an oil-refinery project to be built by state-run refiner Hindustan Petroleum Corp. in northern India.
Mittal and ONGC
ONGC has had several prospective deals fall through, sometimes being outbid by others for new oil fields. ONGC's oil-and-gas portfolio outside India is thinly spread around the world, including modest projects in places like Myanmar, Sudan and the Russian Far East. That is where Mr. Mittal comes in. The joint venture gives ONGC a partner who is a specialist in deal making and who also has access to capital, thanks to his reputation on Wall Street. It “improves [ONGC's] ability to go into these overseas areas more effectively,” said Luke Parker of Wood Mackenzie, an Edinburgh oil-consulting firm. The partnership between Mittal and ONGC has plans to move further into energy trading and shipping, and it could stretch to 21 countries in coming years, according to the parties.
Analysis
Mittal is venturing in Oil sector in a similar manner in which he, over the past two decades, built a tiny Indonesian metals mill into Mittal Steel Co., which will finalize its merger with Arcelor SA of Luxembourg this summer.
Because Mr. Mittal is a force to be reckoned with in the global commodities business, his moves are sending ripples through the oil industry. In spite of these apprehensions in the market, Mr. Mittal is quiet about his intentions. “The family is making investments to diversify the portfolio,” he said in a recent interview, declining to elaborate. “It is a very infant stage. There is nothing much to talk about.”
On the contrary, industry insiders don’t feel threatened by these initiatives. According to billionaire Wilbur Ross, who sits on the board of Mittal Steel of the Netherlands “I don't think that he is going to be able to consolidate the whole world's oil industry; that's a big bite even for him. I think he is doing it partly to help India and partly to make money.”
Any foray into oil comes with risks. While the steel business is cyclical – prices swing with the global economy – there is no business with bigger boom-and-bust cycles than oil. Today's lofty oil prices have inflated the cost of everything from older oil fields to new exploration licenses worldwide, boosting the entry costs for newcomers. If oil prices fall significantly – or crash, as they have after every other boom – it will be much harder to make money from Mittal's investments. Meantime, salaries and other costs have soared, pinching the biggest, most efficient companies, such as Exxon Mobil Corp., Royal Dutch Shell PLC and BP PLC.
There are some parallels between the steel industry of the 1990s and oil today. Like steel was then, oil today is poised for consolidation and is dominated in many countries by state-owned companies. However, the differences are formidable. When Mr. Mittal started building his steel business, many steelmakers were considered dinosaurs and could be bought cheaply. By contrast, the oil business is brimming with highly valued assets and pumping at near full throttle to meet today's demand.
Lakshmi Mittal, the global steel business giant, is setting his sights on another elemental commodity: oil. Some of the strategic initiatives by him in the recent times validate this statement:
# In the past year, the London mogul's private investment company, Mittal Investments, has joined with India's state-owned Oil & Natural Gas Corp. for several overseas joint ventures in oil field exploration.
# It also has teamed with large oil firms in Russia and France to develop reserves in Africa and Asia.
# Last year in Nigeria, ONGC and Mittal successfully bid for promising and sought-after oil-exploration acreage. Part of their pitch: a commitment to invest some $6-billion (U.S.) to build, among other things, a refinery, a power plant and a railroad in the country.
# Mittal Investments holds a 48.02-per-cent stake in two joint ventures – ONGC Mittal Energy Ltd. and ONGC Mittal Energy Services Ltd. – while ONGC owns a 49.98-per-cent stake in those ventures, with the balance held by investment firm SBI Capital Markets Ltd.
# Has teamed with Russia's OAO Lukoil Holdings and Total SA of France, paving the way for more deals in Africa and Central Asia. Mittal Investments also is getting into oil refining, recently announcing a $720-million investment for a 49 per cent stake in an oil-refinery project to be built by state-run refiner Hindustan Petroleum Corp. in northern India.
Mittal and ONGC
ONGC has had several prospective deals fall through, sometimes being outbid by others for new oil fields. ONGC's oil-and-gas portfolio outside India is thinly spread around the world, including modest projects in places like Myanmar, Sudan and the Russian Far East. That is where Mr. Mittal comes in. The joint venture gives ONGC a partner who is a specialist in deal making and who also has access to capital, thanks to his reputation on Wall Street. It “improves [ONGC's] ability to go into these overseas areas more effectively,” said Luke Parker of Wood Mackenzie, an Edinburgh oil-consulting firm. The partnership between Mittal and ONGC has plans to move further into energy trading and shipping, and it could stretch to 21 countries in coming years, according to the parties.
Analysis
Mittal is venturing in Oil sector in a similar manner in which he, over the past two decades, built a tiny Indonesian metals mill into Mittal Steel Co., which will finalize its merger with Arcelor SA of Luxembourg this summer.
Because Mr. Mittal is a force to be reckoned with in the global commodities business, his moves are sending ripples through the oil industry. In spite of these apprehensions in the market, Mr. Mittal is quiet about his intentions. “The family is making investments to diversify the portfolio,” he said in a recent interview, declining to elaborate. “It is a very infant stage. There is nothing much to talk about.”
On the contrary, industry insiders don’t feel threatened by these initiatives. According to billionaire Wilbur Ross, who sits on the board of Mittal Steel of the Netherlands “I don't think that he is going to be able to consolidate the whole world's oil industry; that's a big bite even for him. I think he is doing it partly to help India and partly to make money.”
Any foray into oil comes with risks. While the steel business is cyclical – prices swing with the global economy – there is no business with bigger boom-and-bust cycles than oil. Today's lofty oil prices have inflated the cost of everything from older oil fields to new exploration licenses worldwide, boosting the entry costs for newcomers. If oil prices fall significantly – or crash, as they have after every other boom – it will be much harder to make money from Mittal's investments. Meantime, salaries and other costs have soared, pinching the biggest, most efficient companies, such as Exxon Mobil Corp., Royal Dutch Shell PLC and BP PLC.
There are some parallels between the steel industry of the 1990s and oil today. Like steel was then, oil today is poised for consolidation and is dominated in many countries by state-owned companies. However, the differences are formidable. When Mr. Mittal started building his steel business, many steelmakers were considered dinosaurs and could be bought cheaply. By contrast, the oil business is brimming with highly valued assets and pumping at near full throttle to meet today's demand.
