energy

Opposition protestors in Caracas last month amid demands for a refrendum on removing President Nicolas Maduro from power

Opposition protestors in Caracas last month amid demands for a referendum on removing President Nicolas Maduro from power  © Getty Images

After years of decline, the situation in Venezuela is becoming desperate. Could the latest fall in the oil prices provide the tipping point that finally brings to an end the unhappy period of Marxist rule begun by Hugo Chavez in 1999?

In the last two months the oil price has fallen by 20 per cent, ending the hopes of producers around the world that the downward slide of the last two years is over and that prices will soon return to a level that they used to regard as “normal”. For many, the latest fall will be the last straw. Numerous companies have maintained their dividend payments through borrowing. With prices falling again that looks unsustainable. Many, including the state companies, also face hard investment decisions on projects that need higher prices to be viable. With capex requirements outstripping revenue and little prospect of raising more money through rights issues more projects will be postponed or abandonedRead 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

Sameh Shoukry, Egypt's foreign minister, who was visiting Israel last week

Sameh Shoukry, Egypt's foreign minister, who was visiting Israel last month  © Getty Images

The world has discovered a new province rich in energy supplies. Three major discoveries of gas have been made in the eastern Mediterranean over the last few years and there is the prospect of much more being found in areas still to be explored. That makes the region one of huge international interest. The only challenge is getting the gas to the markets in which it will be used, and that is a problem not of geography or technology but of politics.

How to resolve this new “Eastern Question”? For years the absence of a satisfactory answer has stalled the development of the Israeli and Cypriot fields and deterred further exploration. But now it begins to look possible that a combination of circumstances has opened the door to a practical solution.

The eastern Mediterranean — often described as the Levant Basin — covers the stretch of water that runs from the northern coast of Egypt up past Sinai, Israel, Lebanon, Syria and Cyprus to the southern coast of Turkey. The three big discoveries are the Leviathan field 130 km off Haifa in Israel, the Aphrodite field just east of Leviathan offshore Cyprus and Zhor in Egyptian waters 120 miles north of Port Said. 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

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

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

Flooding on the Somerset Levels in 2014

Flooding on the Somerset Levels in 2014  © Getty Images

Is climate change the cause of extreme weather events? Until now the link has been suspected but never confirmed with scientific confidence. That position is now changing. A new study from the US confirms that for some extreme events there is a causal connection.

This link between climate science and immediate weather conditions can only strengthen the case of those arguing for policy change. The impact of a damaging heatwave in terms of deaths, sickness and other social and economic costs is much more likely to rouse public opinion than the distant prospect of what might to some sound like a modest increase in the global mean temperature. All politics are local, and they are also immediate. The discount rate applied to future possibilities is very high: what could happen to a future generation decades matters much less than what is happening to me here and now. It brings climate to the foreground and diminishes the argument of those who say that since we don’t know everything we should do nothing and wait until we see how things turn out. If the impact is immediate and people are dying as a result, the call for action will be loud. Read more

Russian Gas Supplies Through Ukraine Turned Off

Russia locks on gas supplies to Ukraine  © Getty Images

Is Europe trapped in a state of dependence on Russian gas? What would happen if by some accident, let alone a strategic decision taken in Moscow, the gas stopped coming. Would eastern Europe grind to a halt, and would the west, led by Germany, sue for peace on any terms ?

This was the core topic for debate last week at a seminar organised by the Geopolitics Forum at Corpus Christi College in Cambridge as part of their series on nightmare scenarios. With wide participation from within the university and beyond, we were able to go beyond the headlines to build an analysis based on facts. It is worth setting out a few of those facts. Read more

George Osborne Visits North Sea oil in Scotland

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

On Wednesday, George Osborne will present the UK budget to the House of Commons. At a moment of deep uncertainty for the country’s energy industry — which is discouraging investment and creating quite unnecessary risks for the future. From the North Sea to Hinkley Point and shale there is confusion and doubt. Mr Osborne should come forward with a package of messages to restore confidence. Here are four obvious steps the chancellor should take.

First, the North Sea is now on the verge of a serious cutback in activity that will reduce energy supply and lead to lost jobs as well as much lower tax revenues. The hopes expressed in Sir Ian Wood’s report two years ago for an renaissance in the North Sea and the development of the billions of barrels of remaining resources will be lost. Read more

Executive Vice President in charge of fi

Thomas Piquemal  © Getty Images

Thomas Piquemal, the finance director of EDF has performed a significant public service by resigning and focusing attention on the continuing problems around the UK’s Hinkley Point nuclear project in Somerset.

I cannot remember the last occasion when the CFO of a major company resigned over an issue of policy. The event is certainly rare and can only increase the pressure on the French company’s chairman, Jean-Bernard Lévy.

There are multiple questions behind the resignation. Read more

SAUDI-MINING-EXHIBITION-AL-NAIMI

The Saudi oil minister, Ali al-Naimi   © Getty Images

The kingdom’s not for turning. There will be no production cuts. Oil will continue to be produced at unwanted levels until other suppliers are forced out of the market.

That was the unequivocal message delivered at the IHS Cera conference in Houston two weeks ago by the Saudi oil minister, the 81-year-old Ali al-Naimi. Mr al-Naimi tried to claim that the US shale industry was not his particular target but that did not seem to convince those involved in a sector which is beginning to feel the real pain of $30 oil.

