Friday, June 28, 2013

Gold below $1,200/oz, set for worst quarter on record

By Clara Denina
LONDON (Reuters) - Gold fell below $1,200 an ounce to its lowest since August 2010 on Friday, on track to post its worst quarter on record, as fears persisted that the U.S. Federal Reserve will wind down its monetary stimulus soon.
Bullion has taken a beating - losing as much as 15 percent or about $200 an ounce - since the beginning of last week when Fed Chairman Ben Bernanke laid out a strategy to roll back the bank's $85 billion monthly bond purchases in a recovering economy. This supports an increase in real interest rates, making gold comparatively less attractive.
"Gold has been battered by the Fed's policy stance, while the change in U.S. real interest rates, which have turned positive in June, has become an element disproportionately negative for gold relative to other commodities," Standard Chartered analyst Daniel Smith said.
"The next short-term target stands at $1,160, but I think prices will be higher at the end of the year than they are now as the market starts to price in that the Fed's language will unlikely change from now on."
Spot gold fell to a near three-year trough of $1,180.71 an ounce earlier and it was trading at $1,191.80 by 1405 GMT, down 0.6 percent on the day. Comex gold futures for August fell $20.20 to $1,190.40 an ounce.
Traders said stop-loss orders - automatic sale orders placed at pre-set levels to limit losses - were triggered when gold was sitting on the edge of $1,200. Others said that a lot of funds and institutions are required to close their positions ahead of the end of the quarter, causing heavy liquidation.
Gold is down 25 percent for the April-June period, its biggest quarterly loss ever, based on Reuters data that dates back to 1968. A close at its three-year lows on Friday would also mean the worst weekly performance since 1983.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were unchanged at near four-year lows for a second consecutive day on Thursday. The fund has recorded unprecedented outflows of 12.26 million ounces so far this year, down 28 percent to 31.7 million ounces.
Concerns over a credit crunch and economic growth in China also weighed on investors.
Gold prices near three-year lows have attracted only a muted response from global consumers, who are waiting for them to stabilise.
"Support at $1,150-$1,160 ... should be a level that buyers are eyeing," ANZ said.
Premiums over London spot prices rose to $4 per ounce in Hong Kong and $3 in Singapore from earlier this week, dealers said.
Tokyo premiums remained stable at $2 an ounce, while Dubai premiums were around $3 and Istanbul's at $5 to $6.
Demand in top consumer India increased only slightly, but tight supplies due to government restrictions on imports led to higher premiums.
Silver touched a near three-year low at $18.19 an ounce, before gaining 1.4 percent at $18.71 an ounce. Prices fell 38 percent since the start of the year.
Platinum rose 0.3 percent to $1,316.74 an ounce and palladium was down 0.4 percent to $642.22 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; editing by Jane Baird)

Thursday, June 27, 2013

BoG calls for complete withdrawal of fuel subsidy

The Bank of Ghana (BoG) has joined the clarion call on government to stop subsidising the prices of utilities and petroleum products, explaining that the removal of subsidies will help stabilise the macroeconomic environment leading to a rise in foreign direct investments (FDIs).

While noting the short-term effects of subsidy removals on prices, especially on lorry fares and consumables, the Central Bank said the positive impact of the action on key fiscal variables such as the exchange rate, budget deficit and inflation far outweighed the anticipated negatives, hence the need for a complete withdrawal of subsidies.

The acting Head of Research, Mrs Grace E. Akrofi, advanced the bank's position at a seminar on fuel subsidies in Accra.

The seminar, organised by the Institute of Financial and Economic Journalists (IFEJ) in collaboration with the African Business Media (ABM), brought together officials from the BoG, the National Petroleum Authority (NPA), think tanks and some civil society organisations, to discuss the relevance or otherwise of subsidies on these essential products.

Sharing BoG's experiences on the impact of subsidy payments on monetary policy, Mrs Akrofi said the huge payments made on subsidies, most of which are often not budgeted for, sometimes puts a swing on monetary policy, leading to a rocky macroeconomic environment.

That, she said, acts to taint the image of the economy in the eyes of investors partly causing FDIs inflows to slow.

“Because we continue to subsidise the prices of petroleum products notwithstanding the cost involved, we are not able to achieve certain economic targets such as the budget deficit, trade deficit and even inflation. But all these things go a long way to determine how competitive we are for foreign investors," she said at the discussions.

"If these things are stabilised, possibly through the withdrawal of the subsidies, then we believe that more FDIs will come in and that will help grow the economy," Mrs Akrofi explained.

The government last year used some GH¢809 million in cash to subsidise the prices of fuel and utilities, according to this year's Budget and Economic Policy Statement.

