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Chippla's Weblog - Thoughts on Issues

January 10, 2008
14:13
Tata's Nano
» ‎ Read entry @ Chippla's Weblog - Thoughts on Issues

For the past couple of weeks this blogger had eagerly been awaiting the 2008 Delhi Auto Show. The reason for this was no other than the unveiling of Tata's people's car—the Nano. Meant to cost 100,000 Indian Rupees (equivalent to $US 2,555 at today's exchange rate), Tata's relatively small, yet seemingly attractive car is aimed at providing a much better and affordable means of transportation for middle and lower class Indians. It currently has the enviable title of being the "world's cheapest car."

Information on the Nano can be obtained from the car's website. It is not my intention to duplicate such information on this blog. However, the Nano's fuel efficiency (at 20 km per liter or 47 miles per gallon) does appear impressive when compared against most automobiles on the road today. Based on information from the United States Government's Fuel Economy site, the average passenger car used in the United States, and manufactured in 2007, does about 27 miles to the gallon at best.

The Nano would likely succeed in achieving one of Tata's goals—apart from making money—, and that is providing an affordable means of transportation, which directly competes with motorcycles that dot Indian cities today. Though certain European mainstream media have criticized the Nano as being unsafe and also an environmental disaster waiting to happen, they either seem to totally miss the point or are so consumed with the fear that it might one day be exported to the shores to Europe.

The Nano isn't being built to compete with a standard BMW, Audi, Honda...or whatever 'well-known' brand one may prefer. Rather, it is targeted at a market currently filled with millions of non-car users, most of who would never in their lifetimes be able to afford brand new (or second-hand) locally manufactured or imported cars at current prices. And this market extends way beyond the shores of India—it is to be found in much of Asia and Africa.

Going by current standards, most families in developing countries—where huge markets exist—will never be able to afford a car at current prices. Automobile factories in parts of Africa churn out cars, which most families only get to see and never drive or own. The same goes for India. By contrast, in much of Europe and the North America, most families are able to afford cars.

It appeared that if the people could not come to the car, the car had to come to the people. A starting point entailed challenging existing design philosophies about cars—that they must be big, fuel guzzlers, very fast and extremely safe. That's exactly what Tata did. And the resulting product could likely open to it new market niches in developing countries that its competitors in the global automobile industry would struggle to get into.

Automobile makers, irrespective of where they are located, will surely closely watch what becomes of the Tata Nano. With Western European car sales set to fall in 2008, according to information on the Auto Industry website, European auto makers will work hard to gain a larger share of the automobile market in places like China and India, in order to keep shareholders happy and remain in business.

A presence in China, India and parts of Asia is thus becoming a conditio sine qua non to many multinational companies (automobile makers or not), largely headquartered in the United States and Western Europe. Sometimes though, multinationals become self-obsessed that they either fail to see the need for change or the need to adapt to new ways of thinking in these markets.

And yes, maybe its time for a change in the global automobile industry. That change would not necessarily be the Nano or whatever competing products may follow. But that change could indeed be sparked by the Nano. Computer prices have fallen drastically over the years, making them affordable to more people across the globe. Who says the same can't happen to cars?
January 05, 2008
16:02
Should Nigeria Welcome Gazprom?
» ‎ Read entry @ Chippla's Weblog - Thoughts on Issues

The Financial Times reports that the Russian gas company, Gazprom, is in talks with the Nigerian government on the development of the latter's gas fields. These talks center on Gazprom investing in "energy infrastructure" in Nigeria "in return for a chance to develop some of the biggest gas deposits in the world" according to information on the Financial Times' website.

What does come as a surprise to this blogger is the fact the report claims that Russian president, Vladimir Putin wrote to the Nigeria leader, Umaru Yar'Adua on the need for an energy partnership between both countries. This may, however, not be unconnected with statements made by Putin, in early 2007, to the Kremlin, in which he made it clear that the concept of a group of gas exporting countries was worth looking into, as reported by Reuters.

