Business

NEW YORK — Devon Energy Monday said it would sell assets in Texas and other sites to the smaller Linn Energy for $2.3 billion as US independents reshuffle properties amid the shale boom. 

Devon will sell Linn “non-core” oil- and gas-producing properties in the Rockies, onshore Gulf Coast and mid-continent regions. About 80 per cent of the production associated with the assets produces natural gas. 

Devon said the plan was consistent with efforts to tilt its portfolio towards a heavier share of oil, which some analysts believe has a better long-term price outlook than natural gas.

Devon previously sold other non-core properties in Canada and spent $6 billion to purchase assets in the Eagle Ford oil play in Texas. Both Devon and Linn are considered oil and gas “independents”, which means they produce oil and natural gas, but do not refine crude into gasoline.

“Devon is now concentrated in some of the most attractive North America resource plays, with liquids expected to approach 60 per cent of our production by year-end and multiyear oil production growth projected to be in excess of 20 per cent,” said Devon Chief Executive John Richels. 

Linn, meanwhile, said it identified more than 1,000 future drilling opportunities spread out over 900,000 acres from the Devon assets it will acquire. 

The deal is consistent with Linn’s efforts to build its presence in the Rockies and mid-continent, the company said. Linn plans to divest “non-core” properties in the Texas Panhandle and western Oklahoma. 

GENEVA — Countries must dramatically rethink strategies for avoiding and dealing with financial crises, the Bank for International Settlements (BIS) said this week, urging far more focus on fighting debt.

The Swiss-based BIS — dubbed the central bankers’ central bank — warned in its annual report that while the global economy was showing some encouraging signs of recovery from the crushing 2008 financial crisis, the factors that sparked it were still very much in play.

If governments fail to make the necessary policy adjustments to ward off similar crises and crashes, “the global economy may be set on an unsustainable path”, the report said, warning that “at some point, the current open global trade and financial order could be seriously threatened”.

BIS voiced deep concern over the stark contrast between the euphoria currently seen in many financial markets and the continued weak investments being made in the real economy, especially at a time when the geopolitical outlook remains “highly uncertain”.

“A new compass is badly needed,” Claudio Borio, who heads BIS’s monetary and economic unit, insisted to reporters ahead of the report launch.

Central banks’ bid to help spark growth by among other things slashing interest rates has helped create more appetite for short-term, high-risk investments on stock markets, and froth in property and corporate bond markets, the report found.

But at the same time, economies that had been hard-hit by the crisis had not done enough to sanitise balance sheets and root out the debt-dependency that got them in trouble, while countries spared last time were showing growing signs of financial vulnerability, the report indicated.

Ditch debt as key growth engine 

This was especially true in emerging markets that have seen their economies boom amid an abundance of cheap credit in recent years, it said, stressing that clear policy shifts were needed “in all major economies, whether or not they were hit by the crisis”.

As a clear sign of the troubled road, Borio warned that both private and public sector debt was rising steadily “even as the capacity to pay for it is diminishing”.

“It is essential to move away from debt as the main engine of growth,” he insisted.

To overcome the legacy of the global financial crisis, policymakers need to go beyond their traditional narrow focus on business cycles, and take on financial cycles, which are far longer but also cause far more damage when they contract, according to BIS.

“Focusing our attention on the shorter-term output fluctuations is akin to staring at the ripples on the ocean and losing sight of the more threatening underlying waves,” Borio warned.

The BIS report called for policies aimed at aggressively warding off financial booms, but also at dishing out fewer growth incentives during busts to avoid inspiring more debt taking.

“The road ahead is long,” Borio acknowledged, saying it was all the more important to “start the journey sooner rather than later”.

“The current upturn in the global economy is a precious window of opportunity that should not be wasted,” he said.

CAIRO — Egypt’s Cabinet has submitted a revised budget for the new fiscal year which starts on Tuesday, proposing a narrower deficit after President Abdul Fattah Al Sisi rejected a previous draft because spending was too high, finance ministry spokesman Ayman Alkaffas told Reuters on Sunday.

The new budget envisages a deficit of 240 billion Egyptian pounds ($33.6 billion) in the fiscal year ending June 2015, less than the 292 billion pounds in the initial draft, he said.

Last month, the finance ministry predicted a fiscal gap of around 290 billion pounds, or 12 per cent of the gross domestic product (GDP) for the coming year and forecast growth of around 3.2 per cent, too low to create enough jobs for the young Egyptians that enter the workforce each year.

