British Government Signs A Deal For New Nuclear Power Plant

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The election is over and against all expectations we have a clear result. When it comes to energy policy, however, the agenda will be set not by what the Conservative party has promised in its manifesto but by external events. A number of looming issues are already obvious and the government will have no control over most of them.

The first is the further postponement of the plans for nuclear development starting at Hinkley Point in Somerset. Two new reactors capable of supplying some 7 per cent of total UK electricity demand are planned. The first was originally supposed to be on stream in time to cook Christmas dinner in 2017. But despite the prospect of a lavish price — index linked for 35 years regardless of what happens to global energy prices – and £10bn of even more generous financial guarantees, funding for the investment required is not in place. The reluctance of investors to commit will not be helped by the technical problems in the reactor vessels, which are now under investigation by the French nuclear regulator. This problem has widespread implications for the companies involved (Areva and EDF) and for nuclear development in many countries across the world, starting with France itself. Read more


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Can a country with an inflation rate of 70 per cent and a shortage of such basic goods as milk and toilet paper really be so dangerous to the US that President Barack Obama is required to declare a national emergency in response to the extraordinary threat to national security that it poses? Apparently so. That is what happened in March and although Mr Obama has now backtracked by saying that Venezuela isn’t really a threat, the executive order has not been rescinded.

More importantly, the damage has been done. The clumsy American approach has reinforced the crumbling authority of the government of President Nicolas Maduro. The US has been designated the national enemy once again and blamed for everything that is going wrong. The Venezuela government opened 200 signing booths and collected a supposed total of 10m signatures for a statement protesting against American imperialism. The result is that the prospect of serious reform in Venezuela has been put back. Reform is much needed, not least in the beleaguered corrupted corporate structure of PDVSA, the state oil company. Read more

Whitehall Prepares For Major Cuts Under Coalition Government

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Imagine that you are a minister with an important decision to take. The decision is finely balanced and you have your doubts about costs and the commitments on deliverability. You are inclined to say no. But hold on – the firm involved employs your wife as a consultant which brings in a helpful £ 40,000 a year. If you take the wrong decision the consultancy is very likely to come to a rapid end.

Or consider that you are a moderately senior civil servant who can see your career coming to an end as one round of spending cuts follows another. There is a company, already successful, and if it expands further it will need experienced staff. You like them and they like you, as they have made clear over a couple of very pleasant lunches. The only slight problem is that in order to expand they need a decision taken on which your advice is likely to be decisive. Read more

BRAZIL-ROUSSEFF-CONSTRUCTION-SALONThe corruption investigation initiated by the Brazilian prosecutor, Rodrigo Janot, into 54 individuals including leading politicians is just beginning. The allegations behind the inquiry concern the diversion of huge amounts of money from Petrobras, the state oil company.

No one know how much money is involved, which means that no one knows what the company is now worth.

Petrobras’s share price has fallen by 44 per cent over the last year, with some some $90bn wiped off the value of the company in just six months.

Part of that is due to falling oil prices, but more is the direct result of the company’s internal problems. There are no signs yet of the ambulance-chasing investors who like to pick up undervalued assets for a song piling in. They must think, probably with good reason, that the worst is yet to come.

In the US a class action law suit has begun. The scandal could yet bring down the Brazilian government, not least because for most of the period when the corruption is said to have happened Dilma Rousseff just happened to chair Petrobras. It could also be a deep embarrassment for the audit firms who seemed to have missed what was happening.

The question for the moment is what happens now to Petrobras itself. Read more

Saudi Arabia's newly appointed King Salman meets with US President Barack Obama

Saudi Arabia's newly appointed King Salman meets with US President Barack Obama  © SAUL LOEB/AFP/Getty Images

Having talked vaguely for many years about the possibility of developing nuclear power as an alternative source of energy, it seems that Saudi Arabia under its new leadership may finally be taking steps towards what would be one of the world’s largest nuclear building programmes over the next decade. Read more

The urgent attempts by Europe’s leaders to negotiate a solution to the crisis in Ukraine represent an open acknowledgement that the policy of sanctions has so far failed. Mr Putin continues to destabilise the Government in Kiev and to undermine its authority in the east of the country. They may also reflect a growing realisation that sanctions are in danger of backfiring. Greece faces a serious debt crisis but at least the debate on how to resolve that crisis is now being held in the open. we know the options and the risks. In Russia, however, there is another debt crisis which is going unmanaged and which could easily get out of hand. Read more

News has diminished value if it comes from far away. Just as terrorism gets more coverage if it occurs in Paris, much of the analysis of the consequences of falling oil prices has focused on the US shale industry and the North Sea. But spare a thought for some of the other losers, starting with Nigeria where the fall will not only further damage a fragile state but will pose risks which could affect all of us before too long.

It would be good to be able to be optimistic about Nigeria — a country which in the past has been listed as one of the possible economic powerhouses of the 21st century. Remember MINT (Mexico, Indonesia, Nigeria and Turkey), the successor grouping to the BRICS (Brazil, Russia, India, China and South Africa)? Great acronyms invented by the always imaginative Jim O’Neill, but in both cases the groupings look a little shaky and performance is well short of promise. Nowhere more so than in Nigeria, which provides a sharp reminder that even if Opec is broken, oil is still vulnerable to political upheaval. Read more

Russian president Vladimir Putin greets Chinese president Xi Jinping at the Apec meeting in Beijing last month © AFP

Russia’s President Vladimir Putin heads to New Delhi next weekend and will sign a deal with India on energy supply, marking the latest step in a remarkable set of developments that will reshape the international energy business and particularly the natural gas market for years to come. Read more

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The deal reached at last week’s European summit on climate change will satisfy no one. The non-binding Europe-wide targets place no responsibility on national governments and provide none of the confidence necessary for the essential investments in supply and infrastructure that are yet to be made. Poland may be the short-term winner – reflecting a clear shift in European decision-making to the east – but the summit failed to address the hard reality that current policies are not working. A new approach is needed.

