* Statoil says appraisal well at Aldous Major South successful

  * Some analysts upgrade find's size after news

  * N.Sea find could be 3rd biggest ever made off Norway (Adds analysts, detail, updates shares)

  By Gwladys Fouche and Henrik Stolen

  OSLO, Oct 18 (Reuters) - Norway's Statoil said a major oil find, described as a " giant" by a partner last month and seen as giving new life to fading North Sea output, was significant and it would aim to give a more precise estimate of the size within a couple of weeks.

  Statoil said that an appraisal well in its Aldous Major South structure showed a " significant" amount of oil.

  The discovery has revived prospects for the North Sea, a mature oil region largely written off by the oil majors as a promising area for new exploration.

  Oil minnow Lundin Petroleum said last month that Avaldsnes/Aldous Major South, which could already be the biggest oil find made so far this year, may hold 1.2 billion to 2.6 billion barrels of oil equivalent (boe).

  At 2.6 billion barrels, it would be the third-largest made on the Norwegian shelf, surpassed only by the Statfjord and Ekofisk fields which kicked off Norway's oil era in the 1970s, each field with more than 3 billion barrels.

  Statoil, one of Lundin's partners in the find, declined at the time to confirm the Swedish company's estimates, saying that it had to make more analysis of its own.

  So far, Statoil believes Aldous Major South on its own may hold between 400 million and 800 million boe. On Tuesday it said the appraisal well at Aldous Major South was promising.

  " Discoveries are always positive, and this is a significant oil column," Statoil spokesman Ola Anders Skauby told Reuters, adding that the company hoped to have a volume estimate for the find within " a couple of weeks" .

  The firm said that an appraisal well drilled at the site proved an oil column of 50-55 metres (164-180 feet).

  Some analysts upgraded their estimates of the discovery's reserves after the news.

  " Based on today's announcement from Statoil, we have increased our mid-point volume for Aldous (Major South) from 600 million barrels to 850 million barrels," DnB NOR markets analyst Espen Hennie wrote in a note to clients.

  Hennie now estimates Aldous could contain as much as 1,400 million barrels. " We think the risk is predominantly skewed to the upside relative to the current market expectations," he wrote.

  Another analyst, who did not provide updated figures, said the find could be even bigger than thought.

  " It looks like the volumes will be in the higher end of the range Statoil provided, and maybe over," said Teodor Sveen Nilsen, an analyst at First Securities.

  " It certainly confirms that there is a lot of oil there," he said.

  Statoil shares were trading 0.44 percent higher at 1216 GMT on an Oslo bourse whose main index was down 0.3 percent.

  Shares in Det norske , which has a stake in Aldous Major South, were up 7.5 percent while Lundin shares were up 5.3 percent.

 

  NEW LIFE IN MATURE OIL REGION

  Avaldsnes, which is connected to Aldous Major South even though it lies in a different production licence, is estimated to hold between 800 million and 1.8 billion boe, according to Lundin, up from 100 million to 400 million it previously saw.

  By comparison, Buzzard, Britain's largest oilfield which feeds into the benchmark UK Forties crude oil production stream, was found 10 years ago with reserves of around 500 million boe.

  The biggest new UK oilfield now in the news, which BP has just announced it will be developing off the west of Shetland, is the 640 million-barrel Clair Ridge oilfield.

  On average over the last 10 years, new oilfields discovered in the UK sector of the North Sea have contained only around 20 million barrels.

  Avaldsnes/Aldous Major South could make up a fifth of Norway's oil supply from 2020, rising to over half by 2027, consultancy Wood Mackenzie said earlier this month.

  Lundin expects production to start in 2017 while Statoil believes it will more likely be in 2017-2018. .

  The Norwegian Petroleum Directorate (NPD), which manages Norway's oil and gas resources, has been more cautious, however, suggesting it could be in 2018-2019 before the field can produce.

  The NPD, like Statoil, has not confirmed Lundin's numbers as it carries out more analysis on the size of the find, although it does believe that the find is undoubtedly large.

  It expects to book the discovery in Norway's overall resource estimates early next year.

  Norway is the world's eighth-largest oil exporter and the second largest for gas. Oil production peaked in 2001 and has fallen since. In 2010 the Nordic country produced 1.8 million barrels per day.

  Lundin is the operator of Avaldsnes with a 40 percent interest. Statoil has a 40 percent interest, and Maersk Oil, a unit of Danish shipping giant Maersk < MAERSKb.CO> , has a 20 percent interest.