Boosted by aid worth billions of dollars from Gulf Arab countries after Sisi deposed Islamist president Mohamed Morsi last July, Egypt’s 2013/14 budget deficit was set to shrink to around 11 per cent of GDP from some 14 per cent the year before.

It was not immediately clear what percentage of GDP the deficit would account for in the new budget.

“All non-productive expenses have been trimmed down,” Alkaffas said, but declined to go into details pointing to a statement due to be issued later.

When asked about a time frame or details of cuts in Egypt’s energy and food subsidies programme, which traditionally eats up around a quarter of state spending, he replied: “We don’t have a time frame or a named product. This is going to be coordinated with other ministries.”

Austerity

Sisi, who was inaugurated as president this month, has pledged to give up half his salary and property and called on the Egyptian people to make similar sacrifices, as he prepares the public for a period of painful economic austerity.

In the same speech, Sisi rejected the initial budget plan, saying the deficit was too large and continued borrowing would not leave “anything good” for future generations.

The turmoil of the past three years, in which two presidents have been overthrown and hundreds of people killed in the streets, has battered the tourist industry and investment, worsening a huge unemployment problem and pushing up the deficit.

A simple spreadsheet model of Egypt’s public debt, created by Reuters in March, suggests it will be several years before the rising ratio of debt to GDP, which was 89.2 per cent in the fiscal year to June 2013, levels off and starts to fall.

Separately, one of the developers of a natural gas field off Israel’s Mediterranean coast on Sunday said it has signed a letter of intent to provide gas to a facility in Egypt.

Delek Drilling said it is negotiating a deal to provide seven billion cubic metres of natural gas from the offshore Leviathan gas field to British company BG’s plant in Idku, Egypt, through an underwater pipeline annually for 15 years.

An industry official familiar with the deal said it could be valued at about $30 billion — which would be the largest energy deal in Israel’s history. He spoke on condition of anonymity because he was not authorised to comment on the deal.

Until recently, Egypt provided natural gas to Israel. But following the ouster of president Hosni Mubarak in 2011, supplies were disrupted and eventually halted.

Last month, Houston-based Noble Energy Inc., one of Delek’s partners, reached a preliminary deal to sell up to 2.5 trillion cubic feet of gas annually over 15 years to Union Fenosa Gas SA for its liquefied natural gas facility in Egypt.

Despite a long history of geopolitical conflict with its Arab neighbours, the discovery of large natural gas deposits off its coast has positioned Israel to become a leading energy exporter in the region.

Earlier this year, Noble Energy and its partners signed a deal with Arab Potash Co. and Jordan Bromine Co. in Jordan, and another deal with a Palestinian power company to supply gas to a power plant to be built in the West Bank.

Israel has long relied on imports to meet most of its energy needs. The gas fields are expected to supply Israel’s domestic needs for decades and could transform the country into an energy exporter.

BAHRAIN — Bahrain Airport Company (BAC) announced Sunday in a press statement received by The Jordan Times that it will host the first ever routes MENA in Bahrain in November 2015. This inaugural event will see route development professionals from across the Middle East and North Africa (MENA) region gather to discuss air service development to, from and within the region in a three-day forum. “The opportunity in the MENA region is quickly growing despite a number of challenges in recent years,” the statement said. “According to industry reports; the region continues to be the world’s fastest-growing inbound travel market for the past 10 years, recording a 10 per cent in average annual growth rates,” it added. The statement indicated that the aviation industry in Jordan has seen positive growth with a contribution of 5.3 per cent to the overall gross domestic product. “The tourism sector in Jordan also acts as an economic driver and the second fastest growing sector in the Kingdom. More than 5.9 million passengers travelled to, from and within Jordan last year with inbound tourism topping the list at around 3 million tourists from the region,” it concluded. 

BRUSSELS — In the latest shift away from the austerity of the eurozone crisis, European Union (EU) leaders signalled at a summit that they were ready to give member states extra time to consolidate their budgets as long as they pressed ahead with economic reforms.

Under pressure from Italian Prime Minister Matteo Renzi, the leaders adopted a text which pledged to make "best use" of the flexibility built into the bloc's fiscal rule book — the so-called Stability and Growth Pact.

Renzi, whose country has the second biggest debt in Europe at more than 135 per cent of gross domestic product (GDP), has been pushing for a more growth-friendly interpretation of the fiscal rules since taking office in February, because without faster growth Rome won't be able to pay down its debts.

"If a country enacts serious structural reforms, it has the right to flexibility, which is the most important political point," Renzi told reporters at the end of the two-day summit. He called the new language a "turning point" for Europe.

