© Getty Images

The planned sale of a 5 per cent stake in the Saudi state oil company Aramco is still in limbo. There is no clarity on where it will be listed, on its value or, most important, on how the rights of minority shareholders can be protected in an entity that will be 95 per cent owned by the Saudi government.

The volatility of politics in Riyadh over the last few months, centred around the transfer of power from the former crown prince Mohammed bin Nayef to the 31-year-old Mohammed bin Salman, has not helped. The question now is whether the sale will go ahead or not. Read more

 

Shell's CEO  Ben van Beurden

Shell's CEO Ben van Beurden  © Getty Images

Royal Dutch Shell’s decision to sell electricity direct to industrial customers is an intelligent and creative one. The shift is strategic and demonstrates that oil and gas majors are capable of adapting to a new world as the transition to a lower carbon economy develops. For those already in the business of providing electricity it represents a dangerous competitive threat. For the other oil majors it poses a direct challenge on whether they are really thinking about the future sufficiently strategically.

The move starts small with a business in the UK that will start trading early next year. Shell will supply the business operations as a first step and it will then expand. But Britain is not the limit — Shell recently announced its intention of making similar sales in the USRead more

Saudi energy minister Khalid al Falih

Saudi energy minister Khalid al Falih  © Getty Images

Reality is slowly dawning. Saudi Arabia has recognised that it is the swing producer in the global oil market and the only country with the ability to move the oil price by its own actions.

Last Monday, the Saudi energy minister Khalid al Falih announced that from August Saudi exports would be limited to 6.6m barrels a day, 400,000 below current levels, implying a net fall from a year ago, before the current Opec quota arrangement was put in place, of almost 1m barrels a day. But is this enough to push oil prices up ?

The immediate reaction of the oil market gives one answer. Prices rose on the announcement but only by 3 per cent. Brent crude crept up and just managed to reach $50 a barrel. It is worth remembering that only three years ago the price was well over $100.

Any action is better than none. Without this cut in exports the price could well have fallen further. But the true answer to the question is that on its own the Saudi action is insufficient. Why? Read more

This week’s post is dedicated to the memory of Stephen Tindale — energy expert, campaigner, colleague and friend for the last 30 years. We met when he worked as assistant general secretary of the Fabian Society, Britain’s oldest think tank, of which I was then treasurer, and worked together in other organisations, including the Centre for European Reform. Two weeks ago Stephen, who had long suffered from depression, took his own life.

Born in Africa and trained at the Foreign Office, Stephen cared about the world and was an internationalist in the best sense. Going from the Fabians to become director of Greenpeace in the UK, a move that surprised those of us who had expected him to follow a more conventional career in government or politics, he helped to take the environmental lobby beyond its origins as a protest movement. Read more

 

Iranian oil minister Bijan Zanganeh (left) shakes hands with Patrick Pouyanné, CEO of Total, after signing the deal

Iranian oil minister Bijan Zanganeh (left) shakes hands with Patrick Pouyanné, CEO of Total, after signing the deal  © Getty Images

Total’s deal over the development of the next phase of Iran’s huge South Pars gas field was announced in Tehran on Monday to coincide with President Emmanuel Macron’s State of the Nation address at Versailles. The deal is a sign of both France’s renewed self-confidence and the ever-changing dynamics of politics in the Middle East. For the international oil and gas business, it marks the beginning of re-engagement in Iran after almost 40 years of exclusion.

Having been mildly critical of one of France’s large companies last week, it is good to be able to praise another one. Total has shown the nerve to ignore the hostility to Iran displayed by the US administration. President Donald Trump has roundly criticised his predecessor Barack Obama’s deal to control Iranian nuclear developments but has offered nothing in its place. Continuing US sanctions and the threat of more attempts to isolate Iran have kept most western companies away. Total has decided not to fall in line. Read more

To no one’s great surprise, the cost of the planned new nuclear reactors at Hinkley Point in southwest England has been increased again and another possible year’s delay has been added to a project that is already eight years behind schedule.

