Monday, December 14, 2015

Shell plans 2,800 job cuts after BG deal; Oil crisis spikes suicides in Canada; Amidst Bric decline, India is the only silver lining

1 Shell plans 2,800 job cuts after BG deal (BBC) Royal Dutch Shell has said it will cut 2,800 jobs if its planned takeover of BG Group goes ahead, about 3% of the combined group's workforce.  The proposed job cuts are in addition to the 7,500 job losses Shell announced in July. The tie-up between Shell and BG deal is due to be completed early next year.
However, an institutional investor has said that the deal does not make "financial sense" at current oil price levels. David Cumming, head of equities at Standard Life Investments, said it was "very difficult to make the deal work" with oil below $40 a barrel, saying oil prices needed to be $60-$70 a barrel.
Shell announced in April that it had agreed to buy BG, in a deal that valued the oil and gas exploration firm at about £47bn. In its latest statement, Shell said that the planned job losses were part of "operational and administrative restructuring". The final regulatory barrier to the Shell-BG tie-up was cleared on Monday after it was approved by China. It has already been approved by regulators in Australia, Brazil and the European Union.
2 Oil crisis spikes suicides in Canada (Omar Mouallem in The Guardian) Jesse Seibel of Whitecourt, Alberta, used to wake up every day at 3am, fully rested and ready to work. Having laboured in the northern oil patch since his teens, just like his father, the tattooed and pierced wireliner had grown oddly appreciative of the work’s long hours and hard labour.

At 26, Seibel, who never finished high school, was earning as much as $5,000 a month threading electrical cables into reservoirs, enough to live comfortably and never miss paying rent and child support. Then, last February, he was sent on a three-day stint, not knowing that his employer was preparing his termination papers. He learned that he’d been laid off along with others days later. Within months, he and his girlfriend were homeless and moving into his parents’ house.

Now he’s $7,000 behind on child support payments. “I tried so hard to do it on my own, be a good father – the guy who goes to work everyday and earns his money,” he says. “It’s very depressing.” Seibel’s represents one of 40,000 Alberta oil jobs losses since the price of petroleum plummeted late last year. According to Petroleum Labour Market Information, 185,000 will have been lost by spring, as a result of the market crash. Between January and June, suicides spiked 30% compared to 2014. 

At this rate, 654 Albertans will have killed themselves this year, an unprecedented number for a region that already had the second highest suicide rates amongst the 10 provinces. Only Saskatchewan, another energy-dependent region, has a higher rate, and it’s seen 19% more suicides this year.

In a widely circulated story this week, the CBC correlated Alberta’s suicides with economic recession. Numerous media have followed, including one conservative publication that’s gone as far as to blame the environmental plans of the province’s new leftist government, but there’s no evidence to support this, says Mara Grunau of Canada’s Centre for Suicide Prevention director. Three in four Alberta suicides are male and the vast majority are under 55.

3 Amidst Bric decline, India is the only silver lining (Camille Accad & Jordl Rof in Khaleej Times) Emerging markets are going through a rough patch. Brazil is suffering its worst crisis in 80 years, Russia's economy is contracting close to five per cent compared to the previous year and China continues to decelerate.
Only one country in the group seems to be able to generate good news: India. In the third quarter of this year, real GDP growth accelerated from seven per cent to 7.4 per cent year on year. While exports continued to contribute negatively on growth, the domestic sector remained robust, due to a rebound in investment and private consumption resilience.
Private consumption has been growing at an average rate of 6.1 per cent annually in the last three years, rising 6.8 per cent year on year in the latest quarter. But the best part is the trend in investment, which went up rapidly in the last three quarters: from 2.4 per cent year on year in the last quarter of 2014 to 6.8 per cent in the three months ending in October this year.
According to the central bank, the reasons behind the good evolution on investment are low oil prices and better business conditions, facilitated by the boost in public capital spending and cheaper credit. The "twin deficits" - simultaneous deficits in the current account and fiscal balance, that traditionally burden the Indian economy - are also improving.
But India's economic outlook is not without risks. First, growth will not be sustained unless crucial reforms to reduce red tape and boost investment are implemented. Two critical measures that will be able to simplify bureaucracy and reduce corruption - the goods and services bill - and free land for industry purposes - the land acquisition bill - are currently stuck in the upper house. Government inaction is a central cause of concern.
The second risk is the price of oil. Low global oil prices have helped significantly to improve inflation and deficits, as the country is a major net oil importer and the government subsidises gasoline. If prices were to rise, the room for reforms would disappear amid high inflation, higher interest rates, and growing deficits. However, India will not realise its true potential unless the government delivers the reforms that were promised.

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