Chancellor Angela Merkel and President Vladimir Putin talk at the G20 summit in Antalya,Turkey, on November 16  © Getty Images

Russia is coming in from the cold. A full-scale reset of the relationship with the international community is well underway. A country that was a pariah state a few weeks ago, isolated by sanctions, is rapidly becoming an essential ally. What does this sudden turn of events mean for the energy business?

The reason for the reset is clear: the enemy of my enemy is my friend. The common enemy is the Islamist militant group Isis. For the Germans and for Chancellor Angela Merkel the destabilisation of Syria has opened up a flood tide of refugees. The warm welcome offered initially in Germany, Sweden and a few other parts of Europe has chilled. Something must be done to stop the flow at source.

For the French and many others across Europe, terrified by last week’s awful events in Paris, the identity of the enemy in Syria and the Middle East has also come into sharp focus. The same is true in Moscow where the downing of a Russian airliner over the Sinai desert has made those in the Kremlin realise that they, too, face a ruthless enemy. When set against the challenge of Isis nothing else matters much. Ukraine and all the other disputes can be assigned to a distant back burner — not solved but not allowed to get worse. It is time to work together. Read more

Scottish Windfarm Starts Producing Electricity

The Braes of Doune windfarm, Scotland   © Getty Images

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


President Vladimir Putin  © Getty Images

With oil prices back down to $50 a barrel for Brent crude, a falling gas price and its share of the European energy market declining, the Russian economy is in real trouble. The situation is dangerous because the problems cannot easily be corrected. The risk is that the economic problems could lead to political instability both within Russia and around its borders.

Anyone wanting to understand the historical context for what is happening in Russia should read Restless Empire a newly published book written around a series of maps which take go back to the emergence of the Slavs some 5000 years BC. The book, edited by the late Ian Barnes who sadly died before publication, is beautifully presented and free of the biased commentary so often associated with histories of Russia. The maps in particular are fine examples of immaculate design applied to the presentation of complex data. I only wish there were more maps, and in particular more on the production and trade in energy that dominates the modern Russian economy. Read more

Shell's Polar Pioneer arrives in Seattle

Shell's Polar Pioneer arrives in Seattle

Great companies become and stay great by taking big bets. The art of betting is, of course, about understanding the odds and being prepared and able to lose if it comes to it. Every big company in the world has been through that process — the only difference in the oil and gas industry is that the numbers are bigger. The general rule of betting in the corporate world is not to put at risk more than 10 per cent of the total business. For the biggest, that leaves plenty of scope.

So there is nothing wrong in principle with taking big bets. What is, puzzling, though is when a company with a record of deep caution stretching back to the second world war makes a series of bets that all run contrary to the conventional wisdom. The company concerned is Shell, which in the past few months has placed three huge betsRead more

Political Leaders Meet As Greece Crisis Intensifies

Sigmar Gabriel and Angela Merkel  © Getty Images

Last week’s decision on the future of the German energy policy by Sigmar Gabriel — the economics minister and Angela Merkel’s number two and would-be successor — was complicated and multifaceted. The net result, however, is simple. The German coal industry will survive and coal will remain a major, and probably the largest, fuel source for power generation for another decade and perhaps longer. Read more


Amber Rudd  © Getty Images

Last week’s decision by the UK’s new energy secretary, Amber Rudd, to approve Centrica’s plans for a dramatic increase in gas imports from Gazprom has cast a cloud of uncertainty over Britain’s policy on sanctions against Russia. In recent months the UK, along with the US, has been one of the strongest advocates of tough sanctions. In Europe, opinion has been more equivocal and divided. The German Chancellor, Angela Merkel, called the Russian occupation of Ukraine “a criminal act” when she was in Moscow last weekend. Many in Germany and France, however, see sanctions as pointless. To them, Russia is a neighbour, difficult at times certainly, but a presence to be lived with. Ukraine on this view is of no strategic importance and its multiple problems stem from its own corruption. Now it seems that the UK has switched sides in this debate.