  Statoil is the operator of Aldous Major South and has a 40 percent stake. The other partners are Det norske oljeselskap with 20 percent, Lundin with 10 percent and Norwegian state-owned firm Petoro with 30 percent. (Editing by William Hardy)

WASHINGTON, Oct 18 (Reuters) - Small U.S. businesses still face a very tough economy and are experiencing more challenges than larger businesses after the recession, Treasury Secretary Timothy Geithner said on Tuesday.

  " Small businesses are more concentrated in construction and retail, industries that were at the epicenter of the crisis and have not returned to pre-recession levels," Geithner said in prepared remarks to the Senate Small Business Committee.

  Citing a lack of demand and poor sales as the biggest hurdles for small businesses, Geithner tried to convince lawmakers that the Obama administration's $447 billion jobs program would help struggling firms hire, invest and expand.

  The administration's jobs proposal would extend the employee payroll tax holiday.

  Geithner urged Congress to support specific provisions in the proposal. Senate Republicans have already blocked the overall bill, forcing the administration and Senate Democrats to consider pushing parts of the bill through Congress. (Reporting by Rachelle Younglai Editing by Neil Stempleman)

By Peter Apps, Political Risk Correspondent

  WASHINGTON (Reuters) - Four months ago, Admiral William McRaven commanded the operation that killed Osama bin Laden. Now, as the new head of U.S. special forces, he argues that his shadowy, secretive warriors are increasingly central to how America and its allies fight.

  When the suntanned, towering SEAL testified to the Congressional House Armed Services Committee in September, just a few weeks after he took over his new role, he used posters detailing the growth of his forces. In the decade since September 11 2001, U.S. Special Operations Command personnel numbers have doubled, its budget tripled and deployments quadrupled.

  The Bin Laden takedown is simply the tip of an iceberg of fast-growing, largely hidden action by the United States and its allies. Those with knowledge of such operations say this changing state of warfare could spark a range of unintended consequences, from jeopardizing diplomatic relationships to unwanted, wider wars.

  That's not entirely new. Secret wars against communism in Southeast Asia in the 1960s helped spawn larger conventional conflicts. In the 1980s, the " Iran-Contra" arms-for-weapons scandal embarrassed the Reagan administration, while support for Islamist guerrillas fighting Russian occupation in Afghanistan helped produce Bin Laden and Al Qaeda.

  And it's not just western powers. Just last week, the United States accused Iran of a plot to kill the Saudi ambassador.

  The appeal of such tactics is clear. Military operations are far more politically palatable if you keep dead bodies off TV screens. A computer worm planted in Iran's nuclear program, secret help to rebels in Libya, drone strikes to cripple Al Qaeda -- all can achieve the desired effect without massive publicity.

  In an era of budget cuts, they are also cheap -- particularly compared with the cost of maintaining and deploying a large conventional military force. McRaven said his 58,000 operatives cost a mere 1.6 percent of the Pentagon's predicted 2012 budget.

  " Put simply, (they) provide a tremendous return on the nation's investment," McRaven told the unclassified portion of the Congressional hearing. " The special operations forces have never been more valuable to our nation and allies around the world than they are today, and that demand will not diminish for the foreseeable future."

  MORE WARS, FEWER PEOPLE?

  The CIA has long retained its own, much smaller band of paramilitary operatives, sometimes operating with military special forces. Their numbers have also risen sharply in recent years to hundreds or even thousands, security experts say. Under its new director, General David Petraeus, the agency is expected to further increase such deniable operations as assassination and sabotage.

  Britain, Israel and others are also believed to have renewed their focus on specialist, hidden techniques, and are ploughing resources into emerging fields such as cyber warfare.

  As the Iraqi and Afghan campaigns ramp down, Pakistan, Yemen, Somalia, the Philippines and Mexico are all touted by security and intelligence experts as potential theatres for new operations. U.S. special forces are now deployed in some 75 countries, where their missions range from training to assassinations. Yet even some supporters of the new tactics worry about the lack of public discussion.

  " We may find ourselves fighting more wars with fewer people," says John Nagl, a former U.S. Army officer who wrote its counterinsurgency manual and now heads the Centre for New American Security, a think tank. " That raises some interesting questions -- like whether we have the right to do that. There is much less public debate. Society doesn't pay the cost and so doesn't ask the questions."

