1. Art and Diseño

BUSINESS
20
US deficit to dip
to $468b, will be
lowest since ’07
WASHINGTON
THE US BUDGET DEFIcit will decline slightly to
$468 billion this fiscal year,
the lowest level since President Barack Obama took
office, congressional forecasters said on Monday in a
report heralding the end of a
brief period of dramatically
shrinking red ink.
The deficit, down from
the $1 trillion-plus levels of
Obama’s first four years and
a $483 billion gap in fiscal
2014, will stay largely flat in
NARROWING GAP
As a share of the
economy, the
deficit will be
the lowest since
2007 and close
to the average
over the past
50 years
2016, then begin to march
upward due to rising costs
for debt and caring for fastretiring Baby Boomers.
Estimates by the Congressional Budget Office kick off
what promises to be a contentious budget debate in Washington.
Republicans now in control of Congress seek to eliminate deficits within 10 years
with cuts to social safety net
programmes while lowering
tax rates and boosting military spending. Obama and
his Democrats have proposed
new education and infrastructure spending and tax breaks
for middle-class Americans to
set the agenda for the 2016
presidential election.
Obama will present his
fiscal 2016 budget plan on
Feb. 2.
“CBO’s longer-term budget and economic projections
confirm the need for Congress to act to strengthen
our economy for the middle
class while putting our debt
P.CLOSE CLOSE NET
Rising costs force firms to shut older wells; further oil slide to cut 2% of supply
HOUSTON
and deficits on a sustainable
trajectory,” White House
Deputy Press Secretary Eric
Schultz said.
The CBO report shows the
respite in deficits, fueled by a
recovering economy, will be
short-lived as the federal debt
continues to grow.
“If nothing is done, we will
continue down an unsustainable path full of rising annual
deficits that will add to an already $18 trillion debt,” said
Republican House Budget
Committee Chairman Tom
Price. “Our vital health and
retirement programs will
continue to grow further toward insolvency.”
A major pressure point
for Republican demands to
slash spending will come in
mid-March, when an extension of the federal debt limit
expires. But the CBO estimated that if Congress fails
to grant an extension, the
Treasury Department could
stave off a default crisis until
September or October by
employing extraordinary
cash management measures.
Relative to the size of the
US economy, the federal
deficit after 2018 will be
back above its 50-year average of 2.7 per cent of gross
domestic product. The CBO
said higher interest rates
will nearly quadruple debt
payments to $827 billion
in 2025. The non-partisan
agency also said real economic growth would be modest, peaking at 3 per cent in
2016, then slowing as Baby
Boomers retire.
As a share of the economy,
the deficit will be the lowest
since 2007 and close to the
average over the past 50
years. The 2.6 per cent prediction for this year compares
with a deficit of 9.8 per cent
in 2009.
Annual deficits will one
again surpass the $1 trillionmark by 2025, however, because of the cost of servicing
the nation al debt and paying
for retiring baby boomers,
confirming that the country’s
longer-term fiscal problems
are unsolved.
COLLAPSING CRUDE
prices are confronting scores
of smaller US oil producers
with the grim choice of either
shutting older high-cost wells
or burning through cash in
the hope of riding out the
downturn.
As oil prices fell by more
than half over the last six
months from more than $100
per barrel, the US oil industry responded by slowing its
blistering growth and dialing
back expansion plans.
Now, with US crude
around $46 a barrel, operators are already closing
some small old wells, known
as strippers, and tens of thousands of similar wells are on
the verge of losing money. A
further slide could, by some
estimates, idle an equivalent
of up to 2 per cent of US supply, slowing overall output
growth more than expected
or even leaving it flat.
Ray Lasseigne, an oilfield
veteran and president of
TMR Exploration in Louisiana, is deciding which wells
to close. TMR looks to close
old wells, which produce so
much saltwater that disposal
costs exceed what the oil can
fetch today.
Other running costs include repairs and electricity
to run the pump jacks, also
known as nodding donkeys
because they bob up and
down while pulling oil out of
the ground.
“We’ve identified about
20 of our wells that are not
economic at these prices,”
said Lasseigne. That figure
represents about 10 per cent
of the Bossier City, Louisiana
company’s wells, he said.
His most expensive stripper wells need oil around
$70 to be profitable. Leslie
Tipping, a longtime member
of the oil industry profession
known as “landmen” who
broker mineral rights, said
some marginal wells have
already been closed.
“There have been some
wells that have been shut in
already,” she said.