The cost could could now reach £20.3bn — up from the £18bn quoted last year and the £16bn figure set in 2015. EDF says £1.5bn of the increase is due to a “better understanding” of the construction work needed and UK regulatory requirements. The French energy group is still hoping to complete the project by the end of 2025 but its statement issued on Monday provides a fallback by quoting the possibility of a further 15-month delay to the first reactor, which would take us into 2027. EDF’s comments suggest an inappropriate degree of complacency: £1.5bn is an awful lot of “better understanding”, particularly when the project has been in preparation for the last eight years. Read more

Power in Europe speaks with a German accent. With the UK at the exit door of the EU and France still economically weak Germany is uncomfortably dominant. The latest example of this is the plan for the new Nord Stream 2 pipeline which will bring natural gas from Russia across the Baltic to the North German coast and then onwards to Central and Western Europe.

The question is how Germany will use its power. Read more

The Saudi crown prince Mohammed bin Salman

The Saudi crown prince Mohammed bin Salman  © Getty Images

A week ago I heard a faint rumour of an intense quarrel within the Saudi royal family, which was presumed to be focused on an attempt to force King Salman to rein in his son, the 31-year-old deputy crown prince, Mohammed bin Salman, and to return the country to something closer to normality after three years of chaotic ambition and growing instability. I started to draft a piece discussing how such a coup could reshape the oil market and what action Saudi, under new leadership could take to halt the continuing fall in oil prices.

Now it seems the rumour was correct but the presumption was mistaken. The winner of the coup was not as expected the crown prince Mohammed bin Nayaf but MbS himself, who has deposed the crown prince and taken full authority over everything including the key role of internal security. Read more

Time to get ahead in energy storage research and manufacturing

Time to get ahead in energy storage research and manufacturing  © Getty Images

The UK election is over but the outcome is still uncertain. Beyond the crude politics of securing a working majority in parliament, No 10 will no doubt be focused on the new wave of terrorism and the challenge of Brexit. But there are many other decisions that need to be made and in the energy field someone — a senior civil servant or trusted adviser if ministers are too preoccupied — should focus on an issue that could help reshape the world’s energy market.

Forget the energy price cap promised at the start of the election campaign and soon ditched in favour of yet another review after the realities of the market were pointed out by the industry and independent observers. Read more

In any discussion of the oil market it is all too easy to ignore the real world consequences of the price fall that has occurred over the last three years. We might appreciate a small cut in the price of petrol or gasoline at the pump, even though its effect is dampened by high levels of taxation. But we do not give much thought to the impact of price changes on the supplying countries. That is short-sighted because the structural shift that has taken place is profoundly destabilising and potentially very dangerous.

A new note from the Energy Information Administration in the US published last month sets out the impact of the fall in prices in recent years. It is worth summarising the data, which are expressed in real 2016 dollars. Read more

Austrian police guard Opec headquarters in Vienna during last month's meeting

Austrian police guard Opec headquarters in Vienna during last month's meeting  © Getty Images

The oil price is back where it was some months ago — with Brent crude struggling to stay above $50 a barrel. This is despite an extension of the Opec quota deal and the support of Russia. The fall in prices after the announcement of the nine-month extension on May 25 shows a lack of confidence in the cartel’s ability to reassert total control of the market. The open question is, what happens next?

First, let us dismiss one well-rehearsed conspiracy theory. The outcome is not a deliberate move by the Saudis to convince other Opec members to agree to a tighter quota regime driven by the fear that prices will slip still further. Read more

Uber's brochure

Uber's brochure

As a company Uber is an acquired taste — people love it or hate it, or sometimes both. But it has certainly proved to be an effective disruptor of the business of urban transportation in cities across the world, damaging or destroying old business models and reducing consumer costs by forcing down wages. That’s why their latest initiative, however whacky it sounds, has to be taken seriously.

Uber Elevate takes the concept of personal mobility to a new level, to be precise several hundred feet above the earth. The aim is to develop vehicles (perhaps best described as very small aircraft) that marry the established technology of vertical take-off and landing with the rapidly advancing technology of a new generation of batteries. The vehicles would be designed to transport individuals over the distance, say, from an out-of-town airport into the city centre. Imagine that in London or New York. The limit to the distance is set by the capacity of the aircraft’s battery, so could in theory be expanded. A journey from JFK to New Haven or from Heathrow to Cambridge would not be impossible. Read more

  © Getty Images

The Energy Transitions Commission, an independent group of distinguished global citizens, has just published a report, Better Energy, Greater Prosperity, which describes how the transition to a low carbon energy system can be achieved. The paper is undeniably worthy and well intentioned but its contents are so detached from reality as to be dangerous. Read more

Iran's President Hassan Rouhani

Iran's President Hassan Rouhani  © Getty Images

The spring of 2017 is certainly the season for elections, with contests in France, Britain and South Korea and the election for the chancellorship in Germany to follow in the autumn. For the international energy companies and the global energy market none is more important than the presidential election in Iran that takes place on May 19.