  A MODERN WAY OF WAR

  Quietly, this approach is already redefining how conflicts are waged. Conventional troop surges might have dominated coverage of Iraq and Afghanistan, but behind the scenes the generals were heavily dependent on secret, special operations. Intelligence operators, remote-controlled drones and troops from the SEALS, Delta Force, Britain's SAS and other forces fought hidden campaigns against insurgent leaders and bomb makers, working with local communities to turn conflicts against Al Qaeda, the Taliban and their allies.

  " There has been a real renewed focus on special operations and clandestine services," says Fred Burton, a former U.S. counterterrorism agent and now vice president for strategic intelligence firm Stratfor. " They were always there, of course, but they had become somewhat sidelined. That's definitely changed now."

  To an extent, the shift is down to technology. This provides some entirely new weaponry -- such as the cybermunition Stuxnet, which caused Iranian nuclear centrifuges to rip themselves apart. It also allows force to be more targeted.

  " You change your ability to integrate information, which in many ways is at least as important as collection," says Anthony Cordesman, a former senior U.S. intelligence official now at the Centre for Strategic and International Studies. " You have collation of information almost in real time. You can pull together the information and find the target."

  That is already changing the shape of western militaries. A drone can be flown remotely by just one pilot, but it takes around 20 analysts to interpret and assess the data it collects. This in turn produces a much larger array of potential targets. In Afghanistan alone last year, McRaven says his forces conducted some 2,000 raids against identified high-value adversaries.

  LIKE LAWRENCE IN ARABIA

  To work with tribal groups and win their loyalty, language skills and cultural awareness are essential. Special forces helped shape both the " Sunni awakening," which swept Al Qaeda and its allies from much of Iraq, and the more recent rebel victory in Libya. McRaven said he believed the Afghan " village program," working with local communities and police, might prove his forces' most important contribution to that war.

  The need for such skills is not new, of course. McRaven demands all his officers and NCOs learn a second language. Others in the field read ancient histories or the writings of idiosyncratic English archaeologist T.E. Lawrence, better known as " Lawrence of Arabia."

  Often dressed as a local Bedouin, Lawrence worked with Arab rebels against Turkish forces during World War One, selecting the leaders he felt had the best chance of success and supplying them with arms and tactical advice. It was better and more sustainable, he believed, that local forces do the job than for outsiders to do it for them.

  " What you need is people who can put themselves in harm's way, understand the different cultures and think fast enough to be able to adapt to events," says retired Lieutenant-General Graeme Lamb, a former director of Britain's special forces. " We don't have a huge number of these people, but... there are enough out there who have read Lawrence, dealt with people like Sunni insurgents and are comfortable in that kind of environment."

  THIS OR THE 101ST AIRBORNE?

  But some argue the most important force driving the new tactics is an almost visceral objection to more conventional warfare in the wake of the Iraq conflict, and Israel's wars in Lebanon and Gaza.

  " It's almost always a matter of political will," says Nigel Inkster, a former deputy chief of Britain's Secret Intelligence Service (MI6). " The new technologies do give you some new options, but broadly these capabilities have always existed. The question is whether you choose to take the more covert route or send in the 101st Airborne."

  Cash flow is also key. Those with knowledge of western strategy towards Libya say it was driven more by what could not be done than what could. A wider military intervention was politically impossible and financially unaffordable, yet politicians demanded something be done.

  Some of the most successful strategies were not conventional. British officials say the secret " oil cell" that helped starve Muammar Gaddafi of fuel supplies was key to rebel victory, yet involved the use of little or no military force.

  Besides straining budgets, the global financial crisis has also made great powers more reluctant to risk the economic shock of serious conflict. One reason Stuxnet was such an appealing tool, security experts say, is that it carried less risk of Iranian military retaliation against shipping in the Gulf. That would have sent oil prices soaring.

  A senior Israeli official has said cyber warfare offers a less politically dangerous option for nations in a media-saturated age. Israel suffered widespread international scrutiny and frequent condemnation for its wars in Lebanon and Gaza.

  " War is ugly, awfully ugly," Israel's Deputy Prime Minister Dan Meridor -- who overseas spy services and nuclear affairs -- told diplomats and journalists at the Jerusalem Centre for Public Affairs in February. " War is all the time on television... people see this and can't take it... Because it is difficult, one looks for other ways. One of these ways is the intelligence community ... are trying to do things that don't look that ugly, don't kill people."

  RISK OF BLOWBACK?