An additional GH¢955.8 million was still outstanding and was expected to be retired this year, the Minister of Finance, Mr Seth Terkper, said during the presentation of the budget in March this year.

About GH¢1.2 billion has been budgeted for subsidies for 2013, accordingly to the years.

"All these payments contribute to the budget deficit and that is the concern we have. Assuming those payments weren't made, then it means that the deficit would have been far lower and other fiscals wouldn't have been affected," the

Acting Head of the Central Bank's Research Department said in an interview after the seminar.

BoG's latest posture on the subsidy debate adds to many the number of institutions and individuals advocating the complete withdrawal of subsidies in the country.

The first were the World Bank and the International Monetary Fund (IMF) with both contending that subsidy payments benefited the rich and not the poor, who are often the target, and further deny critical sectors of the economy such as health, education and infrastructure, among others, the needed funds to develop.

The authority said government needed to withdraw fuel subsidies to enable consumers pays realistic prices for petroleum, explaining that the late payment of subsidies was contributing to the current sorry state of the Tema Oil Refinery (TOR) and the intermittent shortages of petroleum products in the country.

These debates and the subsequent indoor negotiations with government led to a complete withdrawal of subsidies on petrol earlier this year amid mixed sentiments from the public.

"That was a good step and we are just wondering why government didn't extend to the other petroleum products," the Head of Pricing at NPA, Mrs Alpha Okaidja Welbeck, told the GRAPHIC BUSINESS after the seminar.

"But we are hoping that they will stop the subsidy thing soon," she added. An Oil and Gas Analyst at ISODEC, Mr Dennis Nchor, however disagreed, explaining that subsidies, by themselves, were not bad but its the strategy that is.

"We have always maintained that if you think subsidies are not benefiting the intended target, then re-target and ensure that it benefits the poor," he said, adding that government needed to institute mitigation measures in place before subsidises are remove otherwise, the poor will suffer greatly.

Wednesday, June 26, 2013

Shell's pipeline closure impacts Nigeria's crude oil export

The Shell Petroleum Development Company of Nigeria (SPDC) has shut the Trains Niger Pipeline (TNP) following an explosion and fire at a crude theft point on the 28" section of the facility at Bodo West.
The TNP closure is affecting some 150,000 bpd of oil.
Before the incident occurred SPDC closed the 28" TNP to rid it of crude theft connections. It has also closed the 24" section of the pipeline as a precautionary response to the fire; the whole of the TNP system has now been shut in.
Shell says the 24" TNP will reopen when 'it is safe to do so', with the 28" TNP scheduled to commence operations once the blaze has been extinguished and an investigation and damage assessment carried out.
'This is another sad reminder of the tragic consequences of crude oil theft,' SPDC MD Mutiu Sunmonu said in a statement. 'Unknown persons continued to reconnect illegal bunkering hoses at Bodo West even as our pipeline team were removing crude theft points. It was therefore not surprising that the fire occurred from the continuing illegal bunkering even as a previous crude oil theft point was being repaired by the team.
'The explosion also triggered a fire on a nearby barge. Crude theft continues to pose significant challenges to people, the environment and the local and national economy, and all stakeholders must work together to stop this criminal activity.' -
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Monday, June 24, 2013

