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Gene Ellis

Sasol Betting Big on Gas-to-Liquid Plant in U.S. - NYTimes.com - 0 views

www.nytimes.com/...gas-to-liquid-plant-in-us.html

betting plant natural gas

shared by Gene Ellis on 17 Dec 12 - No Cached
    • Gene Ellis
      Gene Ellis on 17 Dec 12
       
      These are areas with lots of natural gas, and little chance of getting it to market, save for liquefication, but even then lacking access to ports.
  • The process is challenging and complex. First a synthetic gas is made from pure oxygen and methane, the main component of natural gas, which is cleansed of sulfur, metals and other impurities, under intense pressure and heat. Then the synthetic gas is put in giant reactors that make a synthetic crude through the Fischer-Tropsch process. The process essentially forces heated synthetic gas to react with a catalyst, typically cobalt, to convert into a liquid hydrocarbon. Finally that liquid is refined into one fuel or another. The process is far more complex than that at a typical refinery, so the plant is much more expensive to build and operate. Alfred Luaces, a refining specialist at the consultancy IHS, said a conventional oil refinery could be built for $50,000 per barrel of capacity, less than half of what Sasol says it is willing to spend on the proposed Louisiana plant.
  • Sasol is building a gas-to-liquids plant in Uzbekistan with the Malaysian oil company Petronas. It is working with Chevron to build another plant in Nigeria.
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  • Rick Manner, a vice president at consultancy KBC Advanced Technologies who has contributed to gas-to-liquids studies for Sasol and other companies, estimated that the projects must keep capital costs at $100,000 for every barrel a day of production capacity to be worthwhile economically at current prices of about $100 a barrel for oil and $4 per thousand cubic feet for natural gas.
  • Mr. Louw, Sasol’s Qatar president, said that the Oryx plant was designed to be profitable with oil at $25 a barrel. That implies a very low long-term price for the natural gas feedstock. He would not specify what Sasol pays its Qatari partner for gas, but he said it was “not zero.”
  • Gene Ellis on 17 Dec 12
     
    The potential, or lack thereof, of natural gas to diesel conversion.
Gene Ellis

Cyprus: The next blunder | vox - 0 views

www.voxeu.org/...cyprus-next-blunder

shared by Gene Ellis on 18 Mar 13 - No Cached
  • What is new is that bank deposits will be 'taxed'. The proper term is 'confiscated'. Like everywhere in the EU, bank deposits in Cyprus are guaranteed up to €100,000.
  • Since bank assets amount to some 900% of GDP, there is no hope of any bailout by the Cypriot government.
  • A less benign scenario is that depositors in Cypriot banks come to fear another round of optimal, time-inconsistent levies. This is what theory predicts. After all, if policymakers found it optimal once, why not twice, or more?
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  • Remember that the current version of the banking union explicitly leaves resolution authority in national hands. In Cyprus, as almost everywhere else, national authorities are deeply conflicted when it comes to their banking systems. Powerful special-interest groups become engaged when banks go bust and governments decide who pays the price. Thus, it is a good bet that Cyprus’s bank resolution will be deeply flawed. The risk to the ECB is real.
  • It will be individually rational to withdraw deposits from local banks to avoid the remote probability of a confiscatory tax. As depositors learn what others do and proceed to withdraw funds, a bank run will occur. The banking system will collapse, requiring a Cyprus-style programme that will tax whatever is left in deposits, thus justifying the withdrawals.
Gene Ellis

