high gas prices

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By Shapi Shacinda

LUSAKA, Jan 11 (Reuters)

Zambia said on Friday it had discovered more oil and gas reserves and had set up a petroleum committee to outline regulations for foreign investors.

President Levy Mwanawasa said the government would also award a 30 percent stake to a foreign equity partner Zambia’s only refinery, Indeni.

Mwanawasa said soil samples from eastern Zambia had shown the existence of oil and that other samples from the western parts also showed encouraging results for oil and gas.

Zambia first announced oil in its northwestern province in early 2007.

“Further investigations were extended to the eastern province in 2007 where 153 soil samples were collected (and) whose laboratory results are very encouraging,” Mwanawasa said in an address to parliament.

Mwanawasa said the government will create a separate regulatory framework for oil exploration and production for foreign investors who would have to obtain different licences for the two undertakings.

“As a result, the government has suspended the process of invitation to tender until the Act (legislation) is repealed and replaced. A new Bill is expected to be tabled in (parliament) within the first quarter of this year,” Mwanawasa said.

The government had planned to call for bids early this year for foreign companies to start major exploration work.

He said the current law had weak provisions for the exploration and production of oil and also on environmental protection and that these would be strengthened in the revised legislation.

Mwanawasa said he had already appointed a petroleum committee to oversee the development of the oil sector.

“The committee is already spearheading formulation of policies and guidelines relating to petroleum and its development in Zambia,” Mwanawasa said.

Mwanawasa said Zambia will invite a third equity partner in the Indeni Oil Refinery, which it jointly owns with French oil major, Total (TOTF.PA: Quote, Profile, Research), on a 50-50 basis.

“The government and the oil company, Total, who are the two shareholders in Indeni have agreed to invite a third shareholder to take up 30 percent of the shares. The process will commence in the first quarter of this year,” he said but gave no further details.

The move was aimed at attracting fresh capital investment in Indeni Oil Refinery and revamp its operations, Mwanawsa said. (Reporting By Shapi Shacinda)

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LUSAKA, November (28) – A unit of South Africa’s Standard Bank has tendered to finance a $1.07 billion crude oil feedstock purchase deal for mineral-rich Zambia, a senior government official said on Wednesday.

Energy and Water Development acting permanent secretary, Oscar Kalumiana, said Stanbic Bank Zambia Plc and Finance Bank Ltd., another local bank were competing for a two-year financing contract for Zambia’s 1.4 million tonnes crude oil requirements.

Zambia, which has faced intermittent fuel shortages due to problems in procuring crude oil for its vast copper and cobalt mines and other sectors of the economy will announce the successful bank by mid-December, Kalumiana said.

“The two banks submitted technical financial proposals through the Zambia National Tender Board (ZNTB). We are evaluating the proposals and will select one of them before mid-December,” Kalumiana told journalists from state media.

Officials say the government is currently scrutinizing tender documents for five foreign oil trading firms which want to start procuring oil for the country.

Kalumiana said the government had requested local banks to participate in the financing to pay for the feedstock supplied in order to access funds quicker, especially for upfront costs.

“It (oil deal financing) will be a revolving facility with each shipment to last one and a half months at $67 million per oil shipment at current prices and we need eight shipments in a year. The banks have other charges and their bids will be graded depending on who has the best structure,” Kalumiana added.

He said Zambia and French oil major Total, which are equal shareholders of the country’s sole Indeni Oil Refinery, had agreed to get a local bank to finance the purchase of oil.

“We agreed with Total that instead of the two shareholders providing the money, we should let the money come from the private sector because the business is profitable. The local banks will be getting their money (after) the fuel is sold,” Kalumiana said.

In October, Zambia — which uses huge amounts of diesel to run its vast copper mines, the country’s economic lifeblood, and other industries — faced severe fuel shortages after Total stopped crude oil imports for the country over a pricing dispute.

Commoditex International of the United Kingdom, Russia’s Lukoil International Trading and Supply Company, Trafigura of Italy, Addax and Oryx Group of France and Independent Petroleum Group of Kuwait are the firms that tendered to procure oil for Zambia.

According to ZNTB data, the oil traders have submitted bids with prices ranging from $65.69 per tonne for crude oil from Iran to $76.15 per tonne of Oman.

Officials say the government turned to local banks for financing after Citi Bank of the United States in October declined to provide financing for crude oil Zambia wanted to purchase from Iran due to an embargo for U.S firms against dealing with Iran.

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The $64 billion question remains as to how Zambia can attract western investors … we at the Zambian Chronicle (in July this year) once detailed that as a nation, the country had serious competitors and we needed to get into these competitors’ pysche as well as those of the would-be investors’ to succeed.