Thursday, April 26, 2007
US Energy Trading Market
Market Size & Forecast
According to a report titled "U.S. Energy Trading," by technology consulting firm Celent
=> The U.S. energy trading market shrank from $1.8 trillion in 2001 to $1.3 trillion in 2002, but will approach $1.7 trillion in 2008 as banks and hedge funds pick up where failed energy merchants left off.
=> Energy trading grew at an extraordinary rate in the late 1990s, only to decrease dramatically in late 2001 and 2002 as Enron Corp. and other failed energy merchant firms collapsed.
=> About 17 percent of the energy trading market is traded electronically, with short-term natural gas contracts being the most heavily traded via this medium.
=> Celent estimates that electronic trading will account for 29 percent of the market by 2008.
=> As the U.S. energy trading market matures, the report found, banks and hedge funds should help drive solid, steady growth as market participants become increasingly comfortable using risk management tools.
According to Energy Insights, an IDC company
=> Energy trading in liquid hydrocarbons will continue to be robust, buoyed by high prices and increased volatility.
=> Trading in electricity and natural gas will recover from the post-Enron slump.
=> Altogether, Energy Insights forecasts the market to grow by 30% during 2002-2006, with oil and gas majors and financial service firms dominating the trading markets, but with asset-based traders - particularly in power - reengaging.
=> Further on the horizon, increased participation of financial institutions in energy commodity trading will bring program trading in 2008 to 2010.
Trends & Issues
Renewed interest from investors
The industry that Enron made infamous - energy trading - is springing to life again. Volatile energy markets and record-high commodity prices are prompting renewed interest from investors eager to play in the sector. That has pushed banks and a growing number of hedge funds to hire more energy traders and brainy quantitative minds to back their bets on energy prices. In Houston, New York and London, a scramble for top trading talent has ensued that rivals the cutthroat hiring frenzy of the late 1990's. "The whole market is hot right now," said Justin Pearson, managing director of Human Capital, a search firm based in London for energy traders. "Everybody is talking about expansion."
More sophisticated tools & platforms
Industry participants are now paying far more attention to counterparty credit risk, using clearing mechanisms such as the Intercontinental Exchange and the New York Mercantile Exchanges ClearPort platform. Price transparency has improved and banks and hedge funds have become increasingly prominent, providing desperately needed liquidity.
Banks playing an important role
With that revival come questions from some financial market analysts about whether energy trading will be better able to withstand another potential meltdown. While banks have stepped in with their superior balance sheets, credit ratings and trading skills to fill the liquidity void left by Enron, the latest ramp-up in trading has also been marked by an air of secrecy underscored by the proliferation of hundreds of hedge funds that are speculating on everything from crude oil to electricity in both regulated and unregulated markets. Many funds are being aided by investments from banks, which are also buying up distressed power plants and other remnants of the collapsed sector.
Investment banks are major players
Wall Street banks are notoriously fickle about their commitment to commodities trading. Two dominant players among banks, Morgan Stanley and Goldman Sachs, for example, participate in both the physical and financial energy markets and provide risk management products for clients and their own accounts. A number of other banks have also recently opened energy trading desks. Hedge funds and other speculators, meanwhile, have been drawn into the financial markets by the recent rise in crude oil, gasoline and diesel prices, as well as the long-term trend toward higher and more volatile prices for crude oil and petroleum products, among other commodities. In 2004, Goldman and Morgan Stanley earned about $2.6 billion combined from commodities trading, most of that from energy, according to Sanford C. Bernstein & Company in New York.
Top Companies with In-house Energy Trading Divisions
Sempra Energy Trading ® Corp. (SET) Wholly owned subsidiary of Sempra Energy)
Sempra Energy Trading ® Corp. (SET) is a full-service energy trading company - one of the largest in North America. It markets and trades physical and financial energy products: crude oil and refined products, natural gas and natural gas liquids, power, coal, emissions and ethanol. Sempra Energy Trading ® has more than 1200 customers worldwide. Our customer base includes most of the major oil, gas and power companies in North America, Europe, Asia and South America. Its high-volume financial transactions can involve over 100 billion cubic feet (bcf) of natural gas daily. That translates to approximately one half of all the natural gas consumed daily in the U.S. and Canada. SET is a wholly owned subsidiary of Sempra Energy, a Fortune 500 energy services holding company based in San Diego, California.
Chevron’s Supply & Trading
Supply & Trading manages Chevron's global supply chain, supplying crude oil and refined products to the company's global refining and marketing network. In addition, Supply & Trading markets aviation fuels, marine fuels and marine lubricants.
Supply & Trading plays a critical role around the globe, optimizing system assets, trading and marketing crude oil and refined products, and managing associated risk across the global supply chain.
Headquartered in Houston, it has regional hubs in London, Singapore and Cape Town. Crude and Products Supply & Trading conducts business in nearly 70 countries and trades more than 200 different grades of crude oil and petroleum products.
LITASCO (LUKOIL International Trading and Supply Company)
LITASCO (LUKOIL International Trading and Supply Company) is the international arm of LUKOIL for marketing, supply and trading. It is composed of various companies that are coordinated by and report to LITASCO Geneva, the Group's parent company. The LITASCO Group is made up of subsidiaries and branches in the United States, Netherlands, Sweden, Germany, Middle East,and Singapore. In total, the LITASCO Group is present in thirteen different countries.
LITASCO is one of the world's major traders of crude oil and refined petroleum products. The company's purchases and sales include spot, term, exchange and other arrangements such as swaps, and cover a wide range of locations and counterparts in order to optimize revenues while ensuring security of supply, flexibility and cost competitiveness. LITASCO deals with more than two thousand suppliers and customers, including all of world's major oil corporations.
The activities of the LITASCO Group are split into four main areas:
# Marketing and distribution of LUKOIL crude and petroleum products internationally.
# Supply and logistical optimization of crude oil to LUKOIL refineries located outside of Russia, and of petroleum products to the LUKOIL retail network in Eastern Europe, the Caucasus, and Baltic States.
# Entrepreneurial third party of crude oil and refined products from a global network of trading offices.
# International business development and coordination.
Koch Supply & Trading
Koch companies have interests in and access to major international trading regions in the United states, Europe, Asia and the Middle East. Koch Supply & Trading companies offer customers innovative risk management tools and help businesses worldwide manage margins, cash flow, grade spread and inventory, as well as provide supply, trading, technical and operating services.
