RUSSIA-INDIA-POLITICS-DIPLOMACY

President Vladimir Putin  © Getty Images

Of all those damaged by the oil price collapse, few are in a more difficult position than Russia. High prices have sustained the Russian economy since Vladimir Putin came to power in 1999. Hydrocarbons provide the overwhelming proportion of export revenue. Now something radical may be needed to avert economic collapse and political dissent.

Privatisation is back on the agenda of the international oil industry. Although the prospect of the Saudis selling a share in Aramco has been tantalisingly floated by the Saudi deputy crown prince Mohammed bin Salman in his interview with the Economist two weeks ago, there are other potential sales that are likely to be completed sooner. The most intriguing is the possibility that the Russian government will sell off another slice of its 69.5 per cent holding in Rosneft. Read more

IRAQ-OIL

  © Getty Images

Oil is now $30 a barrel. For investors and those dependent on investment income the question is whether the pain being suffered by the oil and gas producers is about to spread to the wider economy. Over the next month most of the companies involved in the sector will produce their annual results and announce their dividends. Investors will be watching anxiously for cuts. But the stark and rather shocking truth is that most companies in the oil and gas business are being forced to borrow to meet their payout commitments and that is a dangerous thing to do.

After a fall in prices of 70 per cent over the last 18 months there is a strong prima facie case for dividends to be reduced. That would painful for investors — not least the institutions that are relying on big oil for more than 23 per cent of total market yield. (Another 8.9 per cent of yield should have come from the mining sector if Glencore and Anglo hadn’t already cut their dividends.) But will it actually happen? Read more

IRAQ-CONFLICT

The battle for Kirkuk, Iraq's oil capital  © Getty Images

It has always been hard to accept the argument that the series of wars in the Middle East since 2001 have been about oil. Afghanistan is not an oil state and most of the oil which will be produced from Iraq will end up in China and the Far East rather than in the US or Europe. On the other hand what is happening now in Syria and Northern Iraq shows that oil and power are inseparably linked. Read more

Ben van Beurden, Shell CEO  © Getty Images

Of course the answer is obvious. How could anyone be so foolish as to think that a company with earnings of $19bn in 2014, with reserves of 13bn barrels of oil and gas and with daily production of 3m barrels of oil and gas could possibly fail ? How could anyone think of bracketing Royal Dutch Shell with GEC, or ICI or Lehman Brothers — each in their time great companies but now reduced to dust. Perhaps it is impertinent to even ask the question. Surely Shell has survived for a century and more getting through wars, expropriation, an entanglement with Nazi Germany, the horrors of Nigeria and numerous other “crises”?

All true. Shell is undoubtedly one of the world’s great companies — decent, honest, civilised and a world leader in energy technology. But even those attributes do not provide complete protection in a world where the past is no guarantee of the future. Companies can have too much history and too great a sense of their own institutional importance. In a very competitive world no one is ever totally safe. Read more

There are two divergent views of what is happening to the oil price within the industry and among serious investors. 2016 may help us to see which is correct.

The first view is that the price is inherently cyclical. What has come down must go back up again and the deeper the trough the higher the next mountain.

The alternative analysis is that the shift we have seen over the past three years is the beginning of a long-term structural shift which will see energy prices materially lower in real terms in the next half century than in the last. Those who take this view believe, to put it very simply, that the likely growth in supply is stronger than the growth in demand.

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FRANCE-ECONOMY-ENERGY-GAS-OIL

A tunnel at the LNG terminal under construction at Dunkirk, France  © Getty Images

If you think the fall in the oil price is dramatic and disruptive, take a moment to consider the natural gas market. The world’s three main gas markets — in Europe, the US and Asia – may be distinct but the growth of trade in liquefied natural gas which can take it across the world has linked them. The impact of a swing in one market soon spreads across the globe.

According to the excellent analysis from Energy Aspects, prices for LNG in the key north-east Asian market – the supply into Japan and Korea – are down this year by more than 50 per cent to between $7 and 8 per million British thermal units (Btu), even allowing for a slight seasonal ramp up in the fourth quarter. That is almost 70 per cent down from the peak in 2013.

Unfortunately, at the time of that peak many companies got carried away and set in train dozens of new LNG projects worldwide. The complex technology of liquefaction means that each project is expensive – costing at least $5bn and often much more. Of the projects planned dozens have been cancelled, often forcing investors to write off substantial sums. But the bad news is that many are still under construction. Once work has begun, it is very hard for companies to go back on a major investment decision. Read more

National Tribute to The Victims of The Paris Terrorist Attacks At Les Invalides In Paris

Laurent Fabius  © Getty Images

The agreement on climate change in Paris will satisfy no one. The complaints are predictable and have already begun.

