Iran war negotiations -Crunch time


Bookmark and Share

Will Iran and israel go to warFirst day of talks between Iran and the P5+1 nations have not yielded any results and the talks have been postponed to today 15:00 GMT for an unscheduled second round. Talks were unacceptable to Iran as it asked for lifting of all sanctions and said that the western demands were unacceptable, outdated and unbalanced – in particular with regard to the core ban on uranium enrichment. The western world only offered not to impose any more sanction post June. Also Iran is loath to surrender its self grown nuclear enrichment program, which the west believes that if it goes beyond the 20% level of enrichment would be “a blow out to developing a nuclear weapon on demand.” Iran’s Saeed Jalili has made a counter offer of 5 items based on the principles of step by step and reciprocity.

Meanwhile after US rejected Israel’s demands of nuclear Iran, the latter has now revived its military options. Israeli Defense Minister Ehud Barak, today conveyed in an ignored news radio broadcast (literal translation of his verbatim speech from Hebrew to English) –  “There is no need to tell us what to do, and we have no reason to panic. Israel is very, very strong, but we do know that the Iranians are accomplished chess players and will try to achieve nuclear capabilities. Our position has not changed. The world must stop Iran from becoming nuclear. All options remain on the table.” This follows significant back channel talks between the Israelis and the US over the past weekend. US Defense Secretary Leon Panetta, Secretary of State Hillary Clinton and National Security Adviser Tom Donilon in talks independantly struck down or skirted the Israeli demands leaving the Israelis with no choice than to consider the option of a strike on Iran.

Although in press it is portrayed that US is doing everything to avoid war, however the passage of a resolution for zero tolerance policy on nuclear weapons on May 18th virtually seals their pro- war stance. The US House of Representatives passed the bill with an overwhelming majority of 401 ayes against 11 nays. And when one considers the fact that the Republicans are though of as war mongers, 166 of the 190 Democrats voted in support clearly spelling the bipartisan support. The House affirmed that only would  Iran be not be allowed to manufacture nuclear weapons, but that it will not be permitted the capability to manufacture them.

A summary of the bill as put forth by the Congressional Research Service is as below –

Affirms that it is a vital national interest of the United States to prevent Iran from acquiring a nuclear weapons capability and warns that time is limited to prevent that from happening. Urges increasing economic and diplomatic pressure on Iran to secure an agreement that includes:

(1) suspension of all uranium enrichment-related and reprocessing activities,

(2) complete cooperation with the International Atomic Energy Agency (IAEA) regarding Iran’s nuclear activities, and

(3) a permanent agreement that verifiably assures that Iran’s nuclear program is entirely peaceful.

Supports:

(1) the universal rights and democratic aspirations of the Iranian people, and

(2) U.S. policy to prevent Iran from acquiring nuclear weapons capability. Rejects any U.S. policy that would rely on efforts to contain a nuclear weapons-capable Iran. Urges the President to reaffirm the unacceptability of an Iran with nuclear-weapons capability and oppose any policy that would rely on containment as an option in response to the Iranian nuclear threat.

Democrat Dennis Kucinich was one of the loners who opposed the move and he was of the view that “war mentality has saturated Washington and arms merhcant were the only to benefit.”

Given the tough stand take by Iran on its sovereign right to nuclear enrichment, US stand on sanctions and Israel’s dogmatic approach of aggression as the only way to resolve the war issue, no clear headway is possible.But we all believe in miracles and only a miracle can avert this war.

Iran Israel ngotiate for a way out

Disclaimer: The views expressed in this article are entirely my own and do not reflect the views of my employer. This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither https://winningtrades1.wordpress.com or myself accepts any liability arising out of the above information/articles.

