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News : Irish Last Updated: Nov 13, 2012 - 8:34 AM


Tuesday Newspaper Review - Irish Business News and International Stories - - November 13, 2012
By Finfacts Team
Nov 13, 2012 - 8:28 AM

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The Irish Independent reports that the value of exploration company Petrel Resources quadrupled after it said it had found as much as one billion barrels of oil off the south-west coast.

The vast reserves are in the so-called South Porcupine basin, which is a huge area off the coast of Kerry.

Petrel believes new computer analysis shows several oil fields on top of one another.

This would make it relatively easy to extract any oil because a single well could suck up oil from many fields.

The snag for Petrel is that any oil is 200km from the coast and lies beneath 1km of water and 3km of rock.

The oil industry is changing quickly as new techniques and high prices allow companies to extract oil from areas that were once believed to be too difficult to drill.

The International Energy Agency said it expects the United States to become the world’s largest oil producer by around 2020, temporarily overtaking Saudi Arabia, thanks to these techniques.

Shares in Petrel soared fourfold to 27 pence from 6 pence on London's AIM stock exchange after the company reported a raft of promising drilling targets in the South Porcupine basin.

Petrel is one of the many companies set up by serial entrepreneur and former UCD academic John Teeling, who has also made millions from whiskey and mining companies.

Mr Teeling told the Irish Independent that the success of Providence Resources, which has also found signs of gigantic oil reserves in the Porcupine Basin, had put Ireland on the map with international investors and oil companies.

Petrel would now look for a partner to share the expense of drilling for oil and apply to the Government for a licence, he added.

London stockbroker Northland Capital described Petrel's comments as "very bullish" but warned that drilling in these waters would be difficult and costly.

The Government sold licences to explore in Irish waters late last year after the previous administration started a process to issue new licences to encourage exploration.

There was little interest at the time and most licences were sold cheaply to Irish companies.

Like other exploration companies, Petrel has used advanced computer programmes to examine old data gathered during previous exploration campaigns.

This data can now be analysed using modern computer programmes that are much better at telling companies whether oil can be found in any area.

Providence Resources, which is looking for oil in several areas off the Irish coast, said yesterday that there were a possible 872 million barrels of recoverable oil at its Drombeg prospect off the west coast.

New seismic tests show there could be oil close to the ExxonMobil-operated Dunquin field, Providence told a conference on oil in the Atlantic, which was held in Dublin.

Drilled

Petrel Resources is one of the many small exploration companies listed on London's AIM stock exchange but it has been around for 20 years in some shape or form.

It has been focused on Iraq and Ghana in recent times but previously drilled in Irish waters in the 1990s.

It was Petrel chief executive David Horgan who kept plugging away at the company's Irish interests when other directors had lost interest and wanted to focus on exploration further from home.

Yesterday, as Petrel's shares soared, Mr Horgan's strategy seemed to be paying off.

Mr Horgan has benefitted from several trends in the oil industry.

The first trend is rising prices, which make it economically feasible to extract oil from deep sea fields.

The second trend is new technology, which makes it easier to find oil.

The third trend is a new belief in the prospects for major oil finds in Ireland.

The Irish Independent also reports that Finance Minister Michael Noonan is insisting the Government does not want to pay the next €3.1bn tranche of Anglo-Irish Bank debt due next year.

Mr Noonan refused to rule out a deal on the promissory notes ahead of next month's Budget, even though the prospect is highly unlikely.

He is in Brussels for a meeting of eurozone finance ministers, but the main focus is on solving the ongoing crisis in Greece. A deal on Ireland's bank debt was not discussed last night, and Mr Noonan denied the Greek situation was delaying a deal for Ireland.

Talks are ongoing with the European Central Bank (ECB) on the Anglo-Irish promissory notes, as well as separate negotiations on a possible retrospective recapitalisation of Irish banks using the European Stability Mechanism (ESM).

Mr Noonan said the Government does not want to pay the next instalment of the Anglo-Irish promissory note, with €3.1bn due next March.

"We didn't pay it last year and we don't want to pay it this year, so we would certainly need an agreement in advance of that."

He also said he did not want to completely shut off the idea of securing a deal on the promissory notes in advance of the Budget, but this was unlikely.

"Well, I don't want to close off anything by saying 'no'," Mr Noonan added. "I'm pushing to get an agreement as quickly as I may get that agreement and I don't want to close off any options."

He said the Government hoped to push these issues on during Ireland's presidency of the European Council, which begins in January.

"I don't think the Greek issue is inhibiting our talks with the ECB in any way whatsoever," Mr Noonan added.

"And in terms of the ESM, possibly directly recapitalising banks, well the prior condition on that is the Euro banking union supervisory mechanism would be in place.

"That would be our priority in the presidency to drive that so it is in place for the first couple of months of the year."

The Greek parliament recently approved further austerity measures, and Greece says it will start to run out of money on Friday.

Funding

However, EU economic commissioner Olli Rehn last night said funding will not be a problem by Friday. When asked if there would debt writedown for Greece outside of the private sector, Mr Noonan said he would wait and see what proposals were brought forward and would react to them.

Differences have emerged between the EU and the IMF on the issue of public debt write down, with Jean-Claude Juncker, president of the eurogroup, ruling it out, but IMF chief Christine Lagarde saying everything is on the table.