The commitments made are not legally binding and political decisions could be altered by future elections or regime changes. The funds available for adjustment are too limited and, of course, there is no carbon price.

All true, but politics is the art of the possible and what has been agreed is a triumph for French diplomacy and for the French Foreign Minister Laurent Fabius personally. Many deserve credit but success depends on leadership. He is the Energy Personality of the Year because he has played a crucial role in changing how the sector will evolve worldwide for decades to come. Read more

FRANCE-ENERGY-HYDRO-ALSTHOM

A pump turbine at Alstoms' global technology and hydropower centre in Grenoble, France  © Getty Images

Storage — whether of grain or of knowledge through the printed word — has been a crucial element in human development. Of all the many technical advances that are transforming the energy business none is potentially more important than storage: it give us the ability to control the way, and crucially the timing, of energy consumption. Used on a major scale it could help to make heat and light available to those outside the commercial economy and could radically alter the energy mix.

Two excellent recent research reports summarise the current state of the art in the field and offer some predictions. The first is from Lazards and is the latest in a series assessing trends in the costs of different mechanisms. The second is from Moody’s and concentrates on the advances being made in reducing the cost of batteries.

In discussing storage it is important to demolish two myths. First, the technological advances are not about to transform the energy system to the point where a major proportion of consumers defect from existing distribution systems. Second, it does not require a dramatic breakthrough for making it on a significant scale to become economic. Read more

George Osborne’s concept of a “Northern Powerhouse” is a good and timely idea. The UK economy is disproportionately skewed to London and the South East. Other regions need development and jobs. The cities of the North – from Liverpool and Manchester to Leeds and Sheffield provide a strong base with great potential. What they can achieve could provide a model for other neglected areas. But good ideas need to be translated into tangible actions. So here is one possibility – Northern Power – a municipal energy business for the North of England. Read more

TURKEY-G20-SUMMIT-PUTIN-MERKEL

Chancellor Angela Merkel and President Vladimir Putin talk at the G20 summit in Antalya,Turkey, on November 16  © Getty Images

Russia is coming in from the cold. A full-scale reset of the relationship with the international community is well underway. A country that was a pariah state a few weeks ago, isolated by sanctions, is rapidly becoming an essential ally. What does this sudden turn of events mean for the energy business?

The reason for the reset is clear: the enemy of my enemy is my friend. The common enemy is the Islamist militant group Isis. For the Germans and for Chancellor Angela Merkel the destabilisation of Syria has opened up a flood tide of refugees. The warm welcome offered initially in Germany, Sweden and a few other parts of Europe has chilled. Something must be done to stop the flow at source.

For the French and many others across Europe, terrified by last week’s awful events in Paris, the identity of the enemy in Syria and the Middle East has also come into sharp focus. The same is true in Moscow where the downing of a Russian airliner over the Sinai desert has made those in the Kremlin realise that they, too, face a ruthless enemy. When set against the challenge of Isis nothing else matters much. Ukraine and all the other disputes can be assigned to a distant back burner — not solved but not allowed to get worse. It is time to work together. Read more

Optimism, however essential for human progress, can be very dangerous if misapplied or allowed to run to excess. There can be few better examples of this than the new review of India’s energy future published last week by the International Energy Agency. As you would expect, the paper is fascinating in its detailed description of India’s energy economy. But the forecasts are seriously over optimistic. They gloss over the challenges that even a radical modernising government in Delhi is not managing to overcome and they ignore the very real risks of a much less happy outcome. Read more

IRAN-VENEZUELA-DIPLOMACY

Iran's President Hassan Rouhani   © Getty Images

Step by step, month by month, the agreement between Iran and the international powers to control nuclear development in the country is moving forward. Beyond the rhetoric about whether the deal will be effective or not — a debate that will surely continue — the prospect of an end to some of the sanctions on Iran comes closer. What could that mean for the oil market?