logo
Vinit Bolinjkar Head of Research, Ventura Securities Ltd

Tel: | Mobile: 0 9730836363

http://winingtrades1.wordpress.com

http://in.linkedin.com/in/vinitbolinjkar

Bookmark and Share

Petronet LNG – Short term underperformance; long term outlook still bullish


Bookmark and Share

Petronet LNG - riding high on the LNG demand in India While maintaining a BUY on the stock of Petronet LNG (PLL) we have cut our target price to Rs 175 (8.7x FY14 valuations) as significant headwinds in terms of pricing pressures, step up nature of the input cost pricing could affect fortunes. In addition any clamp down by PNGRB on marketing margins ( a la Indraprastha Gas Ltd) could seriously dent marketing margins and is always a hanging sword. Also PLL has maximised efficiencies of its facilities and further increments in capacity utilizations from the current 107% seem unlikely. Although there is strong visibility on volume growth, capacity expansion is backended for FY13 and hence the stock is expected to remain an underperformer for a couple of quarters. The commencement of the Kochi terminal and jetty expansion activity at the Dahej terminal is expected to lead to significant ramp up in capacity from Q4FY13. However the proposed dilution of equity to raise resources to the tune of Rs 1500-2000 crores for its planned 5 MMTPA facility at Gangavaram, Andhra Pradesh would lead to dilution of future earnings However current valuations still remain attractive (given the adverse macro backdrop for corporate earnings) and our target price of Rs 175 provides a possible 25.7% upside from the current levels.

Detailed Analysis of Q4FY12 earnings of Petronet LNG

Initiating coverage report on Petronet LNG dated April 13, 2011

Petronet LNG Weekly price chart

Tehcnical Analysis of Petronet LNG

Detailed Analysis of Q4FY12 earnings of Petronet LNG

Initiating coverage report on Petronet LNG dated April 13, 2011

Disclaimer: The views expressed in this article are entirely my own and do not reflect the views of my employer. This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither https://winningtrades1.wordpress.com or myself accepts any liability arising out of the above information/articles.

logo 
Vinit Bolinjkar Head of Research, Ventura Securities Ltd

Tel: | Mobile: 0 9730836363

http://winingtrades1.wordpress.com

http://in.linkedin.com/in/vinitbolinjkar

Bookmark and Share

The energy complex is just about to go berserk


Soon gushing barrels of oil will be trickles of oil

Oil supplies - only illusions

Oil is hitting new highs as Brent crude nears $126. And as the summer season approaches, the demand supply situation is only getting worse. The setup has always been around with the peak oil time in play

    and at any point the levee will break

However bad news can also provide opportunity and one can protect by following certain practical suggestion [link]. The crude oil chart below is clearly showing that the time frame is near at hand.

Crude oil - On your marks. get set go!!!

Crude oil - on the verge of a huge break out

However natural gas, which is hitting new lows and is out of favor, presents an incredible opportunity. The self explanatory chart attached clearly outlines the

Natural gas unbelievable buying opportunity or a clear sell

Natural gas at new lows. Manna from heaven for the long term investor

Disclaimer: The views expressed in this article are entirely my own and do not reflect the views of my employer. This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither https://winningtrades1.wordpress.com or myself accepts any liability arising out of the above information/articles.

logo 
Vinit Bolinjkar Head of Research, Ventura Securities Ltd

Tel: | Mobile: 0 9730836363

http://winingtrades1.wordpress.com

http://in.linkedin.com/in/vinitbolinjkar

Bookmark and Share

World crude oil – Drops left in the ocean


Dear All

I thank all for the overwhelming feedback on my previous article Burning Oil : Geo-politics of the war against Iran. While the article would have probably raised the level of concern about how the Iran situation will pan out, I guarantee that the few slides in this presentation – World crude oil – Drops left in the ocean – will simply blow your mind away.It will make you think real hard about how we have abused mother earth and IT IS TIME that as responsible earthlings would do our bit to provide future generations with cheap oil.

Just to drive home the point, I would like to point out that the World oil demand is growing at @ 1.2% p.a. in line with population growth, while oil supply is declining at an astounding 4-5% every year. This is despite new oil discoveries coming on stream. What it means is that we would have to find two Saudi Arabia production sized discoveries every year just to maintain status quo. This is extremely unlikely as no new major oil discovery of a large size has been reported in the last forty years . Spiralling prices are virtually guaranteed, though the pace may vary in line with recessionary periods and boom times.