Products traded by Koch Supply & Trading companies include:
# Petroleum & chemicals: crude oil, petrochemicals such as benzene, toluene, mixed xylenes, paraxylenes and styrene; diesel, jet and residual fuels, and intermediate feedstocks such as naphtha, vacuum gasoil and straight run fuel oil.
# Risk management products: structured risk management products such as derivatives, cross-commodity and other hedging products.
# Natural gas & gas liquids: natural gasoline, butane, ethane, propane, olefins such as ethylene and propylene, and plastics.
Active on a number of international exchanges such as NYMEX , LME, IPE, SPCEX, NYBOT, CBOT, CME, EUREX, LIFFE
AEP Energy Services (Subsidiary of American Electric Power Company, Inc.)
AEP Energy Services, Inc. is a national energy company engaged in the marketing and trading of energy commodities and related services. Specifically, the company analyzes and projects current and future market clearing prices for various energy commodities; trades energy commodities and associated financial instruments in both regional and national energy markets; and, markets energy supplies and related services to both the wholesale and large industrial segments of the energy market. AEP Energy Services, Inc. is a wholly owned subsidiary of American Electric Power (AEP), one of the nation’s largest investor owned utilities.
Duke Energy Trading and Marketing (DETM)
Duke Energy Trading and Marketing (DETM) is a joint venture in which Duke Energy Corporation has a 60 percent interest. DETM markets natural gas, electricity and other energy-related products to a wide range of customers.
Southern Company Energy Marketing (a unit of Southern Company)
Southern Company Energy Marketing is jointly owned by Southern Energy Inc. and Vastar Resources Inc. Southern Company Energy Marketing provides energy marketing, risk management and financial services and other energy-related commodities, products and services to customers in North America. Southern Energy’s parent company, Southern Company (NYSE: SO), is one of the largest producer of electricity in the United States.
Shell Trading (US) Company
Shell Trading (US) Company is a corporation that acts as the single market interface for Royal Dutch Shell companies and affiliates in the United States. It became operational in August 1998 and has offices in Houston, TX (headquarters); Dallas, TX; Denver, CO; Midland, TX; and San Antonio, TX; and has an affiliated Shell Trading company in Calgary, Alberta. Shell Trading Highlights:
# Buys and sells more than five million barrels per day of hydrocarbons
# One of the largest physical traders of hydrocarbons in the United States
# One of the world's largest energy trading company
Its portfolio includes the buying and selling of physical crude oil, finished products, and feedstocks, as well as trading various paper products, both on exchanges (The New York Mercantile Exchange and The Chicago Mercantile Exchange) as well as over the counter. Through its operations, Shell Trading (US) Company buys and sells more than five million barrels of hydrocarbons per day in physical markets, making it one of the largest petroleum supply organizations in the United States and the world. Specific businesses include acquisition, sales and trades of domestic crude oil and products; lease crude oil acquisition and marketing; marine chartering; and risk management services.
Reliant Energy Securities & Commodities Trading Center
The company has a wholesale energy trading and marketing business that ranks among the top five in the U.S. in combined electricity and natural gas volumes and has a presence in most of the major power regions of the U.S. It also has power generation and wholesale trading and marketing operations in Western Europe. The Reliant Energy Trading Center is located on the first floor of the Jerry and Kay Cox Graduate Business Center. The facility seats up to 40 students at computer workstations. It is outfitted with two Bloomberg terminals, four independent LED projectors, a SMART Technology system and two drop-down screens. The center also features the Kiodex Risk Workbench, a state-of-the-art trading and risk management platform.
Some other major players that operate in energy & commodities trading on various exchanges are:
• El Paso Energy
• Totalfina Elf
• Continental Power Exchange
• Calpine Corporation
• Exelon Corporation
• Dominion Resources, Inc.
• Southern Company
• Constellation Energy Group, Inc.
• Mirant Corporation
Top Companies from Financial Services Sector
• Deutsche Bank AG
• Goldman Sachs
• Morgan Stanley Dean Witter
• SG Investment Banking
• Bank of America
• American International Group
List of Exchanges for Global Commodity Trading
• Chicago Board of Trade
• Chicago Mercantile Exchange
• Euronext.liffe
• Kansas City Board of Trade
• London Metal Exchange
• Minneapolis Grain Exchange
• New York Mercantile Exchange
• New York Board of Trade
• Winnipeg Commodity Exchange
For a list of other commodity exchanges, please click on the following link:
http://en.wikipedia.org/wiki/Commodities_exchange
List of online Commodity Exchanges
IntercontinentalExchange, Inc. (NYSE: ICE)
Web: https://www.theice.com
APX Inc.
Web: http://www.apx.com
Enporion, Inc.
Web: http://www.enporion.com
Petroleum Place, Inc.
Web: http://www.petroleumplace.com
According to a report titled "U.S. Energy Trading," by technology consulting firm Celent
=> The U.S. energy trading market shrank from $1.8 trillion in 2001 to $1.3 trillion in 2002, but will approach $1.7 trillion in 2008 as banks and hedge funds pick up where failed energy merchants left off.
=> Energy trading grew at an extraordinary rate in the late 1990s, only to decrease dramatically in late 2001 and 2002 as Enron Corp. and other failed energy merchant firms collapsed.
=> About 17 percent of the energy trading market is traded electronically, with short-term natural gas contracts being the most heavily traded via this medium.
=> Celent estimates that electronic trading will account for 29 percent of the market by 2008.
=> As the U.S. energy trading market matures, the report found, banks and hedge funds should help drive solid, steady growth as market participants become increasingly comfortable using risk management tools.
According to Energy Insights, an IDC company
=> Energy trading in liquid hydrocarbons will continue to be robust, buoyed by high prices and increased volatility.
=> Trading in electricity and natural gas will recover from the post-Enron slump.
=> Altogether, Energy Insights forecasts the market to grow by 30% during 2002-2006, with oil and gas majors and financial service firms dominating the trading markets, but with asset-based traders - particularly in power - reengaging.
=> Further on the horizon, increased participation of financial institutions in energy commodity trading will bring program trading in 2008 to 2010.
