2012 Looks Promising for Energy Investors

By Abantika Chatterjee

Rising oil prices and increased demand for oil and natural gas have set the ball rolling for exploration and production for the new year. With oil prices hovering around the $100-per-barrel mark, companies across the world have increased their focus on production. A recent survey by Barclay's Capital showed that major E&P companies have hiked their planned expenditures for 2012, hitting a cumulative figure of $600 billion. This indicates a feverish pitch in E&P activities in 2012 that should rake in moola for the companies and their investors. Read along and I will tell you where well-known energy companies are focusing their budgets in 2012.

The numbers

Company	2011 Capital and Exploratory Expenditures (in billions)	2012 Estimated Budget (in billions)	Change
ExxonMobil(NYSE: XOM)	$33-$37	$33-$37	--
Chevron(NYSE: CVX)	$28.0	$32.7	17%
PetroChina	$26.8	$30.0	12%
Royal Dutch Shell	$25-$27	$25-$27	--
Total(NYSE: TOT)	$20	$23	15%
BP(NYSE: BP)	$19	$20	7%
ConocoPhillips(NYSE: COP)	$12	$14	17%
Chesapeake(NYSE: CHK)	$5.0-$5.4	$5.4-$5.8	7%

Company filings, Web sources.
We can see that four of the companies are exhibiting double-digit growth in their budget allocation. A huge portion of the budget is going to go into finding and developing natural gas reserves since the world's energy demand has been witnessing a shift toward it. The emergence of natural gas as the best alternative to the continually depleting oil reserves has pushed oil majors and minors to grab land in newly found unconventional reserves. This has also created enough opportunities for large-cap oil-field-services companies such as Schlumberger, Baker Hughes, Halliburton, and Weatherford, as the unconventional plays require lot of high-tech equipment and severe-site maintenance.
Focus areasNow let's shed some light on the places the money will go. Projects witnessing increased capital spending are Chevron's Wheatstone and Gordon Australian liquefied natural gas (LNG) projects; the Australia Pacific LNG project, which is a joint venture of ConocoPhillips, Origin Energy, and Sinopec; and Exxon and Interoil's Papua New �Guinea projects. Apart from being rich in reserves, Australia and Papua New Guinea are well-located to serve Asia, with China and India acting as perfect markets. After the Fukushima Daiichi nuclear disaster in March, Japan has also become a target market for project operators in the region as natural gas is seen as safer than nuclear energy.
Other places drawing oil and services companies are the U.S. shale plays of Bakken, Barnett, Eagle Ford, Woodford and Marcellus. Among them, Bakken has experienced the highest growth in the past five years. According to the U.S. Geological Survey, there are 3.65 billion barrels of recoverable crude oil present in the Bakken. ExxonMobil has 410,000 net acres of leasehold and seven operating rigs in the Bakken. The company has also invested in the Woodford shale.
The oil sands of Canada are also attracting investments from both domestic and international players. The oil sands provide these players a good source of supplying crude oil to the U.S. If TransCanada gets approval for its Keystone XL pipeline, oil sands prospects will brighten up further. A majority of these projects are scheduled to operate from 2014, with a few adding to production post-2017, and some as early as 2012.
Key driversHigh oil prices are one of the main drivers behind the increased capital spending of oil majors. With oil futures settling between $101 and $110 for WTI and Brent, respectively, oil and gas companies have increased efforts to produce more and cash in on the price rise.
The increased demand for natural gas is another driver persuading companies to add more natural gas assets to their project portfolios. Demand from emerging markets and shale discoveries in Latin America, apart from the proven reserves of the U.S., Qatar, Iraq, and Canada have given enough reasons for energy companies to invest.
Foolish bottom line Rising oil prices and burgeoning natural gas demand stand to play a vital role in shaping the energy sector in 2012, and the increased budget of oil players seems worth spending. If you're looking for top energy plays to profit of the oil boom, check out The Motley Fool's "3 Stocks for $100 Oil." You can download this special report for free by clicking here.

http://www.msnbc.msn.com/id/45796716/ns/business-motley_fool/t/looks-promising-energy-investors/

Retail invasion of Canada shows no sign of slowing

Mon Dec. 26 2011 6:48:12 AM | The Canadian PressTORONTO —

The influx of U.S. and foreign chains to Canada shows no sign of slowing as we head into a new year.

Marshalls, Express and Topshop were some of the retailers that opened up shop in Canada in 2011.