Jewellers join government's campaign to cut gold buying

By Siddesh Mayenkar
MUMBAI (Reuters) - India's biggest jewellers' association has asked members to stop selling gold bars and coins, about 35 percent of their business, adding its weight to government efforts to cut gold imports and stem a swelling current account deficit.
The call by the All India Gems and Jewellery Trade Federation (AIGJTF), which represents about 90 percent of jewellers, comes just days after financial services company Reliance Capital halted sales of its gold-backed funds.
"As a responsible trade body, we have requested our retailers not to sell gold coins or bars. We need to help the government to solve the CAD (current account deficit) problem," said Haresh Soni, chairman of the AIGJTF, which has more than 40,000 members.
India is the world's biggest gold buyer, and soaring imports have sent its current account to a record deficit. New Delhi has raised the import duty on gold twice since January 1, doubling it to 8 percent, and the central bank has imposed measures forcing customers to pay up front for gold.
"We have appealed to members not to sell coins and bars till our CAD situation resolves," Soni said.
"We expect 1,500-2,000 retailers to stop sale of gold coins and bars immediately," he added.
About 30 to 35 percent of last year's imports of 860 tonnes went into investment demand, Soni said. Most of the gold imported into India goes into making gold jewellery, traditionally part of a bride's trousseau and dowry.
"We are safe guarding the jewellery industry ... (which) generates employment and creates revenues for the government," he said.
On Monday, shares in listed jewellers such as Gitanjali Gems Ltd (GTGM.NS) and PC Jeweller Ltd (PCJE.NS) fell sharply on concerns the government measures could hit their businesses.
Soni said the federation had asked the government to reduce the import duty from 8 percent to 4 percent.
Falling world prices from mid-April triggered a surge in demand globally. India's imports hit a record of 162 tonnes in May, more than double the average monthly import level in 2011, a record year.
The government's and central bank's latest actions to curb buying came earlier this month, and Soni said imports in June had declined drastically. He declined to give specific figures.
Finance Minister P. Chidambaram said last week imports had fallen in value to about $36 million a day from $135 million before the curbs.
But the World Gold Council (WGC) estimated imports could still be 300-400 tonnes in the second quarter - almost half the total for 2012 - and the government itself said imports had exceeded 300 tonnes in April to mid-May.
Domestic prices are already back near levels before the rise in the duty, which indicates demand could revive, particularly as a bountiful monsoon starts to raise hopes of increased incomes for farmers and India's large rural community.
On April 16, domestic gold futures hit a contract low of 25,270 rupees per 10 grams, and they are now trading around 26,734 rupees.
The WGC said it expected 2013 demand - largely covered by imports - to be "at the higher end of our estimate of 865 to 965 tonnes", which would be close to the record 969 tonnes of 2011.
"Demand in India is price inelastic ... the fundamental reasons for gold demand in India cannot be addressed through supply restrictions," said Somasundaram PR, managing director for India at the WGC, in an email.
The WGC last month said 82 percent of Indian consumers in a survey said they thought the price of gold would increase or be stable in the next five years. Many Indians see gold as a sound investment in a country that lacks any kind of comprehensive banking system and with real interest rates stubbornly low.
Over centuries, Indians have squirreled away at least 20,000 tonnes of gold - more than is stored in the vaults of the U.S. Federal Reserve - in their quest for a safe investment. (Editing by Jo Winterbottom and Jane Baird)

Thursday, June 20, 2013

TOR debt not a threat to GCB Bank

The Tema Oil Refinery (TOR) is still reeling under heavy debt and operational difficulties that is making it difficult to operate.

TOR is feared to have lost more than US$63 million since July 2012 as a result of its inability to process and refine crude because of broken equipment.

The country’s only state-run refinery has been operationally idle since July last year due to the breakdown of critical equipment. The plant's shutdown was due to lack of feedstock.

Although the Managing Director, Mr Ato Ampiah told Reuters the plant was expected to restart in November 2012 as new supplies became available, the refinery is still idle.

Reports reaching the Graphic Business indicate that many experienced workers at TOR have been poached to work in other refineries in other parts of the world, especially in the Middle East and Gulf States.

Germaine to the refinery’s woes is the inability of the company to pay its debts running into hundreds of millions of dollars.

Until recently, the Ghana Commercial Bank (GCB) bore the brunt of debts owed by TOR, a situation that threatened to collapse both the bank and the refinery. GCB was only able to survive the heat because the government took steps to retire a greater chunk of the debt.

The government intervened and paid GH¢445 million out of the over GH¢1 billion debt owed the Ghana Commercial Bank (GCB) in cash in 2010.

In 2011, the government issued a three-year bond valued at GH¢522 million to further retire the over debt TOR owed the GCB.

These developments helped the listed bank to turn around its fortunes, returning as much as 343 per cent profit before tax amounting to GH¢91.3 million for 2010 over the GH¢20.6 million recorded in 2009.

The bank, thus, recorded a net interest income of GH¢259.9 million in 2010, 57 per cent over the 2009 figure of GH¢165.8 million.

The trend has continued since the government’s salvaging efforts. Last year, the bank’s profit before tax went up by 520 per cent from GH¢31.1 million in 2011 to GH¢192.9 million; net profit up from GH¢18 million in 2011 to GH¢143 million, representing 695 per cent rise.

The Managing Director of GCB, Mr Simon Dornoo, told the bank’s 19th annual general meeting on May 30 that what was left of the TOR debt on its books was about US$50 million (about GH¢100 million) which did not pose as any risk to the bank as before.

“Steps are being taken to recover the rest of the debt from TOR. I don’t think this is a big deal for now but we are sure it will be settled in due course,” Mr Dornoo said, but declined to give specific timelines on when the bank and the oil refinery will bring closure to the issue Industry watchers have told the GRAPHIC BUSINESS that besides the debt overhung are operational challenges that is stifling the company’s operations, including the right equipment and machinery.

The industry players said even with the three per cent increment on petroleum prices announced on May 31 will mean nothing to TOR because pricing was per se not the challenge for the company.

Currently, the country’s fuel needs are supplied by bulk oil companies which bring in products for distribution by filling stations across the country.