Tipping, who manages oil
and gas interests for patrons
of the bank Northern Trust in
Agencies
TURNOVER TRADES VOLUME
VOLUME
PRICE VOLUME
File
An oil pump jack in Watford City, North Dakota. With US crude around $46 a barrel, operators are already closing some small old wells and tens of
thousands of similar wells are on the verge of losing money.
Texas, said she was fielding
more calls from clients who
are nervously watching sliding crude prices.
“Most of our clients have
inherited these assets, so
they’ve been through this
before,” said Tipping. “But
there’s concern. There’s
some fear.”
She expects well closures
at higher-cost fields across
much of North America, including older parts of North
Dakota’s Bakken, and areas
where the geology is difficult,
such as the Anadarko Basin in
Kansas and Oklahoma.
There are about 400,000
stripper wells in the US, most
with operating costs of between $20 and $50 per barrel, according to analysts at
Wood Mackenzie, a leading
energy and commodities consultancy. The cheapest ones
are in locations where there is
BEST ASK
PRICE
BEST BID
LOW
HIGH
OPEN TOP
COMPANY
REGULAR MARKET
FINANCIAL SECTOR
AL ANWAR HOLD .. (AAIT)
AHLI BANK (ABOB)
AL MADINA INV .. (AMII)
BANK DHOFAR (BKDB)
BANK MUSCAT (BKMB)
BANK SOHAR (BKSB)
GLOBAL FINANC .. (GFIC)
GULF INVESTME .. (GISI)
HSBC BANK OMA .. (HBMO)
NATIONAL BANK .. (NBOB)
OMAN AND EMIR .. (OEIO)
OMINVEST (OMVS)
ONIC. HOLDING (ONIC)
OMAN UNITED I .. (OUIS)
AL SHARQIA IN .. (SIHC)
TAAGEER FINAN .. (TFCI)
Total
little underground saltwater.
Strippers often produce
just a few barrels a day, but
together they account for up
to 1 million barrels per day,
a ninth of US output.
Not all stripper wells are
losing money now and those
that do may not be shut in.
This is in part because producers can lose their leases
forever if they shut wells for
more than a few months, so
owners are often willing to
pump at a loss and store oil
until prices rise.
“At $40, we think you
have got about 100,000 to
200,000 barrels per day at
risk” from US stripper wells,
said RT Dukes of Wood
Mackenzie.
That could represent a
dent of up to 2 per cent dent
in output compared with US
Energy Information Agency
forecasts that this year’s US
0.350
0.612
0.113
0.430
0.388
0.322
0.149
0.227
0.229
0.071
37,804
0.594
0.230
40,000
0.148
0.143
0.344
0.125
5,000
12,154
150,000
0.182
274,459
1,560
15,000
18,400
0.360
17,000
4,220
0.114
65,420
8,955
6,000
58,000
0.444
0.392
0.324
83,597
0.151
0.228
0.239
0.073
1,000
0.596
0.231
42,326
0.149
0.144
0.350
0.126
3,000
5,000
7,350
0.184
3,384
14,500
733
14,000
3
116,701
10,000
7
35,500
2,700
132,129
3,400
2
13
26
39,860
1
100 1,484,923 337,626
48
840,100 195,087
34
274,049 19,576
15,696 5,494
0.350
97
1,424,199 856,467
27
859,154 197,430
162,674
18,545
41
977,230 146,850
4
46,045 6,609
11
115,000 40,850
50
632,350 80,421
10,000 4,300
0.430
162,846
63,184
293,500
96,086
134 1,439,871 259,099
2,765 412
0.149
598 8,740,402 2,328,035
0.229
0.230
0.070
0.350
0.612
0.230
0.114
0.152
0.143
0.360
0.130
0.430
0.388
0.330
0.175
0.150
0.227
0.232
0.071
0.350
0.600
0.230
0.114
0.150
0.144
0.356
0.127
0.430
0.388
0.328
0.180
0.150
0.229
0.237
0.075
0.350
0.612
0.233
0.114
0.152
0.146
0.360
0.130
0.430
0.388
0.328
0.172
0.149
0.229
0.235
0.075
0.350
0.612
0.230
0.114
0.152
0.144
0.360
0.131
0.430
0.388
0.330
0.184
0.149
0.226
0.230
0.068
0.596
0.229
0.114
0.148
0.143
0.350
0.125
0.388
0.324
0.175
production will average 9.3
million bpd.