In an article posted in the Washington Post, Tomoel Murakami Tse shades more light on what western investors are looking for before they can make our enterprise a destination for their investment dollars … thanks a trillion

For Further Reading Click Here … http://zambianchronicle.com/2007/07/26/116/

By Tomoeh Murakami Tse

Washington Post Staff Writer

Forget the emerging markets of China, Brazil, India and Russia. If you’re looking for that extra kick in your investment portfolio, you’ll have to venture to Latvia, Bangladesh, Namibia and Ivory Coast, according to a small but growing number of mutual fund managers exploring the front line of stock investing known as frontier markets.

In the past several years, many investors who put their money into emerging markets enjoyed annual returns of more than 30 percent, attracting capital from Japanese housewives and American pensioners.

Bangladesh's market rose 60 percent in the past year. The head of the exchange says its value will double next year, lifted by IPOs for state and private firms.

Bangladesh’s market rose 60 percent in the past year. The head of the exchange says its value will double next year, lifted by IPOs for state and private firms. (By David Greedy — Bloomberg News)


But as investments in Chinese retail companies and Indian tech firms become more mainstream, and as more analysts caution that such outsize gains are not sustainable, money managers are asking: Where next?

“A lot of hidden gems are no longer hidden,” said Hugh Hunter, head of global emerging markets at WestLB Mellon Asset Management. “Clearly, frontier markets are the next tier. . . . We have no option but to go forward in this area.”

So don’t be surprised if you start seeing unfamiliar stocks from far-flung places on statements from your emerging markets fund manager.

Aside from the need to keep looking for new investment opportunities, Hunter and others say, economic growth and development of the capital markets have turned some frontier markets into appealing, long-term investments for those with a healthy appetite for risk. Money managers view the frontier economies much as they did the emerging markets of a decade ago. They are hopping on airplanes to visit countries where as few as a half-dozen companies are listed on the local stock exchanges.

A handful of mutual fund firms, including Franklin Templeton and Baltimore-based T. Rowe Price, already offer individual investors exposure to the frontier markets via emerging market mutual funds. This month, T. Rowe launched the Africa & Middle East Fund, with investments in Kenya and Lebanon, among other places. As markets develop, T. Rowe said, the fund could potentially invest in Algeria, Botswana, Ghana, Kuwait, Mauritius, Namibia, Tunisia and Zimbabwe.


“We’ve seen a number of factors come together,” said Joseph Rohm, an analyst for the fund. “Africa is enjoying strong GDP growth. Inflation has halved over the last five years. . . . We’ve seen governments spend heavily on power, electricity, roads. For the first time ever in the continent’s history, that’s really happening.”The fund’s largest holdings include United Bank, the largest lender in Nigeria, which recently implemented reforms in the banking sector. The bank is expanding operations outside the country, T. Rowe noted.

There is no precise definition of what constitutes a frontier market vs. an emerging market. Some investors, for example, consider Israel and Korea to be developed markets, while others do not.

In general, frontier markets are smaller — fewer companies, fewer investors, less trading. There’s also less regulation, information on companies and transparency. The markets are considered to be in the nascent stages of development and even riskier than emerging markets, which, of course, are riskier than developed markets like the United States.

Think of it this way: While a money manager invested in an emerging market might worry about bubbles created by unsophisticated domestic investors, his or her counterpart in a frontier market might be concerned about a lack of local investors.

About 540 stocks are traded across 22 frontier markets, with a total market capitalization of $165 billion, according to an April report by Acadian Asset Management. By comparison, the market cap of just one Russian oil company, Lukoil, is about $70 billion, and more than 800 companies are listed on the Shanghai Stock Exchange, one of two exchanges in China.

Despite its size, a frontier market can reward investors handsomely. In the past three years, the Ukrainian stock market has returned 700 percent. It has risen about 160 percent in the past year, while the market in Slovenia gained 110 percent. Botswana returned about 90 percent, and Bangladesh advanced 60 percent. But not all are winners. The Jamaican exchange is down 4 percent this year, though it gained 150 percent in 2003 and 2004 combined.

The S&P/IFC Global Frontier Markets index, which covers the stock markets of 22 countries, gained 49 percent in the year ended Aug. 31. That compares with 16 percent for the Standard & Poor’s 500-stock index during the same period.

But numerous potential downfalls exist in frontier markets. One big concern is the lack of “liquidity,” or the ability to buy and sell stocks quickly. Hunter of WestLB Mellon said it recently took him close to a month to get out of a single position in a frontier market in Europe.

There is also the risk of wild fluctuations in foreign-exchange rates, which can unexpectedly lower the value of investments. The value of the peso in Argentina, for example, plummeted five years ago when the government was forced to devalue the currency during the largest foreign debt default in history.

Money managers have to ask themselves fundamental questions. “What are the rules that allow me to get in and out quickly?” said Alka Banerjee, vice president of global index management for Standard & Poor’s. “Is there a derivatives market which allows me to hedge my exposure? These are the kinds of infrastructure that a stock market needs for it to become basically more accessible to any global investor.”

One benefit investors should consider, noted Rohm of T. Rowe, is the frontier markets’ low correlation to developed markets, offering diversification to individual portfolios.