The Volta River Authority (VRA), which generates electricity for the national grid, also brings in crude oil on its own to power its thermal plants at about US$3 million a day, leaving the Tema Oil Refinery (TOR) standing as a white elephant.

In September 2012, the then Energy Minister, Dr Oteng Adjei, announced that the TOR debt had been reduced to GH¢610 million from the December 2008 total of GH¢1.6 billion.

Last year, the oil refinery secured some US$900 million in financing from banks BNP Paribas and Standard Chartered to help it clear its debt backlog and purchase crude oil supplies.

It was the second multi-million dollar bailout since 2010 for the 45,000 barrel-per-day plant, which has run only intermittently for years due to trouble securing credit to line up a steady supply of crude shipments.

Mr Ampiah said BNP Paribas would provide US$750 million in financing, US$450 million of which would be used to pay off debts, while Standard Chartered would provide US$150 million.

While TOR struggles with operational challenges, analysts have questioned whether the company would get back on track so as to retire its debts, such as the US$50 million owed GCB.

Although GCB has reduced its exposure to TOR, it still has about GH¢404 million in advances and loans to government departments, public institutions and public enterprises. The figure increased from GH¢207.4 million in 2011.

That notwithstanding, GCB made impressive progress with its financial position, recording 48 per cent return on equity to post total income of GH¢418 million in 2012 from the 2011 figure of GH¢289 million.

This 45 per cent increase in incomes resulted in profit before tax of GH¢192.9 million in 2012. The corresponding GH¢143 million profit after tax was also 695 per cent higher than the GH¢18 million the bank recorded in 2011.

These results mean that investors in GCB shares made a whopping 671 per cent more return on their stocks in 2012, as the earnings per share increased from GH¢0.07 per share in 2011 to GH¢0.54 per share in the year under review.

Wednesday, June 19, 2013

Par Petroleum to purchase Hawaii-based fuel refinery

San Antonio-based refiner Tesoro has found a buyer for its Hawaii refinery in the shape of Par Petroleum (PP).
Houston-based PP will shell out $75 million (€56 million), plus working capital of between $225 million to $275 million, for the 94,000 barrel per day (bpd) refinery in Kapolei. The deal includes all retail stores and associated logistics.
‘We are pleased to have reached this positive outcome for the company,’ says Tesoro CEO Greg Goff, while adding the plant was not considered part of its strategic focus.
Tesoro revealed earlier this year that it would convert the refinery to a storage and distribution terminal if a buyer could not be found, with employee layoffs due to begin in June.
PP says the deal, expected to close in the third quarter, would be majority financed by issuing $200 million in common stock, plus the retail gas stations will remain under the Tesoro brand.
Brian Schatz, a Democratic US senator, was quoted as saying the operation is a critical part of Hawaii's economy and the purchase will ‘help with the availability of jet fuel, diesel fuel and other refined products’.
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Wednesday, June 12, 2013

UK top court rules against oil tycoon in divorce

Yasmin Prest leaves the Supreme Court of the United Kingdom after winning a 17.5 million pound (US dlrs 27 million) divorce case between her and her Nigerian Oil tycoon husband Michael, in London, Wednesday June 12, 2013. Britain's top court on Wednesday handed oil tycoon Michael Prest a costly setback in a divorce case, ruling he must give his ex-wife property assets held by companies he owns. (AP Photo / John Stillwell, PA) UNITED KINGDOM OUT - NO SALES - NO ARCHIVES
LONDON (AP) — Britain's top court on Wednesday handed an oil tycoon a costly setback in a divorce case, ruling he must give his ex-wife assets held by companies he owns.
In a case with significant implications for wealthy divorcing couples, the Supreme Court ruled that Nigeria-born Michael Prest should surrender seven properties to his English former wife, Yasmin.
Alison Hawes, a specialist family lawyer at law firm Irwin Mitchell, said the ruling meant "that business people cannot deliberately 'hide' their assets in businesses and corporate structures to protect them in future in the event of a divorce."
The couple, now in their 50s, married in 1993 and lived in Britain before divorcing in 2011. Michael Prest was ordered to transfer the properties as partial payment of a 17.5 million pound (about $27 million) settlement.
He challenged that decision, and last year the Court of Appeal ruled that the companies constituted a separate legal entity and couldn't be included in the divorce.
But seven Supreme Court justices ruled the properties were assets to which Michael Prest was "entitled" and should be included in a divorce settlement.
The court insisted it wasn't establishing a general principle allowing courts to "pierce the corporate veil" and seize assets in divorce cases. But legal experts said the judgment was still significant.
"The Supreme Court has handed down a landmark decision in which, for the first time since at least the end of the 19th century, it has accepted a general exception to the rule against 'piercing the corporate veil,'" said Michael Hutchinson, a partner at law firm Mayer Brown.
"This is an extraordinary decision and the implications for corporate governance are potentially huge."
Yasmin Prest said the judgment was "more a case of satisfaction and relief than celebration. None of this would have been necessary if Michael had been sensible and played fair."
Michael Prest wasn't in court Wednesday.