After production hit 9.1
million bpd in late 2014, the
agency now expects production to climb to 9.42 million
bpd around the middle of this
year, then ebb to 9.26 million
bpd at year’s end.
Its latest January 13 outlook forecasts the 2015 average price of the Brent crude
global benchmark at $58 a
barrel and the U.S. benchmark at $3-4 below that.
Some warn the slowdown
could be more pronounced
given the sharp drop in the
number of rigs drilling new
wells. The prevailing industry view, however, is that
new, more productive, shale
oil wells in Texas, North Dakota and Colorado will keep
output rising.
Those wells, which typically do not need constant
pumping to make oil flow,
have helped US crude output
to nearly double since 2007.
They have also prompted
Opec and Saudi Arabia to let
prices fall in what is widely
seen as an attempt to force
US rivals to cut output.
But publicly-traded shale
oil companies talk of cash
operating costs between $10
and $30 a barrel, suggesting
oil prices would have to fall by
another third to force them
consider well closures.
The upshot? It might take
a prolonged slowdown in
drilling of new wells to significantly curb US supply.
Break even levels for drilling new wells in most US
shale oil fields range between
$50 and $80 per barrel - well
above operating costs for existing shale wells.
In response to the price
slump, most oil companies
have already cut drilling budgets by 25 per cent or more,
but they are still sinking new
wells. Furthermore, unlike
small stripper well operators, several producers have
hedged much of their 2015
output at prices close to $90
a barrel, keeping lots of their
new output profitable.
Vast efficiency gains also
mean that more oil can be
squeezed from fewer new
wells. For example, EOG
Resources said in November
that output of new fracked
wells in the Eagle Ford shale
of Texas was up 39 per cent
compared with wells sunk at
the start of 2014.
“To me, it’s going to be
extremely difficult for any
US production to be cut significantly,” TMR’s Lasseigne said about the possible
impact of well closures.
Reuters
BP freezes pay in 2015 to cut costs
LONDON
0.2270.002 (0.87%)
0.2300.005 (2.11%)
0.0710.004 (5.33%)
0.3500 (0%)
0.5960.012 (1.96%)
0.2300.003 (1.29%)
0.1140 (0%)
0.1490.002 (1.32%)
0.1440.002 (1.37%)
0.3500.004 (1.11%)
0.1260.003 (2.31%)
0.4300 (0%)
0.3880 (0%)
0.3240 (0%)
0.1830.008 (4.65%)
0.1490 (0%)
WEDNESDAY, JANUARY 28, 2015
Oil rout roils small US producers
MUSCAT SECURITIES MARKET
LAST
OMAN TRIBUNE
BP IS FREEZING BASE
pay across the group this year,
the latest in a series of steps
by oil majors to cut costs in
response to sinking oil prices.
Over the past year, oil majors have been selling assets to
protect cash flows and shareholder dividends.
Many have accelerated cuts
in capital and operating expenditures, including freezing
some projects, as crude prices
more than halved since June to
below $50 per barrel.
Salaries in the oil sector are
a major part of operating expenses. BP employed 83,900
employees in 2013 and paid
them around $13.6 billion
in benefits, including wages
and pensions, according to
the company’s website.
“The tougher external environment in 2015 means that
our businesses and functions
need to work... to take a number of measures in response
to the harsh trading environment,” chief executive Bob
Dudley said.
“One of the measures we
are taking across the group
is a general freeze to base pay
for 2015, with only a few exceptions for specific circumstances around the world,”
Dudley added.
A BP spokesman would not
comment directly on the internal message but confirmed the
step, saying: “We have told
staff across BP that we intend
to freeze base pay worldwide
for 2015.
“Together with our work
to simplify and increase efficiency across BP, we see
this as a prudent measure in
response to the current challenging market environment
in which BP is operating.”
In December, BP announced a $1 billion programme to cut thousands of
jobs globally, including its UK
North Sea operations.