The euro crisis: The non-puzzle of peripheral pain | The Economist - 0 views

www.economist.com/...euro-crisis-0

shared by Gene Ellis on 18 Apr 13 - No Cached
  • Mystery mostly solved, then; the rich periphery's riches relative to Germany were largely a short-run phenomenon driven by a dramatic short-run divergence in house price trends.
  • Investors who bet that productivity growth would be much faster in the south were wrong.* All the prices and wages set on the basis of the expectation of faster productivity growth were correspondingly wrong and needed to adjust. Real effective exchange rates were badly out of alignment.
  • Two things began happening in the euro zone in 2007. Growth in the number of euros spent every year began slowing, and the distribution of euro spending within the euro area began shifting back northward.
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  • The picture is one in which there are many fewer euros floating around the euro area than markets expected a half decade ago, and the distribution of those euros is moving northward.
  • It seems reasonable to argue that the distributional shift needed to occur, given the actual productivity performance.  The overall slowdown in euro spending growth, however, looks like an unnecessary and painful complication to adjustment.
  • This has all been the result of the commitment to keep just one euro. But that commitment is painful, and the alternative—more than one euro—is looking more attractive.
  • Where prices were rigid, as in goods and labour markets, fewer euros meant slow disinflation but rapid contraction in output and a big rise in unemployment.
  • If there had been no single currency, the northward capital flight would have depreciated peripheral currencies. Had the periphery borrowed in its own currency, that would have imposed losses on its foreign creditors while also boosting its export industry. Had peripheral economies instead borrowed in dollars or deutschmarks their debt burdens would have ballooned with depreciation, potentially pushing banks and sovereigns into default—but the depreciation boost to competitiveness would have remained. Either way, the depreciation of the currency would effectively shrink the value of wealth in the periphery.
  • Since 2010, Spanish home prices have dropped over 20%, while German home prices are up a smidge.
  • Where prices were more flexible, as in asset markets, price adjustment was quick. Over the past two years, Spanish equities have fallen 24%, while German equities are up 8%.
  • The northward euro shift had two nasty effects, then: it shrank asset values while also (via wage rigidity) creating substantial unemployment.
  • This threatened to accelerate into a full-scale run and collapse until the ECB intervened.
  • as markets observed the periphery's reduced ability to pay off its debts, they moved their euros northward even faster
  • For the periphery to raise its external surplus (necessary in order to service its large and growing debts) it must rely much more on import compression than on export growth.
Gene Ellis

Greek Credit-Default Swaps Are Activated - NYTimes.com - 0 views

dealbook.nytimes.com/...it-default-swaps-are-activated

greek

shared by Gene Ellis on 17 Jun 12 - No Cached
  • The decision by the International Swaps and Derivatives Association ends months of speculation that a Greek default might not set off the swaps, a result that could have undermined their role as insurance against debt defaults.
  • Still, doubts about the instruments’ effectiveness may linger. European officials initially shaped the Greek debt restructuring to avoid activating them. The concern is that future restructurings could be arranged to stop swaps from paying out.
  • the restructuring activated the swaps only after the country made a legal move on Friday.
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  • The Greek government chose to apply so-called collective action clauses, which it had earlier inserted into its bonds registered under Greek law. The deal maximized total debt relief for the country,
  • but it also forced losses on bondholders — a credit event, and therefore a trigger, for the swaps.
  • Since then, banks and regulators have taken steps to strengthen the market, mostly by making sure that investors can pay out the money they owe on swaps.
  • Nearly $70 billion of swaps are currently outstanding on Greek debt. But after both sides settle their accounts, the amount that will need to be paid out should be no more than $3.2 billion.
  • Some investors entered swaps on Greece as a way of effectively insuring themselves against losses on their Greek bonds, while others used them as a way to bet on a default happening.
  • Before investors doubted Greece’s solvency, the swaps offered insurance at what turned out to be an extremely cheap price. At the start of 2008, an investor buying protection on Greek debt had to pay only $22,000 annually to insure against default on $10 million of Greek bonds over five years, according to Markit, a data provider. Now, the protection would cost about $7.6 million.
  • Investors will most likely continue to want default swaps to protect against losses on Greece’s new bonds. These bonds, to be issued Monday, are expected to have yields of well over 15 percent, according to advance pricing. This suggests investors have strong doubts about Greece’s creditworthiness even after its restructuring. Fitch Ratings said on Friday that it would probably give Greece’s new bonds a low, junk-bond rating.
  • Gene Ellis on 17 Jun 12
     
    Global
Gene Ellis

Crippled eurozone to face fresh debt crisis this year, warns ex-ECB strongman Axel Webe... - 0 views