Tuesday, June 11, 2013

Regulate bunkering services - David Ameble

Mr. David Ameble, Chief Executive Officer of the award-winning bunkering firm, Inter Maritime Services Limited, has disclosed to B&FT that it is high time appropriate authorities step in to regularise the bunkering business environment to push out fake operators.

According to Ameble, the country’s bunkering sector needs support from Government to stay in business while current players need to operate in a well-formed structure.

“In as much as bunkers need Government’s support in the area of gas oil supply directly from Tema Oil Refinery (TOR), we – bunkers -- must also operate our companies in a more structured way to eliminate doubts from our regulators.”

With his experience in the industry, Mr. Ameble implored vessel owners to establish confidence in a country’s bunkering services delivery before sailing to that destination.

“Most ships upon discharging cargo to the two ports in the country -- Tema and Takoradi -- sail to South Africa to bunker,” he revealed.

He also pointed out that, occasionally, foreign vessels bring down their bunkering ships to our territorial waters to refuel the vessels because of no confidence in the country’s services.

This move, he said, deprives the nation of taxes which otherwise would have gone to Ghana Ports and Harbours Authority.

The latest Bunker publication by Matrix Maritime Media has revealed that for the second quarter of 2013, over 500 companies were engaged in bunkering services globally.

The publication also disclosed that Germany and the Netherlands topped the world with 26 and 21 firms respectively.

A breakdown from continents disclosed that Africa had the lowest number of bunkering companies, Nigeria and South Africa dominating with 13 and 11 companies respectively.

According to the report, three companies deeply engaged in the bunkering business in Ghana are Inter Maritime services, Omar Oil and Jedtech Limited. All these companies operate from Tema and are members of the World Bunkering Association.

Friday, June 7, 2013

Canadian Utility Finds a Use for Detroit’s Pile of Oil Sands Byproduct

Fabrizio Costantini for The New York Times
Petroleum coke, a byproduct of refining Canadian tar sands, has disturbed residents as it sits on a bank of the Detroit River.
OTTAWA — In something resembling a bottle return program, Detroit’s enormous petroleum coke pile, a byproduct of Canadian oil sands, is making its way back to Canada.
A Canadian electrical power plant, owned by Nova Scotia Power, is chipping away at the three-story-high, blocklong pile of petroleum coke on Detroit’s waterfront. The company is burning the high-carbon, high-sulfur waste product because it is cheaper than natural gas.
The uncovered black pile, which has angered and upset some residents of Detroit as well as others across the river in Windsor, Ontario, began appearing this year. Owned by Koch Carbon, a company that is controlled by the industrialists Charles and David Koch, it is a byproduct of processing heavy bitumen piped from the oil sands in Alberta to a Detroit refinery.
Its final destination had been something of a mystery. Most petroleum coke, often referred to in the oil industry as petcoke, is used as inexpensive fuel in countries like China, India and Mexico with relatively loose emissions controls. Environmentalists were concerned not only about the impact of the growing pile in Detroit but also about where the material would be burned.
In an e-mail, Neera Ritcey, a spokeswoman for Nova Scotia Power, confirmed that the company “bought fuel from that location.” Citing “competitive reasons,” Ms. Ritcey declined to offer specifics about its petcoke purchases.
The electrical utility’s use of petcoke, which is a particularly high emitter of greenhouse gases, feeds into concerns that the waste material’s unusually low cost and increasing availability in the United States may derail efforts to shift coal-burning power stations to cleaner natural gas.
At the same time, the Obama administration is reviewing the Keystone XL pipeline, a project that would send more oil sands bitumen to American refineries and correspondingly increase the amount of American petroleum coke.
Residents on both sides of the Detroit River have noted regular visits to the coke pile by two self-unloading, oceangoing bulk carriers owned by Canada Steamship Lines of Montreal. Web sites that track ship movements indicate that one of those ships, the Atlantic Huron, has made several trips this year from Detroit to a coal terminal in Sydney, Nova Scotia. The terminal services two Nova Scotia Power plants that burn petroleum coke, according to regulatory documents.
A power station at Point Aconi in Nova Scotia that uses the petcoke has an unusual burning system that minimizes some forms of pollution from high-sulfur fuels. Documents suggest that it is Nova Scotia Power’s heaviest user of petroleum coke.
The Point Aconi plant, which opened in 1994, was initially promoted as a way to keep a local coal mine open. But the mine closed anyway and the power station now relies entirely on imported fuel.
Nova Scotia produces natural gas from offshore fields and Nova Scotia Power, which was owned by the provincial government until 1992, burns the cleaner fuel in some of its plants. But last year, the company produced 59 percent of its power from coal and petroleum coke, an increase of two percentage points from 2011.
In a blog post on the company’s Web site, Wayne O’Connor, the company’s executive vice president for operations, said the increased use of coal and petroleum coke was a matter of price.      
“We had been steadily increasing our use of gas because we could buy the fuel at relatively low prices and using it creates fewer emissions than coal,” he wrote. “In this case, the switch to coal help save our customers money over continuing to use gas, while still allowing us to meet emissions requirements.”      
Despite the regular visits to Detroit by ships to take away the petcoke, the oil sands bitumen refinery there is producing the material at a rate which means the waterfront pile continues to grow.
A version of this article appeared in print on June 7, 2013, on page B5 of the New York edition with the headline: Canadian Utility Finds A Use for Detroit’s Pile Of Oil Sands Byproduct.