Mr Noonan was also asked if a deal on the promissory notes was tied to shutting down the Irish Bank Resolution Corporation (IBRC), formerly Anglo, but would only say the Government had been talking to the ECB for "some time".

And he added Ireland wanted to put "flesh on the bones" of the June European council meeting which committed to jobs and growth before it assumes the EU presidency.

"The theme of the Irish presidency is jobs and growth and that's building on the commitments in the council meeting on ,June 29, where Europe committed itself to a jobs and growth programme in addition to fiscal corrections.

"So what we'll want now even before our presidency, is flesh put on the bones of the commitments of the June council in respect of jobs and growth."

The Irish Times reports that the 2007 meltdown of the state-owned Sachsen LB bank cemented in many German minds Dublin’s reputation as the light-touch regulation “wild west” of European banking.

However, a new report suggests that the “cluelessness” of Sachsen LB’s German-based directors played a crucial role in losses of at least €429 million for the German taxpayer.

The 556-page report, commissioned by the state prosecutor office in Leipzig, is likely to form the backbone of charges of breach of trust against five former landesbank directors.

Clouds gathered 

The report describes these directors as “fair-weather pilots”, unaware of the massive risks in the bank’s balance sheet, they failed to change course as clouds gathered on global markets in 2007. Had they sold Sachsen LB sub-prime assets at the first sign of the looming storm, the report suggests, they could have saved the bank €114 million and financial ruin.

Five years after it was founded in 1992, Saxony’s state-owned landesbank set up a Dublin subsidiary, Saxon LB Europe. By 2003 this operation was financing a massive buy-up of loans with short-term credit.

Activities of about €30 billion were managed in off-balance sheet “conduits” named “Georges Quay” and “Ormond Quay”.

According to the report conducted over 19 months by Freshfields and Deloitte, Sachsen LB’s directors ignored the “gallop” of investors out of markets in 2007. While other German institutions were getting out of the market, the audit found that the Leipzig bank continued to invest.

At a meeting on July 16th, 2007, chairman of the board Herbert Süß conceded that the bank’s capital markets division was beginning to feel an interest rate squeeze, but insisted the bank was not vulnerable to the sub-prime crisis. Another board member insisted that the bank only invested in top-rate assets.

On August 17th, 2007, the bank was hit by the sub-prime wave washing over Europe. The report’s authors say the directors were “stunned and amazed” by the danger facing the bank. With a week to survive, other banks threw Sachsen LB a €17 billion lifeline. It was later sold off to the Landesbank Baden-Württemberg of Stuttgart.

The Irish Times also reports that the Government’s revamped etenders website, which promises to remove red tape and make it easier to win public contracts, has sparked many user-complaints following its relaunch.

The redesigned site, etenders.gov.ie, unveiled yesterday by Minister of State for Public Service Reform Brian Hayes, is intended to streamline public procurement and end the cumbersome paper trail traditionally associated with the process.

However, dozens of frustrated users posted complaints on Twitter and other tech forums yesterday complaining about the site’s slow speed and general poor functionality.

“Page loads were incredibly slow with lots of errors trying to log in and view tenders. When I did log in I couldn’t download any documents,” said one user who contacted The Irish Times. “The old site seemed to work fine; it wasn’t pretty but it did the job.”

Another user posted on Twitter: “Given up trying to use the new etenders site – loads of errors, pages not loading. Life’s too short.”

Maryrose Lyons of Brightspark Consulting said: “First I telephoned the number on the email with the tender notifications, got on to a really nice girl in Ireland, who said that they no longer handle etenders support. She gave me another number. Called the other number (an 021 number) and got through to a French messaging system.”

The contract to build the new site was outsourced by the Government to Swedish company EU Supply after no Irish companies bid for the tender. The company has subcontracted its technical support function to a call centre in Estonia.

A National Procurement Service spokesman said yesterday the site was experiencing a “huge volume of traffic” and this may be causing delays.

Launching the site, Mr Hayes promised it would make the awarding of State contracts “a lot easier”. The website streamlined the process in favour of suppliers who had rightly complained about “the endless documentation that is attached to each bid”.

The Irish Examiner reports that Ireland risks a lost decade if it fails to shift its credit supply to new viable enterprises, the Central Bank’s chief economist Lars Frisell has warned.

Irish banks face economic uncertainty and pressure to deleverage but this threatens to stifle their ability or willingness to supply credit at reasonable cost, he told a conference in Luxembourg.

He was making a case for a banking union that includes the single supervisory mechanism, now under way, and the further components of a common deposit protection and a single bank resolution mechanism.

The overriding purpose of the banking union is to break the bank-sovereign link. The link is due to banks holding large amounts of their own sovereign’s debt on their balance sheets — own country sovereign bonds forming the bulk of a bank’s most liquid reserves since they are uniquely deemed risk free.

The behaviour of banks affects the health of the overall economy, since if they are strong they can supply the real economy with credit.

"Ireland and several other European countries risk facing a dilemma similar to that suffered by Japan during its ‘lost decade’ in the 1990s, when many of its banks failed to shift their credit supply to new, viable enterprises," he said.

What is needed, Mr Frisell argues, is a circuit-breaker, a common European backstop to supply banks with both capital and liquidity without feeding the sovereigns’ vicious debt circle.

"This logic should provide the backdrop for a European banking union," he said.

Foreign news reviews and more comprehensive coverage of Irish news is available in our Daily News Digest in the Global category on Finfacts Premium.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.


© Copyright 2011 by Finfacts.com

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