Thursday, December 27, 2007


Iran Oil Deal & Malaysia

Iranian National Oil and Malaysia's SKS Ventures signed a US$6 billion contract to develop the Golshan and Ferdows offshore gas fields in Iran, which contain an estimated 60 trillion cubic feet of gas. A second part of the deal to build plants to produce liquefied natural gas worth US$10 billion would soon be ready for signing. The initial project was expected to be completed by 2014, with Golshan delivering 2.5 billion cubic feet of gas a day,and Ferdos producing more than 880 million. SKS Ventures is a privately held company of Syed Mokhtar AlBukhary. The announcement came just two weeks after China's Sinopec announced a US$2 billion contract to develop the Yadaravan oil field in south-west Iran.

The deal is not so straight forward as it seems. The US government have tried very hard to discourage foreign companies from investing in Iran over concerns that the money could be used to support a nuclear weapons program in the country. Following China, now Malaysia is thumbing their noses at the US.

Iran's oilfields are no small potato. After Russia, Iran is estimated to have the world's second-largest natural gas reserves, though due to US and United Nations-imposed sanctions, Iran has been having problems developing their oilfields.

Energy companies such as Royal Dutch Shell, France's Total and Austria's OMV, have remained involved in operations in the country despite political condemnation. Over the weekend Iran said that it was close to signing an agreement with Italian power company Edison to pump 4.5 billion cubic feet of gas to Europe. Malaysia, like China, has strong business links with Iran, including through Pertonas, which has a 10% stake in the Pars Liquified Natural gas project, led by Total.

There are two ways of looking at Iran, the more belligerent the attitudes towards a country, the less they have to lose. To engage them is a better way. Most global problems can be traced to a lack economic power. Hence helping Iran develop its economic prowess can be argued as a better long term solution. The existence of "allies" to Iran will also help in future negotiating tables. To isolate and demand changes usually backfires.


9 comments:

Hain Kuon said...

Hi,

Im not sure isit permissible to post my question over here.

Dec 28: Google mother share 700USD but Google-C1 RM0.13

Nov 14:Google mother share 660.5USD, Google-C1 RM0.33

Can someone help me to clarify this matter?Thanks in advance.

Salvatore_Dali said...

ppl got over excited on google-c1 on the first couple of days after listed, you can search in my blog for GOOGLE as I have written on the ridiculous pricing on secondary mkt... all I can say is the cw px on nov 14 is GROSSLY EXPENSIVE... the cw px on Dec 28 is EXPENSIVE still..

Hain Kuon said...

i read your article everyday religiously. You mentioned that 0.15 is a "ok la"price. Now the price is 0.13 and mother share of 700USD definitely generate a lower premium then price on Nov 14, albeit a shorter tenure. Well, my opinion is that local bourse is not fundamental anymore especially with derivatives. Please correct if im wrong.

Salvatore_Dali said...

hain,

i said 15 sen ok la... during the early days, now more than 1.5 month already... not true anymore, the 15 sen was base don prevailing mkt px of google then... pls be fair in yr comment..

Salvatore_Dali said...

there is a mark to the mkt px, but also you lose premium day by day, or theta, then you also lose premium on the basis of "mkt bullishness" which evaporated over the last few weeks... so cw entry px is not stagnant.

Salvatore_Dali said...

i may be willing to give 20% premium a month and a half ago, now I am looking at 10% or less... thats because mkt bullishness has gone off... hope that clear things up.

Salvatore_Dali said...

This was posted on OCT 31:

As of yesterday's price of US$694, the premium is 12% for the call warrant at 11 sen. At 14 sen, the premium goes to 18%. Gearing would be 5.4x. I would expect a lot of over-eager buyers. Don't chase above 15 sen or when premium breaches 20%. At the current price level of close to US$700, a lot of things has to go right every quarter, even then we may not see US$750 within 6 months. So, beware.

The stock px then was close to US700 then as well, my comments for 15 sen is good if all things were equal... again, time lost (2months), bullishness under tone for equities.

Hain Kuon said...

Ok.really appreciate for your advise.

rask3 said...

Hi,

Okay, let me see what I might contribute here. A lot of losses have happened in financial markets for all sorts of reasons but I would single out "lack of understanding of financial instruments" as one of those that novice investors or traders should be aware of.

The simple fact is that the further away you get from an underlying asset or security the greater the risk you expose yourself to. Put another away derivate instruments such as call warrants merely add another layer of risk.


If some clever guy comes up with another instrument, let me call it, "call warrants on company issued warrants" it should be even more exciting, except that risks would go up as you now have a bet on another bet on another bet. Of course, the upside is the stupendous leverage you could get.

Before anyone touches a warrant he should understand how they are priced theoretically. Studying the Black Scholes model of option pricing would be very helpful. Another thing don't ever buy a security simply because it is cheap in absolute terms. A warrant selling below 10 sen may be expensive and another selling for RM1.OO might be cheap. Better still, don't touch anything that you can't understand.


Rask