Wednesday, June 5, 2013

PRECIOUS-Gold rises after U.S. jobs data misses forecasts

* Market awaits Friday's U.S. non-farm payrolls data
* Chinese gold imports from Hong Kong fall from record
* Worries over Indian demand simmer after RBI announcement (Updates prices)
By Jan Harvey
LONDON, (Reuters) - Gold prices rose on Wednesday after U.S. jobs data missed expectations, curbing speculation the Federal Reserve may start paring back its $85 billion monthly bond-buying programme.
The bond purchases are part of a package of Fed stimulus measures known as quantitative easing, which have helped push gold prices to record highs in recent years by keeping interest rates at rock bottom and stoking fears over inflation.
Spot gold was up 0.4 percent at $1,404.17 an ounce at 1401 GMT, having earlier touched a session low of $1,395.19. U.S. gold futures for April delivery were up $8.40 an ounce at $1,405.60, off a low of $1,395.10.
A report by payrolls processor ADP showed U.S. private employers added 135,000 jobs in May, falling short of expectations. The data is seen as an important precursor to Friday's monthly non-farm payrolls report.
Mitsubishi analyst Jonathan Butler said the jobs data was being closely watched by gold traders.
"As the unemployment rate has been explicitly tied into quantitative easing, there has been a direct correlation between the non-farm payrolls and what happens to the gold price," he said.
Hawkish comments from Fed members of late have fuelled speculation that the bank may start to rein in its bond-buying programme.
Kansas City Fed President Esther George said on Tuesday slowing the pace of bond buying would not mean tightening U.S. monetary policy and would help wean financial markets off their dependence on cheap money from the central bank.
China's total gold imports from Hong Kong fell to 125.715 tonnes in April from a record high of 223.519 tonnes in the previous month, despite a drop in prices of the metal to two-year lows during the month.
Gold stayed under pressure on concerns that demand from number one buyer India will be hurt by fresh moves by the Reserve Bank of India to curb gold imports.
"Various comments from officials hint at the potential for more measures to come, as the government is taking a hard line trying to curb the country's appetite for gold," UBS said in a note. "This poses a risk for Indian gold demand up ahead should more and more restrictions be implemented."
Among other precious metals, silver was up 0.9 percent at $22.62 an ounce, while spot platinum was up 1 percent at $1,502.50 an ounce, and spot palladium was up 0.3 percent at $750.65 an ounce.
Platinum extended its premium over gold to more than $100 on Wednesday, its highest since August 2011, as the white metal benefited from concerns over supply from South Africa, source of three-quarters of the world's platinum. (Editing by James Jukwey and Elaine Hardcastle)

Tuesday, June 4, 2013

Ghana’s removal of fuel subsidy spurs Nigeria’s move to increase price of petroleum products

