Gas

The next few months will be a critical period in the history of the North Sea. After 50 years which have seen 42 billion barrels of oil and gas produced, the province could now see a significant proportion of activity brought to a premature end. Fields which are uneconomic at current prices could be closed down and then decommissioned. Much of of the oil and gas which remains ( between 12 and 24 bn barrels ) could be left behind, undeveloped and valueless. For some fields, such as Brent, the exhaustion of reserves makes decommissioning inevitable. For others, however, we should be finding a way to maintain operations and to ensure that the resources in place can be developed when prices rise again. Read more

Energy executives returning from their summer holidays face some hard choices. I know of at least three major oil and gas companies that have ordered full scale strategic reviews.

The problem, for the companies and for investors, is that prices are falling. The Brent oil price is down 15 per cent since June and by the time you read this could have slipped below $100 [Update: this morning, Brent fell 87 cents to $99.95 a barrel – a 14-month low.] Natural gas and coal prices are also down. 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

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

Behind the continuing negotiations on new nuclear in the UK one big question remains unanswered. Who is going to pay? Senior officials are concerned that the pressure to close a deal is undermining a sensible negotiating strategy by separating the terms – including the strike price and the issues of risk allocation – from the question of funding.

To grasp what is happening you have to understand the degree of desperation which now exists in Government to deliver growth. Growth is the justification of the whole economic strategy and of course the solution to the challenge of rising borrowing. Growth is seen as the only platform from which either coalition party can go back to the electorate. But growth is elusive and time is running out. Read more

Tamar, a natural gas platform off IsraelThe Eastern Mediterranean is never dull. The whole area – land and sea – has been contested for centuries. And now, it turns out to have natural resources. Over the last decade, the area known as the Levant Basin has been identified as one of the world’s more interesting areas for exploration.

The first gas finds off the Israeli coast have led to a reappraisal not just of other areas along the coast from Egypt in the South to Turkey in the North, but also of the coastlines around the whole of the Mediterranean – from Albania to Spain. And the entry of Exxon and Rosneft into Lebanon opens up the prospect of another new exploration area and may provide a key to the development of the Eastern Mediterranean as a whole. Read more

The controversial bailout deal for Cyprus proposed by eurozone finance ministers has led President Nicos Anastasiades to promise investors who stay in the country after the compulsory forfeit of 9.9 per cent of their deposits that they will share in the country’s future wealth from natural gas.

In return for the forfeit they will be given shares in the banks and what are described in press reports as ” equity returns, guaranteed by future natural gas revenues”. Read more

The rumours that Vladimir Putin is about to replace Aleksey Miller as the chief executive of Gazprom continue to swirl around the markets across Europe. As usual it is hard to know what is true and what is dreamt up by Mr Miller’s enemies. Removing Mr Miller would not, however, solve Gazprom’s problems. What the company really needs is a new strategy. What should it be. ? Read more

There is absolutely no need for an energy shortage in the UK, but the indecision of policy makers is making serious problems over the next few years ever more likely. There is no shortage of supply – but the raw materials of the energy business – such as gas and coal, or for that matter wind – have to be converted into power to produce the electricity which is essential for a complex modern economy. If the power stations are not in place electricity can’t be produced. Read more

For some years I used to bet on the end year oil price with Ed Crooks. He usually won.

I thought for 2013 a wider challenge would be a better test for FT readers.

So here are six questions: Read more

The abandonment by Shell of this years drilling plans in the Arctic is hardly a surprise. The project is complex and has run into one technical problem after another. Shell is rightly prudent when it comes to the risks involved in an area which is both environmentally sensitive and under the intense scrutiny of the world’s media not to mention a set of lobby groups energised by the prospect of taking on one of the world biggest companies.

There will now be another delay adding to the five years and several billions of dollars the company has already devoted to the project.

Shell has decided to take on the environmental lobby and to prove that the Arctic can be drilled and developed safely. That is a big bold move in itself, but the real problem for the Shell board and it’s shareholders – which include most pension funds in the UK and the US – is that the economics of development make sense only if one assumes ever higher oil prices.

Shell has never published a detailed analysis of the economics of Arctic development. The commonly quoted numbers for the resources which could be found – 26bn barrels of oil and 130tn cubic feet of gas – suggest a big prize. But what is the cost of development? And what oil or gas price in the US or the world market is necessary to make the project profitmaking?

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Mitt Romney has given Barack Obama a free pass when it comes to energy and environmental policy.  Obama needs only to point to Romney’s energy plan - with its proposed demolition of federal controls on new energy developments and its omission of any mention whatsoever of climate change to claim the votes of the environmental lobby.

Even those most disappointed by the last 4 years can hardly fail to back Obama when the alternative is someone who used his acceptance speech last week to mock Obama’s commitment to the environment and to contrast Obama’s aim of helping to save the earth and the oceans with his own commitment to helping ordinary American families get jobs.  But what won’t be said this week at the Democratic Convention in Charlotte is that the American energy outlook for the next four years at least is already very largely set, and won’t be much altered by whoever is elected in November. Read more

The cancellation of the Shtokman LNG project by Gazprom was bad (if not totally unexpected) news for Gazprom.  The company will now be even more dependent on selling pipeline gas into northern Europe.  That will put pressure on prices and could squeeze out other suppliers in areas where Russia has particular political leverage – such as Germany.   The more important consequence though is that the decision will force a reappraisal of several other LNG projects around the world which have been relying on ever rising gas prices. Read more