Agencies
INDUSTRIAL SECTOR
AL ANWAR CER .. (AACT)
AL JAZEERA ST .. (ATMI)
DHOFAR CATTLE .. (DCFI)
GALFAR ENGINE .. (GECS)
GULF INTERNAT .. (GICI)
OMAN CABLES I .. (OCAI)
OMAN CEMENT (OCOI)
OMAN FLOUR MI .. (OFMI)
RAYSUT CEMENT (RCCI)
SALALAH MILLS (SFMI)
VOLTAMP ENERG .. (VOES)
Total
0.4480.002 (0.44%)
0.3300 (0%)
0.1800 (0%)
0.1800 (0%)
0.1900 (0%)
2.0100 (0%)
0.4700.012 (2.3%)
0.5800.004 (0.68%)
1.8550 (0%)
1.4850 (0%)
0.3900.008 (2.09%)
0.444
5,000
5,000
2,500
30,000
1,500
0.470
0.578
1.855 146
0.000 0
0.386
10,000
0.330
0.193
0.182
0.190
2.020
9,467
900
1.870
1.485
2,500
0.448
3,000
6,000
35,000
13,200
3,661
0.514
0.580
500
4,935
0.394
150
6
5
16
3
3
5,395
1,400
3
1
10,000
3
6,850
32,000 10,530
110,000
149,500
10,000 1,900
3,500 7,048
5
7,738
3
7,800
5,873 10,894
65
97
4
8,942
52
342,268
3,069
0.328
19,800
27,144
0.190
2.010
3,953
4,526
1.855
1.485
3,487
92,448
0.448
0.330
0.180
0.182
0.190
2.010
0.516
0.582
1.855
1.485
0.390
0.448
0.330
0.180
0.182
0.190
2.010
0.510
0.580
1.855
1.485
0.390
0.450
0.330
0.180
0.182
0.190
2.020
0.522
0.584
1.855
1.485
0.382
0.448
0.328
0.180
0.183
0.190
2.010
0.516
0.582
1.855
1.485
0.390
0.3380 (0%)
0.5660 (0%)
0.2360 (0%)
2.2000 (0%)
0.6960 (0%)
1.7750.005 (0.28%)
0.3240.032 (8.99%)
0.4820.018 (3.6%)
1.7200 (0%)
0.334
0.566
0.235
2.200
0.696
0.338
0.596
0.236
2.230
0.700
417
3,000
10,000
1.800
18,717
18,500
20,000
1,000
72,705
1.780
0.330
0.482
500
23
2
14
1
20
86,680
3,000
3,400
1
233,923
1,050 625
211,000
300 660
169,479
66
173,254
10
43,000
7
34,100
42
72
144 866,148
79,240
0.598
50,572
2.200
118,417
309,071
13,956
16,440
1.720
589,054
0.340
0.596
0.242
2.220
0.700
1.795
0.324
0.484
1.655
0.338
0.596
0.240
2.220
0.700
1.785
0.324
0.482
1.655
0.338
0.598
0.240
2.200
0.700
1.790
0.356
0.500
1.720
0.340
0.566
0.242
2.200
0.700
1.795
0.328
0.484
1.720
0.0900.001 (1.1%)
0.0950 (0%)
0.0810 (0%)
0.1950.004 (2.01%)
0.090 42,211
0.092 25,000 0.094
0.080 248,130 0.081
0.194 15,000
0.092
5,000
17,870
0.195
5,000
1
3
5,985
13
78,400
3,565 339
21,130 1,712
24
240,887
41
343,982
7,091
0.095
0.081
47,054
56,194
0.091
0.092
0.081
0.199
0.090
0.092
0.081
0.195
0.091
0.095
0.081
0.199
0.091
0.095
0.081
0.199
0.5820 (0%)
0.1020.005 (4.67%)
0.2440 (0%)
0.0690.002 (2.99%)
0.580 8,072
0.102
0.244 900
0.068
0.582
166,593
0.258
7,400
855
0.104
15,000
0.070
16
5,000
1
4,590
76,783 44,949
46
640,784
100 24
2
7,200
65
724,867
0.586
65,616
0.244
497
111,086
0.586
0.100
0.244
0.069
0.586
0.102
0.244
0.069
0.588
0.107
0.244
0.067
0.582
0.105
0.244
0.069
0.1790.001 (0.56%)
3.2000.05 (1.59%)
2.2550 (0%)
0.1790.002 (1.12%)
0.179 0.179
3.200
2.260 500
0.179
50,807
848
2.300
36,503
0.180
3.300
1,000
0.180
191,972
344
2
75,209
36
8
2,481
36
82
46,363
37,368
2.255
32,428
121,755
0.179
3.180
2.255
0.179
0.179
3.200
2.255
0.180
0.178
3.150
2.255
0.178
0.180
3.200
2.255
0.180
0.0600 (0%) 0.06
0.000 0
0.000
0
1
50,000 3,000
1
50,000
0.060
3,000
0.060
0.060
0.060 0.060
0.1050 (0%)
0.1020 (0%)
0.1060 (0%)
0.105 140,028 0.000
0.092 10,000 0.000
0.106 200,000 0.108
1,492
325
134
4
157
33
14
1,951
0.105
0.102
0.106
204
0.107
0.102
0.106
0.107
0.102
0.106
0.105 0.105
0.102 0.102
0.106 0.106
987
11,523,488
0.326
0.175
0.180
0.189
2.010
0.448
0.180
0.180
0.470
0.580
0.390
SERVICES SECTOR