Another U.S. company appears poised to launch.

Catherine Fisher of Ann Incorporated, the parent company of Ann Taylor and Loft, says a formal announcement hasn't been made.

But she says they're "actively pursuing entry into the Canadian market" expected for late in 2012.

And U.S. discount giant Target is set to enter the Canadian market in 2013.

Daniel Baer of Ernst and Young says Canadian retailers will need to exploit their knowledge of the consumer and use the fact that they're homegrown to their competitive advantage.

He also notes companies won't just be battling for dollars.

Baer foresees more competition for retail talent like personnel to fill management and head office positions.

Kathy Perotta of The NPD Group says Canadian retailers need to work towards keeping -- and growing -- their existing share of the pie.

She says the total apparel and basics market is worth roughly 23.3 billion dollars, so new entrants to Canada are going to take their share from somebody.

http://www.cp24.com/servlet/an/local/CTVNews/20111226/121226_retail_US_Canada/20111226/?hub=CP24Home

Harper sees trade deals as key to his political success

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JOHN IBBITSON |Columnist profile
OTTAWA— From Monday's Globe and Mail
Published Sunday, Dec. 25, 2011 7:25PM EST
Last updated Sunday, Dec. 25, 2011 11:21PM EST

Others may judge the Harper government by what it achieves, or fails to achieve, on the environmental front, with first nations or in making government more accountable. But Stephen Harper judges himself on how well his government manages the economy. In that context, nothing is more important to the Conservatives than trade.

By this time next year, either the Prime Minister will have one major agreement in his pocket and several more in the works, or this administration, by its own accounting, will have failed one of its most crucial tests.

The good news for the Tories is that they may soon clear the first and biggest hurdle. Government sources predict that a signed Canada-European Union Trade Agreement will be in place by February or March.

Some of the terms of that agreement will be contentious. EU businesses will have greater access to Canadian government-procurement contracts, for example. And dairy quotas for European imports will probably be raised, in exchange for increased quotas for Canadian pork exports.

But the deal is likely to be worth the concessions. Despite its problems – and they are legion – the EU remains the world’s largest common market, with 500- million people and a collective GDP of $16-trillion.

Improving access to that market is vital to this country’s long-term prosperity, which is why provincial governments are reportedly onside. (Negotiators also insist that the deal will clear all 27 European parliaments without difficulty. We’ll see.)

The EU agreement is vital to the Harper government’s second-most important goal: getting the member nations of the Trans Pacific Partnership to accept Canada’s application to join.

The TPP is emerging as a potentially powerful new trade bloc, as the Obama administration seeks to fashion a Pacific economic consortium that could rival China in size and influence.

Canada wants to be part of the partnership but has been shut out because the Conservative government continues to protect dairy and poultry farmers from foreign competition.

The word is that the Conservatives will use the agriculture provisions of the EU treaty to show the Pacific nations that Canada is willing to be flexible on agricultural subsidies. Maybe it will work; maybe it won’t.

If it doesn’t, then Mr. Harper will have to make an enormously difficult choice: give up on joining the Trans Pacific Partnership, which would be a severe blow to this country’s Pacific aspirations, or scrap supply management, which will enrage the all-powerful dairy lobby.

At the same time, the Harper government is exploring with the Chinese whether there is enough common ground to launch talks on a free-trade agreement, or whether to pursue sectoral negotiations instead.

The Conservatives have already negotiated a Foreign Investment Protection Agreement, or FIPA, as part of their trade negotiations with India. Both countries are waiting until Mr. Harper visits there next year to formally announce it.

As well, International Trade Minister Ed Fast will decide in 2012 whether to restart the stalled trade negotiations with South Korea, or abandon them entirely. Pork producers are anxious to see a deal, since the U.S. and Korea now have one, but concerns over Korean protectionism in the auto sector are holding that agreement back.

Hopes for progress in trade talks with Mercosur, the South American trade bloc, are fading. Argentina, in particular, is more interested in throwing up new barriers to trade than in tearing down existing ones.

But if the Harper government can sign agreements with the EU, China and India, and worm its way into the Pacific Partnership talks, it will be able to claim a robust record in expanding and diversifying trade.

If it can’t, then the Conservatives’ talk of protecting jobs and expanding overseas business opportunities will have proven to be just that: talk.

By the end of next year, we should know which it is.