The presentation titled World Crude Oil – drops left in the ocean is a humble effort to bring to your attention the acute shortages that plague us.

logo 
Vinit Bolinjkar Head of Research, Ventura Securities Ltd

Tel: | Mobile: 0 9730836363

http://winingtrades1.wordpress.com

Bookmark and Share

India’s Energy policy – For the people or against the people


Wrong policy leading to oil shortages

India most vulnerable to oil shocks

Raising concerns over the rising oil prices and alarming the people is not the reason a government is elected. The 2007-2008 oil shock was substantial reason to wake up and formulate a policy which would lead to energy security. Instead, 5 years later we have an energy crisis on hand. The energy crisis of a nature which can throw India of its tom tommed high growth rate into the abyss of negative growth. So where has the policy initiative bungled up.

Has the much promised strategic petroleum reserve been created?
In December 2009 the Government had indicated the setting up of an SPV called Indian Strategic Petroleum Reserve Limited (ISPRL) that would create a storage facility of five million tonnes by 2012. This was to effectively increase India’s strategic reserve to 8.5 mt which would be enough to meet 90 days of consumption. However this has yet to see the light of day and it would really go a long way if the government would give more information on the same. At present the website does not provide any status information and the site was last updated in September 2009.

While Cairn comforts, RIL increases anxiety
The manner in which the government has gone about handling the Cairn issue and dealing with KG6 crisis leaves little to be desired. While Cairn which produces oil was subject to harassment for no wrong doing on its part, RIL is allowed to toy with India’s biggest energy find ever. Lack of transparency right from the cost of the project to gas throughput leaves the average citizen wondering what’s going on? Today government met to discuss the KG6 issue but what is the action initiated? Will the government continue to play with the common man just to pacify the largest corporate of private India.
IMHO just like the army was invited to build the overhead bridge in Delhi which collapsed prior to the Commonwealth Games, similarly the army should be given the charge to find out the exact issue which is crippling gas production at KG6 and if possible rectify the same.

CBM policy still no gas production
Its been many years since the CBM policy was announced and barring for Essar oil and another company’s Ranigunj blocks none of the corporates ho had been issued blocks have reported any progress. Of the 17 year licences 4 years have already passed. And I was under the impression that it is much quicker to develop a CBM field than a natural gas well!

Coal production –wishful thinking or time wasting
India has the 4th largest coal reserves in the world, yet we import coal. From the time a coal block is allotted on an average it takes 8-10 years to develop a coal block in India as against 4-5 years overseas. Beaurocracy and red tapism is what prevents progress and we hear that the PMO is going to do something about it.

Nuclear production – pursuit of the wrong fuel
India has the 4th largest reserves of thorium in the world and these are sufficient to fuel 2500 years of electricity needs. With technological development available as far back as in 1970 one only wonders why we want uranium and I keep scratching my head as to why would the government not promote this fuel source. You would be probably scratching your head 40 years from now still trying to figure this one out.

Shale gas – huge potential with game changing propositions for India’s fuel security. Alas government policy
India has large shale deposits, with good prospects in the Gangetic plain, Punjab, Rajasthan, Gujarat. Tamil Nadu , Andhra and the north-east . If these reserves are tapped it would make India self sufficient in energy. Besides being cheap, the revolutionary potential of shale gas, has the potential to revolutionise both the world energy scene and global geopolitics and virtually turn India into a super power. However the national policy is not in place and the draft is gathering dust in the corridors of Delhi.

So where do we go from here?
If the government does not, act one thing is sure that the reforms initiated since 1991 would be reversed. Already the financials are looking similar to 1991. And even if the government pacifies the populace with white lies, the stock markets and currency will enlighten everyone by tanking abruptly.
In these accelareted times of world economics and the energy crisis created by the US -Iran stand off, India is most vulmurable as nearly 80% of the crude oil is imported. If the various arms of the government would come together to iron out a consolidated energy policy the world be at India’s beck and call. Else shit would hit the fan.

logo 
Vinit Bolinjkar Head of Research, Ventura Securities Ltd

Tel: | Mobile: 0 9730836363

http://winingtrades1.wordpress.com

How the common man can protect himself from the Iran war


Considering the risks of the latest Gulf War, Indians can take a few steps whichc would drastically help reduce impact of a sharp rise in the price of the fuel oil outlined below

War in the gulf can fire any time from out of control forces.
While the Americans talk to the Iranians through back channels, posturing with military might is only escalating. USA has just added one more aircraft carrier in the Gulf and Iran is to conclude its 10 day long military exercise with the launch of its Shabab 3 missile system that has a range of over 2000km. The American military choppers are flying too close to the Iranian war games and the risk increases that skirmishes could escalate into war.

