Meci Group News Letter for 2015

Welcome to this year’s Meci Group newsletter.  This will be brief.  There’s lots going on.

In this newsletter I’ll cover:

  • Becoming a Member – Our standards – no jobs, no bosses
  • Bucket List Activities: Fly Fishing in Iceland and Switzerland
  • Activities, Consulting and Products
  • Publishing
  • CXO Recruitment
  • Solar Energy and Aqua-farming Projects
  • And a bit more…

But firstly a little bit about our focus for this year.

Shifts in dynamics of world power suggests that this year is the time to focus on Russia, Turkey and Iran. So that’s what we’re going now.

Now let’s get to it…

Meci Group Philosophy

I was reading a book recently, “Let My People Go Surfing, by Yvon Chouinard and in it I found an excellent summary of what is the philosophy of Meci Group and a very good summary of sustainability in life and business.

I encourage you to read it.

Here’s some very interesting statements from the book:

  • 25% of all the world’s insecticides are used on cotton and cotton represents only 3% of world’s farmland.
  • Patagonia have been using organic cotton since the late 1990’s.
  • Patagonia polyester fleece jackets are made from recycled PET bottles with each jacket using about 25 bottles.

It reminds me of another giant in the sustainable industrial space:  Ray Anderson (his company is Interface).  See his TED talk from a few years ago.

I write extensively on building collaborative and consensual organizations on my website.  I encourage you to read should these topics be of interest to you and your company.

Yes, Meci Group is in commodity trading (gold, silver, oil and petroleum products) and business in the oil sector, however I see this as a transition phase for us and humanity as a whole.  Picking ourselves up from one, extremely damaging, polluting and very, very short term focused way of living (which has been prolific for the last 150 years since we started burning coal in large quantities) to a sustainable one is something that is happening very fast in this early 21st century.

There are less than 10 more effective years in the oil sector and it is will most likely be over by 2030. Shocking news for many I am sure (especially those heavily invested in it). This is all explained here.

“It’s okay to be eccentric, as long as you are rich; otherwise you’re just crazy”.  Yvon Chouinard, owner Patagonia

Complete the Ring – Become A Member of Meci

Meci Group is not for employees. There are no jobs here. There are no bosses.  It’s a collective of consensual people, working together and adhering to a code of equality and consensus for the benefit of themselves, their family, their community and society as a whole.Image result for gold rings

In isolation, the words “Growth” and “Jobs”: are words not used at Meci Group.

Become a member of Meci Group. It’s easy and there’s no risk.  We operate a very flat organization and you’ll see we work across a range of industries and interests. Find out more about our standards and what would be expected as a member

More information about the projects mentioned here and others we are working on will be sent out to members in the next week or so.

See here to become a member: www.meci-group.com/membership

Always rememberer power of compounding – Einstein called it the 8th wonder of the world.

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t

… pays it.” Albert Einstein

Bucket List – Fly Fishing in Iceland and Switzerland

Have you seen the movie “Bucket List” with Morgan Freeman and Jack Nicholson?  Well this should be on it.  Pascal Zeller of Switzerland brings the chance to do a once in a lifetime, or a once-every-year event. Your choice.  Check it out here: 11 to 18 April. There’s a great photo of Pascal on Brienzersee in Switzerland:

Switzerland and Iceland Fly Fishing on Facebook

Activities, Consulting and Products

Consulting services – last year we provided support to 10 companies. This included oil drilling services companies from China, Russia, CIS, USA, Europe, banks such as UBS and consultant groups such as Boston First and McKinsey & Co.

Products included drilling rigs and drilling products from China, meat from Central Asian country of Kyrgyzstan and tea from Iran.

Several clients requested heavy construction equipment quotations which we sourced from Europe, East Asia and the Americas.

See here for more: www.meci-group.com/clients

We expect to do more of the same this year.

Specifically:

  • Drilling chemicals from Romania.
  • Heavy Construction Equipment from Germany, Japan and USA. We have a fleet of RT and AT cranes ready for purchase.
  • Solar projects.
  • Aqua-farming – Growing Shrimp in Europe and Central Asia.