SOURCE: http://www.theglobeandmail.com/news/politics/harper-sees-trade-deals-as-key-to-his-political-success/article2283361/?utm_medium=Feeds%3A%20RSS%2FAtom&utm_source=Politics&utm_content=2283361

China Petrochemical Corp. Completes Purchase of Daylight Energy

By Benjamin Haas

Dec. 24 (Bloomberg) -- China Petrochemical Corp., the nation’s biggest oil refiner, completed the purchase of Canada’s Daylight Energy Ltd. for about C$2.2 billion ($2.16 billion), the company said in an e-mailed statement yesterday.

Sinopec, as the Chinese company is known, said it paid C$10.08 a share in cash for Calgary-based Daylight.

Cong Peixin, a spokesman for the China Petrochemical unit that carried out the transaction, declined to elaborate on the statement. Daylight confirmed the completed sale in a statement released yesterday.

The purchase gives the Beijing-based company access to more than 300,000 acres of land in areas rich with oil and natural gas, after falling crude prices made valuations attractive.

Sinopec Group, China National Petroleum Corp. and Cnooc Ltd. are seeking to gain technology through partnerships in order to develop China’s shale-gas reserves, estimated to be larger than those in the U.S.

China, the world’s biggest energy consumer, has partnered with Exxon Mobil Corp., Royal Dutch Shell Plc and Chevron Corp. to explore possible shale wells.

Chinese companies have announced $18.3 billion worth of bids this year for overseas oil and gas exploration and production companies, according to data compiled by Bloomberg. Cnooc bought Canada’s Opti Canada Inc. in November for $34 million in cash, agreeing to take on $2.4 billion in debt.

Daylight’s proven and probable reserves rose 46 percent to the equivalent of 174 million barrels of oil at the end of 2010, the company said March 1. The company’s production was 35 million barrels in the third quarter, according to data compiled by Bloomberg.
http://www.businessweek.com/news/2011-12-27/china-petrochemical-corp-completes-purchase-of-daylight-energy.html

Asian demand for resources good news for British Columbia

By Darah Hansen, Vancouver Sun; With Files From Postmedia News December 22, 2011

British Columbia stands to be a big winner next year as Canada succeeds in diversifying its export markets for its wood products, according to the Conference Board of Canada.

B.C. wood has gained a significant share of China's wood imports over the past five years, increasing from less than one per cent in 2006 to 14 per cent in the first nine months of 2011, the board said in its report on the wood products industry.

At nearly $1 billion so far this year, the value of wood exports to China was more than twice last year's level for the same period, and is expected to continue to rise over the next five years.

"The China story is definitely a huge deal for B.C. wood producers," said Graham Sheppard, an industry analyst with ERA Forest Products Research.

Approximately 30 per cent of B.C. softwood lumber exports has gone to China in 2011, accounting for more than 95 per cent of Canada's total exports to the country.

Diversification into China, and, to a lesser degree, Japan, comes as Canada seeks to reduce its dependence on its next-door neighbour.

In 2006, 86 per cent of Canadian wood exports were sent to the United States, with B.C. wood accounting for about half the total. So far this year, the national share was 63 per cent. Michael Burt, director, Industrial Economic Trends, cited the fragility of the U.S. economy and endless rounds of litigation over softwood lumber as key reasons for the diversification push.

As a result, profits before taxes will rise to $565 million in 2012 from $283 million in 2011. Extending the forecast out to 2016, profits should almost double again from 2012 forecast levels to $1.04 billion.

http://www.vancouversun.com/business/Asian+demand+resources+good+news+British+Columbia/5897463/story.html

[Exclusive] Canada resumes WTO threat over beef

By Kim Tae-gyu

Canada is threatening to resume its complaint with the World Trade Organization (WTO) should Korea fail to begin importing Canadian beef next year as previously agreed.

A source familiar with the issue said Wednesday that Canada is ready to return to a WTO dispute settlement panel because Korea’s National Assembly may not approve imports of Canadian beef due to a partisan standoff.

Korea promised to lift its eight-year ban on Canadian beef imports in June, which started due to mad-cow disease outbreaks there in 2003. In return, Canada dropped its complaint with the WTO.

``Korea pledged to import Canadian beef products from cattle aged less than 30 months, which are regarded as safe, from next year. But the country might not comply with the promise due to parliamentary wrangling,’’ the source said.

``In this climate, Canada has reiterated its willingness via various diplomatic channels to resume WTO procedures unless the Assembly keeps the Dec. 31 deadline.’’

