Iranians protest against Saudi Arabia after the hajj stampede  © Getty Images

Oil prices are now 50 per cent lower than they were a year ago, and less than 40 per cent of their peak in 2012. Worldwide, there is a continuing surplus of supply over demand of around 2.5m to 3m barrels a day. This is despite the loss of exports from Libya and two bloody wars – the first against the Islamic State of Iraq and the Levant (Isis) in Syria and Iraq, the another against the Houthi rebels in Yemen. Those two wars, which do not directly affect any significant oil producing areas, are proxy conflicts for the rivalry between Saudi Arabia and Iran. Now, however, there is a growing risk of open war between Riyadh and Tehran. Oil facilities and exports would inevitably be primary targets and in those circumstances a price spike would be unavoidable. The question is whether such an escalation can be prevented.

Relations between the Kingdom of Saudi Arabia and the Islamic Republic of Iran have never been close. The conflict is partly religious, partly economic and territorial. Both want to be the clear regional leader. In recent months relations have deteriorated. The latest trigger is the death of 767 Islamic pilgrims at the annual hajj in Mecca. The dead included an estimated 169 Iranians. Since the tragedy – caused by a stampede at a bottleneck as about 2m took part in the journey – Iran’s leaders have used the event as a stick to beat the Saudi authorities in general and the royal family in Riyadh in particular. The failure of the Saudis to return the dead Iranians to their own country has provoked an unspecific commitment of “retaliation” from Iran’s supreme leader Ayatollah Khamenei.

The heightened language indicates the tension that pervades the region. The situation is comparable to Europe in the months before the first world war, and equally dangerous. Read more

Protesters Take To Kayaks To Demonstrate Against Shell's Plans To Drill In Arctic

Protesters approach Shell's Polar Pioneer oil drilling rig in May  © Getty Images

Shell’s decision to abandon exploration in the Arctic is an acknowledgment of reality, although that makes it no more comfortable for those involved. Some $7bn (more, according to some estimates) has been lost in its Chukchi Sea campaign — the unsuccessful Burger J well must be the most expensive ever drilled, anywhere in the world. But, financially, Shell can afford it, and many in the oil company will be relieved that the issue is out of the way.

The exploration effort was a PR disaster for a company that prides itself on its environmental record. The prospect of success, followed by years of conflict over the next steps — the development of permanent facilities for actual production — worried some senior executives more than the prospect of failure. The possibility of facing up to a new US president in the person of Hillary Clinton who is on record as opposing Arctic drilling was hardly welcome for a company that believes itself distinct from companies such as ExxonMobil that take a more challenging line on climate change and other issues. These reputational issues were no doubt very important elements in the decision to pull out. Read more

The energy business is entirely familiar with the concept of stranded assets. Now, however, a new concept has been introduced: the idea that some assets, specifically hydrocarbons, will inevitably be stranded and left undeveloped as the world reduces its hydrocarbon consumption in order to avoid the risks of climate change. The question is whether investors and companies should be worried by that concept. Read more

Tamar, The Natural Gas Production Platform Off The Israeli Coast, Is To Begin It's Natural Gas Production

Drilling in the Tamar field in the Levant Basin  © Getty Images

Eni’s announcement that it has made a world-scale gas discovery off the Egyptian coast is undoubtedly good news both for the Italian company and for Egypt, even if the hype and the over-optimistic timetable that some are talking about need to be balanced by some consideration of the challenges still be to be resolved. But the discovery should have an even wider impact because it confirms the view that the Nile and Levant basins are the most prospective, underexplored areas in the world.

The discovery, named Zohr, is said to hold some 30tn cubic feet of gas, which if confirmed, would put in the list of the 20 largest gas fields across the world. Read more


Construction at EDF's EPR project in Flamanville, France  © Getty Images

Strong and capable energy ministers are rare but the UK government appears to have found one in the person of Andrea Leadsom. Ms Leadsom is nominally the Minister of State in the Department of Energy and Climate Change (ie the number 2) but that is a detail. She is not crippled by self-doubt and initially hesitated for many hours before taking the job. Perhaps energy did not seem important enough. Perhaps number 2 was the wrong number.