www.telegraph.co.uk/...-ECB-strongman-Axel-Weber.html

shared by Gene Ellis on 24 Jan 14 - No Cached
  • Crippled eurozone to face fresh debt crisis this year, warns ex-ECB strongman Axel Weber
  • Harvard professor Kenneth Rogoff said the launch of the euro had been a "giant historic mistake, done to soon" that now requires a degree of fiscal union and a common bank resolution fund to make it work, but EMU leaders are still refusing to take these steps.
  • "People are no longer talking about the euro falling apart but youth unemployment is really horrific. They can't leave this twisting in wind for another five years," he said.
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  • Mr Rogoff said Europe is squandering the "scarce resource" of its youth, badly needed to fortify an ageing society as the demographic crunch sets in.
  • "If these latent technologies are not realised, Europe will wake up like Rip Van Winkel from a long Japan-like slumber to find itself a much smaller part of the world economy, and a lot less important."
  • Mr Rogoff said debt write-downs across the EMU periphery "will eventually happen" but the longer leaders let the crisis fester with half-measures, the worse damage this will do to European society in the end.
  • Mr Weber, who resigned from the Bundesbank and the ECB in a dispute over euro debt crisis strategy, said new "bail-in" rules for bond-holders of eurozone banks will cause investors to act pre-emptively, aiming to avoid large losses before the ECB issues its test verdicts. "We may see that speculators do not wait until November, but bet on winners and losers before that," he said.
  • Sir Martin said the eurozone is pursuing a reverse "Phillips Curve" - the trade off between jobs and inflation - as if it were testing "what level of unemployment it is prepared to tolerate for zero inflation".
  • Pierre Nanterme, chairman and chief executive officer of Accenture, said Europe is losing the great battle for competitiveness, and risks a perma-slump where debt burdens of 100pc of GDP prevent governments breaking free by investing in skills and technology.
  • He said Europe is falling further behind as the US basks in cheap energy and pours funds into cutting-edge technology. "A lot is at stake. If in 12 to 24 months no radical steps are taken to break the curse, we might have not just five, ten, but twenty years of a low-growth sluggish situation in Europe," he said.
  • "People are no longer talking about the euro falling apart but youth unemployment is really horrific. They can't leave this twisting in wind for another five years," he said
Gene Ellis

EUobserver / Former ECB chief blames governments for euro-crisis - 1 views

euobserver.com/122721

shared by Gene Ellis on 27 Jan 14 - No Cached
  • Former ECB chief blames governments for euro-crisis
  • But the 71-year-old French banker said he had warned EU governments of growing economic divergences in the euro area as far back as 2005 and that he had criticised member states, notably France and Germany, for ignoring the deficit and debt rules which underpin the common currency.
  • Trichet noted that the ECB intervened on bond markets and bought up Greek debt as early as May 2010, when he was still chief and when the first-ever EU bailout was still being drafted. It interevened again in 2011 to buy Italian and Spanish debt when investors started to bet against the larger euro-states.
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  • "If we wouldn't have bought Spanish and Italian debt - a move which was highly criticised at the time - we would be in a totally different situation now," he added.
  • Turning to Ireland, where the government first used taxpayers’ money to guarnatee all deposits in Irish banks and then had to seek a painful rescue package, Trichet said "nobody advised them to do so."
  • Back in 2010, the IMF said Greece could never repay its debt and should write off some of its private and public liabilities. But the EU, under a deal by the French and German leaders, wanted the private sector to take the hit alone in what it called “private sector involvement [PSI],” putting Trichet in a tough spot.
  • Despite his actions, PSI came back in a vengeance in Cyprus in 2013, when it was renamed a “bail-in,” and when it saw lenders snatch the savings of well-to-do private depositors on top of private bondholders.
Gene Ellis

IBM Wants to Invent the Chips of the Future, Not Make Them - NYTimes.com - 0 views

bits.blogs.nytimes.com/...ps-of-the-future-not-make-them

shared by Gene Ellis on 18 Feb 15 - No Cached
  • For several months, IBM has been seeking to sell its chip-manufacturing operations
  • The most likely buyer is GlobalFoundries, a large contract chip manufacturer, the person said, for a price of probably less than $2 billion.
  • Ms. Rometty stated that while IBM’s priorities were in fields like data analytics and cloud computing, and it had agreed to sell its industry-standard computer server business to Lenovo of China for $2.3 billion, she added: “But let me be clear — we are not exiting hardware.”
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  • Selling its semiconductor-manufacturing operations would mesh with IBM’s well-established course of shedding hardware businesses with lower profit margins. Over the years, the company has retreated from printers, personal computers and disk drives, as well as its pending sale of smaller server computers. Designing chips and licensing technology, without manufacturing, can be lucrative. Qualcomm, a maker of chips for mobile devices, is the showcase example.
  • IBM’s research agenda is a recognition that the end of the silicon era of computing, using complementary metal-oxide semiconductor technology, or CMOS, is finally on the horizon.
  • “IBM is not giving up on silicon, but it is saying it’s time to place an array of bets, and to move beyond silicon.”
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