Trends & Issues
Renewed interest from investors
The industry that Enron made infamous - energy trading - is springing to life again. Volatile energy markets and record-high commodity prices are prompting renewed interest from investors eager to play in the sector. That has pushed banks and a growing number of hedge funds to hire more energy traders and brainy quantitative minds to back their bets on energy prices. In Houston, New York and London, a scramble for top trading talent has ensued that rivals the cutthroat hiring frenzy of the late 1990's. "The whole market is hot right now," said Justin Pearson, managing director of Human Capital, a search firm based in London for energy traders. "Everybody is talking about expansion."
More sophisticated tools & platforms
Industry participants are now paying far more attention to counterparty credit risk, using clearing mechanisms such as the Intercontinental Exchange and the New York Mercantile Exchanges ClearPort platform. Price transparency has improved and banks and hedge funds have become increasingly prominent, providing desperately needed liquidity.
Banks playing an important role
With that revival come questions from some financial market analysts about whether energy trading will be better able to withstand another potential meltdown. While banks have stepped in with their superior balance sheets, credit ratings and trading skills to fill the liquidity void left by Enron, the latest ramp-up in trading has also been marked by an air of secrecy underscored by the proliferation of hundreds of hedge funds that are speculating on everything from crude oil to electricity in both regulated and unregulated markets. Many funds are being aided by investments from banks, which are also buying up distressed power plants and other remnants of the collapsed sector.
Investment banks are major players
Wall Street banks are notoriously fickle about their commitment to commodities trading. Two dominant players among banks, Morgan Stanley and Goldman Sachs, for example, participate in both the physical and financial energy markets and provide risk management products for clients and their own accounts. A number of other banks have also recently opened energy trading desks. Hedge funds and other speculators, meanwhile, have been drawn into the financial markets by the recent rise in crude oil, gasoline and diesel prices, as well as the long-term trend toward higher and more volatile prices for crude oil and petroleum products, among other commodities. In 2004, Goldman and Morgan Stanley earned about $2.6 billion combined from commodities trading, most of that from energy, according to Sanford C. Bernstein & Company in New York.
Top Companies with In-house Energy Trading Divisions
Sempra Energy Trading ® Corp. (SET) Wholly owned subsidiary of Sempra Energy)
Sempra Energy Trading ® Corp. (SET) is a full-service energy trading company - one of the largest in North America. It markets and trades physical and financial energy products: crude oil and refined products, natural gas and natural gas liquids, power, coal, emissions and ethanol. Sempra Energy Trading ® has more than 1200 customers worldwide. Our customer base includes most of the major oil, gas and power companies in North America, Europe, Asia and South America. Its high-volume financial transactions can involve over 100 billion cubic feet (bcf) of natural gas daily. That translates to approximately one half of all the natural gas consumed daily in the U.S. and Canada. SET is a wholly owned subsidiary of Sempra Energy, a Fortune 500 energy services holding company based in San Diego, California.
Chevron’s Supply & Trading
Supply & Trading manages Chevron's global supply chain, supplying crude oil and refined products to the company's global refining and marketing network. In addition, Supply & Trading markets aviation fuels, marine fuels and marine lubricants.
Supply & Trading plays a critical role around the globe, optimizing system assets, trading and marketing crude oil and refined products, and managing associated risk across the global supply chain.
Headquartered in Houston, it has regional hubs in London, Singapore and Cape Town. Crude and Products Supply & Trading conducts business in nearly 70 countries and trades more than 200 different grades of crude oil and petroleum products.
LITASCO (LUKOIL International Trading and Supply Company)
LITASCO (LUKOIL International Trading and Supply Company) is the international arm of LUKOIL for marketing, supply and trading. It is composed of various companies that are coordinated by and report to LITASCO Geneva, the Group's parent company. The LITASCO Group is made up of subsidiaries and branches in the United States, Netherlands, Sweden, Germany, Middle East,and Singapore. In total, the LITASCO Group is present in thirteen different countries.
LITASCO is one of the world's major traders of crude oil and refined petroleum products. The company's purchases and sales include spot, term, exchange and other arrangements such as swaps, and cover a wide range of locations and counterparts in order to optimize revenues while ensuring security of supply, flexibility and cost competitiveness. LITASCO deals with more than two thousand suppliers and customers, including all of world's major oil corporations.
The activities of the LITASCO Group are split into four main areas:
# Marketing and distribution of LUKOIL crude and petroleum products internationally.
# Supply and logistical optimization of crude oil to LUKOIL refineries located outside of Russia, and of petroleum products to the LUKOIL retail network in Eastern Europe, the Caucasus, and Baltic States.
# Entrepreneurial third party of crude oil and refined products from a global network of trading offices.
# International business development and coordination.
Koch Supply & Trading
Koch companies have interests in and access to major international trading regions in the United states, Europe, Asia and the Middle East. Koch Supply & Trading companies offer customers innovative risk management tools and help businesses worldwide manage margins, cash flow, grade spread and inventory, as well as provide supply, trading, technical and operating services.
Products traded by Koch Supply & Trading companies include:
# Petroleum & chemicals: crude oil, petrochemicals such as benzene, toluene, mixed xylenes, paraxylenes and styrene; diesel, jet and residual fuels, and intermediate feedstocks such as naphtha, vacuum gasoil and straight run fuel oil.
# Risk management products: structured risk management products such as derivatives, cross-commodity and other hedging products.
# Natural gas & gas liquids: natural gasoline, butane, ethane, propane, olefins such as ethylene and propylene, and plastics.
Active on a number of international exchanges such as NYMEX , LME, IPE, SPCEX, NYBOT, CBOT, CME, EUREX, LIFFE
AEP Energy Services (Subsidiary of American Electric Power Company, Inc.)
AEP Energy Services, Inc. is a national energy company engaged in the marketing and trading of energy commodities and related services. Specifically, the company analyzes and projects current and future market clearing prices for various energy commodities; trades energy commodities and associated financial instruments in both regional and national energy markets; and, markets energy supplies and related services to both the wholesale and large industrial segments of the energy market. AEP Energy Services, Inc. is a wholly owned subsidiary of American Electric Power (AEP), one of the nation’s largest investor owned utilities.
Duke Energy Trading and Marketing (DETM)
Duke Energy Trading and Marketing (DETM) is a joint venture in which Duke Energy Corporation has a 60 percent interest. DETM markets natural gas, electricity and other energy-related products to a wide range of customers.