Unsurprisingly, however, she has rapidly mastered the brief and appears to be finding that the subject is more interesting and the policy issues more complex and important than she had imagined. The question now is whether she can use her authority to force a better bargain for energy consumers by negotiating a new and improved deal with the owners of the long-planned and much-postponed Hinkley Point nuclear power station. Read more

Electricians Work On Transmission Tower In Chuzhou

Electricians work on a transmission tower In Chuzhou, China  © Getty Images

The energy market has many dimensions – from the ever volatile oil price to the environmental challenges of climate change. It is worth remembering, however, that for one person in six worldwide energy is a matter of subsistence and survival. The only energy to which they have access is wood or dung collected by hand. With electricity or any of the other sources of heat, light and mobility which we take for granted they are unable to improve their circumstances because without energy there can be no agriculture, no trade and no education. Read more


Oil sprays from a well at Tuba oil field in Iraq  © Getty Images

Oil is now clearly a cyclical commodity that is in a period of over-supply. According to recent commentaries from the International Energy Agency, the excess of production over consumption was as much as 3m barrels a day in the second quarter of this year, which is why prices have fallen. The question for producers, consumers and investors is: how long will it be before the cycle turns back up?

The initial caveat, of course, is that the “normal” oil market could be overturned by political decisions at any time. The Saudis, instead of greedily trying to maximise their market share and imposing huge losses on others, could decide that the stability of the region, and of their own kingdom, would be better served by cutting production and settling for a new equilibrium. There is a chance of that, as I wrote a couple of weeks ago, and the Saudis are under huge pressure from other Opec members but there is a mood of rigid arrogance in Riyadh which suggests that the necessary climb down will not come easily. What follows assumes that King Salman bin Abdulaziz al-Saud and his son the deputy crown prince stick to their current policy.

What then drives the cycle ? Read more

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For investors who thought the situation in the oil sector could not get worse, the last few weeks have come as a bad surprise. In the US, West Texas Intermediate prices have slipped below $40 a barrel and on Monday Brent crude fell below $44. There is no obvious sign yet that the bottom of the cycle has been reached and the latest negative data from China adds further downward pressure. The next casualty of the falling price will be corporate dividends.

Much attention has been paid to the implications of lower oil prices on countries such as Russia, Venezuela and Nigeria which depend for the bulk of their national income on oil. For them, the economic and political implications are serious. As we saw at the end of the 1980s, not just in the former Soviet Union but also in Opec states such as Algeria, a heavy fall in prices undermines the social contract between governing elites and the wider population. Both those countries look vulnerable now, as do a range of others including Angola, Brazil and Nigeria. In all those cases the impact of a price fall compounds existing problems. It is hard to avoid the conclusion that one or more of these nations will see a regime change before the end of the year. Read more

Scottish Windfarm Starts Producing Electricity

The Braes of Doune windfarm, Scotland   © Getty Images

Organisations, especially those that are doing well, can easily get stuck on narrow views of the future and their own role within it. It can be useful and creative in those circumstances to give people the opportunity to think more widely. One method that I have seen used to great effect is to ask people to imagine the world in 10 years’ time and suggest what might have changed, particularly against the expectations of the conventional wisdom. The process can provide a useful counterweight to long-term forecasts, which tend to do no more than roll forward recent history.

In that spirit, and for the holidays, here are a few stories on the energy sector from the FT in 2025. These are not forecasts — just possibilities. Readers would be welcome to suggest additions to the list.

1. In Moscow, ShellGaz — the world’s largest energy company as measured by its listing on the FTNikkei 250 — announces that it is proceeding with Eaststream3, the latest in a series of export projects from eastern Siberia. Eaststream3 will take gas by pipeline to the rapidly growing cities of northern India. ShellGaz was formed in 2017 through the merger of Royal Dutch Shell and Gazprom and represented the first fruit of the reset of European-Russian relations after the agreed federalisation of Ukraine. Read more

Deputy Crown Prince Mohammed bin Salman Of Saudi Arabia Visits Jordan

Deputy Crown Prince Mohammed bin Salman visiting Jordan this month  © Getty Images

With the latest analysis from the International Energy Agency showing that oil production capacity continues to rise despite the sharp fall in prices, is Saudi Arabia ready to admit that its strategy of over-production designed to force other producers out of the market has failed?