In reality, Europe has been shifting towards a softer fiscal stance since last year in an effort to revive growth in struggling southern states, and combat high unemployment, particularly among young people.

Countries like France and Spain have already been given extra time to reach the EU's deficit target of 3 per cent of GDP. In parallel, the European Central Bank (ECB) has cut interest rates to record lows to ward off the threat of Japanese-style deflation in the 18-member eurozone

Germany, the most ardent defender of tough budget policies, has been worried that fiscal leniency could lead to a new spending spree by governments taking advantage of low borrowing costs and open the way for a new crisis.

Italian-German deal

But Renzi and German Chancellor Angela Merkel reached a deal late on Thursday which stresses the need for a flexible interpretation of fiscal rules, while stopping short of any change to the EU pact.

Merkel stressed at a news conference that it would be up to the European Commission, not member states themselves, to decide whether extra time was granted.

"The best use of flexibility means the best use, not the fullest use but the best, the most appropriate for the situation," Merkel said.

Under EU rules, governments have to strive towards a budget close to balance or in surplus, excluding one-off revenue and spending and the effects of the business cycle. They also have to reduce public debt.

But the rules also say that governments can be given more time to reach budget balance if they undertake reforms that have a verifiable positive impact on economic growth — an option that has so far never been used.

"Structural reforms that enhance growth and improve fiscal sustainability should be given particular attention, including through an appropriate assessment of fiscal measures and structural reforms, while making best use of the flexibility that is built into the existing Stability and Growth Pact rules," the text agreed by leaders read.

The structural reform option, however, will be of little use to France, which has been backing Renzi's push for more flexibility, because it only applies to countries that have a budget deficit smaller than 3 per cent of GDP.

Paris, which has a deadline of 2015 to cut its budget shortfall below that level, will have to wait until then to take advantage of that option.

Some EU policymakers worry that using the structural reform clause opens the way for a more political approach to the rules.

This is because it is very difficult to quantify with any degree of accuracy what effect a structural reform will have on growth, especially in the longer-term.

The amount of leeway granted in structural deficit reduction can therefore be politically influenced.

"The rules are fine. The way in which they are policed and enforced is not. The challenge is to improve the process in a way that minimises the inevitable political strains," Berenberg Bank chief economist Holger Schmieding said.

AMMAN — The Central Bank of Jordan (CBJ) on Saturday officially launched e-FAWATEERcom system to help citizens check and pay their bills electronically via different paying outlets.

The CBJ announced in a statement that the banks which have linked to the system so far are Al Ittihad Bank, Jordan Islamic Bank, Egyptian Arab Land Bank, Jordan Commercial Bank, Arab Bank, Housing Bank, Cairo Amman Bank, Bank of Jordan, Islamic International Arab Bank, Dubai Islamic Bank, Societe Generale de Banque-Jordanie, Arab Banking Corporation, National Bank of Abu Dhabi and Al Ahli Bank. 

The Jordan Customs Department and the three telecommunications companies for landline, mobile and Internet (Umniah, Zain Jordan and Orange Jordan) have also linked to the system. 

Mobile and Internet pre-paid charging cards service will be provided through the system within two weeks.

According to the statement, “meetings between officials from the CBJ and the Ministry of Information and Communications Technology resulted in linking all e-government services to the system”. 

e-FAWATEERcom is a central system that provides reviewing and paying bills and other services electronically through linking public and private institutions at various sectors, from one side, with banks and paying service providers, on the other side. 

The system provides access to all electronic payment methods related to banks such as branches, ATM’s, banking telephone and Internet, and paying through mobile and kiosk devices.

This procedure enables citizens (consumers) to pay all their bills easily, safely and 24/7.

The central bank expects all parties to have benefits from this system such as enhancing the concept of governance in the e-payment, reducing the use of paper money, decreasing costs, time and efforts, increasing repayment rates and the flow of money, and decreasing hazards of money-typical transactions.

The system also aims at establishing a solid infrastructure for the e-government and avoiding service abruptions to citizens due to being late on payment. 

JCB referred the tender of operating and administrating the system to Madfouatcom Company for e-payment under the supervision of JCB.

AL ASEEL OILFIELD, Egypt — Egypt's oil minister said on Thursday that BP's $10 billion gas project, stalled for three years, had restarted and that production would begin in 2017, a sign of progress in efforts to ease the worst energy crunch in decades.

In another move that could help improve investor confidence, Sherif Ismail also said Egypt would pay $1.5 billion of the money it owed to foreign energy companies by the end of 2014.