Image result for RT80 crane rough terrainImage result for truck heavy equipment

Buying Gold & Silver

Cash is clearly not safe: eroding values because of inflation and changes in the G20 summit in September 2014 mean that what happened in Cyprus is now endorsed and agreed to by Image result for gold and silverthe top 20 development nations.  Remember Cyprus? In 2013, 50% of depositor funds were “acquired” – stolen – in the “bail-in” when banks went broke.  That’s one for solidarity!

If you want to buy gold or silver be very careful how you do it. Buy physical only and hold it where you can get to it. Not in a bank. In a bank run the banks will be closed.

We work with Hard Assets Alliance for all your precious metal requirements. They can sell, ship and store (if required) your hard metal assets.  Go to the links here to learn how:

Because you understand finance (or when you do you will), events such as the high level of the US government debt ($18.1T, 75% of GDP) and the very high level of US derivatives ($690T) you know we are in for a rocky ride when the non-sustainability of these become apparent to investors and the positions begin to unwind.  We saw a little bit of this in the 16% drop in USD in less than 1 day against the Swiss Franc when the Franc was decoupled from the Euro on the 15th January 2015.  More to come on this…

A Thought Experiment

And now a thought experiment courtesy of Professor Albert Bartlet.

Imagine you have a bottle and inside that bottle you have a single bacteria. A bacterium. A bacterium that doubles itself. The time is 11 am and at 12 noon the bottle will be full of bacteria.

A few questions…

At what time will the bottle be half full?https://i0.wp.com/www.worldpopulationbalance.org/images/bacteria/bacteria_rings.jpg

Answer: 11.59 am

1/4 full?

11:58 am.

1/8 full?

11:57 am.

So for most of the time in the bottle there’s lots of room.  It’s not until the last minute, less than 2% of the time, that there’s a sudden physical limitation applied to the scenario.

That’s the power of compounding, and exponential growth. Always remember it. It will bode you well for your investments and your life.

10 Simple Things My Dad Taught Me About Networking

Darrah Brustein is a writer, master-networker, and serial entrepreneur with businesses in merchant services, networking and financial education for kids; she is also the founder of Network Under 40, a networking organization young professionals.

Read more…

Publishing

This year I started contributing occasionally to the Al Jarida Newspaper, an Arabic news paper targeting high net worth individuals in Al Jardia Page 12 - 21 Feb 2015the Middle East.

I write in the economic section.

Here is my latest article and you can see others on my website.

CXO Recruitment with Marwick & Stimson

Executive Search professionals with more than 1,000 placements in CXO and MD level positions in Oil & Gas, Engineering, Construction, Property, Finance and Retail Sales.  Spanning 40 countries…

Enough said.

Contact us if you need someone for your CXO position. Marwick & Stimson can help you find them:

Recruitment@Meci-Group.com

Solar Energy and Aqua-farming (Shrimp) Projects

This year we are moving into solar projects and aqua-farm (shrimp) projects where ever we can. The world is moving this way in a hurry and it’s a green thing to do.

I wrote about solar in one of my recent articles.

The photo voltaic derived energy sector is growing rapidly and foretells of a dramatic shift away from oil in the very near future.  44% of all crude taken from the ground is burnt as fuel in passenger cars.  Cheap electricity from the sun will eliminate this demand in a matter of months when the shift comes. This is expected within 10 years.

Image result for shrimp farming

Aquaculture

Shrimp farming got my attention in this article.

In Conclusion

In all of our work we always advocate considering the placement and timing of your present investment portfolio.

Remember our core business is in consulting: wealth management, business management and investments.

Billionaires and employees alike receive our services.

For one client, we recovered over 2m USD within 4 weeks of commencing our work and with further guidance they have since gone on to tender over 3b USD in EPC projects. They where within 6 months of closing their doors and have since won close to 10% of these tenders (yes, that’s $300m in projects).

Maybe you or someone you know could use our help.

Thank you for your support in 2014 and it’s shaping into a great 2015.

(PS, check out my latest full page article here about building a team with a profitable outcome).

