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Saturday, 9 January 2010

Kuwait's Political Hostilities Test Investor Confidence

After Dubai's debt debacle, will Kuwait become the next Persian Gulf state to come under greater international scrutiny?

The wealthy state, owner of 10% of the world's oil, isn't about to run out of money. But a political crisis, exemplified by Parliament's demand this week that the state bail out its indebted citizens by buying $23 billion of consumer loans, is driving away foreign investment, damaging the country's economic prospects.

Kuwait is the only Arab Gulf state with a fully elected Legislature. But the fractious relationship between Kuwait's ruling Al Sabah family and the Islamist-dominated Parliament risks creating economic stagnation. In the past three years, Kuwait has seen the dissolution of three parliaments and the resignation of five governments. The emir, Sheik Sabah Al Ahmad Al Sabah, is expected to oppose Parliament's consumer-loan bailout bill, leading to a new bout of hostilities between the two camps.

The dispute will do little to raise Kuwait's profile for investors. The sheikdom already receives less foreign direct investment than any other Gulf Cooperation Council state, ranking alongside Yemen and Iraq, according to the U.N. Foreign investors are losing confidence despite the emirate's energy riches. Last year, Kuwait canceled contracts valued at more than $8 billion to build a new refinery in the Gulf state due to political objections. Oil companies, including BP, Royal Dutch Shell and ConocoPhillips, have become weary of the promise that Kuwait may open up its border oil fields with Iraq for investment. BP, which has operated in Kuwait for more than 50 years, has scaled back its office.

But without more foreign investment and expertise Kuwait is unlikely to achieve its target of boosting oil-production capacity to four million barrels a day, from below three million barrels now. Kuwait's economy was the worst performer among the six-member Gulf Cooperation Council in 2009, according to the International Monetary Fund. Shares on the Kuwait Stock Exchange slumped 10% last year, compared with double-digit-percentage gains for Abu Dhabi, Saudi Arabia and even Dubai.

Without radical overhauls, Kuwait's economy will continue to lag behind others and oil production will suffer, threatening the country's role as one of the top producers of the Organization of Petroleum Exporting Countries. For investors, Kuwait is a further reminder of the political risks that lurk among even the most oil-rich states as their institutions struggle to keep up with the pace of social and economic change.END

LNG project with Qatar to be finalised this month

Minister for Petroleum and Natural Resources, Syed Naveed Qamar hoped load shedding of gas would come to an end by next year as a deal to import Liquified Natural Gas (LNG) from Qatar was about to be finalised this month.

The imported LNG would be used for power generation and industrial production, mainly for the textile sector, the minister said.

Qatar is one of the largest LNG producers of the world, operated by the state-owned Qatar Gas Company. LNG is one of the fastest growing fuels in the world and due to high demand, its supply has been under stress.

How the LNG Boom Could Make These Two Countries Rocket in 2010

"How big can it get?" Thats a question Eric Sprott asks himself before he puts his dough in a stock. It may seem a small question, but I think its helped him guide his fund, Sprott Offshore, to a 21% annual return over the past nine years, versus a 1.1% loss for the market. If you want big returns, you have to start with acorns, not oak trees.

So I ask myself as I sit here in the first days of 2010 and think through the opportunities in front of me today: What can get big? Where can we really score?

I have one play in mind that can easily get 235% bigger in the coming year (more on that at the end of todays article). It will make hay from a number of big trends moving its way. Well start with one of them: the rise of LNG, or liquefied natural gas. (LNG is supercooled natural gas, which turns into a liquid that you can then ship on tankers.)

Builders of Dubai's Dreamscape Soar in Japan

Shares in Asia rose Friday with Japan's Nikkei 225 Index climbing 1.1% to 10,798. In Hong Kong the Hang Seng Index rose 0.1% to 22,297, and in China the Shanghai Composite Index also rose 0.1%, ending the day at 3,196.

Japanese engineering firms Kajima Corp. and Obayashi Corp. helped push the Nikkei higher. Kajima spiked 6.8% and Obayashi climbed 6.7% in today's trading. The firms are members of a consortium of companies contracted to build the Dubai Metro. The Financial Times reports that the group is currently in a dispute over $3 billion in unpaid bills, and that the price of the project has more than doubled to $7.6 billion since construction started about five years ago. The consortium claims that the ballooning price tag is the result of major changes to the original scope and design.

Amid the fanfare of opening the world's tallest tower, the Burj Khalifa, this week also marked the opening of the Burj Khalifa Metro Station, which TIme Out Dubai says will serve 10,000 people each weekday and more than 19,000 on weekends and holidays.

Dubai ruler signals confidence in Dubai World head

Dubai's ruler indicated continued confidence on Friday in the chairman of Dubai World [DBWLD.UL], the government-owned conglomerate that is seeking to restructure more than $20 billion in debt.

"Sultan bin Sulayem, chairman of Dubai World, continues to hold his position," the office of the emirate's ruler, Sheikh Mohammed bin Rashid al-Maktoum, said in a statement carried by state media. It did not elaborate.

Dubai World rocked global markets on Nov. 25 when it said it would seek a debt standstill on $26 billion.

The conglomerate staved off a $4.1 billion bond default by its real estate unit, Nakheel [NAKHD.UL], after receiving a $10 billion bailout from the neighbouring emirate of Abu Dhabi, holder of most of the oil reserves of the United Arab Emirates, the world's third largest crude exporter.

In December a banking source said that Dubai World told creditors it would pitch a standstill proposal in mid-January.

A Dubai World spokesperson said last month the company was aiming to have a restructuring plan in place by April.END