The minister told reporters on a visit to Al Aseel oilfield in the western desert that production at BP's North Alexandria concession would begin in 2017, with 450 million cubic feet per day initially being extracted. He said output would rise to 800 million cubic feet per day in 2018.

Those volumes would mean a significant boost to current production, which Ismail told a local newspaper this month was expected to reach 5.2 billion cubic feet (bcf) per day by the end of December.

The news comes a day after Algeria agreed to ship five cargoes of liquefied natural gas (LNG) to Egypt this year, according to a source at Algerian state energy firm Sonatrach.

The total amount of the Algerian shipments will be enough to meet around three days' worth of average daily consumption, according to Reuters calculations, enough to provide serious short-term relief to gas shortages that have resulted in regular power cuts in Egypt this year.

"Gas imports are planned for a period of the next four to five years, until energy self-sufficiency is achieved," Ismail told reporters on Thursday, referring to overall imports.

The government has struggled to pay foreign companies for gas and work on some major new gas projects has ground to a halt at a time when generous state subsidies are stoking growing demand.

Egypt earlier this year forecast gas production would fail to meet surging domestic demand in the next fiscal year that begins July 1, signalling more blackouts ahead.

Egypt's steadily declining gas production has been exacerbated by foreign firms' wariness about increasing investment when the government owes them money and has diverted most of the gas promised for exports to meet domestic demand.

The near-daily power cuts are forcing energy-intensive industries to close factories or sharply cut production.

BG Group's problems in Egypt have affected its LNG unit so much that it cut production forecasts for the year and served "force majeure" notices to affected buyers and lenders.

In another move that could help improve investor confidence, Ismail said Egypt would pay $1.5 billion of the money it owed to foreign energy companies by the end of 2014.

The latest government figures put Egypt's debts to foreign oil companies operating there at $5.7 billion, but officials including Ismail acknowledge that debts are mounting even as the government pays off what it owes now.

The government has promised to pay companies including BG Group and BP $3 billion by the end of 2017 as it tries to lure back investors to help it develop its reserves.

In April, Ismail said Egypt would pay about $1 billion "within two months" but the government has not yet announced that it has paid.

BP, one of the largest foreign investors in Egypt, had initially planned to start production at its North Alexandria project this year, the minister said. Ismail said a delegation from BP would arrive on July 17 for talks with the government.

AQABA — Representatives from the Aqaba Special Economic Zone (ASEZ) promoted the Jordanian port city as a touristic and investment destination during a tour this week in several US cities.  

The first marketing campaign in the US included visits to New York, Washington and Baltimore. 

Aqaba Special Economic Zone Authority (ASEZA) Chief Commissioner Kamel Mahadin, who chaired the delegation, described the campaign as an integrated drive by the public and private sectors to jointly coordinate promotional efforts and highlight successful investments in Aqaba.

The investment and media campaign seeks to promote stability and security, despite the regional turbulence, he said     

The delegates discussed education systems, training and specialised vocational programmes with representatives of major US universities in order to arrive to joint programmes to be implemented in cooperation with them in the various fields. 

They also met and held discussions with various media outlets, highlighting the positive business environment and the main advantages of the region, its objectives and achievements, in light of the latest regional political developments.  

Mahadin stressed the importance of the media sector as a partner, underscoring its role in stimulating and drawing investments and reflecting the true image of Jordan and the ASEZ.  

The Jordanian team also held talks with government officials and business leaders in the fields of energy, infrastructure, services, and tourism within the framework of furthering joint cooperation. 

The delegation was hosted by Citi Group.

PARIS — A consortium including French industrial groups Vinci and Alstom signed this week a two-billion-euro ($2.7 billion) contract with Qatar Railways to build a tram system for the city of Lusail. The contract won by Alstom and QDVC, which is 51 per cent owned by Qatari Diar and 49 per cent by Vinci's major projects unit, was signed on Monday at Paris' Elysee Palace during an official visit by Emir Tamim Ben Hamad Al Thani. Vinci said the contract includes the construction of 25 stations and the electric infrastructure surrounding the four-line network, which is expected to stretch 33 kilometres when finished. For its 750 million euros slice of the pie, Alstom said it will deliver 35 trains along with power supply equipment, signalling and trackworks. The tramway in Qatar's newest planned city with a population of 200,000 is expected to open in 2018 with further lines added two years later.

AMMAN — Supported by the UK Embassy’s Arab Partnership Fund, the Business Development Centre (BDC) launched this week the Sharaka Discussion Forum "Economic Development: Opportunities and Aspirations of Jordanian Youth and Entrepreneurs.” 