There are 12 candidates but the main contest will be between the current President Hassan Rouhani and his main challenger Ebrahim Raisi. To label them as moderate and hard line is a convenient western shorthand. The nuances of policies and allegiances makes the comparison more complex. Mr Rouhani is not a secular liberal and Mr Raisi, at least on the basis of his past role as attorney general, is perhaps not as rigid as some imagine. Both are survivors in the complex and often vicious game of knives which has existed in Iran since the 1979 revolution. Read more

Oil tankers dock at Iran's Khark Island oil facility

Oil tankers dock at Iran's Khark Island oil facility  © Getty Images

Oil prices have fallen over the last week by more than 10 per cent and, with both Brent crude and the US WTI benchmark below $50 a barrel, the price stands at its lowest level in six months. Why? The straightforward answer is that the market has lost all confidence in the power of Saudi Arabia to set prices. The realisation has dawned that the sheikh has no clothes.

Two specific factors are responsible for the latest downturn. Read more

Construction at France's EPR plant at Flamanville

Construction at France's EPR plant at Flamanville  © Getty Images

This post is co-authored by Shahin Vallée

The energy market in Europe is being radically transformed by formidable forces, but governments and companies alike are so far failing to adapt to a changing world. Some of the greatest risks lie in the nuclear sector. The scale of the challenge suggests that only a pan-European approach can produce viable solutions but can the continent, in the wake of Brexit, deliver the necessary co-operation? Read more

Saudi deputy crown prince Mohammed bin Salman

Saudi deputy crown prince Mohammed bin Salman  © Getty Images

Spare a thought today for the hundreds of bankers trapped in the luxury hotels of Riyadh and Dhahran working for on the sale of the century – the privatisation of part of Saudi Aramco, the state oil company.

Their job is to conduct due diligence and package the presentation to the market of a company that produces almost 10m barrels of oil every day and holds exclusive rights to claimed reserves of 266bn barrels of oil and 8.3tn cubic metres of natural gas. Aramco has a host of related businesses including refining and shipping. According to some reports, it has been valued by the Saudis at $2tn (more than the gross domestic product of Italy or India), on which basis the sale of even 5 per cent would be worth $100bn.

Easy? Triples all round and big bonuses for everyone?

Not quite. Three things stand in the way of a successful sale: governance, political risk and the oil price. Read more

Theresa May

Theresa May  © Getty Images

Theresa May needs an energy policy adviser. I hasten to add that this is not a job application – but someone is needed to pull together the necessary reforms and to help the UK prime minister avoid self-destructive mistakes such as an attempt to take charge of fixing energy prices.

The predominant view in Whitehall – from the Treasury to the business department which is now responsible for energy – is that current policies are mistaken and require radical reform. Those policies take no account of the structural fall in energy prices; the failure of new nuclear to live up to its promise; the changing pattern of demand; and, most important of all, the transformation in the global energy market being brought about by a range of new technologies. Read more

Construction of Russia's Yamal LNG facility

Construction of Russia's Yamal LNG facility  © Getty Images

A fundamental shift of power is underway in the world energy market. This is not about the transition from fossil fuels to low carbon or from high cost choices such as nuclear to lower cost gas and renewables. Even more important for producers and investors is the move from a market led by producers to a buyers’ market in which the ability to set prices and choose trading partners lies in the hands of consumers.

The latest example of this is the creation of a buyers’ group led by the three leading Asian liquefied natural gas importers. Read more

  © Getty Images

Is coal finished, to be displaced by renewables in a move that will solve climate change and clean up air quality across the world? Is coal — as one headline writer put it recently — in free fall?

Or is it still the dominant and growing source of power and heat in countries that make up the bulk of the global economy? Hasn’t its future just been rescued by President Donald Trump’s announcement that he is scrapping the environmental regulations that threatened coal use in the US? Read more