Oil

China's Jiang Jemin, the CEO of CNPC and Tony Hayward of BP smile after signing a major oil deal with Iraq in 2009 (AHMAD AL-RUBAYE/AFP/Getty Images)

Happier days: China's Jiang Jemin, the chief executive of China National Petroleum Corporation, and BP's Tony Hayward, signing a major oil deal with Iraq in 2009 (AFP/Getty Images)

One of the ironies of the current chaotic situation in the Middle East is that a country that could arguably be at risk of losing the most is standing aside.

While the US and some European powers agonise over whether – and how – they should intervene to prevent the disintegration of Iraq, China is absent. But China needs Iraqi oil in growing volumes. The country’s import dependence for crude and products now stands at 8m barrels a day and is rising. According to the latest International Energy Agency estimates, Chinese imports could be well over 11mbd by 2030. That is on modest assumptions about economic growth and generous assumptions about gains in efficiency and substitution out of oil, in sectors where a switch is possible. The figure could be higher if China cannot increase its own production.

The only country in the world likely to be able to provide such an increase in production is Iraq, and it is no accident that China is heavily invested in the development of fields such as Rumaila and West Qurna outside Basra in the South. On the Iraqi government’s own figures, China is the largest foreign investor in the country’s oil sector. As US oil consumption and import requirements decline, energy security has become a Chinese issue. Read more

An Egyptian protester waves the national flag. MAHMUD KHALED/AFP/Getty Images

A protester waves the Egyptian flag (Getty)

After a decade of introspection, Europe is being forced to confront the instability on its borders, particularly to the east and the south.

At least five deeply troubled states – Mali, Libya, Syria, Iraq and Ukraine – pose a diverse series of threats ranging from a flood of refugees to the radicalisation of individuals and terrorism, to the disruption of energy supplies.

The problems in each of the five could spread to other states and regions – including Lebanon, Algeria and the Balkans. But further problems could be yet to come, if the list of unstable countries is extended to include Egypt. The risk is very serious.

A casual observer would be forgiven for thinking that Egypt has been stabilised by the election of President Abdel Fattah al-Sisi and the removal from government of the Muslim Brotherhood. The outcome may not be exactly what was hoped for when the protesters gathered in Tahrir Square in Cairo three and a half years ago, but there is order in the streets. Unfortunately that is not the full story. Egypt is financially broke and dangerously dependent on the insecure generosity of the Gulf states. The risk of violence has killed the tourist industry, which was a major source of revenue and employment. Living standards have fallen and Egypt now faces a profound crisis with a shortage of energy, water and food. Read more

Last week I wrote about the forthcoming independence referendum in Kurdistan. To move from events there to what is happening in Scotland is a surreal experience. In Erbil the vote will be a deadly serious matter which could create a new country for a nation which as they say has no friends but the mountains having been a victim of international betrayal and cynicism for centuries. There is no knowing whether the Kurdish referendum will end in triumph or tragedy. In Edinburgh what should be an equally serious debate about breaking the relationship with the rest of the UK is now close to a farce. Read more

Flying east over the mountains into the new international airport of Erbil, the administrative capital of Kurdistan, you are conscious of entering history. Times past – how many wars just have been fought around the citadel in Erbil – one of the oldest known settlements in continuous occupation in the world – over its 5,000 year history? But also current history because what is happening in Erbil now could reshape not just Iraq but the rest of the Middle East. And, almost incidentally, the world oil market. Read more

Premier Li Keqiang of China is due in the UK this week. Despite all the challenges and potential disagreements there is scope for much closer cooperation around joint work on big issues. Energy should be at the heart of the discussion. Read more

By common agreement the situation in Iraq is dangerous and deteriorating. By similar common agreement there is no appetite for international intervention to do anything about it. Neither the US or Europe or anyone else will be sending forces into the besieged cities Mosul or Kirkuk. After more than a decade of unsuccessful wars in Iraq and Afghanistan, there is no public or political support for engagement anywhere – not in Syria, Libya or now in northern Iraq. Though totally understandable, I think this is profoundly wrong and very dangerous. Read more

The decline of North Sea oil and gas production continues. The trend is now a problem not just for the Scottish Nationalists but also for the UK Treasury and the 450,000 people who work in North Sea related businesses. The deplorable thing is that the decline is unnecessary and could be halted. Read more

Week by week Scotland seems to slip away. The reaction to the fiasco at the CBI demonstrates just how sensitive business is to involvement in politics. But the future of the United Kingdom is a matter on which business should have a strong and clear voice. In its absence the momentum behind the cause of independence will grow. Read more

Readers will be familiar with the issue of shale gas - its potential to change the world energy market and the controversies surrounding its development. But you might be less familiar with tight oil – oil from shale rock which can also be extracted by hydraulic fracturing. That is the next story and its development particularly in the UK will be every bit as controversial. Even the publication of the initial basic survey of the resources in place is being held up by political nervousness. Read more

Putin at the launch of the Russian section of a Russia-China oil pipeline in 2010. (Alexey Druzhinin/AFP/Getty)

As well as demonstrating the courage of Ukraine’s people, the one thing that the country’s political crisis of the past few weeks has made clear is the weakness of Russia. President Vladimir Putin likes to present his country as a reviving world power but it is trapped by its own dependence on oil and gas.