Southern Company Energy Marketing (a unit of Southern Company)
Southern Company Energy Marketing is jointly owned by Southern Energy Inc. and Vastar Resources Inc. Southern Company Energy Marketing provides energy marketing, risk management and financial services and other energy-related commodities, products and services to customers in North America. Southern Energy’s parent company, Southern Company (NYSE: SO), is one of the largest producer of electricity in the United States.
Shell Trading (US) Company
Shell Trading (US) Company is a corporation that acts as the single market interface for Royal Dutch Shell companies and affiliates in the United States. It became operational in August 1998 and has offices in Houston, TX (headquarters); Dallas, TX; Denver, CO; Midland, TX; and San Antonio, TX; and has an affiliated Shell Trading company in Calgary, Alberta. Shell Trading Highlights:
# Buys and sells more than five million barrels per day of hydrocarbons
# One of the largest physical traders of hydrocarbons in the United States
# One of the world's largest energy trading company
Its portfolio includes the buying and selling of physical crude oil, finished products, and feedstocks, as well as trading various paper products, both on exchanges (The New York Mercantile Exchange and The Chicago Mercantile Exchange) as well as over the counter. Through its operations, Shell Trading (US) Company buys and sells more than five million barrels of hydrocarbons per day in physical markets, making it one of the largest petroleum supply organizations in the United States and the world. Specific businesses include acquisition, sales and trades of domestic crude oil and products; lease crude oil acquisition and marketing; marine chartering; and risk management services.
Reliant Energy Securities & Commodities Trading Center
The company has a wholesale energy trading and marketing business that ranks among the top five in the U.S. in combined electricity and natural gas volumes and has a presence in most of the major power regions of the U.S. It also has power generation and wholesale trading and marketing operations in Western Europe. The Reliant Energy Trading Center is located on the first floor of the Jerry and Kay Cox Graduate Business Center. The facility seats up to 40 students at computer workstations. It is outfitted with two Bloomberg terminals, four independent LED projectors, a SMART Technology system and two drop-down screens. The center also features the Kiodex Risk Workbench, a state-of-the-art trading and risk management platform.
Some other major players that operate in energy & commodities trading on various exchanges are:
• El Paso Energy
• Totalfina Elf
• Continental Power Exchange
• Calpine Corporation
• Exelon Corporation
• Dominion Resources, Inc.
• Southern Company
• Constellation Energy Group, Inc.
• Mirant Corporation
Top Companies from Financial Services Sector
• Deutsche Bank AG
• Goldman Sachs
• Morgan Stanley Dean Witter
• SG Investment Banking
• Bank of America
• American International Group
List of Exchanges for Global Commodity Trading
• Chicago Board of Trade
• Chicago Mercantile Exchange
• Euronext.liffe
• Kansas City Board of Trade
• London Metal Exchange
• Minneapolis Grain Exchange
• New York Mercantile Exchange
• New York Board of Trade
• Winnipeg Commodity Exchange
For a list of other commodity exchanges, please click on the following link:
http://en.wikipedia.org/wiki/Commodities_exchange
List of online Commodity Exchanges
IntercontinentalExchange, Inc. (NYSE: ICE)
Web: https://www.theice.com
APX Inc.
Web: http://www.apx.com
Enporion, Inc.
Web: http://www.enporion.com
Petroleum Place, Inc.
Web: http://www.petroleumplace.com
Tuesday, April 24, 2007
Human Capital Trends in Energy, Oil and Gas Sector
Energy is one of the most essential and most visible industries in the world. So it is not surprising that in today’s increasingly complicated world, political volatility and economic struggles have a significant impact on petroleum and natural gas companies. After several years of lackluster hiring, oil-and-gas exploration and production companies are drilling for executives who can help discover new fields or extend the life of existing fields. Industry employers also are hiring senior finance executives and experienced technical professionals, such as geologists and engineers. Analyzing these trends from executive search industry’s perspective it can be concluded that all these recent developments and macro-economic factors affecting energy and utilities sector are going to create an immediate requirement for experienced and talented leaders to tackle these issues. Eventually, executive search and HR consulting firms will get new opportunities from all these developments to consolidate their positions in a sector which till date was quite unexplored.
This article takes into account all these industry trends and macro-economic factors and analyzes the underlying opportunity for Executive Search, HR Consulting, Management Appraisals and Talent Management services in this sector.
Deregulation
Leading executive search firms are consulting with a number of utilities to identify senior managers with the skills necessary to lead their organizations’ transition to the competitive market. The industry requires leaders with deft management skills, international experience and the ability to navigate politically charged situations. This is especially critical as companies expand operations to capture growing reserves in countries such as Russia, and reach new markets, most notably in China.
Instability in Oil producing regions
As many of the world’s main oil producing regions are unstable, petroleum and natural gas companies require leaders with the financial and technological expertise to monitor and reduce their organizations’ risk and liabilities.
Following factors are forcing companies to look overseas for new finds.
# Domestic reserves are dwindling,
# Oil and gas prices have risen at the wellhead, making exploration and production more profitable.
# Rise in prices also boosts overall company valuations, making it more expensive for companies to grow through mergers and acquisitions.
"Companies want to add more through the drill bit than by trying to acquire," says Richard Preng, managing director, global energy, in Houston for recruiter Spencer Stuart. Domestic oil-and-gas companies are clustered in Texas, Colorado and Oklahoma, so U.S. demand is strongest in oil-and-gas centers such as Houston, Denver and Oklahoma City, notes Michael Saunders, a recruiter with the Energists, a Houston-based search firm, who describes hiring activity in these cities as "quite buoyant."
Start-ups and Smaller exploration companies are springing up in major centers
Smaller exploration companies springing up in major centers also have become a hiring force. These companies typically are founded by oil-and-gas executives who have left larger players either voluntarily or as part of a layoff due to mergers or reorganizations. They're then seeking funding and teaming up to start organizations that will tap or explore reserves that aren't profitable to the oil-and-gas behemoths but can be lucrative ventures for smaller, more nimble organizations. Often, the goal of the founders is to build value quickly and then sell the new company. Their game plan is to build up the company and then sell it, so they aren't concerned with hiring feedstock for the future.
Demand is moderate to good for senior exploration executives with strong technical and international backgrounds and good track records of discovery. Small- to midsize U.S. or foreign oil-and-gas exploration companies need such executives to fill VP, SVP, or International VP of EandP roles.