The first thing to be made clear is that Centrica has done nothing wrong. The company’s intention of doing business with Russia was signalled at the AGM three weeks ago when its chairman said that Russia would be a major supplier of gas to Europe for a long time to come. I don’t doubt that Centrica has got a very good deal. Having won approval so easily I wouldn’t be surprised if they do more business with Gazprom. Read more

One of the greatest mistakes in the analysis of what is happening in Ukraine is the view of Russia as a one man dictatorship. That is clearly not the case. Moscow is a complex political society with numerous powerful figures. They, rather than Russia’s passive democracy, determine who is in charge. Vladimir Putin has been a strong leader but his power is not absolute. The eternal truth is that all leaders lose power in the end and very few go voluntarily.

After nearly 15 years in office as President or Prime Minister he has already exceeded the normal lifespan of leadership. Actuarially he is living on borrowed time and is dependent on continued success. In the current situation the line between success and failure is very narrow and energy issues are at the heart of the judgment. Read more

The dispute over Ukraine has moved into a diplomatic phase and for the moment at least the prospect of a Russian advance into eastern Ukraine has receded. The consequences of what happened in the Crimea, however, continue to shape European policy making. The invasion provided a sharp reminder of Europe’s reliance on Russian gas – a degree of dependence which the EU will now reduce even if a settlement is agreed by the diplomats. It is quite possible that within two or three years European gas imports from Russia could be halved. Russia would be reduced to being one supplier among many in a world where gas-to-gas competition inexorably reduces prices. 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

Pipeline will be laid on the bed of the Black Sea

Gazprom has been putting the final investment agreements in place for the South Stream project, clearing the way for construction of the 63bn cubic metres a year pipeline to Europe to begin next month. Never mind that demand for Russian gas in Europe is falling, or the $19bn cost of South Stream. The pipeline will help free Gazprom from dependence on Ukrainian transit pipelines and improve European energy security.

Gazprom and its foreign partners took a final investment decision on the 900km offshore section of South Stream at a meeting in Milan late on Wednesday. The pipeline will be laid on the bed of the Black Sea and will link southern Russia with the coast of Bulgaria.

 Read more

A tanker is filled at a Gazprom refinery. Getty

Could the conflict between Gazprom and the European Union become the antitrust case of the decade?

The answer is yes and the argument is spelt out in an excellent paper just published by the Centre for European Policy Studies.

The case could not only make legal history and provide a very timely reminder that the EU is alive and kicking, it could also transform the international gas market, pushing on the fall in prices already underway and undermining to the point of extinction the linkage between the prices of crude oil and natural gas. Read more

The announcement that Areva are to join with China’s Guangdong Nuclear Power Holding Company to bid for new capacity in the UK represents a bold statement in favour of globalisation and against established judgments of national energy security by the UK government.

The traditional view has been that the UK’s strategic resources should be under the control of nationally controlled or “friendly” entities.   When BP’s privatisation in the 1980s failed in the face of a market downturn and more than 20 per cent of the shares were picked up by the Kuwaitis, Mrs Thatcher reacted vigorously and the Kuwaitis were forced to sell down.

The main concern has been Russia. Read more

Shares in EON have risen by 10 per cent over the last two weeks and have led a limited rally among Germany’s hard pressed utilities.  The deal reached after years of negotiation with Gazprom sets a precedent and puts a big question mark over the pricing structures and energy mix across the whole European electricity sector.

The scale of the price reduction has not been announced but was sufficient for EON to add over €1.5bn to their net profit forecast for this year.  The cut in prices is a reflection of reality.  European gas demand has been falling and supplies are plentiful.  In addition to continuing production from the North Sea , supplies from Russia, central Asia, north Africa, west Africa, Qatar and Trinidad are all competing to supply European consumers.

That is before counting any exports of gas from the US ( which are due to start in 2016 ) or any production from Europe’s extensive shale gas resources.

The reality of falling prices is a global phenomenon.   Read more