Terry Murden: Asian demand is helping to shape energy sector

Published on Wednesday 18 August 2010 16:31

CASH is being splashed around the commodities sector and it would appear that the deals involving Dana Petroleum, Cairn Energy and BHP Billiton won't be the last before the summer is out.

At least one other 100 million acquisition is rumoured in the North Sea while BG Group is the latest blue chip to be attracting interest, though the whispers could be down to a bit of hysteria triggered by what else is going on.

Behind the sudden rush of deals is a growing demand for raw materials in the booming Asian markets. South Korea - pursuer of Dana - imports almost all the oil it needs, prompting the state to order a round of global acquisitions. China, which last week overtook India as the world's second biggest economy, could provide a rival for BHP's bid for Potash, the fertiliser business.

Cairn's decision to sell a big stake in its Indian business to Vedanta Resources for 5.5 billion, discussed here last week, is a strategic move for the Edinburgh company that will be looking to win the lottery twice if it can repeat its Rajasthan experience in Greenland.

The deal will also mean a substantial payday for its shareholders, including founder Sir Bill Gammell, prompting one excitable Glasgow newspaper to headline on the anticipated 10m he may trouser. While that would satisfy most of us it was put somewhat in the shade by the 300m that Potash boss Bill Doyle could walk away with if BHP Billiton is persuaded to increase its existing 25 billion offer.

Dana, the Aberdeen-based explorer, is facing a rather different future now that its suitor, the Korea National Oil Corporation, has lodged the first hostile bid by an Asian company. Poor old Tom Cross, or should that be soon to be 'rich beyond his wildest dreams' Tom Cross, has held out against the bid, preferring to retain the independence of the company he founded, or at least persuade KNOC to increase its 1,800p per share offer.

The chief executive is really caught between a rock and a hard place. He could try to persuade a white knight to come in with a higher offer to at least get the price he believes properly values the firm's exploration programme. But there has been no sign of a rival offer, and KNOC has already got just under 49 per cent of shareholders on board.

The other route would be to re-open talks with KNOC in the hope that a friendlier approach would persuade it to chip in a few extra millions and thereby drop the hostile process that it didn't want to pursue in the first place.

Either way, Dana is a goner and an Aberdeen tycoon is set for a 60m windfall. There, that's the headline already written.

Music to ailing retailers' ears

LIVE music is enjoying a boom and mainly as a consequence of the ubiquity of recorded music.

Downloading technology has made music universally available. But that's become its problem. It is too easy and convenient to access. No longer do we need to visit record shops or seek out independents to find those rare discs. If you want something you can get it with a few clicks of the mouse.

Aside from the fact that it's taken some of the fun (okay, also some of the pain) out of finding what you want, it has reduced music listening to a rather bland, feel-free experience.

Now the downloaders are switching to the live option. Attendances at festivals are rocketing, attracting a wider audience, including those willing to pay more and demanding a wider range of services. As a result, live music last year generated 1.5bn against 1.3bn for recorded music.

It could also be good news for high street chains such as HMV. Acquiring festivals (it bought Mama Group, owner of a number of festivals) and ticket sellers gives them a greater chance of survival.

n tmurden@scotlandonsundaycom