  But the secret campaign against Iran's nuclear program has not been entirely bloodless. Sabotage might be relatively clean, but Israel's Mossad is also suspected of being behind the killings of several of Tehran's nuclear scientists.

  With so much now taking place behind the scenes, a handful of critics is expressing concern that there is simply far too little scrutiny.

  " The implications are vast," says Patricia De Gennaro, a counterinsurgency expert and professor at New York University who has worked with U.S. forces in the Middle East. " There is no accountability. People have been basically brainwashed, with the help of the media and others in the Beltway, into believing we don't have a right to know what their military is doing."

  In an era that may see heightened state-to-state rivalry -- not least between older western powers and increasingly assertive emerging states such as China -- any operations that go awry could heighten tensions further.

  The information revolution may also be making it harder to keep operations secret. The Bin Laden raid was reported by a local resident on Twitter within minutes of the helicopters touching down.

  It would be a delusion to see covert operations as a simple solution to global problems. " This comes in cycles," says Cordesman.

  " There is a tendency to grossly exaggerate success and underestimate the cost... These things are never under control, not even in a democracy. Nothing you ever do with violence is going to be clean or simple. But sometimes you just have to look at the options, look at the consequences of not acting, and then do it."

  (Edited by Sara Ledwith and Simon Robinson)

* China Q3 GDP slows to 9.1 pct slightly lower than expected

  * Freeport's Grasberg resumes production at reduced rate (Updates prices after U.S. data)

  By Susan Thomas

  LONDON, Oct 18 (Reuters) - Copper fell on Tuesday after top metals consumer China's economic growth data came in a touch lower than expected and on concerns about its biggest trading partner Europe's festering debt problems.

  Strikes at two Freeport-McMoran Copper & Gold mines, including one of the world's largest copper mines in Indonesia, lent little support.

  China's economy grew 9.1 percent in the third quarter, its weakest pace since early 2009, just below market forecasts. Its steel and power output also fell, a further sign that economic problems in the West, and Beijing's year-long monetary tightening campaign, have begun to pinch.

  " The comment from Germany put metals on the defensive, and overnight the market was disappointed by the Chinese numbers. Although they weren't far away from forecasts, it hasn't helped," BNP Paribas analyst Stephen Briggs said.

  Germany warned on Monday a summit of EU leaders next Sunday would not produce a miracle cure for the euro zone's sovereign debt crisis, quashing expectations of a breakthrough.

  Compounding Europe's problems, German investor morale dropped to its weakest in nearly three years in October.

  The euro fell and the dollar rose against a basket of currencies. A stronger dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies.

  The comments and data highlight the risks Beijing faces if trading partner Europe does not resolve its problems, and the particular vulnerability of base metals, used widely in construction and industry, to global economic growth.

  " Base metals are far more geared towards economic growth than other commodity sectors. In good years they increase much more strongly and when the economy is poor physical demand declines dramatically," Briggs said.

  Three-month copper on the London Metal Exchange traded at $7,3 34.75 a tonne at 13 12 GMT, down more than 2 percent from $7,495 at the close on Monday , but cutting earlier losses.

  " Slowing growth in China has given the bears new reasons to roar this morning," RBC said in a note. " China's economy grew 9.1 percent in Q3 from a year earlier which has sparked concerns that Europe's debt crisis is dragging on the global economy."

  UBS economist Wang Tao said China's growth was bound to slow further as export growth could fall to as low as single-digit increases by 2012.

 

 

  POOR FUNDAMENTALS

  U.S. data showed producer prices rose more than expected in September to record their largest increase in five months.

  Zinc fell to its lowest in around two weeks and traded at $1,867 per tonne from $1,903 at the close on Monday. The metal, used to galvanize steel, is perceived to have the poorest fundamentals among base metals.

  Recent data from the International Lead and Zinc Study data shows the global refined zinc market will have a 317,000 tonne surplus this year and 135,000 tonnes surplus next year.

  " The market seems pretty short right now, I think that's why we had the run-up in the last few days," a trader at the LME said. " The market was running a bit too short so we've had a few people stopping out."

  Short selling is a common way for hedge funds and other investors to bet on falling commodities or shares prices.

  The trader added that the uncertainty over Europe was weighing heavily on the base metals market. Those worries neutralised any boost to copper prices from supply disruptions.

  Freeport resumed producing at a reduced rate on Tuesday, after halting output on Monday, but it said it is looking at a long-term shutdown of its Grasberg mine in Indonesia to safeguard multi-billion dollar assets as it struggles with labour disruptions.