American aircraft carrier

The trigger happy Israelis are just waiting to break ranks and are like blood hounds on American leash waiting to launch. While the Israelis have clearly stated their intent that sanctions will only give more time to the Iranians, they would like to act with immediate effect and use force to neuralize the nuclear ambitions of their natural foe. While the Israelis fret and fume over Iran they are busy planning another raid into the Gaza strip and Hezbollah is ready to strike Israel with tens of thousands of very deadly short-range “Katyushka” rockets.

Mathew Kroenig, an influential CFR member has in an article said that “a surgical strike on Iran’s nuclear facilities is the least bad option. [article link]. And through this article one may get a clear idea that the aggression on Iran is a high probability. Unconfirmed sources from Washington indicate that May would be the best time to launch the aggression.

Will Iran wilt? With sanctions which would virtually crumble it economically (70% of its earnings are through oil) it is unlikely that Iran would be tethered and would surely strike back in through terror action on oil installations of GCC countries.

How to protect oneself from this global insanity?
With the world already on boil with respect to energy resources which are getting increasingly scarce, an event like this can only derail economic revival of a fragile economy besides hurting us through price inflation. So being forewarned is being forearmed and folks back home can do well to take proactive steps.

Stock up on food supplies and household products
Make sure you have at least 6 months of supplies. Cereals, grains, dairy products processed foods / canned can be stored for months if not for years. It will help protect you from inflation and non availability. Your elected leaders are so caught up in their own fancies that in case of a prolonged military conflict, fuel could be rationed besides becoming more costly. India has barely one month of strategic oil reserves and despite being wary of the situation has not done much to build strategic reserves. Vote banks and money accumulation for for self prosperity does not allow them to think beyond their over grown tummies.

Buy oil futures on MCX
One barrel of oil has ~158 and hence 1 contract of oil valued at Rs 5 lacs (+/- 30,000) for 100 bbl, considering that you travel 50 km a day on average and with a mileage of 8 km per litre will typically last you for 2528 days or 6.25 years.Now this is cool insulation against any price hikes. There is a possibility that oil may rise by $ 50 /bbl or could go as high as $300 if the war gets prolonged. The value of the contract would also appreciate and help insulate much of the risk associated with the price hike. Now middle class individuals would wonder where to get the RS 5 lacs from. fear not the margin for buying this contract is only 4%. But you may put up Rs 1 lac as up front margin and be blissful.

Disclaimer: One thing that investors need to consider is that there is the possibility of downside risk too and should factor in this before placing the trade.

Buying shares of Cairn energy is also a good idea
I believe that Cairn India is a good long term investment. You may read a few reports that I have uploaded on Cairn India update and initiating coverage on Cairn India.

Ask government to take actions to reduce fuel profligacy
Did you know that telecom companies are the second largest guzzlers of heavily subsidized diesel and they can easily shift to renewable sources of energy to power their their cell grid. Pressure companies which have got license to produce oil & gas, coal bed methane to increase production and seize blocks if work is not upto speed. (More about this in another article).

Self help can go a long way
Further self discipline like walking for short distances, car pooling and use of modern tools like email on line meetings etc would help curtail travel and help in lowering overall consumption.
Encourage and promote wind and solar energy and encourage scientific discoveries of new and portable wind mills which can be mounted on building tops and sky scrapers.

Remember we have peaked in terms of global oil production
Remember global oil production is declining at 4-5%, world oil production is growing at 1.5-2% leading to a demand supply mismatch of 6-7%. Virtually all the large oil fields of the world are in perennial decline stage. Further no new large oil field has been discoveries have been made for years. Saudi Arabia has only said it can ramp up production. They have to prove that they can produce 10 mbd and for sustained period in case Iran is destroyed by war.

Higher price of oil is a reality, the Iran war will only hasten it.

logo 
Vinit Bolinjkar Head of Research, Ventura Securities Ltd

Tel: | Mobile: 0 9730836363

http://winingtrades1.wordpress.com