Over the last year, Saudi Arabia has been pursuing what Frank Gardner, the BBC’s security correspondent, described last week as a policy of flexing its muscles – both in the region and in the oil market. The policy is obviously failing. The question now is whether the kingdom will keep going, doubling down on its current approach, or will step back and change course. The second option would involve a significant loss of face for the new king and his favourite son. The costs of simply ploughing on, however, could be much worse. The outcome will shape the future of the region and of the international oil market. Read more


President Vladimir Putin  © Getty Images

With oil prices back down to $50 a barrel for Brent crude, a falling gas price and its share of the European energy market declining, the Russian economy is in real trouble. The situation is dangerous because the problems cannot easily be corrected. The risk is that the economic problems could lead to political instability both within Russia and around its borders.

Anyone wanting to understand the historical context for what is happening in Russia should read Restless Empire a newly published book written around a series of maps which take go back to the emergence of the Slavs some 5000 years BC. The book, edited by the late Ian Barnes who sadly died before publication, is beautifully presented and free of the biased commentary so often associated with histories of Russia. The maps in particular are fine examples of immaculate design applied to the presentation of complex data. I only wish there were more maps, and in particular more on the production and trade in energy that dominates the modern Russian economy. Read more


Loading coal at a port in Yichang, in central China's Hubei province  © Getty Images

Casual readers of the media coverage of the energy business could be forgiven for getting the impression that the coal industry is on its last legs. “Coal is dying and it’s never coming back”; “King Coal’s stages of grief”; “The noose tightening on the coal industry”. Those are typical headlines from the past few weeks. The coal industry, it would seem, is being rapidly destroyed by the combination of public policies on climate change and carbon emissions and by the development of a range of alternative energy supplies – from shale gas to solar. This sense of an industry in decline is reinforced by the rhetoric of the campaigns advocating disinvestment from fossil fuels in general and coal in particular. If you have Oxford University, Michael Bloomberg and the Norwegian Sovereign Wealth Fund against you what hope can there be? The impression of an industry in terminal decline does not, however, quite reflect the reality. Reports of the death of coal owe more to wishful thinking than to any analysis of what is actually happening. Read more


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The Chinese economy is clearly going through its most serious downturn in more than 30 years. After three decades of continuous growth averaging more than 8 per cent per annum, the problems of industrial over capacity and excessive debt are starting to take their toll. The stock market volatility of the last few weeks is a symptom of the bubble that has been allowed to develope in recent years and of the doubts that are now setting in about the sustainability of high growth. The more serious problem, as the published data is now showing, lies in the real economy and in the accumulated and now unfundable debts that have financed booms in sectors such as housing construction and urban property development. Read more

Shell's Polar Pioneer arrives in Seattle

Shell's Polar Pioneer arrives in Seattle

Great companies become and stay great by taking big bets. The art of betting is, of course, about understanding the odds and being prepared and able to lose if it comes to it. Every big company in the world has been through that process — the only difference in the oil and gas industry is that the numbers are bigger. The general rule of betting in the corporate world is not to put at risk more than 10 per cent of the total business. For the biggest, that leaves plenty of scope.

So there is nothing wrong in principle with taking big bets. What is, puzzling, though is when a company with a record of deep caution stretching back to the second world war makes a series of bets that all run contrary to the conventional wisdom. The company concerned is Shell, which in the past few months has placed three huge betsRead more


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Politicians and policy makers can only focus on one problem at a time. With all attention concentrated on Greece for the past month there is a real danger that an even greater problem is developing, almost unnoticed, in Ukraine. The economy there is in deep trouble. A further collapse, perhaps triggered by a debt default, could lead to an outflow of refugees that would make the problem of migrants crossing the Mediterranean look trivial. Energy is at the heart of the crisis but could just possibly be part of the solution.

The basic story is well known. Since the Maidan demonstrations in November 2013, the Ukrainian economy has shrunk. A 5 per cent fall last year is variously forecast to be followed by a contraction of between 5 and 10 per cent in 2015. Investment has ground to a halt and in the energy sector big potential projects such as the shale gas developments planned by Shell and Chevron have been halted. The fighting in the east has cut off coal supplies to the rest of the country from the 300 mines in the Donbass region. The Russian annexation of Crimea has cut off gas supplies from the developments managed by Chernomorneftegaz in the Black Sea. Ukraine, as a result, has become even more dependent on imports of coal and gas from South Africa, Australia, other parts of Europe and even ironically from Russia. These supplies do not come cheap and in many cases suppliers will only do business if they are paid in advance and in hard currency. Read more