Yours sincerely,

Jeremiah Emanuel Josey

Senior Consultant | Council Member – Meci Group | Meci Group International

P: +44 2081 333 596 | F: +41 31 528 0349

Member, Gerson Lehrman Group of Consultants – GLG

Meci @ Linkedin

West to East Business Development

Our Clients

For a little background on Meci Group, we are a collaborative organisation existing under the laws of Switzerland. This means we have a flat organisation with a wide scope of activities dependent on the skills and interests of our members. For instance, my personal focus is in energy, food and industrial projects, plus guidance of the Group. Other members bring their own interests and focus to the Group. For more information about how collaboration works, please see this link on my personal blog here. (Link about Collaborative Workplaces).

Want to join our Group? Go here to find out how.

Copyright © 2015 Meci Group International, All rights reserved.

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After Oil: Money, Food and Polymers – New Business Activities for the Middle East

I wrote this article for the Al Jarida newspaper and it was published on Saturday 7 February 2015.

This article took a full page as I was developing an argument for Kuwait and other oil rich countries after demand for crude oil declines. It is published here: Al Jarida Article 7 Feb 2015 (Go to page 12)

Al Jarida Page 12, 7 Feb 2015

After Oil: Money, Food and Polymers – New Business Activities for the Middle East

Fourteen years ago the former Minister of Oil for Saudi Arabia, Sheikh Ahmed Zaki Yamani said that by 2030 oil would remain in the ground because people would not want it. One oil rich country, Iran, is discussing their future budgets without oil. I have written previously about how dramatic falls in energy creation from solar radiation is now a direct competitor to burning fossil fuel. So what can economies that are heavily reliant on oil revenues such as Kuwait do in a post oil world? This is what I will discuss in today’s article.

Based on experience, for a change to take place in any market there must be three major forces that come together at the same time. These three forces are: Economic, Social and Technical. If a market or industry sector has these forces in play, then it will change. Let us look at the oil market and see if these forces are present.

Economically? Yes. Falling prices have made many oil reserves uneconomic. Falling prices of other energy sources drives consumers towards them.

Socially? Yes. Climate change issues are affecting the entire world and reducing carbon dioxide production is now a topic of common discussion. The United Nations Framework Convention on Climate Change (UNFCCC) and the Intergovernmental Panel on Climate Change (IPCC) are both very vocal in the need to curb carbon dioxide emissions immediately. Not next year, but now. Today. Yesterday if they could do it.

Technically? Also yes. Energy can be produced as efficiently from the sun and the wind as it can from fossil fuels (coal, oil and gas).

So it seems the forces are aligned. Hence the market will move. Then the question remains, what does this mean for countries that are heavily reliant upon fossil fuels, especially crude oil, for their state revenues? Something needs to change. Business will have to divest and reinvest in order to create new revenue streams.

There is a catch however, a complex economic catch. In countries where oil revenues provide a lot of state revenues, oil production is also very cheap. For example in Russia, oil production cost is around $15 per barrel. It’s about $10 per barrel in Iran and less than $5 per barrel in Saudi Arabia, Iraq and Kuwait. New revenue streams however will come with higher operating costs, high retooling costs (more capital investment) and high human capital retraining costs. Margins will be less. Hence there must be significant increases in revenue by these lower margin activities to cover the revenues lost by a fall in oil demand. It will be difficult.

So with that groundwork laid, I boldly predict that for oil rich states such as Kuwait that once oil demand declines there are three areas that can replace oil revenues. These are:

1. Finance, equity and debt investments, investment yields 2. High value polymer production, taking it beyond low value petrochemicals 3. Aquaculture for high efficiency protein production

These income streams can either occur through private ownership, in which case taxation regimes would be required to provide state revenues. Or the ventures would be state owned and continue to operate much like the oil and gas sector operates now. The later would be a tall order. The economic efficiencies necessary in these new industries will not allow traditional work ethics common with the high margin, easy to produce revenues from crude oil. Therefore state governments will get smaller. The private sector will grow, if it can. Private sector needs three factors in it’s favour to thrive: 1) great infrastructure – transport, communications, access to liquidity; 2) excellent legal systems; 3) low taxes. This is something Dubai has been developing and they appear to be doing well.

Let’s go through each one of these three new revenue options in turn, using Kuwait as an example and the benchmark of $50b – Kuwait’s gross income with crude oil price at $45 per barrel.

1) Finance, Equity and Debt Investments, Investment Yields

Sovereign wealth funds of the Middle East are in an ideal position to expand their operations to replace falling oil revenues. Since 1953, the Kuwait sovereign investment fund has accumulated an estimated $550b in assets. Therefore, quite simply, a 10% yield on investment would replace all present revenues from crude oil.