The threats and sabre-rattling will no doubt continue. Russia may be able, and should perhaps be allowed, to keep control of the Crimea and its black sea naval base at Sevastapol – though history does suggests that current events are simply sowing the seeds of another long-running conflict there, not least with the Tatars.

Beyond that, however, Moscow is in no position to confront Europe or even the new government in Kiev. The Ukrainians must not allow themselves to be provoked by an Emperor who has no clothes. Read more

A cold wind of economic reality is blowing in from the North Sea. The days in which offshore oil and gas production could provide easy revenue to support public spending are over. Development of the area’s remaining reserves will only thrive if the tax regime is completely rewritten, with the tax take drastically reduced. Politicians in London and Edinburgh should accept this reality rather than pretending that we still living in the glory days of the 1980s. Read more

Globalisation is incomplete. Markets are open, but in most sectors corporate ownership is still dominated by companies from one side of the Atlantic or the other. This is becoming anachronistic and is set to change.

Nowhere is this more true than in the oil and gas business, where the international market is dominated by what used to be called the Seven Sisters. The formation has changed. Mobil, Amoco and Gulf have gone but the group remains recognisably similar to what existed 80 years ago and still led by BP, Shell, Exxon, Total and Chevron. The only state company that has been truly successful and which can seriously be added to the list is Statoil. The rest of the state companies remain very much creatures of the nation state in which they were established. Read more

Later this week the management of Royal Dutch Shell will finally explain why it has issued a profits warning only 12 weeks after its last formal statement to the market. Investors are waiting for a full and detailed presentation on Thursday. Anything less will reinforce the impression that there is a governance problem which has left top management and directors out of touch with the operations of the business.

Profit warnings are serious things, which means this is quite different from the normal public relations tactic of shovelling all the problems on to the back of an outgoing chief executive, and giving his successor a low baseline from which performance can only improve. Surely a company as serious as Shell is not playing that game? Read more

The fact that the Arab spring did not produce a sudden transformation of the Middle East and north Africa into fully functioning pluralist secular democracies is hardly surprising. Expectations on that front were very naive. But the wave of change is beginning to transform something else – the border lines which were drawn a hundred years ago as the spoils of the Ottoman Empire were divided among the allies. The process will be long and painful but out of it will come new countries. Outsiders including investors may not be able to determine the outcome but they cannot ignore what is happening or simply cling to the past. New realities have to be recognised and Libya is as good a place to start as any. Read more

One of the more regrettable conclusions from 2013 is that the Arctic cannot and will not be preserved and kept pristine from the process of economic development. The resource base is too substantial, the opportunity too tempting. As in the Garden of Eden the apple cannot be left untouched. Development is starting and will continue. The next question is whether it can be managed properly. Read more

Let us start with two questions. Which of the following energy companies is planning to sell assets next year – Shell, ExxonMobil, BP, Total, Statoil, ENI? Answer – all of them. Which of those companies is planning to cut capital expenditure in 2014? Answer – all of them, with the sole exception of Exxon which is planning a modest increase. If you extend the list of companies the answers are the same.

Taken together these answers reveal some interesting points about the oil and gas industry. Most companies now feel they have been over investing – either by doing too much or by allowing costs to rise out of control. Returns have not matched the growth in spending. Shareholders are restive. Asset sales are normal business – every big company builds up a tail of marginal, non-strategic assets. But the scale of current plans goes beyond that. The tail has gone and the assets for sale now are in most cases attractive commercial propositions. Read more

Ukraine, to coin a phrase, is a far way country of which we know little. Its geographic misfortune is to be the buffer state between western Europe and Russia. With all eyes on Iran, too little attention is being paid to the fact that Ukraine is being forced back under the control of the Kremlin.

This week’s events send a very negative signal to western investors who had hoped to develop Ukraine’s extensive shale gas resources both for local use and for export to other parts of eastern and central Europe. The assertion of Russian power over President Viktor Yanukovich and Prime Minister Mykola Azarov will also send a shiver across the other former Soviet satellite states in eastern Europe. Some, like Poland and Romania, are safely within the EU. Many others are not, to say nothing of the major energy producers around the Caspian Sea, such as Azerbaijan and Kazakhstan. Read more

The US energy sector must be bitterly annoyed with President Obama. The deal with Iran agreed in Geneva over the weekend does not lift sanctions but it sends an unmistakeable signal that the door to doing business is opening again. Many many companies around the world will be flying in, most with the full support of their Governments. The only ones who won’t and can’t are American companies forced to respect to the letter every sentence of the sanctions legislation until it is repealed. Read more

Two years and one month after the death Muammar Gaddafi, the continuing power struggle in Libya is beginning to affect the oil market. So far the impact is slight, indicating the extent of OPEC’s spare capacity. The bigger risk will come if the instability spreads from Libya across North Africa or to other parts of the region. For investors, events in Libya are a reminder that any investments in the Middle East carry a large political risk. Read more

Nowhere is the failure of the talks between the international community and Iran over Tehran’s nuclear programme more welcome than in Riyadh. A fudged deal would have given legitimacy to the government in Tehran and confirmed the weakness of the strategic alliance between Saudi Arabia and the US.

More important still, it would have raised the prospect of the Saudis having to make serious cuts in oil production and exports to support the price of the output from Opec, the oil producers’ cartel. These are cuts the kingdom can ill afford. But, sooner or later, Iran will be on its way back into the oil market. Read more