Political Leaders Meet As Greece Crisis Intensifies

Sigmar Gabriel and Angela Merkel  © Getty Images

Last week’s decision on the future of the German energy policy by Sigmar Gabriel — the economics minister and Angela Merkel’s number two and would-be successor — was complicated and multifaceted. The net result, however, is simple. The German coal industry will survive and coal will remain a major, and probably the largest, fuel source for power generation for another decade and perhaps longer. Read more

Power Station For Both Fishing And Solar Energy Built In Jiaxing

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According to the International Energy Agency in their most recent World Outlook the amount of money required to meet energy needs over the next twenty five years is $51tn. That is in real terms measured in 2013 dollars and amounts to approximately 14 times current German gross domestic product.

Energy investment as defined by the IEA includes the exploration, production, distribution, transportation and processing of all forms of energy. It includes new ventures and replacement of the existing capital stock. Some $30tn of the total is expected to be devoted to fossil fuel extraction, transportation and oil refining, while most of the remainder goes to the power sector including $7.4tn to renewables and $1.5tn to nuclear; $8.7tn goes to the development of transmission and distribution systems. This is, of course, an indicative forecast built around the IEA’s assumptions of some progress towards emissions reduction. The detail is less important than the total. Read more


Protests against the reopening of the Sendai nuclear plant  © Getty Images

Within the next few weeks the Japanese utility Kyushu Electric Power will restart its two nuclear power reactors at Sandei in the Kagoshima prefecture in the far south of the country. Fuel loading is set to begin July and the plants should be onstream again in August. After four years of crisis and much legal and political debate, the Japanese nuclear industry is finally on the way back. The implications for the rest of the energy sector in Asia and across the world are significant.

The two reactors at Sandei have been closed since 2011. From a nuclear fleet of 50 reactors capable of producing some 47 GW of electricity and supplying over 30 per cent of Japan’s daily electricity needs at the beginning of 2011, the sector’s output shrank to zero in the months following the Fukushima disaster. At Fukushima itself six reactors have been closed and are being decommissioned. The rest of Japan’s nuclear fleet stands cold and unused. Gradually, however, the negative mood of 2011 has abated. Now the operators of 24 different reactors across the country have applied for permission to reopen with the full and very active co-operation of the Japanese state and the powerful industrial lobbies such as the Kaidanren and the Keizai DoyukaiRead more


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The shocking thing about the papal encyclical Laudate Si is not that it was leaked in advance nor even that it embraces the idea that most emissions of greenhouse gases are the result of human activity. The thing that should shock readers is its attack on science and technology — the very tools, indeed the only tools, which offer a solution to climate change.

I am not a student of theology and therefore do not claim to understand the subtleties of the Catholic Church’s teaching on science. But since the Pope has moved outside his own natural territory and into energy policy, some response seems appropriate.

From a distance, Pope Francis seems to embody decency. He is modest, frugal, concerned for the poor and hostile to the creepier side of the church hierarchy in Rome and beyond. That makes him stand out in a world of shallow and cynical “leaders”. He commands millions of followers and his words deserve to be taken seriously whether one is a Catholic or not. Read more


An employee poses with a pipe used to ca

  © Getty Images

Carbon capture and storage is one of the key elements in the various plans for keeping total emissions within safe limits. Different projections give slightly different numbers but the broad consensus is that the process of sequestration — taking the carbon out of hydrocarbons before they are burnt and then burying it — should account for between a sixth and a fifth of the net reduction needed by 2050 if we are to keep global warming to 2C or less. If CCS doesn’t happen on the scale required, either the level of emissions and the risks of climate change will be higher or some other solution must be found. Sir David King, the former UK government chief scientist, puts it more dramatically: “CCS is the only hope for mankind

Keeping global warming to 2C means that the amount of CO2 captured and stored must rise steadily to well over 7,000 Mt per annum by the year 2050. Is CCS on this scale likely to happen? As Simon Evans and Rosamund Pearce point out in an excellent article for Carbon Brief, the industrial scale of the operation required to capture and store that amount of CO2 is far greater than the scale of the current international oil industry. Looking objectively at the current state of play the answer must be that it is very, very unlikely. Why? And what can do done about it? Read more