But can you get such a high yield on so much capital? You can. You can even get more.

Berkshire Hathaway, the very well known investment group established by Warren Buffet in the 1960’s, holds net assets of $484b. Their net revenues have averaged 20% per year for the past 50 years.

This demonstrates that high yields are achievable.

Employing 330,000 people, Berkshire Hathaway presents a viable model for Kuwait moving forward after oil. Raising the level of investment knowledge therefore is an important skill to develop amongst Kuwaitis. The management of such investment could be achieved by creating 100 investment groups each allocated $5b. Each group would be set the target to achieve 20% or more net annual revenues. It would be survival of the fittest. Consolidation, knowledge transfer and then further expansion would increase the performance of the funds and the skills of the investment management teams.

From first hand experience, investment yields greater than 50% are possible when carefully selected and expertly executed.

So the management of money is a viable solution to entirely replace revenues from falling oil demand.

2) High Value Polymer Production, Taking It Beyond Low Value Petrochemicals

Here is a perspective of the use of crude oil in today’s world:

Oil Consumption Breakdown

From Renewable Energy World

The chart shows that 44% of crude oil is consumed as gasoline, 21% as diesel, and 9% as jet fuel. That means that 74% of crude oil is burnt every day, never to return, non-renewable.

Notice that only 2.7% of all production is consumed in the polymer industry – petrochemicals. This is an industry that takes a product with a market value of $0.30 per kg (crude oil), and then, with complex chemical and mechanical processes, produces products that sell for $1, 5, even $17 per kg. This industry is is the petrochemical industry, producing plastics and polymers.

Value adding to crude oil is a straightforward way to increase revenues once you have installed the necessary equipment and have the required numbers of trained personnel.

I have put together the table below to show different polymers with their prices, their world market share and how much of Kuwait’s revenue this would represent.

For example polycarbonate, a transparent, highly impact resistance plastic common in the automotive industry, sells for about $5 per kg.

PTFE, a high tech fluorocarbon polymer sells for about $17.5 per kg.

But the demand for both of these polymers is low compared to crude oil volumes. Even if Kuwait was producing all of the worlds requirements for these two high value polymers, it would not provide any where near the replacement revenue for the State.

Polymer

World Production (million tonnes per year)

Bulk Market Price

($ per kg)

World Market Value

($ billion per year)

% of World Crude Market Value

Profit at 20% Margin

% of Kuwait Income ($45b)

Polyethylene

80

1.7

136

10%

27

60%

Polypropylene

60

1.5

90

7%

18

40%

PVC

43

2.5

108

8%

22

48%

Polyester (PET)

28

2.2

62

5%

12

27%

Polyurethanes

12

2.5

30

2%

6

13%

Acrylonitrile-Butadiene-Styrene (ABS)

7.3

2.5

18

1%

4

8%

Polycarbonate

3.7

5

19

1%

4

8%

PTFE (Teflon)

0.2

17.5

3.5

0.3%

1

2%

Crude Oil (Kuwait)

150

0.30

45

3%

Crude Oil (World)

4,025

0.33

1,328

100%

Prices and quantities are from various years eg 2012, 2013, and 2014 and are indicative only for the purposes of general trends and forecasting for this article. Further details analysis would be necessary to undertake investment level decisions.

When considering what products the petrochemical industry should focus on, the table highlights that advanced polymers are high value but are not high volume. It also highlights the large scale of investment needed to produce a viable revenue source from advanced polymers. Also there is no one single polymer that would replace crude revenues. Instead a mix would be required, determined by market demand, capital expenditure, and feedstock availability.

Let’s consider two countries in the region, Saudi Arabia and Iraq. Saudi Arabia presently produces 75% of all Petrochemicals in the Middle East (and 10% worldwide). In 2013 Saudi petrochemical production was 86.4 million tonnes and the total value was $66.9b. Note that this equates to only $0.77 per kg, so it’s not in high value polymers, but in mid value intermediate polymer feedstock. In Iraq, Shell has just signed a $11b deal with the Iraqi government to build the Basra Nibras complex (operating by 2021). This is a petrochemical facility with a modest 1.8 million tonne per year capacity. Also, it is not making high value polymers, only intermediary polymer feedstock. Further capital investment is required to do higher value adding.