The current Nigerian leadership, unlike its predecessor, has hardly hidden its displeasure with the big oil multinationals currently operating in the country. In October 2007, Business Day (a Nigerian business newspaper) reported that indecision on the part of the Nigerian government was harming Liquefied Natural Gas (LNG) projects, which the Nigerian state-owned oil company (the Nigerian National Petroleum Corporation) was undertaking with the multinationals.

While the previous Nigerian government, headed by Olusegun Obasanjo, had approved the LNG projects for the export of gas, the current government appears to be of the view that sufficient gas should first be channeled to the domestic market to meet an acute, though seemingly unsolvable, energy crisis that has been growing for the past two decades.

Also in October 2007, the Nigerian government initiated moves to renegotiate oil contracts signed with multinationals such as ExxonMobil, Royal Dutch Shell, Chevron, Total SA and Eni as reported by the Nigerian Vanguard. Future onshore oil contracts could likely all be Production Sharing Agreements (a method widely used in the Middle East) and not Joint Ventures. Thus, multinationals would not only be required to fully fund their activities, but they would also not be able to book Nigerian oil and gas reserves as their assets.

Such a move, by the Nigerian government, could be viewed by some as resource nationalism. It is however, undoubtedly, driven in part by the fact that the Nigerian government feels it is no longer getting a good deal out of contracts signed when oil fetched a mere $15 to $20 a barrel on the international market.

The big question though remains: does such 'unfriendliness' on the part of the Nigerian government towards oil multinationals also extend to Chinese oil companies and (potentially to) Gazprom? It is an undeniable fact that the Nigerian National Petroleum Corporation does not possess the technical know-how or capability to competitively develop its oil and gas fields and grow its production capacity. Thus, the need for private participation in the oil and gas industry (be it from oil multinationals or domestic firms).

In 2006, the Chinese state oil firm, CNOOC, signed deals with the Nigerian government and was granted access to oil fields in the Niger Delta (refer to this article on this blog). Sino-Nigerian oil deals appeared to go much beyond the traditional concept of a multinational coming into a country, prospecting for oil and developing a field—that is if oil were found—and eventually reaping good returns. They appeared tied to the need to help develop local infrastructure— in some cases the infrastructure were not directly related to oil and gas. CNOOC deals were in essence government-to-government deals, signed at time when there was a militant insurgency in the Niger-Delta—an insurgency that continues to this day.

What about Gazprom? What does it have to offer? The Financial Times report (referred to in the first paragraph of this write up) provides next to nothing on this, though it quotes a Nigerian government official as saying:
"What Gazprom is proposing is mind boggling. They are talking tough and saying the west has taken advantage of us in the last 50 years and they're offering us a better deal."
Until such a deal is made public (should the talks between Gazprom and the Nigerian National Petroleum Corporation bear fruit) this blogger remains deeply skeptical. Gazprom, like any other energy conglomerate, is simply strategically positioning itself for global growth beyond the shores of Eurasia. Already a key player in the European gas market, in addition to being 'the' key player in the Russian gas market, it now has its eyes set on a region of the world in need of exponential growth.

Gazprom doesn't really need Nigerian gas. Russia has 9 times the gas reserves of Nigeria. To put this in context, Russia has the largest gas reserves in the world, at 27% of global reserves (based on information from BP's Statistical Review of World Energy). But Gazprom needs access to strategically positioned gas. As a significant player in the global LNG business and with Africa's largest gas reserves, Nigeria seems a good place to start. Gazprom would not go into Nigeria to save it from the perils of western oil multinationals. It would go there for business and strategic reasons. Forget the east-west jargon. The world is not divided into black and white.
16:02
Should Nigeria Welcome Gazprom?
» ‎ Read entry @ Chippla's Weblog - Thoughts on Issues

The Financial Times reports that the Russian gas company, Gazprom, is in talks with the Nigerian government on the development of the latter's gas fields. These talks center on Gazprom investing in "energy infrastructure" in Nigeria "in return for a chance to develop some of the biggest gas deposits in the world" according to information on the Financial Times' website.