  In Peru, workers at Freeport's mine launched a hunger strike on Monday, hoping to pressure the government to resolve a labour dispute 19 days into a walkout at the Cerro Verde copper mine.

  Aluminium traded at $2,199.50 a tonne from a close of $2,217, lead was $1,933 per tonne from $1,986, nickel was $18,750 per tonne from $18,995. Tin traded at $20,651 per tonne from $21,495 at Monday's close. Metal Prices at 1314 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2010 Ytd Pct

  move COMEX Cu 331.30 -6.20 -1.84 444.70 -25.50 LME Alum 2199.00 -18.00 -0.81 2470.00 -10.97 LME Cu 7331.00 -164.00 -2.19 9600.00 -23.64 LME Lead 1934.25 -51.75 -2.61 2550.00 -24.15 LME Nickel 18753.00 -242.00 -1.27 24750.00 -24.23 LME Tin 20700.00 -795.00 -3.70 26900.00 -23.05 LME Zinc 1865.25 -37.75 -1.98 2454.00 -23.99 SHFE Alu 16355.00 -220.00 -1.33 16840.00 -2.88 SHFE Cu* 53680.00 -2150.00 -3.85 71850.00 -25.29 SHFE Zin 14515.00 -745.00 -4.88 19475.00 -25.47 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Additional reporting by Carrie Ho in Shanghai editing by Keiron Henderson)

* China Q3 GDP up 9.1 pct vs. forecast of 9.2 pct

  * Moody's warns France of possible negative outlook

  * German comments on euro zone debt continue to weigh

  * Coming Up: U.S. API petroleum stocks 2030 GMT

  By Philip Baillie

  LONDON, Oct 18 (Reuters) - Brent crude futures pared earlier losses but remained under $110 a barrel on Tuesday, after weaker Chinese economic data prompted concern about future demand from the world's second-largest oil consumer and as Moody's warned France of a negative outlook.

  China's annual economic growth eased to 9.1 percent in the third quarter from 9.5 percent in the previous quarter and below forecasts of 9.2 percent as tight domestic monetary policy and easing foreign demand crimped activity.

  Reuters calculations suggest implied oil demand in China rose just 1 percent in September from a year earlier to about 8.9 million barrels per day, its slowest rate of growth so far this year.

  " The focus is on China, GDP was slightly lower than expected and the oil-specific numbers were very disappointing," Olivier Jakob from Petromatrix said.

  Trouble in the euro zone showed no signs of let-up with France insisting its triple-A credit rating was safe despite a warning shot from ratings agency Moody's but it acknowledged growth would probably miss its target.

  Brent crude < LCOc1> fell by 58 cents to $109.58 a barrel by 1319 GMT, having plumbed lows under $108.62 a barrel earlier.

  U.S. crude < CLc1> pared back losses to trade 33 cents firmer at $86.77 a barrel after government data showed September U.S. producer prices rose at their fastest pace in five months as gasoline prices rose. The futures' front-month November contract expires tomorrow.

  Euro zone leaders offered a glimmer of hope on Tuesday as officials said they were likely to agree to leverage their bailout fund at a summit on Sunday by allowing it to guarantee a portion of newly issued euro zone debt.

  " I think the market overreacted last week but now because the Germans said we haven't got a solution, people are beginning to reconsider their optimism and so we are looking to see prices fall," said Roy Jordan of Facts Energy Global.

 

  Brent settled $2.07 lower on Monday after Germany's finance minister said the European Union summit would not produce a quick fix to the euro zone debt crisis.

  Wolfgang Schaeuble's comments that a definitive solution to the euro zone crisis might not be reached at the summit on Oct. 23 continued to weigh on sentiment, sending European stocks and commodities lower on Tuesday.

  Brent could fall to $108.81, while U.S. crude may have peaked at the previous session's high of $88.18, and a short-term downtrend may develop, according to Reuters market analyst Wang Tao.

 

  INVENTORIES

  All eyes remain on the weekly inventory data from industry body the American Petroleum Institute (API) due later today.

  A Reuters poll forecasts a 1.9 million barrel increase in U.S. commercial domestic crude stocks due to a drop in refinery utilization rates and a rebound in imports.

  " Crude supplies are expected to show a significant build as a result of an anticipated additional rebound in imports back to around 9.2 million to 9.3 million barrels per day," said Jim Ritterbusch, president of Ritterbusch & Associates.

