Monthly Archives: January 2013

Ukraine deal confirms Shell's commitment to shale gas. Getty Images.

Shell’s decision to invest $10bn in the development of shale gas in Ukraine is certainly a significant move.

First, it confirms Shell’s commitment to shale and the company’s determination to override environmental objections to the technology of fracking. Shell believes shale can be developed safely and cleanly enough to avoid damaging either the environment or the company’s reputation. This move will help to confirm shale’s arrival in the mainstream of the energy market. Read more

Western oil workers at In Amenas, the gas plant in Algeria that militants stormed on January 16, knew how vulnerable they were.

An executive from Statoil, the Norwegian oil company, told a visitor to the facility in 2007 that he worried about the risks to expatriate staff travelling to and from the site. After flying from Algiers into the middle of the Sahara, they faced an hour-long bus trip to In Amenas. “We want to build an airstrip near the plant and avoid bus transportation from the airport,” he said. Read more

When I first wrote about shale gas in the FT, back in 2011, one very senior oil industry executive told me that I was badly wrong and that shale would never have an impact beyond perhaps a couple of small areas in the US. A year later he did have the good grace to apologise.

Now shale gas is everywhere – from Ukraine, to China to South Africa (those are just the places where major investments were announced last week). There are still those who deny the importance of shale development, but like those who deny climate change they are beginning to look increasingly out of touch. Read more

Tel Aviv, Israel's financial centre. Getty Images

There is much talk in Davos of black swans, grey swans and white swans. But what about a kosher swan?

For the uninitiated, black swans are unexpected events that have a dramatic impact and sweep away previous certainties and plans.

Tel Aviv is a long way from Davos and not many Israeli politicians find their way up the Magic Mountain, but Shimon Peres, Israel’s president, is a very rare exception. Read more

Fires rage in Australia following record high temperatures. Getty Images

A few days after Typhoon Bopha tore through the Philippines in December, leaving hundreds dead and thousands homeless, a representative from the battered country began to speak at the UN climate talks in the Qatari capital of Doha.

Naderev Saño, the Philippine climate change commissioner, broke down as he made a plea to his fellow delegates, in what turned into one of the conference’s most riveting moments. Read more

The World Economic forum is getting underway in Davos, Switzerland. Getty Images

Fashions come and go and the agenda for the annual meeting of the World Economic Forum in Davos is usually a pretty good guide as to whether skirts are long or short this year. This year’s title for the meeting is “Resilient Dynamism”, which is very cool. But the issues that have slipped down the agenda are energy security and climate change.

There are a few odd sessions, but the focus has shifted and apart from one brief reference to natural resources, neither energy nor climate are mentioned on the web page setting out this year’s themes. This is a very big change from only four or five years ago, when both were prominent topics at every meeting. Read more

The growth of wind farms and other renewable energy projects is heading for a sharp slowdown after 2020 according to official forecasts, despite ministers’ claims they want the UK to become a global centre of green power.

Figures from the Department of Energy and Climate Change predict a tenfold increase in the amount of new renewable power capacity added between 2012 and 2020.

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For the oil and gas companies involved in Algeria, the primary focus for the next few days will be the safety of their staff. Big companies such as BP and Statoil can from the outside seem inhuman. From within they work as families. Many people in London, Aberdeen, Stavanger and Oslo will know one or more of the men caught up in the desert attack. Read more

The UK’s Department for Energy and Climate Change has a new permanent secretary, as predicted before Christmas. The elegantly orchestrated process, along with a comparable process at the Home Office has reasserted the independence of the civil service appointments process. Sir David Normington, the first civil service commissioner is providing to be more than a match for Francis Maude, Theresa May and the others who want to make senior civil servants political appointees.

Stephen Lovegrove, the new man at the DECC, has a number of challenges to overcome. Read more

By Alan Riley

Amid the endless debates across the world on the safety of fracking, policy makers are missing the bigger picture. The ability to extract fossil fuels trapped in shale rock using advanced horizontal drilling, hydraulic fracturing and 3D seismic surveying is the most significant development in the energy industry for at least half a century. The shale revolution implodes the 80:10 resource ratio – that 80 per cent of oil and gas are to be found in the nations of the Opec oil producers’ cartel or Russia, and only 10 per cent in OECD countries and China. Energy can now be extracted from shale worldwide, most significantly in China and the US, but also in Europe.

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Drilling barge the Kulluck Getty Images

Shell's drilling barge the Kulluk. Getty Images

There are two important lessons from the mounting problems facing Shell as a result of the series of accidents that have afflicted its drilling programme in the Arctic.

The first is that major companies must have the capacity to call a halt and to break the inexorable internal momentum that so often makes it impossible to stop projects once they have started. The ability to reconsider is a great sign of strength not weakness.

The second is that a company such as Shell which prides itself (rightly) on its environmental performance is only as good as its weakest contractor. Read more

In the real world, disputes over natural gas production often pit billion-dollar companies against individual landowners. In films, it is the industry’s opponents that command the big battalions.

Promised Land , a fictional account of a gas company’s nefarious tactics, stars and is co-written by Hollywood A-lister Matt Damon, and the supporting cast includes the reliably excellent Frances McDormand and John Krasinski. Read more

By Julio Friedman and Armond Cohen

If you believe the hype, shale gas will solve many of America’s problems, from high petrol prices to wars in the Middle East. There is no doubt that it will bring huge benefits to the US. However, its role in climate change is misunderstood – and must be dealt with urgently.

There is some cause for optimism, at least from a US perspective. The International Energy Agency concluded recently that America will be the world’s largest gas producer by 2015, surpassing Russia. The US is also leading Europe on climate change. If it had ratified the 1997 Kyoto protocol, America would by now have met its obligations.

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A large proportion of oil is now exported to China. Getty Images

The International Energy Agency is one of the more successful of all the international institutions. It has avoided the rocks of ideology – unlike the IMF – and the sands of overweening bureaucracy – unlike the World Bank.

The Agency produces some excellent studies and first class data. But it badly needs to keep up with the times. No international agency working on energy should be excluding China and India from full membership.

The IEA was established in 1974 as a grouping of energy – particularly oil – importing countries to combat the market dominance of Opec. The crucial agreement behind its establishment was acceptance of the need to share the burden of adjustment in the event of any major supply disruption. “Rationing” – though the word was never used – was clearly preferable to a free-for-all bidding war in which countries sought to secure supplies for themselves. Read more

Shale gas drilling rig near Blackpool, in north-west England . Getty Images

I spent the holidays in Wales, dodging the odd shower, and contemplating the potential if someone could invent a technology that, short of massive hydro-power schemes, could convert rainfall into power. Wales would undoubtedly be the Saudi Arabia of rain power.

But Wales may not have to wait for new technology to become an energy producer again. The country looks set to be one of the main centres in the UK for the rapidly expanding shale gas business.

One of the most significant events of 2013 for the energy sector in the UK will be the publication of the next report on shale gas prospects across the country from the British Geological Survey. Well timed leaks of part of the report, which appeared just before the chancellor’s statement in December, have already suggested a significant increase in the resource base available near Blackpool. Read more

EDF faces probe into its relations with China. Getty Images

A new inquiry instigated by the French government into the international activities of the French nuclear industry poses a new challenge to the UK’s plans for a new generation of nuclear power stations. Further delay in reaching a final decision seems certain.

The formal inquiry, established just before the New Year, will be undertaken by the powerful Inspection Generale des Finances. The inquiry is sector wide and focused on potentially inappropriate transfers of protected technologies through the international partnerships developed by the nuclear companies. But according to the French press the inquiry is directed specifically at EDF and its relationships in China. Read more