For an exercise, let’s assumed that the profit margin for a basket of high value polymers is 20% and that that basket sells for $2.5 per kg. This includes all capital investment, operations, maintenance and replacement allowance for the equipment (depreciation). Therefore the net profit will be $0.50 per kg. Thus, with 1,000,000 barrels per day of oil (123 million tonnes per year) converted into a high value polymer would yield $26b in net profits per year, or about half of Kuwait state requirements.

So this is possible, though with considerable capital investment and the time to establish it.

3) Aquaculture for High Efficiency Protein Production

What else can these countries do when oil is no longer wanted for burning? Well, it will still remain a low cost source of energy, and that means that other industries can be supported with it. One such industry is aquaculture, the most efficient form of protein conversion of any animal husbandry practice, as the table below highlights:

Feed Conversion Ratios

Animal

Kilograms of Animal Feed to Produce 1 Kg of Animal Meat

Beef

20

Sheep

4

Chicken

2

Fish

1.4

Shrimp

1.1

This is food for thought for oil rich nations with abundance of sunshine, water, and hence cheap energy. Growing fish and shrimp for hungry expanding world markets is a possible viable investment path, especially as the forecasts of collapsing wild fish and shrimp stocks come more frequently into the news.

One of the fastest growing food industries due to it’s high feed conversion ratio is shrimp farming. Iran has increased shrimp production to 8,000 tonnes per year in only about 15 years, and Saudi Arabia is producing about 25,000 tonnes of shrimp per year over a similar time frame.

There are plans for a 9,000 tonne per annum shrimp farm in Iran which will double production from that country and put it on level with Saudi Arabia.

Aquaculture

WorldFishCentre.org

However, growing shrimp is not a replacement for crude oil sales. It’s a supplement.

Here’s why.

The market price for shrimp is around $5 per kg and they cost about $2 per kg to produce. Hence the net margin is $3 per kg.

To produce $1b net profit per year requires 300,000 tonnes of shrimp.

Note that world shrimp production is about 4 million tonnes per year.

About 40,000 Ha is required to produce this much shrimp (if growing white tail vannamei).

The Kuwait land area is 1.782m Ha, so 2.2% of Kuwait’s total area would have to be converted to shrimp ponds.

Incidentally this much land would also produce about 100 GW of electricity if photovoltaic cells where installed. This is the same amount that both China and India are committing to install by the early 2020’s.

So the volume of resources required is large whilst the net return is comparatively low, despite the fact that it is healthy and expanding.

So, there you have it. A stool with three legs provides the greatest stability:

1. Finance 2. Polymers 3. Food

Perhaps fishing and textiles will again be the mainstay for the region in years to come as it was before oil.

Author Deck Mr. Jeremiah Josey is an Australian who has been living in the Middle East for 7 years. Knowledgeable in the energy markets, he is the Chairman and Director of Oil & Gas of Swiss based Meci Group, a business and investment consultancy operating across the Middle East, Central Asia and Russia.

The End of Oil? Oil Pricing for 2015 and the Rise of Solar Energy

I wrote this article for the Al Jarida newspaper and it was published on Saturday 24 January 2015.

It’s a further development of my previous blog on how technology is changing the way the energy market operates and how the oil price may never rise again.

It is published here:

Al Jarida Article 24 Jan 2015 (Go to Page 16)

Al Jarida

The End of Oil? Oil Pricing for 2015 and the Rise of Solar Energy

For oil prices, it’s a possible flat line in my opinion. Sideways. In fact with recent dramatic changes in the cost of energy we may be witnessing the end of oil. If oil stays low for long enough it may never rise again.

Said in June 2000, by Sheikh Zaki Yamani, former Oil Minister of Saudi Arabia (1962–86), “Thirty years from now there will be a huge amount of oil – and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the Oil Age will come to an end not because we have a lack of oil.”

How so? I hear you ask. How have we reached the end of our modern “Stone Age”?

I say yes. Let’s have a look at why.

Economically, world energy has hit and passed a price equilibrium point between two competing mediums: fossil fuels, and solar energy. This means that how we do busy will change. And it will change rapidly now. For instance, mobile phones took out the land line market in a matter of years once mobile phones became cheap and available enough to do so. They were the better option technically and economically.