  Distillate stocks were projected down 1.4 million barrels and gasoline supplies were seen down 900,000 barrels, while refinery utilization was likely to be off 0.2 percentage point, the poll showed. (Additional reporting by Zaida Espana in London and Francis Kan in Singapore editing by Keiron Henderson)

* Q3 loss 84 cents/share vs Street view loss 16 cents

  * Results hurt by decline in asset value, confidence

  * Stock up 2.4 pct in early trading (Adds details about business line results)

  By Lauren Tara LaCapra

  Oct 18 (Reuters) - Goldman Sachs Group Inc lost $428 million in the third quarter, only its second quarterly loss as a public company, as its investment portfolio tanked and trading revenue fell.

  The results underscore how investment banks can face headaches from their assets even as regulators clamp down on risk-taking.

  Goldman, the largest U.S. investment bank by assets, signaled that it is taking steps to cut costs, including employee pay, for the benefit of shareholders. Its shares rose 2.4 percent in early trading to $99.23.

  In a statement, Chief Executive Lloyd Blankfein blamed the loss on difficult market conditions and a lack of confidence among investors and corporate clients.

  " Our results were significantly impacted by the environment and we were disappointed to record a loss in the quarter," Blankfein said.

  The loss amounted to 84 cents per share, much deeper than the loss of 16 cents expected, on average, by analysts.

  Since going public in 1999, the only other quarter in which Goldman was in the red was a $1.6 billion loss in the fourth quarter of 2008, after the demise of Lehman Brothers.

  The bank's third-quarter net revenue totaled $3.6 billion, down 60 percent from a year earlier -- its sixth consecutive year-over-year revenue decline. Wall Street has struggled with new regulations and choppy markets.

  As profitability shrinks in the industry -- Goldman generated a return on equity of just 6 percent for the first three quarters of 2011, even ignoring a special charge -- the bank is cutting costs. It cut its workforce by 4 percent during the quarter, helping to lower compensation costs by 59 percent.

  During the pre-crisis era, Goldman could generate a return on equity of more than 30 percent per quarter.

  Although revenue declined in some of Goldman's core banking and trading businesses, the main source of losses was its Investing & Lending division, which uses the firm's own capital to make long-term investments.

  Revenue from that division has fluctuated wildly since Goldman restructured into different business segments at the start of 2011.

  The division reported negative revenue of $2.48 billion for the third quarter as asset values dropped sharply. Goldman's stock investment in Industrial and Commercial Bank of China Ltd alone generated more than $1 billion of paper losses.

  The U.S. financial reform law known as Dodd-Frank features a provision called the Volcker Rule, which is meant to limit banks' betting with their own money. Regulators last week released a draft of the rule. which focuses on short-term trading.

  Big declines in Goldman's bond-trading and underwriting revenue also weighed on results, more than offsetting gains from equity sales and trading and its advisory business.

  Goldman's fixed income, currency and commodities client trading business -- once a key profit driver for the bank -- reported $1.73 billion in revenue, a 36 percent decline from a year earlier.

  Equities sales and trading is now a larger slice of Goldman's revenue pie, as higher trading volumes led to bigger commissions. That business reported $2.3 billion in revenue, up 18 percent.

  The bank's underwriting business suffered as clients held back on issuing new securities into volatile markets. Underwriting revenue dropped 61 percent to $258 million, while advisory revenue rose 5 percent to $523 million.

  In the year-earlier third quarter Goldman posted a profit of $2.98 per share. (Reporting by Lauren Tara LaCapra in New York editing by Dan Wilchins and John Wallace)

BEIJING, Oct 16 (Reuters) - India is playing with fire by agreeing to explore for oil with Vietnam in the disputed South China Sea, a major Chinese newspaper said on Sunday, advising the Indian company to reconsider and pull out.

  India's state-run explorer Oil and Natural Gas Corp said on Wednesday its overseas investment arm had signed a three-year deal with PetroVietnam for developing long-term cooperation in the oil sector.

  The news came as China and Vietnam signed an agreement seeking to contain a dispute over the South China Sea that has stoked tensions between the two Communist-ruled neighbours divided by a history of mistrust.

  The China Energy News, published by Communist Party mouthpiece the People's Daily, said cooperation between India and Vietnam in these seas was a bad idea.

  " India's energy strategy is slipping into an extremely dangerous whirlpool," it said in a front page commentary.

  Both China and India have huge energy needs, which had led them to compete in some parts of the world and cooperate in others, it said.

