natural gas

Optimism, however essential for human progress, can be very dangerous if misapplied or allowed to run to excess. There can be few better examples of this than the new review of India’s energy future published last week by the International Energy Agency. As you would expect, the paper is fascinating in its detailed description of India’s energy economy. But the forecasts are seriously over optimistic. They gloss over the challenges that even a radical modernising government in Delhi is not managing to overcome and they ignore the very real risks of a much less happy outcome. Read more


An anti-shale protest in the Algerian Sahara  © Getty Images

The 50 per cent fall in oil prices over the last year is beginning to have a serious impact across the world. Rig rates are down in the US and production of tight oil produced through fracking is beginning to fall. Corporate profits and share prices are down. The private sector generally, however, is remarkably resilient. Costs can be cut, new projects postponed and if things get worse dividends can be reduced. By contrast many of the countries that have come to depend on high prices have little room for adjustment. A few, like Saudi Arabia, still hold vast cash reserves and can tolerate the loss of revenue for several years. Others are trapped and particularly vulnerable because the lack of income compounds all the other problems they face. One of the most vulnerable is Algeria. Read more

British Government Signs A Deal For New Nuclear Power Plant

EDF's existing nuclear power plants at Hinkley Point  © Getty Images

The announcement that some form of funding structure for Britain’s nuclear new build at Hinkley Point in Somerset has been agreed must be read with care. UK consumers and taxpayers are not allowed to see the whole agreement — that privilege is restricted to the French and Chinese governments and their state-owned enterprises — but it is clear that this week’s statements do not amount to the final deal. Much remains to be negotiated, with the UK at a considerable disadvantage because of its all too evident desperation to complete a deal.

Much attention has focused on the relationship between the UK and China, on the cyber security risks of allowing the Chinese to own, construct and operate a plant of their own in the UK and on the political consequences of the deal for George Osborne, the chancellor of the exchequer who is now known to the black humorists of Whitehall as the Manchurian Candidate. The other, and potentially more serious, issue is what the announcement and the further delay it implies means for UK energy policy. Read more


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

Tamar, The Natural Gas Production Platform Off The Israeli Coast, Is To Begin It's Natural Gas Production

Drilling in the Tamar field in the Levant Basin  © Getty Images

Eni’s announcement that it has made a world-scale gas discovery off the Egyptian coast is undoubtedly good news both for the Italian company and for Egypt, even if the hype and the over-optimistic timetable that some are talking about need to be balanced by some consideration of the challenges still be to be resolved. But the discovery should have an even wider impact because it confirms the view that the Nile and Levant basins are the most prospective, underexplored areas in the world.

The discovery, named Zohr, is said to hold some 30tn cubic feet of gas, which if confirmed, would put in the list of the 20 largest gas fields across the world. Read more

Deputy Crown Prince Mohammed bin Salman Of Saudi Arabia Visits Jordan

Deputy Crown Prince Mohammed bin Salman visiting Jordan this month  © Getty Images

With the latest analysis from the International Energy Agency showing that oil production capacity continues to rise despite the sharp fall in prices, is Saudi Arabia ready to admit that its strategy of over-production designed to force other producers out of the market has failed?

Over the last year, Saudi Arabia has been pursuing what Frank Gardner, the BBC’s security correspondent, described last week as a policy of flexing its muscles – both in the region and in the oil market. The policy is obviously failing. The question now is whether the kingdom will keep going, doubling down on its current approach, or will step back and change course. The second option would involve a significant loss of face for the new king and his favourite son. The costs of simply ploughing on, however, could be much worse. The outcome will shape the future of the region and of the international oil market. 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


  © Getty Images

Politicians and policy makers can only focus on one problem at a time. With all attention concentrated on Greece for the past month there is a real danger that an even greater problem is developing, almost unnoticed, in Ukraine. The economy there is in deep trouble. A further collapse, perhaps triggered by a debt default, could lead to an outflow of refugees that would make the problem of migrants crossing the Mediterranean look trivial. Energy is at the heart of the crisis but could just possibly be part of the solution.

The basic story is well known. Since the Maidan demonstrations in November 2013, the Ukrainian economy has shrunk. A 5 per cent fall last year is variously forecast to be followed by a contraction of between 5 and 10 per cent in 2015. Investment has ground to a halt and in the energy sector big potential projects such as the shale gas developments planned by Shell and Chevron have been halted. The fighting in the east has cut off coal supplies to the rest of the country from the 300 mines in the Donbass region. The Russian annexation of Crimea has cut off gas supplies from the developments managed by Chernomorneftegaz in the Black Sea. Ukraine, as a result, has become even more dependent on imports of coal and gas from South Africa, Australia, other parts of Europe and even ironically from Russia. These supplies do not come cheap and in many cases suppliers will only do business if they are paid in advance and in hard currency. Read 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

The process of adjustment in the energy market is far from over. After the dramatic halving of the oil price since June there is now every chance that natural gas will follow suit. Indeed the fall has already begun. During December, US natural gas prices fell below $3 per million British thermal units for the first time since 2012. But that is just the beginning.

Two further factors suggest a continued, and worldwide decline in 2015. First, in Europe in particular, gas supply contracts — for instance from Gazprom into Germany — are tied to the oil price. The link is historic and is gradually giving way to direct gas-to-gas competition. But the older, longer term contracts remain in place for now and that means that a radical downward shift in prices will occur through the coming year.

Secondly, after years of uncertainty since the 2011 Fukushima disaster, there are signs that Japan is ready to accept the gradual reintroduction of nuclear power. The initial steps will be small — perhaps just one or two reactors at first. But even that will be sufficient to undermine gas prices in Asia which rose at times to almost $20/mmbtu as Japan was forced to substitute imported gas for nuclear. Each nuclear station brought back online will reduce demand for gas, and just as prices surged in 2011 now they will slip back. A Reuters survey of some serious analysts, including Wood Mackenzie, forecast a fall of up to 30 per cent in Asian natural gas prices in 2015. Read more

According to the most recent published estimates the economy of the eurozone countries will decline by just 0.3 per cent this year.  But the reality could be worse.  GDP data is always unreliable and hard numbers on some of the key elements in the economy such as energy consumption often provide a more accurate picture of what is really happening.  Recent data showing a sharp fall in gas consumption suggest a sharp contraction in recent weeks. Read more