Energy from fossil fuels has historically been cheap and this enabled the great economic boom of the past 100 years: a population explosion from 1.7 billion people in 1900 to over 7 billion now, and GDP from $2.7 trillion (adjusted) to over $75 Trillion in roughly the same time period (per capita moving from $1,600 adj. to $10,000). The Green revolution (food production). The Technology revolution (computer development). The Connectivity Revolution (mobile phone & internet) and now the Knowledge revolution (P2P and social networking). All fuelled by cheap energy. And now this low cost energy has engineered it’s own replacement: Solar energy.

Looking closely at Illustration 1 below we see these low fossil energy prices. We also see the rise in crude oil prices to between $10 and $20 per mmbtu that caused the oil shocks of the 1970s. Renewable energy, particularly wind and solar, attempted to rise in this time, but their high technology cost was so great that when oil prices dropped again in the mid 1980’s so did interest in alternative means of keeping us warm, cooking our food and illuminating our homes. Just keep burning fossil fuels was the acceptable, economic solution. That is until now. Solar technology costs have plummeted, especially in the last 6 years, coming from an astronomical $220/mmbtu to now being at the same level as Brent crude and LNG at around $15 per mmbtu. And it’s still falling.

Solar Price Falling

As far as economics go, fossil fuel prices are going the wrong way (up) and solar pricing is going the right way (down).

So what is really happening with the tumbling price of oil? Is Saudi Arabia attempting to displace US supply by shutting down high priced tight oil investments? Are there moves afoot to destabilise the Middle Eastern power base by cutting revenues of Iran for their support of the Syrian regime and other related matters? Are there plans to destroy the asset side of the Russian balance sheet and topple their eastern European hegemony?

Yes, it may be all, or some of these things. For now.

But these are still small compared to the impending impact of economics and the immutable power of the sun. I don’t think that solar prices are having any direct effect on oil demand right now, but I believe that very soon they will. We may find that the price of oil does not rise again, or if it does, not for very long before demand falls for the final time. Remember that more than 40% of crude oil consumption is by passenger vehicles and that’s an important fact when considering the low cost of generating power from the sun.

Led by their wallets, consumers will migrate towards solutions that are supported by lower cost energy and they will seek them out as manufactures support their demands. So it’s just a matter of availability of options. And what is the option for reducing energy costs: locally generated electricity for domestic consumption and electric vehicles or EVs for transport. EVs are 90 percent cheaper to fuel and maintain than gasoline cars (Rocky Mountain Institute).

Those options appear to ready now. Today, EVs can be purchased from many of the major vehicle manufactures from around the world. For instance BMW, Chevrolet, Citroen, Fiat, Ford, General Motors, Honda, Kia, Mahindra, Mercedes Benz, Mitsubishi, Nissan, Renault and Tesla to name a few. In fact BMW are expected to phase out internal combustion engines within 10 years (Baron Funds, September 14, 2014). So that means within the very close and near future, almost half of the demand for crude oil will evaporate. The Sheik’s prediction will come true. And about the image of electric cars, in 2013 the fully electric Tesla Model S won the Car of the Year (Motor Trend) for all car types, not just EVs, and was quoted as being the best car ever tested. Ever!

What continues to drive down the cost of solar energy is mega solar projects and continued large scale PV installations. For example the Indian government has made its intentions clear to have 100 GW of installed generating capacity by 2022 and China are planning 100 GW by 2020. That’s the equivalent of 200 nuclear power stations. And pricing will be around $0.06 per kWh – on a par when levelled with present energy costs (nuclear, coal & LNG).

Is the fall in oil price here to stay. Perhaps not just yet. It depends the uptake of EVs, and that is a matter of their availability. But soon low oil prices will be here to stay.

Our choice in this energy shift is to be leaders or let others lead.

Author Deck

Mr. Jeremiah Josey is an Australian who has been living in the Middle East for 7 years. Knowledgeable in the technology and energy markets, he is the Chairman of Swiss based Meci Group, a business and investment consultancy that operates across the Middle East, Central Asia and Russia.

See www.JeremiahJosey.com and www.Meci-Group.com for more.