Daily Sources 2/5

1. Julia Werdigier at the New York Times reports that the Bank of England cut the benchmark lending rate by 0.5% to 1% today. The European Central Bank decided to leave its benchmark lending rate unchanged at 2%.

2. Shai Oster at the China Journal reports that power demand in China is down--the China Electricity Council (CEC) announced yesterday that power consumption grew by 5.23% in 2008, down from 14.8% rate of growth seen in 2007. The CEC expects the growth rate of power consumption to continue to fall in 2009. The electricity grid has been under extreme stress over the last several years, often resulting in brownouts--the let up in demand growth probably signals a tapering off of such difficulties.

"[Beijing] plans to spend just under $85 billion on power projects this year, part of government economic stimulus plans. That is a little bit more than was spent last year.

Spending is likely to focus more on upgrading the national power grid, building an electricity superhighway of high voltage lines to bypass a lot of the aging infrastructure that has bottlenecked power supplies in the past."

Meanwhile, Xinhua Economic News reported today that China will begin the construction of eight more strategic petroleum reserves this year, after the four constructed in 2008 start operations. China's current SPR storage capacity stands at about 136 million barrels or 42.5 days of import demand. The State Council in 2007 suggested that the government ought plan to build 120 days of import demand storage capacity.

3. Keith Johnson at Environmental Capital reports that Sweden has decided to overturn it's old ban on nuclear power, announcing a slew of new nuclear power plant construction plans.

"That’s a big change, because Sweden was an early and ardent opponent of nuclear power, banning new reactors in 1980 even though nuclear power provides about half the country’s electricity. Sweden’s center-right government, which like the rest of the country had been long divided on the nuclear question, just announced an end to the official policy of phasing out nuclear power when the country’s ten reactors reach the end of their life. Most importantly, the government reversed its 2006 campaign pledge not to build any new reactors and ended a ban on nuclear-power research."

4. The IMF announced on Monday that it will seek to boost its capital available for lending to governments to $500 billion from $250 billion.

5. Arijit Ghosh and Shanthy Nambiar at Bloomberg report that Bank Indonesia is seeking to expand its currency swap arrangement with Japan given a fall in its currency reserves of $10 billion since July. This comes as Jakarta negotiates with Tokyo regarding on-going natural gas contracts. (see Daily Sources 2/4 #8.) Indonesia has similar agreements with China and South Korea for $3 billion each under the Chiang Mai Initiative and may well seek further assistance from another, unnamed, country.

"Finance ministers from Japan, China, South Korea and 10 Southeast Asian nations plan to meet on Feb. 22 this month to expand a deal under the Chiang Mai Initiative to boost the pool of foreign-exchange reserves to $120 billion to help defend their currencies."

(see Daily Sources 1/30 #4.)

6. Elisabeth Bumiller and Ellen Barry at the New York Times report that Kyrgyz president, Kurmanbek Bakiyev, announced in Moscow Tuesday that he will ask Parliament to close the US base at Manas.

"About 15,000 personnel and 500 tons of cargo pass through Manas each month. The base is also the home of large tanker aircraft that are used for in-air refueling of fighter planes on combat missions over Afghanistan."

Ms. Bumiller and Barry report that the Kyrgyz Parliament is set to consider the measure next week. However, the State Department's told the media yesterday that no official communication regard the base has been received.

"QUESTION: ... Have the Kyrgyz told you that you have to leave?

MR. WOOD: Look, we have not received any formal communication from the Kyrgyz authorities of any decision to close the base. But as I initially said, we’re having discussions with the Kyrgyz about this, and we’ll continue to do so."

On Tuesday Bakiyev announced that he had secured $150 million in aid from Moscow, the forgiveness of $180 million in debt, and $2 billion in loans. That is a tremendous amount of money for a country with an estimated GDP of $5.05 billion in 2008 (at nominal exchange rates.) The US reportedly provides Bishkek about $150 million in "assistance and compensation" annually, but only "a portion" of that money goes to the government. An anonymous State Department official interviewed by Ms. Bumiller and Barry said that, "fundamentally it comes to money, and the Russians are trying to buy us out."

7. Ijaz Kakakhel at the Pakistan Daily Times reports that an unnamed energy analyst forecast that the shortfall in natural gas would increase to 0.507 billion cubic feet/day (bcf/d) in 2010 as indigenous production is expected to be 4.309 bcf/d over expected demand of 4.816 bcf/d. Kakakhel quotes analysts as suggesting that the natural gas situation means that plans for the Iran-Pakistan-India pipeline ought to be finalized as quickly as possible. However, Tehran contract offers so far have not seemed reasonable to Islamabad or New Delhi. (see Daily Sources 1/19 #12.)

8. Marianne Stigset and Diana Kinch at Bloomberg report that Petrobras CEO Jose Gabrielli told journalists that the company had made no decision as to whether it would tap the equity markets as it seeks financing for its five year plan. Valor Economico had issued a note to investors that Petrobras might sell as much as 45 billion reals ($19.5 billion) of stock. Yesterday Petrobas sold $1.5 billion in 10 year bonds, a week after saying that debt was too expensive. (see Daily Sources 2/4 #12.) Meanwhile, Phaedra Friend at Rigzone reports that Petrobras confirmed it will begin the first phase of the development of the Tupi field in March--long term testing. The field is thought to hold between 5 and 8 billion barrels of recoverable oil equivalent. "Tupi is Brazil’s largest discovery to date, located in block BM-S-11 in the Santos Basin, 155 miles (250 kilometers) from the southern coast of Rio de Janeiro."



Peak production is expected to be about 200 kb/d of oil equivalent, sometime in the next 10 to 15 years. The Brazilian government indicated today that it had approved the five year plan.

9. Eric Watkins at the Oil & Gas Journal reports that in a visit to Lima by Algerian oil minister Chakib Khelil said that Sonatrach will join Petroperu in hydrocarbon exploration and production activities.

10. Courtney Schlisserman and Timothy R. Homan at Bloomberg report that first time unemployment claims rose to 626,000 for the week ended January 31. The total number of people collecting unemployment now stands at 4.788 million. The Bureau of Labor Statistics will announce the official unemployment totals tomorrow. The Associated Press reported that the Commerce Department announced today that factory orders fell by 3.9% in December. For the year of 2008 factory orders increased at a rate of 0.4%.