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August 31st, 2007

Europe thinks about raising the drawbridge

Russia has reacted in predictably robust manner to the FT’s story about how the European Commission is mulling over a range of ideas for keeping Gazprom and other non-EU companies from taking control of strategic energy assets.

The Commission’s ideas, set out in a confidential working paper seen by the FT’s sister paper FT Deutschland, do not have a tremendous ring of conviction to them: the agenda in Brussels is still set by competitiveness, not security. The point of the paper seems to be to find ways for for the Commission to secure its flank against criticism that it is endangering energy security, while its main thrust is still aimed at promoting competition by "unbundling" the national energy champions.

The threat of demanding reciprocity from companies seeking to buy strategic energy assets is a familiar one. As the old joke has it, everyone thinks that everyone else has to show reciprocity, but they never want it for themselves. But using the principle as a way to keep out the Russians may not be easy. In spite of the high-profile cautionary stories such as Sakhalin 2 and Kovykta, not every western company finds it is being pushed back in Russia. Not in the electricity industry, certainly: just ask Enel.

All the same, there is no doubt that since the Ukraine gas crisis 18 months ago, Europe has viewed Russia  in a very different light. If Gazprom tries to buy Centrica or RWE, you can bet some way will be found to block it.

May 11th, 2007

The high price of clean coal

Clean coal technology, in which the carbon dioxide produced by burning the black stuff is captured and stored, is being heavily promoted as an answer to global warming by many in the power and coal mining industries. As part of its forthcoming energy white paper, the UK government will hand out subsidies to a handful of clean coal projects around the country, and most of the UK power generators are expected to compete for the cash. In today’s Times newspaper, however, Centrica, owner of British Gas, warns that clean coal plants will be expensive and a high price for carbon in the European Emissions Trading Scheme, as well as initial subsidies, will be needed to make them economically-viable.

UK energy companies are busy planning new coal-fired power plants, but are hedging their bets on clean-coal technology until they know more about the government subsidies available, and the forecast for carbon prices in the third phase of the European ETS, from 2012. RWE Npower said today it is looking at building a new £2bn coal-fired plant at Blyth in Northumberland. The new 2,400MW plant will be more efficient than older power stations, and will be "carbon-capture ready". Cynics suggest that this means little more than having enough spare land available at the site to possibly build clean coal equipment in the future……

April 18th, 2007

Coal prices on the rise

World prices for thermal coal, used in power stations, are likely to rise sharply in the next few years as China becomes a net importer of the fuel earlier than expected, says Mineweb. European coal prices have already risen to about $70 a tonne from $52 at the end of 2005, it adds. This should benefit mining companies such as Xstrata, Rio Tinto and BHP Billiton. Meanwhile China’s rush to produce the coal it needs from its own ramshackle mines is having tragic consequences. Mineweb points out that there have been three coal mining accidents in China in the last 24 hours.

April 3rd, 2007

Silver lining for Eon in Spain

On Monday night, Eon, Enel and Acciona announced a shock ceasefire (may require ft.com subscription) in the battle to control Endesa, Spain’s biggest energy group. Eon agreed to drop its bid, clearing the way for Enel and Acciona to make an offer. In return, Eon will be allowed to buy a chunk of Endesa’s assets worth around Euros10bn, giving the German group an entry into several new markets. Analysts are saying that this is a good outcome for Eon, and Platts is today looking at who could be Eon’s next target.


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