  " But oil companies must have a bottom line, which is to follow international law and respect the structure of international relations," the newspaper added.

  " On the question of cooperation with Vietnam, the bottom line for Indian companies is that they must not enter into the disputed waters of the South China Sea," it said.

  " Challenging the core interests of a large, rising country for unknown oil at the bottom of the sea will not only lead to a crushing defeat for the Indian oil company, but will most likely seriously harm India's whole energy security and interrupt its economic development.

  " Indian oil company policy makers should consider the interests of their own country, and turn around at the soonest opportunity and leave the South China Sea," it said.

  The pact between ONGC Videsh and Vietnam's oil and gas agency covers new investments and strengthening presence from drilling-to-dispensing in Vietnam, India, and other countries, ONGC said.

  ONGC Videsh, along with TNK-BP and PetroVietnam, has a stake in a gas field in the Nam Con Son basin, off Vietnam's south coast. In 2006, Vietnam had awarded two exploration blocks -- 127 and 128 -- in Phu Kanh basin to ONGC Videsh.

  Vietnam and China -- as well as the Philippines, Brunei, Malaysia and Taiwan -- stake conflicting claims over parts of the South China Sea, a potentially oil and gas rich body of water spanned by key shipping lanes.

  Last month, China's top official newspaper warned that a joint energy project between India and Vietnam in the sea infringed China's territorial claims.

  In May and June, Vietnam accused Chinese vessels of harassing Vietnamese ships within Vietnam's exclusive economic zone. China denied its ships had done anything wrong.

  Businessmen and diplomats say China has pressured foreign firms in deals with Vietnam not to develop oil blocks in the sea.

  China and Vietnam have agreed to strengthen military cooperation, increase contacts between high-ranking officers and establish a hotline for the two defence ministries in a bid to cool tensions, Xinhua news agency said on Saturday. (Reporting by Ben Blanchard and Sally Huang, Editing by Don Durfee)

By Jennifer Ablan

  NEW YORK, Oct 15 (Reuters) - Bill Gross, manager of the world's largest bond fund, apologized to his investors late Friday for his poor performance, saying " I'm just having a bad year."

  In a Special Edition letter posted on PIMCO's website, Gross, who runs the $242 billion PIMCO Total Return portfolio, wrote that he underestimated the contagion effect from the Europe debt crisis and the U.S. debt ceiling debacle.

  " As Europe's crisis and the U.S. debt ceiling debacle turned developed economies towards a potential recession, the Total Return Fund had too little risk off and too much risk on," said Gross, who also shares the title of co-chief investment officer at Pacific Investment Management Co. with Mohamed El-Erian.

  Gross, known as the " bond king" , came under heavy criticism earlier this year when he bet heavily against U.S. Treasuries which have turned out to be one of the biggest outperformers of 2011.

  His fund's poor performance led Gross to simply call his open letter to investors, " Mea Culpa."

  It is up only 1.06 percent year to date versus the benchmark BarCap U.S. Aggregate Index which is up 3.99 percent.

  Gross, who helps manage more than $1.2 trillion at PIMCO, said late Friday the Total Return fund had positions in German bonds and Canadian Treasuries to counter the U.S. underweight position, " but not enough."

  He added that minor percentages of emerging market corporate and sovereign debt, effectively denominated in their local non-dollar currencies, did not perform well either.

  " The simple fact is that the portfolio at midyear was positioned for what we call a " New Normal" developed world economy - 2.0 percent real growth and 2 percent inflation," Gross said.

  That's all changed, of course. Gross said PIMCO's internal growth forecast for developed economies " is now zero percent over the coming several quarters and the portfolio more accurately reflects this posture."

  Last week, Reuters reported that Gross ramped up buying of mortgage-backed securities in September, albeit by using leverage, on the likelihood the Federal Reserve's reinvestment program in those securities will boost prices significantly.

  Gross increased mortgage debt to 38 percent of assets in September, from 32 percent in August, as the U.S. central bank announced last month that it " will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities."

  His move into mortgage-backed securities also comes as the PIMCO Total Return fund's cash equivalents and money-market securities fell to negative 19 percent September, from negative 9.0 percent in August.

  In having a so-called negative position in cash equivalents and money-market securities, it is an indication of using derivatives and short-term securities as collateral in order to boost the fund's buying power with leverage.