…Committee on fuel subsidy scam abandons report
THERE are indications that the decision by the Ghanaian government to scrap its fuel subsidies to curb fiscal deficit saga in its budget may have elicited fresh fears for Nigerian government pursuing similar policy direction.
Besides, President Goodluck Jonathan’s special committee set up to review the Ribadu report on fuel subsidy scam, may have abandoned their assignment due to pressure from some quarters to kill the report.
The Guardian gathered that the Federal Government was yet to put to rest its proposed plans to end subsidies on petroleum products due to pressures from different quarters such as fuel marketers and International Monetary Fund (IMF).
According to a source, with this latest development from Ghana, the government might want to consider scrapping fuel subsidies, which it has not totally given up on.
The Nigeria’s 2013 budget is hinged on an expectation of oil production of 2.53 million barrels per day compared to 2.48 million barrels per day in 2012. The benchmark oil price was also left at $79 per barrel up from $72 per barrel in 2012.
Also, real Gross Domestic Product (GDP) growth rate of 6.5 per cent was projected as well as average exchange rate of N160/$.
The Ghanaian government announced at the weekend that it had increased the prices on fuel between 15-20 per cent.
The National Petroleum Authority (NPA) said in a statement that the decision followed a government directive to achieve full pass-through petroleum products prices in the West African cocoa, gold and oil exports.
“The maximum indicative price for a litre of petrol will be GH¢2.0496 (GH¢9.22 per gallon) and the maximum indicative prices for a litre of diesel will be GH¢2.0683 (GH¢9.31 per gallon),” it quoted the statement as saying.
Kerosene will now sell at 104.65 pesewas per litre, a 15 per cent rise while LPG will go for GH¢24.36 per a 12.5 kg cylinder, according to the report. The LPG price is increased by 50 per cent.
A statement signed by the NPA’s Chief Executive Officer, Alex Mould, said the new prices were based on the crude oil price of $116 per barrel and an exchange rate of GHS1.89/USD.
Ghana’s economy has been one of the world’s fastest growing since oil production started in 2010, but the government has struggled to steady its cedi currency and contain deficit spending.
The cost of subsidies last year reached one billion cedis ($500 million) and was expected to rise to 2.4 billion cedis this year, before the NPA raised prices in February.
Ghana has set a 2013 deficit target of 9 per cent of GDP.
The Federal Government had announced the total removal of subsidy on petrol on January 1, 2012 without prior announcement, raising the price of a litre of the commodity to N141 from N65. The week-long mass demonstration, which followed, forced the government to partially remove the subsidy and reduced petrol price from N141 to N97 a litre.
But if the government eventually removes fuel subsidy, Nigerians will be paying a minimum of N146.59 per litre of petrol at filling stations. This is based on the Petroleum Product Pricing Regulatory Agency’s template, which reveals that the landing cost of a litre of petrol is currently N131.10, with total distribution margins of N15.49, thus bringing the total cost to N146.59.
Over the years, there have been removals of fuel subsidy by previous governments.
For example, during the Gowon regime in 1973, government raised the price of fuel from 6k to 8.45k, which represents 40.8 per cent increase.
During the Murtala Mohammed administration in 1976, it went up from 8.45k to 9k, representing 0.59 per cent.
Obasanjo, October 1, 1978, from 9k to 15.3k, 70 per cent; Shagari, in April 20, 1982, from 15.3k to 20k, 30.71 per cent; Babangida, March 31 1986 from 20k to 39.5k,  97.5 per cent; Babangida, April 10 1988: 39.5k to 42k, 6.33 per cent; Babangida, January 1, 1989: 42k to 60k private vehicles;
Babangida, December 19, 1989: moved to uniform price of 60k, 42.86 per cent; and Babangida, March 6, 1991: 60k to 70k, 16.67 per cent.
Also, during Shonekan administration on November 8, 1993, the price of fuel was increased from 70k to N5, representing 614 per cent; Abacha, November 22,1993: petrol price drops from N5 to N3.25k representing -35 per cent; Abacha, October 2,1994: N3.25k to N15, 361.54 per cent; Abacha, October 4,1994: price drops from N15 to N11, representing -26.67 per cent; Abubakar, December, 20, 1998: N11 to N25, 127.27 per cent and Abubakar, January 6,1999: N25 to N20, -20 per cent.
Again, during Olusegun Obasanjo administration on  June 1, 2000, the fuel pump price was raised from N20 to N30, representing 50 per cent increase; Obasanjo, June 8, 2000: Petrol price reduced to N22 , -10 per cent; Obasanjo, January 1, 2002: N22 to N26, 18.18 per cent; Obasanjo, June to October, 2003: N26 to N42, 23.08 per cent; Obasanjo, May 29, 2004: N50, 19.05 per cent; Obasanjo, August 25, 2004: N65, 30 per cent; Obasanjo, May 27, 2007: N75. 15.38 per cent; Yar’Adua, June 2007, it went down to N65 representing a 15.38 per cent reduction and in Ebele Goodluck Jonathan on January 1, 2012 increased fuel price to N141 and later reduced it to N97.
Meanwhile, indications emerged at the weekend, that President Goodluck Jonathan’s special committee set up to review the Ribadu report on fuel subsidy scam, have abandoned their assignment due to pressure from some quarters to kill the report.
The Guardian gathered that President Jonathan seems not to be disturbed by the failure of the committee to meet the two weeks deadline given to the members of the committee in November 2, last year to produce a draft white paper.
A source from the presidency, which spoke with The Guardian at the weekend, said that the committee, which has virtually all the ministers as members, has not done much to produce the draft white paper.