Energy sector could see more mergers in '07 / Production and access challenges may drive growth
Industry experts feel that energy sector could see more mergers and acquisitions to counteract difficulty in gaining access to oil and natural gas and higher costs of getting it to the surface. Analysts expect more mergers in 2007, particularly with increased competition from state-owned oil companies that can make acquisitions unfettered by investor pressure for near-term increases in earnings or cash flow.
Fadel Gheit, an oil analyst with Oppenheimer and Co. in New York, said many oil companies are in prime financial condition with clean balance sheets and billions on hand. But he said the challenge to maintain production - let alone increase it - in the face of rising costs and competition for access could prompt companies seeking growth to go shopping. This year companies largely pumped up or streamlined asset bases with multimillion-dollar deals to buy and sell portions of each other's holdings. Such deals often involved interests in oil and gas fields in North America and the Gulf of Mexico or access to unconventional resources such as oil-soaked sands in Canada or oil shale in the United States.
"They're just seeing an increasingly challenging reinvestment environment," said Dan Pickering, an analyst with Pickering Energy Partners in Houston. "Access to foreign jurisdictions is tougher, competition from national oil companies is hotter, and host governments from across the world are extracting more money to participate." Simmons and Company International, a Houston-based independent investment bank, said in a recent research report that so-called organic replacement of reserves - or ability to replace reserves on their own rather than through acquisitions - was less than 100 percent in the last two years and likely to remain "relatively meager for some time to come." Simmons estimated that oil majors would generate $245 billion in cash flow and asset sales in 2007, and have $80 billion of that available for stock buybacks or acquisitions. Simmons also speculated on which companies are likely acquirers or likely to be acquired.
E.g. ConocoPhillips closing on its $35.6 billion purchase of natural gas producer Burlington Resources.
Anadarko Petroleum Corp. bought Kerr-McGee Corp. and Western Gas Resources for more than $21 billion to increase its North American footprint, particularly in the Rocky Mountains and the Gulf.
Statoil, Norway's state-controlled oil company, announced plans to buy offshore energy and oil operations of Norsk Hydro, Norway's largest publicly traded company. The $28 billion deal, expected to close in the third quarter of 2007, will create the world's largest offshore operator, surpassing Royal Dutch Shell.
It is speculated that potential acquirers would include Irving-based Exxon Mobil Corp., the world's largest oil company, which can best afford an all-cash deal, "but appears to be patiently awaiting one of its large peers to be selling at a steep enough discount to make the plunge." The report also noted that San Ramon, Calif.-based Chevron Corp. has spare cash as well, and Houston-based Marathon Oil Corp. has said it's seeking a Canadian oil sands partner.
CEO Movements in 2005
In 2005, 48 CEO positions changed in the energy sector (including utilities), according to Chicago-based Challenger, Gray and Christmas, a human resources consulting and research firm. Twenty-one of the CEOs retired; 12 resigned or stepped down; and 15 moved on to other companies or pursuits.
Demand for Talent in Energy Sector
Trends in the occupational structure of both mining and the utility sector:
• Employment is projected to decline especially in skilled trades and, to a lesser extent, in administrative, clerical and secretarial, transport and machine operatives and elementary occupations
• For sales and personal service occupations, small increases are expected
Replacement demands of both mining and utility sector:
• Until 2012, there is a replacement demand of (in total) 12,000 staff in administrative, clerical and secretarial occupations
• A number of other occupational groups such as personal service and sales / customer service occupations will experience growth of over 50% of current employment levels over the decade
• Managerial, professional and associate professional occupational groups are all projected to require replacements amounting to 25-35% of current employment levels.
Compensation
“The oil and gas sector is probably better compensated than most other industries, [and executive] pay tends to be higher for companies in this sector than in other industries,” according to Steve Cross, business leader for executive remuneration in the Houston office of Mercer Human Resource Consulting. (See April 2005 Mercer report, “The Wall Street Journal/Mercer Human Resource Consulting CEO Compensation Survey.”)
Talent and Experience requirements
Attractive candidates typically have 15 to 20 years of experience, with at least five years in management and a few years' working overseas, says Lue Gates-Weiss, an independent oil-and-gas industry recruiter in Houston. "The last two years have been pretty dismal, but now companies are assessing possible expansion," says Ms. Gates-Weiss. "Optimism is increasing on the hiring side." Ms. Gates-Weiss says she hasn't seen pay offers increase much for recruited executives, but compensation is rising for employees. In 2003, exploration and production (EandP) companies planned to give executives raises averaging 5.2% and exempt employees raises averaging 4.4%, according to a survey by Effective Compensation, a pay-consulting firm in Lakewood, Colo. Among the 70 surveyed companies, about 95% had short-term bonus programs for executives, managers and professionals.
Demand for Exploration Executives increasing
In larger organizations, top exploration executives are in demand to help find and oversee discoveries in foreign countries and regions, says Ms. Gates-Weiss. They must have experience negotiating for concessions, such as agreements regarding how discoveries might be shared and operated, with foreign governments for single countries or entire regions and continents, such as Latin America or Africa. "They also need a strong technical foundation plus management skills to give them commercial acumen," she says. A vice president in charge of exploration might earn a salary ranging from $200,000 to $300,000 plus a bonus, she says.
Opportunities for Outsiders
Changes in the CEO office, the Sarbanes-Oxley Act of 2002 and the complexity of financial reporting in the oil-and-gas industry also are generating searches for senior financial executives. While new hires for exploration, production and other technical positions always need strong direct-industry experience, oil-and-gas companies occasionally hire finance executives from outside the industry from sectors that typically are stronger than in the oil-and-gas industry in other areas, such as investor relations.
Technology Leaders Needed
The technology executives sought are those who can help EandP companies gain an advantage by using modern exploration technology, says John Westropp, a principal with Christian and Timbers, a New York-based search firm. He is seeking a new CEO for an early-stage company that has developed proprietary technology for the industry. Candidates should have excellent leadership and management skills, plus experience in getting major oil-and-gas companies to adopt new technology. Cash pay for the position will be about $300,000 annually, plus equity.