  Gross' move to seek more yield by putting more money into mortgage bonds is yet another bold bet which many will be watching after Gross's call on Treasuries cost his fund's performance. In doing so, he is effectively extending the average duration of his fund's investments, making them potentially more exposed to a rise interest rates.

  Clearly, Gross is betting interest rates will remain low for some time as the world economy continues to struggle.

  In his " mea culpa" letter, Gross resorted to baseball analogies and metaphors. He closed his letter by saying: " This is big league ball, where your ticket holders come to the park expecting not a circus-Willie Mays-catch but more wins than losses and a year-end performance that places your bond assets near the top of the standings."

  He added, " Baseball metaphors aside, we know why PIMCO Total Return is arguably the largest and hopefully the greatest bond fund in the world."

PARIS, Oct 15 (Reuters) - U.S. economic growth has gained some strength but remains too slow and would benefit from passage of a job creation bill that congressional Republicans have blocked, Treasury Secretary Timothy Geithner said on Saturday.

  Geithner, speaking at the conclusion of a Group of 20 meeting that focused on Europe's debt crisis, was lobbying for a last-ditch effort by Democrats to win passage of at least parts of a $447-billion jobs bill.

  The bill was blocked by Senate Republicans last Tuesday but President Barack Obama wants Congress to begin voting next week piece by piece on the proposals.

  Geithner told a news conference that U.S. growth was " somewhat stronger" in the second half than earlier in the year when he said a hard political fight over raising the debt limit had sapped business and consumer confidence.

  He added that Europe's debt crisis -- which G20 members are still struggling to get under control -- had also hurt U.S. growth and was slowing a recovery.

  " For these reasons, we have proposed in the United States a very substantial package of actions to strengthen growth and job creation, tied to reforms that would reduce our fiscal deficits to a sustainable position over the medium term," Geithner said.

  In Washington on Saturday, Obama used a weekly radio address to paint Republicans as obstructionists impeding his drive to revive a slow-growing economy and lower high unemployment.

  Geithner repeated that China could help restore faster global growth by letting its yuan currency rise faster but said he had not seen comments made by China's Premier Wen Jiabao earlier who said China's exchange rate would remain steady to protect its exporters.

  He suggested it would be in China's own interest to allow more rapid appreciation, which would tamp down inflation while helping the global economy to reach more balanced growth.

  " It's in the interests of the global economy for China to let the exchange rate appreciate more rapidly and more broadly in response to the upward pressure on the currency you are seeing now," Geithner said. (Reporting by Glenn Somerville and Abhijit Neogy, editing by Mike Peacock)

WASHINGTON, Oct 15 (Reuters) - Businessman Herman Cain, rising in national polls, raised $2.8 million in the third quarter to finance his run for the 2012 Republican presidential nomination, far shy of his main rivals but an increase over his earlier fundraising efforts, his campaign said on Saturday.

  Cain, a former CEO of Godfather's Pizza who has never held elective office, raised an additional $2 million after the reporting period ended on Sept. 30, his campaign said. His campaign also reported $1.33 million cash on hand and no debt.

  He entered the race as a long-shot but has picked up momentum in recent weeks, winning the Sept. 24 Florida straw poll -- a test of strength of the Republican candidates -- and gaining news media coverage for his tax reform proposals.

  Cain placed first in an NBC-Wall Street Journal poll among Republican candidates and second in a Reuters Ipsos poll this week.

  His fundraising totals in the third quarter were far behind Texas Governor Rick Perry's $17 million and former Massachusetts Governor Mitt Romney's $14 million.

  Cain had raised $2 million in the second quarter, among the lowest of the major Republican presidential aspirants.

  " Mr. Cain's message is spreading and attracting supporters all across the country," Mark Block, Chief Operating Officer for Friends of Herman Cain Inc., said in a statement.

  Cain's signature " 9-9-9" tax proposal would create a flat 9 percent income, corporate and national sales tax rate.

  His supporters, including Republicans aligned with the conservative Tea Party movement, support the plan for its commitment to lower taxes. Critics say the plan would benefit wealthy taxpayers at the expense of middle- and lower-income Americans.

  In another development, former Utah Governor Jon Huntsman's campaign reported having about $327,000 in cash on hand at the end of the third quarter, raising questions about his long-term viability in his long-shot run for the Republican nomination.

  Huntsman, who served as U.S. ambassador to China under President Barack Obama before entering the race, has lent himself $2.24 million so far in his bid for the nomination. (Reporting by Eric Johnson and Kim Dixon Editing by Will Dunham)