Energy policy

The Mosul Dam on the Tigris

The Mosul Dam on the Tigris  © Getty Images

The understandable focus on Syria, in particular on the horrific situation that has unfolded in Aleppo over the last few weeks, has distracted attention from the potentially more dangerous developments in Iraq.

Ten years after the execution of Saddam Hussein and five years after the official exit of American troops that was supposed to mark the end of a conflict which began with the US invasion in 2003, Iraq remains a war zone. The unrelenting bomb attacks on both military and civilian targets demonstrate the defiance of Islamist militants. As the battle to retake the strategic northern Iraqi city of Mosul – held by Islamic State forces since 2014 – comes to a head the risks are very high, with implications that will shape not only the future of Iraq itself but also the international oil market. Read more

Saudi Deputy Crown Prince Mohammed bin Salman

Saudi Deputy Crown Prince Mohammed bin Salman  © Getty Images

The downbeat mood of the times was confirmed before Christmas by the publication of the Bloomberg Pessimist’s Guide to 2017. The guide lists some of the things that could go badly wrong across the world in 2017. Last year the Guide predicted both Brexit and Donald Trump’s election as US president. This year the possibilities range from the collapse of the Mexican economy after Mr Trump pulls the US out of Nafta to the election of Marine Le Pen as the next president of France. Some of the predictions, such as California’s decision to declare independence from the US (Calexit), to the forced departure of the Saudi Deputy Crown Prince Mohammed bin Salman could be seen as ambivalent outcomes that many would welcome. Pessimism, however, has its limits and so here, are a few notes of hope for the New Year. As ever, I have focused on the core issues of energy but politics are never far away. Some of the possibilities listed seem to me highly likely to occur to one degree or another. Others are long shots – but then Donald Trump was a long shot a year ago. Read more

Amber Rudd, home secretary, speaking at the Conservative party conference

Amber Rudd, home secretary, speaking at the Conservative party conference  © Getty Images

A few weeks ago I argued that Brexit would have very little impact on the energy sector in the UK or Europe. Energy prices are decided by the international market, the energy mix has always been dictated by national governments and there is no apparent appetite for Britain to diverge from the climate policies and emissions targets set by the EU with its full support. All that remains true, but circumstances have changed. A new factor has emerged in the Brexit debate that could do great damage to the country’s sector.

The issue was expressed in chilling terms in two speeches at the Tory party conference this month. Theresa May, prime minister, said: “If you believe you’re a citizen of the world, you’re a citizen of nowhere. You don’t understand what the very word “citizenship’ means”.

 Read more

The new, pragmatic Saudi oil minister, Khalid al-Falih

The new, pragmatic Saudi oil minister, Khalid al-Falih  © Getty Images

Two years ago, the Saudi government put in place a strategy intended to protect its position in the world oil market. The plan was to increase their production to the point where prices fell. The aim was to squeeze other producers, in particular the US shale industry, and force them to cut output. The belief then was that the US industry needed a price of around $90 a barrel to keep going. Once prices fell below that level, the Saudis thought they would have protected their market share, and in the process, sent a sharp warning to others, particularly the Iranians who want to restore their production following the nuclear deal with the US.

The strategy has not only failed but has caused serious damage to the Saudis themselves. Prices fell much further than anyone anticipated because other participants in the market did not respond as expected. The Saudi increase in production has not destroyed the US industry – American output has fallen only marginally despite a 70 per cent drop in prices. The kingdom simply underestimated the resilience of the US producers and their ability to cut costs. Read more

With the UK government's green light for the Hinkley Point nuclear power project came the announcement of a new national security test for would-be investors in infrastructure

With the UK government's green light for the Hinkley Point nuclear power project came the announcement of a new national security test for would-be investors in infrastructure  © Getty Images