Demand for technical contributors -- geologists and engineers -- also is high as new EandP start-ups build their teams, says Mr. Saunders. The scarcity of skilled professionals is helping to keeping pay healthy for such candidates. A senior technical professional can negotiate an annual base salary of about $130,000 to $140,000, says Mr. Saunders.
Recruiting crisis in energy industry
While the public frets about high gasoline prices and disruptions by rusty pipelines, one of the biggest threats to future energy supply lurks in the personnel departments of oil and gas companies.
An industry expected to deliver a 50 percent increase in energy supplies by 2030 faces this expanding demand with a shrinking pool of available talent. The industry is on the verge of losing a whole generation of professionals who are reaching retirement age, creating a huge vacuum of talent and no experienced replacements. Finding and retaining qualified talent is a management problem that could turn the situation into a serious operating crisis for many companies.
This assessment comes from Damon Beyer, a Houston partner with the New York consulting firm of Katzenbach Partners. The statistics project a grim scenario for an industry that has long paid too little attention to succession planning, retention, training and recruiting.
# More than 500,000 petroleum jobs were lost between 1982 and 2000 in the United States, from a high of 860,000 in 1982.
# The average age of workers in the oil and gas industry is 49, while average ages in other technology-focused industries hover in the 30s.
# Enrollment in critical U.S. undergraduate programs, e.g. petroleum engineering, fell 85 percent from 1982 to 2003. Only 1,000 graduates are expected this year.
# A quarter of U.S. employees in the most scarce exploration and production skill sets will be eligible for retirement by 2009.
# By the end of this decade, there will be a 38 percent shortage of engineers and geoscientists and a 28 percent shortage of instrumentation and electrical workers.
# The most skilled -- and most critical -- jobs are now the hardest ones to fill. Asked to name the biggest skill gaps, executives of 22 leading energy companies named petroleum engineering (77 percent), and geology, geophysics and engineering analysis (73 percent each).
References
http://www.bizjournals.com/houston/stories/2003/11/03/newscolumn1.html
http://houston.bizjournals.com/houston/stories/2006/08/14/editorial2.html
http://www.careerjournal.com/salaryhiring/industries/energy/20040429-capell.html
http://www.guidance-research.org/future-trends/energy/occupations
This article takes into account all these industry trends and macro-economic factors and analyzes the underlying opportunity for Executive Search, HR Consulting, Management Appraisals and Talent Management services in this sector.
Deregulation
Leading executive search firms are consulting with a number of utilities to identify senior managers with the skills necessary to lead their organizations’ transition to the competitive market. The industry requires leaders with deft management skills, international experience and the ability to navigate politically charged situations. This is especially critical as companies expand operations to capture growing reserves in countries such as Russia, and reach new markets, most notably in China.
Instability in Oil producing regions
As many of the world’s main oil producing regions are unstable, petroleum and natural gas companies require leaders with the financial and technological expertise to monitor and reduce their organizations’ risk and liabilities.
Following factors are forcing companies to look overseas for new finds.
# Domestic reserves are dwindling,
# Oil and gas prices have risen at the wellhead, making exploration and production more profitable.
# Rise in prices also boosts overall company valuations, making it more expensive for companies to grow through mergers and acquisitions.
"Companies want to add more through the drill bit than by trying to acquire," says Richard Preng, managing director, global energy, in Houston for recruiter Spencer Stuart. Domestic oil-and-gas companies are clustered in Texas, Colorado and Oklahoma, so U.S. demand is strongest in oil-and-gas centers such as Houston, Denver and Oklahoma City, notes Michael Saunders, a recruiter with the Energists, a Houston-based search firm, who describes hiring activity in these cities as "quite buoyant."
Start-ups and Smaller exploration companies are springing up in major centers
Smaller exploration companies springing up in major centers also have become a hiring force. These companies typically are founded by oil-and-gas executives who have left larger players either voluntarily or as part of a layoff due to mergers or reorganizations. They're then seeking funding and teaming up to start organizations that will tap or explore reserves that aren't profitable to the oil-and-gas behemoths but can be lucrative ventures for smaller, more nimble organizations. Often, the goal of the founders is to build value quickly and then sell the new company. Their game plan is to build up the company and then sell it, so they aren't concerned with hiring feedstock for the future.
Demand is moderate to good for senior exploration executives with strong technical and international backgrounds and good track records of discovery. Small- to midsize U.S. or foreign oil-and-gas exploration companies need such executives to fill VP, SVP, or International VP of EandP roles.
Energy sector could see more mergers in '07 / Production and access challenges may drive growth
Industry experts feel that energy sector could see more mergers and acquisitions to counteract difficulty in gaining access to oil and natural gas and higher costs of getting it to the surface. Analysts expect more mergers in 2007, particularly with increased competition from state-owned oil companies that can make acquisitions unfettered by investor pressure for near-term increases in earnings or cash flow.
Fadel Gheit, an oil analyst with Oppenheimer and Co. in New York, said many oil companies are in prime financial condition with clean balance sheets and billions on hand. But he said the challenge to maintain production - let alone increase it - in the face of rising costs and competition for access could prompt companies seeking growth to go shopping. This year companies largely pumped up or streamlined asset bases with multimillion-dollar deals to buy and sell portions of each other's holdings. Such deals often involved interests in oil and gas fields in North America and the Gulf of Mexico or access to unconventional resources such as oil-soaked sands in Canada or oil shale in the United States.
"They're just seeing an increasingly challenging reinvestment environment," said Dan Pickering, an analyst with Pickering Energy Partners in Houston. "Access to foreign jurisdictions is tougher, competition from national oil companies is hotter, and host governments from across the world are extracting more money to participate." Simmons and Company International, a Houston-based independent investment bank, said in a recent research report that so-called organic replacement of reserves - or ability to replace reserves on their own rather than through acquisitions - was less than 100 percent in the last two years and likely to remain "relatively meager for some time to come." Simmons estimated that oil majors would generate $245 billion in cash flow and asset sales in 2007, and have $80 billion of that available for stock buybacks or acquisitions. Simmons also speculated on which companies are likely acquirers or likely to be acquired.
E.g. ConocoPhillips closing on its $35.6 billion purchase of natural gas producer Burlington Resources.
Anadarko Petroleum Corp. bought Kerr-McGee Corp. and Western Gas Resources for more than $21 billion to increase its North American footprint, particularly in the Rocky Mountains and the Gulf.
