A look at how a climate change deal could affect oil majors Read more
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A look at how a climate change deal could affect oil majors Read more
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
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
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
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
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
Almost all the major oil and gas companies I know are undertaking substantial reviews of their policies on climate change. That is true in Europe and in the US. Why now, and what will be the outcome ?
First, it is important to stress that the rethinking is not being driven by the recent attacks on the companies. Describing Shell and its chief executive Ben van Beurden as “narcissistic, paranoid and psychopathic” is just childish and reduces what should be a serious debate to playground abuse. The reviews began before the latest media campaigns and are driven by corporate strategic concerns. Read more
The signals are clear – but contradictary. China has embraced the concept of climate change and is allowing officials to discuss the risks openly. Two weeks ago Zheng Guogang, head of the Chinese metereological administration warned of droughts, rainstorms and the threat to major infrastructure projects. He could not have spoken without permission.
But at the same time economic growth remains the prime objective of Chinese policy and growth requires the consumption of ever greater volumes of primary energy, led by coal.
Demand may have slipped by a small amount last year but new coal plants are still being opened. Coal consumption in China has doubled in the last ten years. China is now the world’s largest economy and consumes more than half of all the coal used worldwide each year. Within two decades, even on quite modest assumptions about economic growth it will have an economy twice the size of the US with personal living standards equivalent to those of the US in 1980. But it will still be an economy powered by coal – with demand on current policies up by another 20 to 25 per cent according to the forecasts produced by the International Energy Agency. Read more
I have never given much credence to the idea that an international agreement on climate change capable of establishing a global carbon price was likely to be reached – either in Paris this December or anywhere else – anytime soon.
If Europe, which is way ahead of the rest of the world when it comes to climate policy, can’t set its own carbon price, what hope is there that the US, India and all the others will?
As a result I’ve never taken seriously the view that a vast amount of energy investment by the oil and gas companies will be left stranded as carbon-generating fuels are priced out of the market. The argument has always felt like wishful thinking. If everyone obeyed the Ten Commandments there would be no prisons and the police forces of the world would be redundant.
But, and it is a very important qualification, change doesn’t come just through legislation and international treaties. Technology is arguably much more important and there is growing evidence that some fundamental changes are coming that will over time put a question mark over investments in the old energy systems. Read more
Given the seriousness of the messages contained in last week’s report from the International Panel on Climate Change, one might expect some sense of urgency around the search for solutions. Regrettably, that is not the case. Governments and campaigners especially in Europe seem rigidly focused on pursuing the holy grail of a global deal, under which the world’s major economies would move together in a synchronised process of decarbonisation. The futility of that approach is evidenced by the fact that Europe itself has been unable to set an effective carbon price and has done almost nothing to advance the technology of carbon capture and storage (CCS), which is one of the few ways in which emissions could be managed. Read more
At a painfully slow speed the consensus on climate change is building. There is a human impact on the climate as a result of greenhouse gas emissions. Those who seriously question this view are now reduced by the sheer weight of the evidence in the new Intergovernmental Panel on Climate Change report to the level of the eccentrics who maintained that the earth was flat long after the reality had been proved. Read more
Those despairing of the lack of progress in managing climate change or the absence of practical and realistic energy policies in so many countries should take a look at the work being done by some of the world’s great universities.
In Durham, the Energy Institute has focused on the societal aspects of changes in energy technology. One of their main projects is to look at the role and potential of smart grids. Thanks to advances in IT, smart grids now offer the prospect of managing the distributed production and use of power in ways which will transform the economics of the whole sector. Smart grids create automatic processes which can help both businesses and households not only manage what they use but also to become producers themselves –selling power into the grid. Read more
Finally, the UK’s energy policy is taking shape after months of confusion. At its heart is a realisation that, while some decisions are urgent, others can wait. Time and timing matter. The approach is practical as well as political but it won’t suit everyone. And it leaves the biggest issue of all – climate change – unresolved. Read more
The comments in President Obama’s second inaugural speech on climate change have encouraged campaigners to think that something substantive is about to happen. It is always good to be optimistic, but the hard question is what exactly is he going to do and what will it achieve. Read more
A few days after Typhoon Bopha tore through the Philippines in December, leaving hundreds dead and thousands homeless, a representative from the battered country began to speak at the UN climate talks in the Qatari capital of Doha.
What does 2013 hold for the UK’s Climate Change Committee? This worthy body was established in 2009 and is responsible for advising the government on emissions targets and reporting to parliament on the progress being made on reducing greenhouse gas emissions.
The remit sounds reasonable but the reality is that the committee has been written off in Whitehall. The committee’s advice is blatantly ignored and its chief executive, despite his obvious knowledge and capability, has been dismissed by no less than the prime minister as too inexperienced and unqualified to be appointed as permanent secretary of the energy department. For a serious public servant that is pretty damning. Read more
Jim Yong Kim, World Bank president, has made an urgent plea for action to address the “devastating” risks of climate change as the development body releases a stark assessment of the potential impact of rising global temperatures.
“It is my hope that this report shocks us into action,” Dr Kim said in the foreword of a study the bank commissioned to look at what would happen if the world warmed by 4°C from pre-industrial levels.
Barring a last minute intervention by the Treasury, the UK government will publish its new energy bill within the next few days. As it stands, the bill is a triumph of politics over economics and common sense – a symbolic victory for the Liberal Democrats designed to keep the coalition’s unhappy marriage together.
The problem is that serious investors will not believe a bill that reinforces subsidies to onshore wind, puts no hard numbers on the subsidies necessary for nuclear new build, sidelines the potential of energy efficiency and further technological advances, and completely ignores the issue of energy costs and competitiveness. Read more
Thanks to those who have commented on the post on adaptation to climate change – or at least thanks to most of them.
Just to be clear, I don’t see adaptation as an alternative to emissions reductions but as an essential part of a twin track strategy. We need both. As I said, I can’t see emissions being kept low enough to avoid the risk of an increase of around 2 degree C. That isn’t a statement of what is desirable, but a judgment of the current political reality. I hope I’m wrong, but watching what is happening in the US in particular, I am not optimistic. I will write more on the US situation in the run up to the election. Given my lack of optimism I feel that adaptation is an imperative. But the other track should be pursued as well. If we don’t limit emissions at all, the risk is that the average temperature change could go well beyond 2 degrees. Then we really will be in trouble, especially in terms of food production and the fate of low lying territories and their inhabitants. Read more
Evidence from the American space agency NASA published at the end of July shows the remarkable and disturbing degree to which Greenland’s ice cap has melted. Taken in combination with extreme weather conditions in the US and Asia over the last few months, what is happening in Greenland raises again the unresolved issue of climate change and what should be done to mitigate the associated risks. But the traditional approach of gradually reducing emissions by changing the energy mix may no longer be a viable option. Read more
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