For most of the last half century, energy security has been defined in terms of Opec boycotts, the risk of the Strait of Hormuz being closed to oil tankers and the dangers of Russia cutting off gas supplies through the European pipeline network. In the last few years, however, much has changed. Now, energy security concerns are focused internally and the risks are concentrated around the networks that sustain complex modern economies. The networks are physical but they are controlled by electronic systems. The greatest threat on this updated analysis is that hostile forces – whether terrorists or state-sponsored cyber specialists – could penetrate and disrupt or destroy those systems. These fears are beginning to reshape public policy and that will affect how the energy business develops across the world. Read more

Hillary Clinton

Hillary Clinton  © Getty Images

Is it mad or deeply cynical to say that the outcome of the US presidential election doesn’t really matter for the energy sector? Surely there are big differences of belief between the two candidates, reflected in their stated policy positions? Surely their supporters are giving their votes and money to bring about changes they believe in? True, but if you take a step back from the noise and fury of the campaign it is worth asking whether the sector will be very different in 2025 if Hillary Clinton prevails or if the recent drift in the polls continues and President Donald Trump is inaugurated on January 20. Read more

The Azerbaijani president Ilham Aliyev (left) with John Kerry, US Secretary of State, earlier this year

The Azerbaijani president Ilham Aliyev (left) with John Kerry, US Secretary of State, earlier this year  © Getty Images

For a few years in the 1990s, Azerbaijan looked like one of the world’s lucky countries. Freed from Soviet dominance, rich in resources, especially oil and gas, and immune to the radical and extremist Muslim fundamentalism that was spreading from Saudi Arabia and other parts of the Middle East, the country seemed to have a lot going for it. Twenty years later the situation has deteriorated badly and looks likely to get worse. Economic success is being destroyed by rampant corruption. Constitutional changes this autumn will entrench the power of President Ilham Aliyev, who rules Azerbaijan as if it were a family estate. What went wrong and what can be done? Read more

Theresa May, UK prime minister

Theresa May, UK prime minister  © Getty Images

I have the sense that Mrs May is a grammar school pupil who likes to get a good mark and to be told she has done well. As a grammar boy myself I recognise the psychology. On Hinkley Point, whatever the inevitable noise from those who dislike the headline outcome, she deserves praise. So “VG 8½ out of 10. A good start to the term. Keep it up”.

There are several illuminating aspects of the latest announcement on Hinkley Point.

First, Mrs May has faced down heavy civil service pressure to reconfirm the deal as provisionally agreed by David Cameron’s government. The willingness to review and now amend the project is a signal that she is prepared to challenge the legacy she inherited from Mr Cameron and his chancellor George Osborne. It is impossible to understand the current government and its policies without appreciating the depth of contempt there is for the public school drinking club circle symbolised by the Bullingdon Club. When the clique took power in Downing Street, they were openly contemptuous of Mrs May and other Tories who did not share their privileged background.. The UK has a new government and scores are being settled. Read more

  © Getty Images

The buzz word of the moment in the energy business is “transition”. It provided the theme for the ONS conference and exhibition in Stavanger in Norway two weeks ago as well as the title for several recent consultancy studies.

Unsurprisingly, transition is the main concept in many of the corporate strategy reviews now being undertaken by some of the leading energy producers and utilities. The meaning of the word, however, is loose and variable. It is not even clear whether some of the big operators in the market understand the breadth of the transition that is already taking place and the extent to which it could reshape the prospects for their businesses.

The transition is normally discussed in terms of the move from hydrocarbons to lower or zero-carbon sources of energy supply. Driven by the fear of climate change and by the adoption of various public policies, the shift has been under way for two decades and more. The Paris conference at the end of last year provided new impetus, even if the end product fell somewhat short of a global deal backed by law and a carbon price. Different countries are moving at different speeds, and the result is a gradual shift in the energy mix, which now promises to be accelerated by advances in technology. Low carbon sources of supply are falling in price and some are within reach of the point where they can be competitive without subsidy. Read more