For the Saudis such pain, along with the even greater suffering being felt by their former allies such as Algeria and Venezuela, may appear to be a necessary cost in securing the kingdom’s goal — a secure oil market share for itself whatever happens to anyone else. On this view, all the others just have to learn the harsh realities of life. Think of it as the application of sharia law to the oil industry. Read more

The engine room at the Flamanville nuclear reactor  © Getty Images

The news that there is to be a further delay to the long-promised Hinkley Point nuclear power station in Somerset should come as no surprise to those who have followed the saga over the last eight years. As the FT report on Monday confirmed, the board of EDF wishes to delay the project for another year . That could easily turn into two years or three or more because it depends on the resolution of the deep problems at Flamanville in France, where a similar reactor is being built, and on the company’s financial health, which is fragile.

The EDF board is right to seek a delay. It is the only rational decision for EDF as a company and in reality for the UK. Whatever the embarrassment involved it is impossible to proceed with a project where the risks and ultimate costs are unknown. The resistance to the project from managers and staff within EDF is very telling. The UK government must accept that Hinkley will not be built for the foreseeable future.

But what comes next ? Read more

Boom Goes Bust: Texas Oil Industry Hurt By Plunging Oil Prices

A worker washes a truck used to carry sand for fracking in Odessa, Texas  © Getty Images

If you live in Europe you could be forgiven for thinking that the shale revolution is strictly an American phenomenon. Casual readers could also easily get the idea that low oil and gas prices are driving down US production of shale gas and tight oil and that even there the revolution is over. All these impressions are mistaken.

Shale development in Europe is virtually non-existent. Fracking is banned in France and discouraged in Germany. In Poland, early results have been disappointing while in the UK, thanks to mistakes by the government and the industry, no drilling has taken place for several years. Starting operations in Balcome — a wealthy and vocal community with no economic imperative to give up its peaceful lifestyle was a mistake. Creating great expectations without putting in place either proper incentives or a clear regulatory framework was a serious policy error. There is talk of a few wells being drilled this year but probably only if local objections can be overridden by edicts from Whitehall — a crass process somewhat at odds with the government’s rhetoric about devolving power to local communities. The approach is not likely to win over hearts and minds and may well prove unenforceable in a number of areas. Read more

FRANCE-CLIMATE-WARMING-COP21-DEMO

Climate change demonstrators during the Paris conference  © Getty Images

Two papers published in the last few weeks provide a sobering reality check after the rhetorical success of the Paris climate change conference in December. Getting any agreement was a diplomatic triumph but producing real change on the scale necessary will be much more difficult. The two documents are very different but both excellent pieces of work. Their calculations and assumptions are detailed, transparent and, most important of all, evidence based. Both, however, reflect a degree of unjustified optimism. Read more

The UK plan is uneconomic for owners and consumers, writes Nick Butler Read more

FRANCE-ENERGY-HYDRO-ALSTHOM

A pump turbine at Alstoms' global technology and hydropower centre in Grenoble, France  © Getty Images

Storage — whether of grain or of knowledge through the printed word — has been a crucial element in human development. Of all the many technical advances that are transforming the energy business none is potentially more important than storage: it give us the ability to control the way, and crucially the timing, of energy consumption. Used on a major scale it could help to make heat and light available to those outside the commercial economy and could radically alter the energy mix.

Two excellent recent research reports summarise the current state of the art in the field and offer some predictions. The first is from Lazards and is the latest in a series assessing trends in the costs of different mechanisms. The second is from Moody’s and concentrates on the advances being made in reducing the cost of batteries.

In discussing storage it is important to demolish two myths. First, the technological advances are not about to transform the energy system to the point where a major proportion of consumers defect from existing distribution systems. Second, it does not require a dramatic breakthrough for making it on a significant scale to become economic. Read more

SENEGAL-BRITAIN-MUSIC-OLY-2012

  © Getty Images

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

GERMANY-ECONOMY-AUTOMOBILE-SHOW-IAA

Penetration of electricity into new areas – such as cars – is still low  © Getty Images

Renewables are taking a growing share of the energy business. In 2014, according to a new report from the International Energy Agency, they accounted for more than 45 per cent of all the new electricity generating capacity added worldwide. Over the next five years the prediction is that they will supply more than half of all new capacity. By 2020 renewables should be providing over 26 per cent of global electricity supplies. They will enhance energy security and reduce emissions. They will also reshape the energy business creating both winners and losers. Read more

IRAN-SAUDI-HAJJ-ISLAM-DEMO

Iranians protest against Saudi Arabia after the hajj stampede  © Getty Images

Oil prices are now 50 per cent lower than they were a year ago, and less than 40 per cent of their peak in 2012. Worldwide, there is a continuing surplus of supply over demand of around 2.5m to 3m barrels a day. This is despite the loss of exports from Libya and two bloody wars – the first against the Islamic State of Iraq and the Levant (Isis) in Syria and Iraq, the another against the Houthi rebels in Yemen. Those two wars, which do not directly affect any significant oil producing areas, are proxy conflicts for the rivalry between Saudi Arabia and Iran. Now, however, there is a growing risk of open war between Riyadh and Tehran. Oil facilities and exports would inevitably be primary targets and in those circumstances a price spike would be unavoidable. The question is whether such an escalation can be prevented.

Relations between the Kingdom of Saudi Arabia and the Islamic Republic of Iran have never been close. The conflict is partly religious, partly economic and territorial. Both want to be the clear regional leader. In recent months relations have deteriorated. The latest trigger is the death of 767 Islamic pilgrims at the annual hajj in Mecca. The dead included an estimated 169 Iranians. Since the tragedy – caused by a stampede at a bottleneck as about 2m took part in the journey – Iran’s leaders have used the event as a stick to beat the Saudi authorities in general and the royal family in Riyadh in particular. The failure of the Saudis to return the dead Iranians to their own country has provoked an unspecific commitment of “retaliation” from Iran’s supreme leader Ayatollah Khamenei.

The heightened language indicates the tension that pervades the region. The situation is comparable to Europe in the months before the first world war, and equally dangerous. Read more