Monthly Archives: September 2012

By the end of this week bids must be in from the consortia seeking to develop the UK’s new generation of nuclear power stations. It is decision time but the irony is that the key decisions will be taken in Paris rather than London. Read more

The abandonment by Shell of this years drilling plans in the Arctic is hardly a surprise. The project is complex and has run into one technical problem after another. Shell is rightly prudent when it comes to the risks involved in an area which is both environmentally sensitive and under the intense scrutiny of the world’s media not to mention a set of lobby groups energised by the prospect of taking on one of the world biggest companies.

There will now be another delay adding to the five years and several billions of dollars the company has already devoted to the project.

Shell has decided to take on the environmental lobby and to prove that the Arctic can be drilled and developed safely. That is a big bold move in itself, but the real problem for the Shell board and it’s shareholders – which include most pension funds in the UK and the US – is that the economics of development make sense only if one assumes ever higher oil prices.

Shell has never published a detailed analysis of the economics of Arctic development. The commonly quoted numbers for the resources which could be found – 26bn barrels of oil and 130tn cubic feet of gas – suggest a big prize. But what is the cost of development? And what oil or gas price in the US or the world market is necessary to make the project profitmaking?

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The Department of Energy and Climate Change survives. For the moment. One of the subtexts of last week’s government reshuffle in the UK was whether this was the right moment for a change in the layout of Whitehall with both the culture and energy departments abolished and their functions distributed elsewhere. In the end, the politics of the coalition made that too difficult. Instead, the DECC is being emasculated with several of its powers transferred elsewhere. What does this mean for energy policy and for companies and investors? Read more

The report in the Financial Times on Tuesday that the Chinese government is inviting international companies to directly involve themselves in its plans to develop shale gas could be of huge significance for the global energy market over the next decade and beyond.

China has huge shale deposits, perhaps double the US levels, and as yet zero production. Bold plans to produce 6.5bn cubic metres of shale gas by 2015 and 60bn by 2020 have generally been dismissed as fanciful given China’s limited technical base in shale and the challenges of infrastructure and water supply.

But never underestimate Beijing’s determination. The resistance to dependence on outside sources of supply is as strong as ever. Indigenous resources will be given priority and China is now rich enough to absorb the costs of bringing supplies from the north and west to the cities on the eastern seaboard. Read more

Mitt Romney has given Barack Obama a free pass when it comes to energy and environmental policy.  Obama needs only to point to Romney’s energy plan - with its proposed demolition of federal controls on new energy developments and its omission of any mention whatsoever of climate change to claim the votes of the environmental lobby.

Even those most disappointed by the last 4 years can hardly fail to back Obama when the alternative is someone who used his acceptance speech last week to mock Obama’s commitment to the environment and to contrast Obama’s aim of helping to save the earth and the oceans with his own commitment to helping ordinary American families get jobs.  But what won’t be said this week at the Democratic Convention in Charlotte is that the American energy outlook for the next four years at least is already very largely set, and won’t be much altered by whoever is elected in November. Read more