Statoil, Norway's state-controlled oil company, announced plans to buy offshore energy and oil operations of Norsk Hydro, Norway's largest publicly traded company. The $28 billion deal, expected to close in the third quarter of 2007, will create the world's largest offshore operator, surpassing Royal Dutch Shell.
It is speculated that potential acquirers would include Irving-based Exxon Mobil Corp., the world's largest oil company, which can best afford an all-cash deal, "but appears to be patiently awaiting one of its large peers to be selling at a steep enough discount to make the plunge." The report also noted that San Ramon, Calif.-based Chevron Corp. has spare cash as well, and Houston-based Marathon Oil Corp. has said it's seeking a Canadian oil sands partner.
CEO Movements in 2005
In 2005, 48 CEO positions changed in the energy sector (including utilities), according to Chicago-based Challenger, Gray and Christmas, a human resources consulting and research firm. Twenty-one of the CEOs retired; 12 resigned or stepped down; and 15 moved on to other companies or pursuits.
Demand for Talent in Energy Sector
Trends in the occupational structure of both mining and the utility sector:
• Employment is projected to decline especially in skilled trades and, to a lesser extent, in administrative, clerical and secretarial, transport and machine operatives and elementary occupations
• For sales and personal service occupations, small increases are expected
Replacement demands of both mining and utility sector:
• Until 2012, there is a replacement demand of (in total) 12,000 staff in administrative, clerical and secretarial occupations
• A number of other occupational groups such as personal service and sales / customer service occupations will experience growth of over 50% of current employment levels over the decade
• Managerial, professional and associate professional occupational groups are all projected to require replacements amounting to 25-35% of current employment levels.
Compensation
“The oil and gas sector is probably better compensated than most other industries, [and executive] pay tends to be higher for companies in this sector than in other industries,” according to Steve Cross, business leader for executive remuneration in the Houston office of Mercer Human Resource Consulting. (See April 2005 Mercer report, “The Wall Street Journal/Mercer Human Resource Consulting CEO Compensation Survey.”)
Talent and Experience requirements
Attractive candidates typically have 15 to 20 years of experience, with at least five years in management and a few years' working overseas, says Lue Gates-Weiss, an independent oil-and-gas industry recruiter in Houston. "The last two years have been pretty dismal, but now companies are assessing possible expansion," says Ms. Gates-Weiss. "Optimism is increasing on the hiring side." Ms. Gates-Weiss says she hasn't seen pay offers increase much for recruited executives, but compensation is rising for employees. In 2003, exploration and production (EandP) companies planned to give executives raises averaging 5.2% and exempt employees raises averaging 4.4%, according to a survey by Effective Compensation, a pay-consulting firm in Lakewood, Colo. Among the 70 surveyed companies, about 95% had short-term bonus programs for executives, managers and professionals.
Demand for Exploration Executives increasing
In larger organizations, top exploration executives are in demand to help find and oversee discoveries in foreign countries and regions, says Ms. Gates-Weiss. They must have experience negotiating for concessions, such as agreements regarding how discoveries might be shared and operated, with foreign governments for single countries or entire regions and continents, such as Latin America or Africa. "They also need a strong technical foundation plus management skills to give them commercial acumen," she says. A vice president in charge of exploration might earn a salary ranging from $200,000 to $300,000 plus a bonus, she says.
Opportunities for Outsiders
Changes in the CEO office, the Sarbanes-Oxley Act of 2002 and the complexity of financial reporting in the oil-and-gas industry also are generating searches for senior financial executives. While new hires for exploration, production and other technical positions always need strong direct-industry experience, oil-and-gas companies occasionally hire finance executives from outside the industry from sectors that typically are stronger than in the oil-and-gas industry in other areas, such as investor relations.
Technology Leaders Needed
The technology executives sought are those who can help EandP companies gain an advantage by using modern exploration technology, says John Westropp, a principal with Christian and Timbers, a New York-based search firm. He is seeking a new CEO for an early-stage company that has developed proprietary technology for the industry. Candidates should have excellent leadership and management skills, plus experience in getting major oil-and-gas companies to adopt new technology. Cash pay for the position will be about $300,000 annually, plus equity.
Demand for technical contributors -- geologists and engineers -- also is high as new EandP start-ups build their teams, says Mr. Saunders. The scarcity of skilled professionals is helping to keeping pay healthy for such candidates. A senior technical professional can negotiate an annual base salary of about $130,000 to $140,000, says Mr. Saunders.
Recruiting crisis in energy industry
While the public frets about high gasoline prices and disruptions by rusty pipelines, one of the biggest threats to future energy supply lurks in the personnel departments of oil and gas companies.
An industry expected to deliver a 50 percent increase in energy supplies by 2030 faces this expanding demand with a shrinking pool of available talent. The industry is on the verge of losing a whole generation of professionals who are reaching retirement age, creating a huge vacuum of talent and no experienced replacements. Finding and retaining qualified talent is a management problem that could turn the situation into a serious operating crisis for many companies.
This assessment comes from Damon Beyer, a Houston partner with the New York consulting firm of Katzenbach Partners. The statistics project a grim scenario for an industry that has long paid too little attention to succession planning, retention, training and recruiting.
# More than 500,000 petroleum jobs were lost between 1982 and 2000 in the United States, from a high of 860,000 in 1982.
# The average age of workers in the oil and gas industry is 49, while average ages in other technology-focused industries hover in the 30s.
# Enrollment in critical U.S. undergraduate programs, e.g. petroleum engineering, fell 85 percent from 1982 to 2003. Only 1,000 graduates are expected this year.
# A quarter of U.S. employees in the most scarce exploration and production skill sets will be eligible for retirement by 2009.
# By the end of this decade, there will be a 38 percent shortage of engineers and geoscientists and a 28 percent shortage of instrumentation and electrical workers.
# The most skilled -- and most critical -- jobs are now the hardest ones to fill. Asked to name the biggest skill gaps, executives of 22 leading energy companies named petroleum engineering (77 percent), and geology, geophysics and engineering analysis (73 percent each).
References
http://www.bizjournals.com/houston/stories/2003/11/03/newscolumn1.html
http://houston.bizjournals.com/houston/stories/2006/08/14/editorial2.html
http://www.careerjournal.com/salaryhiring/industries/energy/20040429-capell.html
http://www.guidance-research.org/future-trends/energy/occupations
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