The source expressed concern that Asia’s fourth-largest economy might suffer a host of problems.

``We might have to import beef from cattle older than 30 months or materials we agreed not to import regardless of age. And we have to remember that the European Union is keeping an eye on the Canadian case as a benchmark,’’ he said. Under the Korea-Canada contract, brains, eyes, spinal cord and other specified risk materials (SRM) are not supposed to be traded between the two nations irrespective of the age of cattle because they are believed to be more susceptible to carrying the disease.

``The hitch is that lawmakers worry too much about public sentiment since the mad cow row in 2008 involving U.S. beef imports. In addition, the ongoing partisan bickering is aggravating the issue.’’

The Lee Myung-bak administration agreed with the United States back in 2008 to restart imports of U.S. beef, which generated a nationwide uproar including months of candlelit protests because of worries about mad cow disease.

This prompted many lawmakers not to proactively deal with the Canadian beef issue.

On a far more negative note, the governing Grand National Party unilaterally passed the controversial free trade agreement with the U.S. last month, prompting opposition parties to boycott any other parliamentary discussions.

When contacted, the Ministry for Food, Agriculture, Forestry and Fisheries (MIFAFF) admitted that it is concerned about the possibility that the Assembly may fail to keep the deadline.

Yet, the ministry refused to confirm whether the Canadian government officially threatened to return to WTO action.                       

http://www.koreatimes.co.kr/www/news/biz/2011/12/123_101326.html

The Changing Relationship of Canadian Business and Foreign Investors

Corporate Counsel | December 20, 2011

When the Australian mining and natural resources giant BHP Billiton Limited bid $40 billion to buy Canada's Potash Corporation of Saskatchewan Inc. in 2010, the Canadian government was quick to slam the door in its face, proclaiming that the merger would not be of "net benefit to Canada."

The decision floored legal experts. In trashing Billiton's hostile takeover on "net benefit" grounds, the government relied on the language of the 1985 Investment Canada Act (ICA). The act had been used only once before to block a deal, in 2008—and that one had potential national security implications.

Coupled with the earlier veto, the Billiton rejection seemed to transform a law once regarded as little more than a formality into a potential booby trap. It also stirred controversy about whether Canada was creeping into a protectionist cocoon—which the government vigorously denies.

Then something remarkable happened. Lazarus-like, Billiton came back two months later, announcing that a plan to develop the world's largest potash mine in the very same area had reached an advanced stage in the company's approval process. The difference was that no acquisition of a company was involved. Billiton was using land it had already acquired. And this time the same provincial leader who led the charge against the buyout scheme was trumpeting the benefits of the project.

The ripple effects of these contradictory official responses to the two projects are still being mulled by legal experts. They highlight an unexpected wrinkle for foreigners who want to invest in Canada. From now on, apparently, they will have to pay as much attention to politics and community relations as to the law, if they want to keep their deals on track. Especially when the federal and state governments they must deal with are in the throes of election campaigns.

"Ultimately, it is a political decision, and it doesn't hurt to have good political relationships," observes Peter Glossop, a partner in Osler, Hoskin & Harcourt's Toronto office, who, like the other lawyers quoted in this article, is knowledgeable about Canadian M&A but wasn't involved in the Billiton matter. (Billiton wouldn't comment.)

George Addy, a partner with Davies Ward Phillips & Vineberg in Toronto, believes in doing your homework. "You have to plan, and plan early," he says. "And you have to have feet on the ground—people in Canada who know the complexities of the various stakeholder interests."

As companies from all over the world—including China—rush to discover and exploit Canada's vast mineral, oil, and natural gas reserves, the question of "net benefit"—and whether it will kill a deal—is keeping many lawyers busy.

U.S. investors are in the front line of those who could be affected. In 2010 U.S. direct investment in Canada totaled more than $306 billion, or 55 percent of Canada's foreign direct investment, according to Canadian government figures. (U.S. statistics show that Canadians directly invested $206 billion in the United States in the same year.)

At the heart of the uncertainty is the fact that "net benefit" ultimately comes down to what many lawyers say is a subjective—and often political—decision by a single individual, the minister of industry, or, in some cases, the minister of Canadian heritage.

This is true even though the law lists the factors the ministers must take into account in reaching a decision on an acquisition. These include considerations ranging from the deal's impact on Canada's economic activity and competitiveness on world markets to the number of Canadians in senior management. By law, the review must be completed within 45 days, though the minister may take an additional 30 days.

http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1324214245310