  © US Energy Information Administration

The attempted coup in Turkey on July 15 may have failed but its consequences are still playing out. Some 40,000 people have been detained as suspected conspirators – so many in fact that ordinary convicts are being released to make room for them. Tens of thousands more have been suspended from their jobs under suspicion of being sympathisers. The trawl for the guilty has reached institutions a long way from the military front line including the energy ministry, where 300 staff have been suspended along with 25 “experts” working for the sector’s regulator EPDK. If it weren’t so serious for those involved you could be forgiven for laughing at a president who sees the number crunchers who set the tariffs for consumers of gasoline and electricity as a threat to his regime. Read more

Theresa May, UK prime minister

Theresa May, UK prime minister  © Getty Images

All new leaders face tests. Do they mean what they say? Will they flinch or give way under pressure? For a prime minister the tests can come from any direction — from the trades unions, from the Kremlin, from political opponents, from dissident backbenchers. Theresa May’s first test as British premier has come from the Chinese in the form of a remarkable article in the Financial Times.

Liu Xiaoming, the Chinese ambassador to the court of St James, does not like the idea that the new UK government should be reconsidering the plan to build a nuclear power station at Hinkley Point in southwest England, and by implication the idea that Chinese companies should own, build, operate and control a further nuclear plant at Bradwell in Essex, in the east of the country.

The article is puzzling. What sort of diplomat negotiates on serious issues through the media? Wouldn’t they normally work discreetly to identify the cause of the problem — if there is one — and then seek to find a quiet solution? Issuing threats is not very diplomatic. Indeed, the article reads as if it had been written by a PR firm instructed to put pressure on ministers. One wonders how Beijing would react if the British ambassador there were to write an article demanding that Hong Kong be allowed to choose its own leaders. Read more

This could be a chance to accelerate projects from lower cost nuclear providers, writes Nick Butler Read more

The French economy minister Emmanuel Macron visits the Civaux nuclear power plant operated by EDF, which is 85% owned by the state

The French economy minister Emmanuel Macron visits the Civaux nuclear power plant operated by EDF, which is 85 per cent owned by the state  © Getty Images

The saga of Hinkley Point goes on. The UK government is right to delay approval of a project in which it has lost confidence. The EDF board may have approved the deal to build a new nuclear power plant in Somerset, southwest England, but the obvious risks were such that the only prudent response is to pause and to reconsider all the options. The government must be right in wanting to avoid locking the UK into an expensive source of supply at a time when the costs of every alternative — including natural gas, solar and wind — are falling. In the post-Brexit world competitiveness is critical.

Theresa May, the prime minister, has also appreciated that approval of the project is now a UK bargaining chip in Britain’s relationship with the French. Cancelling the Hinkley project would destroy the thousands of jobs promised along the supply chain – most of which is located in France. The pressure is now on President François Hollande, who faces a very difficult re-election campaign next year, to force EDF to come up with a much better offer. Read more

The board of EDF meets in Paris on Thursday morning to discuss its long-planned investment in a new nuclear power station at Hinkley Point in Somerset, southwest England. There is speculation that the meeting will come to a definitive decision after years of delay. If the outcome is to go ahead, the French company has work to do in rebuilding trust. So what should investors and consumers be looking for ?

To begin with, it is important to put aside the fanciful idea that the announcement is simply a matter of French politics. Most of the jobs created by Hinkley will be in the supply chain in France and the argument is that President François Hollande needs to ensure that they are not put at risk before the presidential election next year. Read more

The figure of Christo Redentore above Rio's Maracana stadium, site of the Olympic opening ceremonies

The figure of Christo Redentore above Rio's Maracana stadium, where the Olympics will open  © Getty Images

With so much attention focused on the questions of Brexit and the American presidential election it is miss the problems of other parts of the world. Latin America is a prime example of a continent easily forgotten. But while there may be a sort of peace agreement between the government and the rebels in Colombia, in Venezuela the economy continues to disintegrate and in Brazil the whole structure of society appears to be unravelling.

