oil

Let us start with two questions. Which of the following energy companies is planning to sell assets next year – Shell, ExxonMobil, BP, Total, Statoil, ENI? Answer – all of them. Which of those companies is planning to cut capital expenditure in 2014? Answer – all of them, with the sole exception of Exxon which is planning a modest increase. If you extend the list of companies the answers are the same.

Taken together these answers reveal some interesting points about the oil and gas industry. Most companies now feel they have been over investing – either by doing too much or by allowing costs to rise out of control. Returns have not matched the growth in spending. Shareholders are restive. Asset sales are normal business – every big company builds up a tail of marginal, non-strategic assets. But the scale of current plans goes beyond that. The tail has gone and the assets for sale now are in most cases attractive commercial propositions. Read 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

Nowhere is the failure of the talks between the international community and Iran over Tehran’s nuclear programme more welcome than in Riyadh. A fudged deal would have given legitimacy to the government in Tehran and confirmed the weakness of the strategic alliance between Saudi Arabia and the US.

More important still, it would have raised the prospect of the Saudis having to make serious cuts in oil production and exports to support the price of the output from Opec, the oil producers’ cartel. These are cuts the kingdom can ill afford. But, sooner or later, Iran will be on its way back into the oil market. Read more



The sanctions imposed on Iran are not working. The Iranian economy is in a mess with shortages and inflation. But, as a very interesting paper just published by Patrick Clawson of the Washington Institute shows, it is not collapsing. Non-essential imports have been cut back and a range of exports – including minerals, cement and agricultural products – are actually growing. Iran’s main trading partners are Iraq, China, the UAE and India. Unemployment is high and no one believes the official figures, but it is probably lower than that of Spain. And, most seriously, oil sanctions are breaking down.

 Read more

Vladmir Putin (left) and Igor Sechin (right)“We are about to see a new wave of consolidation in the world’s oil and gas business.” The words are not mine – they were spoken earlier this month by the President of what is now the world’s largest energy business. Igor Sechin is the President of Rosneft, the Russian company which with the completion of the takeover of TNK now produces over 4 million barrels of oil per day – more even than Exxon.

Rosneft is 70 per cent owned by the Russian state. Mr Sechin, who is famous for a spell in Soviet intelligence, is one of the most powerful men in Russia. John D. Rockefeller used every device possible to limit competition as he built Standard Oil and was eventually defeated by a cultural and legal resistance to monopoly. Mr Sechin has no such problems. The consolidation of Russia’s oil assets over the last decade has had the full support of the Kremlin. Read more