“The forum provides a discussion between the public and private sectors where opportunities and aspirations of youth and entrepreneurs in Jordan are discussed,” BDC said in a press statement. 

It added: “The initiative aims at opening a continuous dialogue and building relations between the public and private sectors to ignite and strengthen the partnership between both sides to face challenges and seize opportunities and thereby accelerate development in the Jordanian economy, based on the continuous cooperation between the two sectors.” 

According to the statement, the discussion forum was attended by Jordanian youth from different governorates as well as owners of small and medium enterprises, who are all beneficiaries of BDC’s programmes.

The BDC-managed Sharaka initiative, under the patronage of British Ambassador Peter Millet, was moderated and administered by Jawad Anani who highlighted three main pillars: SMEs (opportunities and financing), public and private sector partnership and the investment environment and the ways to improve it. 

“There were several interventions and inputs from attendees who are from various public and private sector entities revolving around the opportunities and services provided to SMEs from governmental organisations as well as chambers of industry and commerce in order to enhance competitiveness, increase exports and to better promote Jordan, while also maximising the use of those opportunities and services,” the BDC indicated in the statement.

“The initiative also focused on suggestions from entrepreneurs and youth and interventions from public sector representatives that aimed at highlighting the current available opportunities for youth and future solutions and perspectives of the private sector in order to serve two sectors to serve small and medium enterprises, entrepreneurship and investment projects, as well as their focus and perseverance to continue developing Jordanian governorate hoping to achieve full economic integration,” the statement said.

According to BDC, Sharaka has highlighted important issues affecting the interests of Jordanian entrepreneurs and youth. The initiative focused on the most important expectations and policies adopted by the government to stimulate economic development, which in turn will contribute to the convergence of opinions and views.

Industry and Trade Minister Hatem Halawani said: “The partnership exists between the public and private sectors and we are ready to improve and develop this partnership, and the government is currently working to launch certain laws & regulations specifically to facilitate the work of small and medium enterprises, expected to be launched within two weeks including a clear strategy to support SMEs in all aspects."

The minister also highlighted the new investment law, which will be shortly implemented in order to solve many of the challenges faced by young entrepreneurs, where the government is working to establish a single window for the licence and registration of projects.

Planning and International Cooperation Minister Ibrahim Saif said: “Before thinking about the need for developing small and medium enterprises, we must focus on identifying challenges and the various needs facing governorates, including infrastructure, human cadre and market size in those governorates.” 

He added: “So we must solve these challenges as a first essential step towards sustainable development.” The Ministry of Planning and International Cooperation identified some of the main shortcomings at the provincial level and have included some of these projects within the executive plan 2014 – 2016. 

A decision has been made to set up vocational and professional cities creating the necessary infrastructure and providing funding for business owners and young Jordanian entrepreneurs from different governorates, as well as finding the basis from which to start and expand the project thus creating more job opportunities in governorates.

Iyad Al Qadah, director of sales and income tax, said: “The department is working hard to study the work exemption of up to 50 per cent of investment projects in the southern governorates in order to increase investment opportunities in the various governorates of the Kingdom."

Millett said: “Economic growth in any country comes from the expansion of private sector businesses and an increase in national exports to that country, so the public sector needs to open direct channels of communication with the private sector and facilitate actions that will increase exports.”

He added: “This is what actually happens in Britain, where there are channels of daily contact between the government and private sectors, and there are specialised units in embassies to help entrepreneurs and exporters in facilitating their export procedures to various countries in the world.”

“Similarly we care to support such initiatives and activities that open a constructive dialogue between the sectors and serve young Jordanian entrepreneurs," the ambassador continued.

Nayef Stetieh, BDC chief executive officer, said: "We have launched the Sharaka initiative through direct contact with Jordanian entrepreneurs and youth from different governorates through our entrepreneurial programmes offered to a vast number of groups of people. 

“We recently opened an urgent, necessary and constructive dialogue between the private and public sectors in order to identify essential services available for Jordanian entrepreneurs, and to break the barrier between youth and the government as well as to inform the government of the current situation and needs, whether these needs are market needs or fundamental infrastructure which Jordanian entrepreneurs pursue and aspire thus converging different views,” he added.

The statement concluded that there will be further meetings and forums to be held by the BDC dealing with strengthening the private and public sector partnership as one of the most important outcomes from this initiative. 

A special focus will be on renewable energy in Jordan and its strategies followed by the educational sector and its outputs.