I will look at Venezuela in a later post. For now let’s consider Brazil. Over the next few weeks international audiences will be swamped with TV coverage presenting the glamorous image of the Olympics, which Rio is hosting for the first time. But behind the pictures of the Christo Redentore statue and no doubt some stunning performances from the athletes, there is a dark side to a country crippled both by a recession as bad as anything seen in the last century and by a deep loss of confidence in the institutions of government and commerce. Read more

Greg Clark leaves 10 Downing Street as the new business, energy and industrial strategy secretary

Greg Clark leaves 10 Downing Street as the new business, energy and industrial strategy secretary  © Getty Images

A changing of the guard in an organisation is a good time at which to pause and reconsider every aspect of strategy. The mistakes of the past can be admitted, entrenched but outdated positions can be quietly left behind and altered circumstances accepted. That is what should happen now in the UK in relation to energy policy. Read more

George Osborne visiting the Montrose Platform in the North Sea

George Osborne visiting the Montrose Platform in the North Sea  © Getty Images

At one level, the UK’s exit from the EU should have very little impact on the energy business. The price of oil, gas and coal is set by international markets not by the institutions in Brussels. The EU has never had the authority to determine the energy mix of individual member states and even under the latest plans for an “energy union” different countries would retain in full the ability to choose whether they want to develop shale gas or to eliminate nuclear power. Read more

Celebrations in Tahrir Square after the ousting of Egypt's President Hosni Mubarak in February 2011

Celebrations in Tahrir Square after the ousting of Egypt's President Hosni Mubarak in February 2011  © Getty Images

Remember the Arab Spring and the heady promise of freedom and peace in the Middle East? Many normally sensible observers were carried away by the excitement of the internet-led revolution in Tahrir Square and across the region. Now, a similarly happy transformation is promised in the energy market as the world moves away from oil, gas and coal. The transition is certainly coming but its implications will be as disruptive and dangerous as those of the Arab Spring. We should be prepared for the consequences rather than misled by wishful thinking.

The shift to a low-carbon energy system will be smooth, orderly and beneficial for most of the global economy: that is the view of a new set of papers from the Global Agenda on the Future of Oil and Gas – a group set up by the World Economic Forum, the organisers of Davos. Unfortunately, all the evidence so far points in the opposite direction. The shift may be beneficial in terms of the world’s environment, but economically and politically the result could be dramatically destructive. Read more

A solar farm in France. A European common grid would help overcome the problem of intermittancy with renewables  © Getty Images

With a few honourable exceptions, the debate on British membership of the EU has so far consisted of a contest between the outs and the half outs – that is, those who want Britain to leave completely and those prepared to stay only if the country is protected from further incursion by immigrants or European policy makers. The other approach – active engagement to change and improve what happens – has barely been articulated. In several areas positive engagement is much needed and offers substantial benefits. Energy policy is a good place to start.

The EU has only limited competence when it comes to energy policy. The mix of fuels and the tax system under which they are traded remain matters of national choice. That isn’t likely to change. It would be a waste of time to try to force France to accept fracking or to tell the Germans that they are going to have to keep nuclear power. Any attempt to centralise such emotive decisions will fail. Read more

Construction of the EPR at Flamanville, northwest France

Construction of the EPR at Flamanville, northwest France   © Getty Images

The cloud of doubt around EDF’s long-planned new nuclear plant at Hinkley Point in Somerset continues to grow.

The final investment decision has been delayed yet again. The start up date has been put back to 2026 – nine years behind the original schedule. A new contingency, amounting to £2.7bn, has been added to the cost of the project.

Now, in a remarkably frank interview the French energy minister, Segolene Royal has said that the company may have been “carried away” by its enthusiasm for the project and has joined the chorus of internal staff and engineers in warning of the risks to EDF’s finances from going ahead. But although Hinkley inevitably gets all the attention in the British press, EDF’s real problem is to be found in the half constructed plant at Flamanville on the Cotentin Peninsula on the other side of the English Channel. Read more