The fractious debate which led up to the summit should be understood as marking the end of the “consensus” on energy policy established in 2008. Anyone wanting to understand the details of the debate should read the excellent summary produced by Carbon Brief which spells out the positions of the key states on major issues. Read more

A wind turbine complex on the Zhemo Mountain in the outskirts of Dali, in China's southwestern province of Yunnan (LIU JIN/AFP/Getty Images)

A wind turbine complex on the Zhemo Mountain in the outskirts of Dali, in China's southwestern province of Yunnan © LIU JIN/AFP/Getty Images

The starting point for anyone wanting to understand how the world’s energy markets will develop over the next 20 years must be China. Companies, bankers, investors and those of us who try to follow the industry will have to shift our attention away from local circumstances in Europe or the US. What happens in both continents is interesting, but on the world scale it pales into insignificance. Even a very radical change in the European market — a real carbon price or a single common energy policy, or indeed the development of French and German shale gas — would be as nothing compared to the transformation that is coming, as China becomes the dominant force in every part of the energy business. Read more

The Saltire national flag (Ian Forsyth/Getty Images)

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Devolution max — the home rule option endorsed by the three UK party leaders — could just encourage Scots to vote No next Thursday. For many in the business sector, however, including the energy companies, the idea looks half baked; a proposal adopted in panic because of a solitary poll showing the Yes campaign ahead. The consequence will be an extended period of uncertainty with a new question mark over every prospective investment in Scotland. Read more

A sign pointing to Whitehall (Peter Macdiarmid/Getty)

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Applications close this week for the newly created post of chief executive of the UK civil service. The general reaction to the advertisement of the vacancy has been muted, to put it mildly, with a much repeated view that the job is un-doable.

The role is certainly not an easy one – think of it as Yes Minister with knives – but the conventional wisdom is too negative.

Whitehall badly needs reform and this could be a good way to drive forward the changes which have been so elusive over the past few years. But if they really want change and a modern, professionalised civil service, ministers will have to adapt as well. Read more

William Hague (L) and Nato Secretary General Anders Fogh Rasmussen unveil the logo of the Nato Wales' summit (JOHN THYS/AFP/Getty Images)

The unveiling of the Nato Wales' summit logo (AFP/Getty)

In ten days time Nato’s leaders will gather in Wales for their bi-annual summit. There is certainly plenty to discuss at Celtic Manor – Ukraine, Iraq, Afghanistan and of course the continued inadequacy of defence spending which is leaving the military in many countries unable to fulfill all their stated commitments.

But tucked away in one bland paragraph of the draft communiqué now being circulated is a brief reference to energy security. Let’s hope there is substance behind the words.

Energy policy remains strictly a matter for national governments but the risks arise from the fact that many countries are dependent on imports for large proportions of their daily supplies. Forty years ago the risk came from the growth of oil imports and a reliance on Opec suppliers. Now the risk is an interruption of natural gas supplies. Gas has become progressively more important as a source for electricity production and for heating. The US and Canada are well supplied thanks to the development of shale gas, but Europe is not. Indigenous production in the UK and Dutch sectors of the North Sea has fallen sharply and Europe has slipped into a position where 70 per cent of its daily imports of gas come from RussiaRead more

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

Flames from a gas well 40km north of the Qatari capital Doha (KARIM SAHIB/AFP/Getty Images)

Flames from a gas well 40km north of the Qatari capital Doha (KARIM SAHIB/AFP/Getty Images)

Global trade in liquefied natural gas has doubled over the last decade and looks set to overtake pipeline gas trade before 2020. LNG is the only viable way of supplying most of the growing requirements of China and India, and the most obvious way of diversifying European supplies away from dependence on Russia. The growth in trade, however, also puts the spotlight on the sources of supply. Central to everything is the tiny Middle Eastern emirate of QatarRead 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

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Why are renewables moving so slowly? Of course the output of renewable energy is growing in absolute terms and in terms of market share in most countries in the world. But the growth starts from a very low base. On the International Energy Agency’s latest numbers, renewables provide just 13 per cent of total global energy needs at the moment, and will provide only 18 per cent by 2035. If traditional biomass is excluded the figures are 7 per cent and 14 per cent.

The problem is cost. Electricity produced from offshore wind and solar costs somewhere between 50 and 100 per cent more per MW/hr than power from natural gas and, with some variations, will continue to do so for the next decade unless one makes the assumption that gas prices are going to increase. Onshore wind is cheaper and in the US in particular is the closest of all the renewables to being competitive without subsidies. Read more

Storms ahead? Photo by Getty

Spare a thought on this bright summer’s day for two men struggling to reconcile truth and political reality.

Oliver Letwin, Cabinet Office Minister in the UK government and Jo Johnson MP, head of the No 10 policy unit, have the task of writing the first draft of the Tory Party’s manifesto for the election next May. The manifesto will have to include something on energy policy.

Both Mr Johnson and Mr Letwin are decent men who can generally be relied upon to speak and act honestly and honourably. That is where their problems begin. On energy policy how can they tell the truth about a policy which by common consent – among business, academics and the serious NGOs – is a costly failure? Read more