What does come as a surprise to this blogger is the fact the report claims that Russian president, Vladimir Putin wrote to the Nigeria leader, Umaru Yar'Adua on the need for an energy partnership between both countries. This may, however, not be unconnected with statements made by Putin, in early 2007, to the Kremlin, in which he made it clear that the concept of a group of gas exporting countries was worth looking into, as reported by Reuters.

The current Nigerian leadership, unlike its predecessor, has hardly hidden its displeasure with the big oil multinationals currently operating in the country. In October 2007, Business Day (a Nigerian business newspaper) reported that indecision on the part of the Nigerian government was harming Liquefied Natural Gas (LNG) projects, which the Nigerian state-owned oil company (the Nigerian National Petroleum Corporation) was undertaking with the multinationals.

While the previous Nigerian government, headed by Olusegun Obasanjo, had approved the LNG projects for the export of gas, the current government appears to be of the view that sufficient gas should first be channeled to the domestic market to meet an acute, though seemingly unsolvable, energy crisis that has been growing for the past two decades.

Also in October 2007, the Nigerian government initiated moves to renegotiate oil contracts signed with multinationals such as ExxonMobil, Royal Dutch Shell, Chevron, Total SA and Eni as reported by the Nigerian Vanguard. Future onshore oil contracts could likely all be Production Sharing Agreements (a method widely used in the Middle East) and not Joint Ventures. Thus, multinationals would not only be required to fully fund their activities, but they would also not be able to book Nigerian oil and gas reserves as their assets.

Such a move, by the Nigerian government, could be viewed by some as resource nationalism. It is however, undoubtedly, driven in part by the fact that the Nigerian government feels it is no longer getting a good deal out of contracts signed when oil fetched a mere $15 to $20 a barrel on the international market.

The big question though remains: does such 'unfriendliness' on the part of the Nigerian government towards oil multinationals also extend to Chinese oil companies and (potentially to) Gazprom? It is an undeniable fact that the Nigerian National Petroleum Corporation does not possess the technical know-how or capability to competitively develop its oil and gas fields and grow its production capacity. Thus, the need for private participation in the oil and gas industry (be it from oil multinationals or domestic firms).

In 2006, the Chinese state oil firm, CNOOC, signed deals with the Nigerian government and was granted access to oil fields in the Niger Delta (refer to this article on this blog). Sino-Nigerian oil deals appeared to go much beyond the traditional concept of a multinational coming into a country, prospecting for oil and developing a field—that is if oil were found—and eventually reaping good returns. They appeared tied to the need to help develop local infrastructure— in some cases the infrastructure were not directly related to oil and gas. CNOOC deals were in essence government-to-government deals, signed at time when there was a militant insurgency in the Niger-Delta—an insurgency that continues to this day.

What about Gazprom? What does it have to offer? The Financial Times report (referred to in the first paragraph of this write up) provides next to nothing on this, though it quotes a Nigerian government official as saying:
"What Gazprom is proposing is mind boggling. They are talking tough and saying the west has taken advantage of us in the last 50 years and they're offering us a better deal."
Until such a deal is made public (should the talks between Gazprom and the Nigerian National Petroleum Corporation bear fruit) this blogger remains deeply skeptical. Gazprom, like any other energy conglomerate, is simply strategically positioning itself for global growth beyond the shores of Eurasia. Already a key player in the European gas market, in addition to being 'the' key player in the Russian gas market, it now has its eyes set on a region of the world in need of exponential growth.

Gazprom doesn't really need Nigerian gas. Russia has 9 times the gas reserves of Nigeria. To put this in context, Russia has the largest gas reserves in the world, at 27% of global reserves (based on information from BP's Statistical Review of World Energy). But Gazprom needs access to strategically positioned gas. As a significant player in the global LNG business and with Africa's largest gas reserves, Nigeria seems a good place to start. Gazprom would not go into Nigeria to save it from the perils of western oil multinationals. It would go there for business and strategic reasons. Forget the east-west jargon. The world is not divided into black and white.

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