AL JAZEERA SE .. (AJSS)
NATIONAL GAS (NGCI)
OMAN INVESTME .. (OIFC)
OMAN OIL MARK .. (OOMS)
OOREDOO (ORDS)
OMAN TELECOMM .. (OTEL)
PORT SERVICES .. (PSCS)
RENAISSANCE S .. (RNSS)
UNITED POWER (UECS)
Total
7,500
2,100
10,000
5,200
1,221
1.775
0.322
0.480
1.725 625
0.338
0.236
0.696
1.775
0.324
0.482
PARALLEL MARKET
FINANCIAL SECTOR
AL MADINA TAK .. (AMAT)
ALIZZ ISLAMIC .. (BKIZ)
BANK NIZWA (BKNZ)
AL BATINAH DE .. (DBIH)
Total
0.090
0.195
INDUSTRIAL SECTOR
ALMAHA CERAMI .. (AMCI)
AL HASSAN ENG .. (HECI)
MAJAN GLASS (MGCI)
OMAN FISHERIE .. (OFCI)
Total
0.100
0.069
SERVICES SECTOR
AL BATINAH PO .. (BATP)
SHARQIYAH DES .. (SHRQ)
SEMBCORP SALA .. (SSPW)
AL SUWADI POW .. (SUWP)
Total
259,067
11,681
5,595
180,641
453,870
THIRD MARKET
INDUSTRIAL SECTOR
NATIONAL MINE .. (NMWI)
Total
Bonds Market
Bonds
BANK MUSCAT C .. (BMBC)
BANK SOHAR BO .. (BSCB)
BANK MUSCAT C .. (MCCB)
Total
MARKET SUMMARY
0
2
0
1
119,347 1
3,301,776
0.178
3.180
0.179
Foxconn to cut jobs on weak sales
SHENZHEN
TAIWAN’S
FOXCONN
Technology Group, the
world’s largest contract electronics manufacturer, will
cut its massive workforce, the
company said, as the Apple Inc
supplier faces declining revenue growth and rising wages in
China. Under its flagship unit
Hon Hai Precision Industry,
the group currently employs
about 1.3 million people during peak production times,
making it one of the largest
private employers in the world.
Special assistant to the chairman and group spokesman
Louis Woo did not specify
a timeframe or target for the
reduction, but noted that
labour costs had more than
doubled since 2010, when the
company faced intense media
scrutiny following a spate of
worker suicides.
“We’ve basically stabilised
(our workforce) in the last
three years,” Woo said. When
asked if the company plans to
reduce overall headcount, he
responded “yes”. Revenue
growth at the conglomerate
tumbled to 1.3 per cent in
2013 and only partially recovered to 6.5 per cent last year after a long string of double-digit
increases from 2003 to 2012.
That decade saw the firm
ride an explosion of popular-
File
Workers look on from a Foxconn logo near the gate of the company’s factory in the
township of Longhua, Guangdong province. Foxconn will cut its massive workforce.
ity in PCs, smartphones and
tablets, largely driven by its
main client Apple, but now it
will halve this year from 26 per
cent in 2014, according to researcher IDC, while PC sales
Revenue growth at the conglomerate
tumbled to 1.3 per cent in 2013
is feeling the effects of falling
growth and prices in the gadget
markets it supplies, a trend that
is expected to continue.
Growth in smartphone sales
will contract by 3 per cent.
Similarly, the average smartphone will sell for 19 per cent
less in 2018 than last year’s
$297. “Even if technology
is improving, the price will
still come down,” Woo said.
“We’ve come to accept that,
our customers have come to
accept that.” Automation will
be key to keeping labour costs
under control in the long-term,
Woo said, as the company
pushes to have robotic arms
complete mundane tasks currently done by workers.
But Woo noted that company chairman Terry Gou’s previously stated goal of 1 million
robots was “a generic concept”
rather than a firm target.
Agencies