The question has to be answered in two parts. First, the short term up to the end of 2016. Second, the longer term stretching to 2020 and beyond. On the first there is a clear consensus across the industry. Iran can produce and export perhaps another 400,000 barrels a day by the end of next year. The limit is set by the condition of existing fields and infrastructure. In the latest of a series of excellent and detailed papers, the US Energy Information Administration suggests the number could be a little higher but also cautions that the amount of condensate available may not be exportable because the market is saturated. That number of barrels a day would add a further dampener to the world price and might force producers in the US to shut in some more tight oil. It is not enough to change the game. Read more

A look at how a climate change deal could affect oil majors Read more

A coal-fired steam-turbine electric generating Plant in Georgia, USA

A coal-fired steam-turbine electric generating plant in Georgia, USA

In just a year’s time, on the first Tuesday in November 2016, the US will vote for a new president. With a deep and widening divide between the two parties on climate change and environmental policy, the election will have major implications for the US energy industry. But the impact will not stop there. The move by President Barack Obama to impose tighter environmental controls on coal-fired power stations has helped encourage countries across the world to make commitments of their own on emissions reductions. China has begun to co-operate with the US on climate change — a massive shift on both sides from the approach that led to the failure of the Copenhagen climate conference in 2009. A change of government in Washington could put all this in jeopardy.

Historically, energy has not been a prominent issue in US presidential elections. The issue was barely mentioned in the debates before the 2008 and 2012 polls. Now, however, Mr Obama’s move against the coal industry has put the topic at the top of the agenda. The issue is divisive and the positions of the two parties have moved further apart in the last six months. Read more

ALGERIA-GAS-SHALE-ENVIRONMENT-DEMO

An anti-shale protest in the Algerian Sahara  © Getty Images

The 50 per cent fall in oil prices over the last year is beginning to have a serious impact across the world. Rig rates are down in the US and production of tight oil produced through fracking is beginning to fall. Corporate profits and share prices are down. The private sector generally, however, is remarkably resilient. Costs can be cut, new projects postponed and if things get worse dividends can be reduced. By contrast many of the countries that have come to depend on high prices have little room for adjustment. A few, like Saudi Arabia, still hold vast cash reserves and can tolerate the loss of revenue for several years. Others are trapped and particularly vulnerable because the lack of income compounds all the other problems they face. One of the most vulnerable is Algeria. Read more

British Government Signs A Deal For New Nuclear Power Plant

EDF's existing nuclear power plants at Hinkley Point  © Getty Images

The announcement that some form of funding structure for Britain’s nuclear new build at Hinkley Point in Somerset has been agreed must be read with care. UK consumers and taxpayers are not allowed to see the whole agreement — that privilege is restricted to the French and Chinese governments and their state-owned enterprises — but it is clear that this week’s statements do not amount to the final deal. Much remains to be negotiated, with the UK at a considerable disadvantage because of its all too evident desperation to complete a deal.

Much attention has focused on the relationship between the UK and China, on the cyber security risks of allowing the Chinese to own, construct and operate a plant of their own in the UK and on the political consequences of the deal for George Osborne, the chancellor of the exchequer who is now known to the black humorists of Whitehall as the Manchurian Candidate. The other, and potentially more serious, issue is what the announcement and the further delay it implies means for UK energy policy. Read more

SENEGAL-BRITAIN-MUSIC-OLY-2012

  © Getty Images

The potential impact of climate change is beginning to get serious attention beyond specialist climate scientists. Last week at the Ecole Militaire in Paris — the elite college for the French defence forces — military and civilian leaders debated the risks and the defence and security implications at a seminar organised jointly by the French Senate and the defence ministry. Three ministers, including those of foreign affairs and defence, led the debate.

Many of the risks are well known — such as the possibility of desertification in particular regions, of water shortages leading to inadequate harvests and a lack of food supplies and on the other hand the prospect of floods or sudden surges in temperature; and the risk of diseases and epidemics spread by dirty water. The problems are concentrated in areas such as Africa, where climate change will compound existing problems such as inadequate healthcare, poverty and weak governments. Read more

GERMANY-ECONOMY-AUTOMOBILE-SHOW-IAA

Penetration of electricity into new areas – such as cars – is still low  © Getty Images

Renewables are taking a growing share of the energy business. In 2014, according to a new report from the International Energy Agency, they accounted for more than 45 per cent of all the new electricity generating capacity added worldwide. Over the next five years the prediction is that they will supply more than half of all new capacity. By 2020 renewables should be providing over 26 per cent of global electricity supplies. They will enhance energy security and reduce emissions. They will also reshape the energy business creating both winners and losers. Read more

IRAN-SAUDI-HAJJ-ISLAM-DEMO

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