Inside the world of business
Stark comments from ECB man
THE 11TH hour intervention by European Central bank (ECB) executive board member Jürgen Stark in the negotiations over additional liquidity support for the Irish banks was as baffling as it was disingenuous.
His dismissal – in a German newspaper interview – of the talks on medium-term funding for the Irish banks as a mere rumour and fraught with legal problems is best seen as megaphone negotiation as the talks reach their crescendo.
It is becoming increasingly obvious that German support for greater flexibility being shown by the ECB is conditional on the Government honouring the unsecured senior bonds of the Irish banks; an issue that Mr Stark also addressed in the same interview.
The attachment of the Germans – and by extension the ECB – to this position is at odds with their overall premise which is that the principles of capitalism must apply and Ireland should now pay the price for its financial misadventures. Hence the penal nature of the interest rate charged on the €67.5 billion provided under the bailout programme agreed with the Troika. What is glossed over is that any rigorous application of the principles of capitalism would have to involve those who were so foolish as to lend to the Irish banks also having to pay the price.
The explanation for this rather à la carte application of the rules is the fear that any haircut on Irish senior bank bonds would trigger another crisis in the European banking sector. Despite the success of the Danes – and the Kazaks – in forcing burden-sharing, it’s a risk that Europe does not want to take. No one less so than the Germans, given that the elephant in the European banking room is the German Landesbanks’ losses.
Oil firm inks deal with Total and CNOOC
IT WAS a long time coming, but Tullow has got its three-way deal with Total and the China National Offshore Oil Corporation (CNOOC) across the line and it is now a case of full steam ahead with the development of its Ugandan oil field.
This could contain up to 2.5 billion barrels of oil, and is likely to yield 300,000 barrels a day at full production.
The company has come a long way from the late 1990s, when its assets were producing 2,000 barrels of oil a day, a mere trickle by industry standards.
This year, production is likely to hit 100,000 barrels a day at full tilt, with 40,000 coming from its share of the Jubilee field off Africa’s west coast.
The company is now worth about $20 billion, and once the $2.9 billion deal with Total and CNOOC goes through, it will have a debt-free balance sheet and $1 billion in cash, along with a business set to generate $1 billion a year in revenues.
Tullow has taken on two partners because it needs their expertise in development. Its own expertise is finding oil, something it has been doing successfully since it took over Energy Africa in 2003.
The news comes at a time when oil prices are high – thanks to the Libyan uprising and other problems in north Africa.
Tullow chief executive Aidan Heavey believes that prices will remain relatively high in the medium term because of tight supply and demand, allied to the fact that more oil is being found in remote regions.
Good news if you are a Tullow shareholder.
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