Oil

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

The fate of proposals to reform the Mexican oil and gas industry, now being considered by the country’s lawmakers, matters well beyond Mexico itself. The outcome could reshape the energy sector in a number of important countries. Read more

It seems bizarre to say that a company which will generate cash this year of between $40bn and $45bn has a fundamental structural problem. But the latest results from Royal Dutch Shell show just how weak the correlation between size and performance has proved to be. Capital expenditure is so high that even cash at that level may be insufficient to cover spending and dividends. The company looks lost – a lumbering dinosaur in a world where the prizes go to the quick and nimble. Read more

Carl Icahn’s purchase of a 5 per cent stake in the Canadian company Talisman Energy marks the entry of activist shareholders into the energy business. Could it indicate the beginning of a revolution?

Activist shareholders have a bad reputation, particularly in Europe where they are seen as asset strippers who pull apart good businesses for a short-term gain. That can happen but they can also be very productive in forcing companies to examine very hard what they are doing with their shareholders’ money. Read more

For the first time in more than a century Turkey has the potential to play a crucial role in the world economy. Its geographic position offers the tantalising prospect of the country becoming one of the key transit routes for both oil and gas from four different regions – southern Russia, central Asia, the Middle East and now from the newly discovered gasfields of the eastern Mediterranean. The only question is whether politics and emotions will get in the way. Read more

The moment is coming for a Presidential decision on the Keystone XL project – the extension of a existing pipeline system designed to take over 800,000 barrels a day of crude from the oil sands of Alberta to the refineries on the Gulf coast. A few months ago the betting was that reluctant approval would be given. Now, however, the pipeline looks more likely to be the victim of Washington politics. Read more

The importance of China in the global energy economy can hardly be overstated. Chinese consumption drives the world market prices of oil, gas and coal. According to a new forecast from the US Energy Information Administration, China could well become the largest importer of oil in the world as soon as this autumn. But how secure is the Chinese economy and what would happen to the energy market if the glory days come to an end.?

To illustrate the current reality lets look at a few statistics. Read more