Many emerging markets fell during the turmoil sparked by U.S. mortgage and credit markets this summer. Not so frontier markets. One reason is that they often deal only in equities and bonds and don’t have derivatives markets. Many of the exotic securities backed by subprime mortgages, the catalyst for the credit crisis, are traded in derivatives markets. “They have no exposure to these sort of instruments,” Rohm said.

On the other hand, many frontier-market economies are dependent on commodities. While raw materials and oil have high prices now, volatile commodity prices and a reliance on commodity exports have been a source of risk for developing countries. But some frontier countries are widening the base of their economies.

Debt relief from the World Bank has freed up African governments to spend their money on infrastructure, said Rohm, a native of South Africa who has traveled extensively across the continent. The emergence of the middle-class consumer has created opportunities for consumer-oriented companies.

“It’s very visible,” said Rohm, who recently returned from a trip to Nigeria, Ghana, Kenya, Uganda and Zambia. Before, “you wouldn’t have seen people walking around with mobile phones. There are a lot of new cars on the road. You see new roads being built. You see new factories being built . . . managements are very happy to meet with investors. They’re producing regular financial statements, which allows us to do due diligence on these companies. ”

We have edited the above article to highlight important issue relative to an investor’s pysche … thanks a trillion

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Toyota’s Net Profit Rises 32%

On Strong Sales, Weaker Yen

August 3, 2007 7:48 a.m.

TOKYO — Toyota Motor Corp., shrugging off an overall slowing of demand in the key U.S. market, posted a 32% rise in net profit to reach a record high in the fiscal first quarter.

Japan’s No. 1 car maker by sales volume said demand for its fuel-efficient vehicles and luxury Lexus line boosted sales in all of its overseas markets. That led to a record net profit of ¥491.54 billion ($4.12 billion) in the April-June quarter, up from ¥371.50 billion a year earlier. Operating income grew 32% to ¥675.4 billion. Revenue rose 16% to ¥6.523 trillion.

The profit rise came in spite of what analysts have called the slowest annual growth rate for auto sales in the U.S. since 1996, due to high gas prices, declining home values and other factors that deter consumers.

But customers continued to flock to fuel-efficient models such as the RAV4 crossover and the Prius gasoline-electric hybrid. Toyota says it sold 762,000 vehicles in the region, up 2% from last year.

“We’re not expecting the U.S. market to go down substantially,” Takeshi Suzuki, a Toyota senior managing director said at a press conference Friday.

Toyota also did well in the crowded pickup truck market, where it had a rough start. Taking a cue from its Detroit rivals, it offered discounts of as much as $3,500 on its redesigned Tundra full-scale pickup. The incentives helped boost sales, but accounted for a significant chunk of its ¥100 billion world-wide marketing budget. The company says that the high-margin Tundra brings in robust profits despite the incentives, and significantly contributed to a 14% rise to ¥160.2 billion in operating profit in North America.

The weak yen, which increases the value of overseas earnings when converted into the Japanese currency, also contributed to the rise in profit in North America.

The U.S. push by Toyota and other Asian auto makers has won them market share at the expense of American makers. Earlier this week, analysts reported that combined market share for the big Detroit brands, including Chevrolet, Ford and Chrysler, in July fell below 50% for the first time.

Honda Motor Co. said last week that demand for fuel-efficient cars in the U.S. boosted its quarterly profit. Nissan Motor Co., meanwhile, reported a drop in profit due to a backlog of big, gas-guzzling vehicles that it can’t sell in the U.S.

Toyota has also been rapidly expanding in fast-growing emerging markets such as China, India and Russia. In Asia (excluding Japan), its sales increased by 13% to 222,000 vehicles, driven largely by a brisk sales in China and Indonesia.

World-wide, the company sold 2.16 million vehicles in the quarter, up 3% from 2.091 million last year. The rise will help Toyota meet its goal of selling 8.89 million vehicles in the year ending March 31, 2008, and possibly inch beyond General Motors Corp. to become the world’s biggest car maker by sales volume this calendar year.

Toyota, valued at $215 billion, is already the world’s most valuable and profitable car maker. One weak spot for Toyota was Japan, where sales fell 8% to 500,632 vehicles. New car sales have been consistently declining in Japan, due largely to an aging population.

As Toyota expands, it must confront problems with quality control and production. In 2005, the car maker recalled 2.38 million vehicles in the U.S., slightly more than it sold, due to quality problems. It has since delayed introducing new models by as much as six months in order to work out engineering and design kinks.

After an earthquake damaged one of its key suppliers last month, Toyota had to shut down production at 12 of its plants in Japan for several days, resulting in a loss of output of 60,000 vehicles. The company says it will make up for the loss during holidays and that it will not have an impact on earnings.

Toyota kept its annual forecasts for the fiscal year ending March 31, 2008. It predicted a net profit of ¥1.650 trillion, up 0.4% from ¥1.644 trillion, and a group operating profit of ¥2.250 trillion, a 0.5% rise.

Write to Amy Chozick at amy.chozick@wsj.com