According to the source, it is clear that government has succumbed to pressure to ensure that the real truth from the report is not revealed.                           The Guardian gathered that there have been serious lobbying from those implicated in the report so as to avoid disgrace from the findings of the special committee.
The source disclosed that the committee constituted was having disagreement among themselves concerning what should be recommended to the government. “There are already discordant tunes among the members of the committee on what should be recommend and what should not be recommend. So, coming out with the recommendations is already being obstructed with this. President Jonathan has also lost interest in the report, which is the reason he is not pressuring the committee to submit the report. I must tell you that the report has died a natural death”, he said.
It will be recalled that the president constituted three committees to prepare draft white papers on reports of special task forces on petroleum, refineries and governance.
This was in line with his earlier vow to fully implement the Nuhu Ribadu’s Special Petroleum Task Force committee’s report.
The committees, according to a statement by Reuben Abati, Special Adviser to the President on Media and Publicity, are to prepare the draft white paper for consideration by the Federal Executive Council (FEC) within two weeks.
The statement noted the action is in furtherance of the president’s “declared commitment to doing all within his powers to ensure greater accountability, probity and transparency in Nigeria’s oil and gas industry”.
The White Paper Committee on the Petroleum Revenue Special Task Force report, which was submitted by Nuhu Ribadu, was chaired by the Minister of Labour, Emeka Wogu with the Minister of Interior, Abba Moro, Minister of State, FCT, Jumoke Akinjide and the Minister of State for Foreign Affairs II, Nurudeen Mohammed as members.
The White Paper Committee on the report of the Governance and Controls Special Task Force was chaired by the Minister of Lands, Housing and Urban Development, Ama Pepple. Other members of the committee are Minister of State, Defence, Olusola Obada; Minister of Transport, Idris Umar, and Minister of State for Agriculture and Rural Development, Bukar Tijani.
The White Paper Committee on the report of the National Refineries Special Task Force has Minister of Mines and Steel Development, Mohammed Sada as chairman, and Minister of Agriculture and Rural Development, Akinwunmi Adesina, Minister of State for Health, Muhammad Pate and Minister of State for Education, Ezenwo Nyeson Wike as members.
Reacting to this development, the Director General of Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf told The Guardian that the inability of the committee to produce the white paper after several months showed that the government was no longer interested in investigating fuel subsidy scam in the country.
Yusuf stated: “It is not surprising that the white paper on the Ribadu report is yet to see the light of day. Given the totality of the circumstances and the ramifications of the issues and the personalities it is doubtful whether there would be white paper. First, there was an issue with the composition of the committee. Some members of the committee cannot be expected to be unbiased because of vested interests.
“Secondly, it is impossible to do a thorough investigation of such a strategic institution when the key players that were being investigated were still on their seats.
“Thirdly, the committee was not a team. They were pulling in different directions with divergent agenda and there was no way it could have produced a credible report.
“The fact that the committee members could disagree in the presence of Mr. President and in the full glare of the public has far reaching implications.
“Evidently, the committee did not get the desired cooperation from the key agencies that were to supply vital information. With all these, it is difficult to go forward with the report. It is doubtful whether the government is ready to do a thorough investigation of the oil and gas sector”.
Also, the Task Force on Refineries led by Kalu Idika Kalu, suggestions to the Federal Government on how to turn around the country’s refining industry has not been worked upon.
The task force gave both short and long term measures in the effort to make the refineries work. In the interim, it wants a new offshore refining scheme to be initiated.
“NNPC currently receives 445,000 barrels of crude oil per day. Of this, only a fraction is refined locally. We propose that the total balance of the unrefined crude should be refined by a new independent arrangement to meet the national demand of the regulated products (PMS and DPK).
“In this regard therefore, the NNPC refineries should be supplied only crude that they can refine. An accountable specialist team should be instituted within NNPC to implement the scheme, based on clearly defined governance and operating guidelines,” the task force advised.
It suggested changes in the ownership structure and business model of the refineries in order to turn them around.
It is recommended that the federal government should relinquish control of the operation and management of the refineries by divesting a majority of its 100 per cent equity to competent, resourceful and experienced refining private partner(s) in accordance with the Public (Privatisation and Commercialisation) Enterprises Act 1991.
It wants this privatisation process to be accelerated in an aggressive but workable time frame, which should culminate in the transfer of majority ownership and operatorship of the refineries to experienced and capable partners within 18 months.
NRSTF advised that the plan for full rehabilitation of the plants should be discontinued.