Britannia Radio

U.S. Crude Oil Production Potential: A Stochastic Outlook through 2030 
Comprehensive Assessment of World Crude Oil Supply Through 2030 
International Ethylene Survey 2012

U.S. Crude Oil Production Potential: 
A Stochastic Outlook through 2030

Establishes the US crude oil production potential over the next 20 years. 

This comprehensive study covers the top 70 producing oil fields, reserves appraisals, EOR potential, and outlook scenarios for the top five basins, and the tight oil resource plays across the entire US. Provided is the relative size of the major producing fields, their vintage, and quality of crude produced. 

The quantitative approach by well known author, Rafael Sandrea, PhD, is to apply his unique proprietary methodology to analyze each source of US crude. From basins, tight oil, top producing fields, plus study of all reserves numbers, to establish a base line, minimum of output, for each crude source. The impact of both tight oil and new NGLs on US supply over the next 20 years was also analyzed. 

The author of over 33 technical papers, eReports, and a text book used in petroleum engineering courses around the world, Dr. Sandrea's previous forecasts have proved to be right on target. For over 30 years he has provided technical services in oil and gas project management, reservoir engineering, geology, seismic processing, and E&P data management through out the world; plus 20 years of petroleum consultation. 

Among findings, the report notes that:

• The upside scenario for tight oil points toward a peak potential of nearly 4 million b/d.
• CO2-EOR can recover up to 10% of the 380 billion barrels of stranded oil. Chemical EOR methods, recently proven overseas, could contribute with an additional recovery of at least another 15%.
• The upside scenario for US crude oil shows a potential growth to almost 8 million b/d. By the same token, total liquids supply could reach 16 million b/d, from 10 million b/d today.

Specifics are detailed for:

• North Slope potential
• US Gulf stranded oil
• Tight oil plays in the Permian
• San Joaquin a possible resurgence
• CO2 in the Williston
• EOR Potential
• Upswing of total liquids
• Two scenarios for future crude production
• Future impact of EOR

Reserves issues in the six major tight oil plays:

• Bakken
• Eagle Ford
• Nobrara
• Monterey
• Avalon
• Bone Springs

All outlooks are stochastic rather than a single deterministic forecast. This approach provides a better account for intrinsic in determinates associated with even the 'best' estimates of EOR potential, of the probable recoverable reserves of tight oil resource plays, and of the most likely yet-to-find reserves over the 20-year forecast period. Reserves are the unique parameter that determines the upper limit of production capacity of any oil or gas field

It is an interesting idea 

but the man left out Israel which seems to have even more massive reserves . 

Pennsylvania is booming at the moment and two new petrochemical units are planned as a result, one for Shell and one for Exxonmobil (the former may be in W VA and the latter on the Texas Gulf coast).   

I was always suspicious of the world running out of oil business.   In  1977 when I worked on a North Sea platform project we were told the world would run out of oil by 2000.  

 

One thing is certain - if the middle eastern nations and Iran had no oil and gas resources no one would bother with them. 

Oil and energy are a blessing and a curse.!

PW

Telegraph

We face a worldwide glut of oil, with profound economic and geopolitical implications, most of them good

By Jeremy WarnerEnergyLast updated: July 26th, 2012

296 CommentsComment on this article

So much for peak oil. According to a fascinating new study by Leonardo Maugeri of the Belfer Center for Science and International Affairs at the the John F Kennedy School of Government, we should stop worrying about when the oil runs out and get ready for $70 a barrel prices (using the Brent benchmark). Likely supply of the black stuff has been significantly underestimated, he reckons, with a veritable glut of new production due to come on stream over the next eight years.

If he's right, we can indeed stop worryng about a lot of things, unless a lover of windfarms and green energy. Petro-power will shift progressively away from its traditional centre of gravity among unstable regimes in the Gulf. Meanwhile, much of the Western hemisphere could return to a pre-World War II status of theoretical oil self sufficiency, with the US dramatically reducing its oil import needs and therefore progressively disengaging from involvement in the Middle East.

Cheaper oil prices will also provide a significant economic boost to major advanced economies such as the US. By lowering fuel costs, a falling oil price is capable of delivering a much bigger stimulus than both fiscal and monetary policy combined. It seems to be unadulterated good news all round.

Here's the relevant bit of Mr Maugeri's analysis:

Based on original bottom up, field by field analysis of most oil exploration and development projects in the world, this paper suggests that an unrestricted, additional production (the level of production targeted by each single project, according to its schedule, unadjusted for risk) of more than 49 million barrels per day of oil (crude oil, and natureal gas liquids, or NGLs) is targeted for 2020, the equivalent of more than half the current world production capacity of 93mbd.

Even adjusting this figure for risk factors, the additional production by 2020 could be 29mbd. Factoring in depletion rates from currently producing fields reduces the net gain to around 17.6mbd, but even this would represent the most significant percentage gain in any decade since the 1980s.

And here's the results of that analysis in graphic form.

click to enlarge

Where's all this stuff coming from? Since 2003, the industry has been engaged in an unparelleled investment cycle to meet growing world demand, which reached its climax from 2010 onwards. Three year investment in oil and gas exploration and production was more than $1.5 trillion. As can be seen from the graphic, production increases almost everywhere, with "unconventional oils", such as US shale/tight oils, Canadian tar sands, and Brazil's pre-salt oils, accounting for a growing proportion.

There are of course plenty of things that could go wrong with these projections, which are in any case hotly disputed by some in the industry. For starters, development of the new sources of supply cited requires a relatively high oil price to be sustained at least until 2015, so as to justify the necessary investment. A bad recession in the meantime, causing the oil price to plummet, could delay much of this investment. Some have also queried the depletion rates Mr Maugeri uses for existing sources of production, which appear to be about half the level assumed by the IEA.

All the same, this all looks very encouraging. According to Mr Maugeri, all but 20pc of this new production is economic at $70 a barrel, so depending on demand by 2020, the price could fall a lot lower once all that new supply comes on stream. It looks as if we going to be able to get down and dirty with oil for a long time yet.

Telegraph

Shale gas still an object lesson for miners

Supply and demand is at the heart of basic economics and that applies equally to commodities markets. Nowhere is that currently more apparent than in the gas market.

Drilling for gas on the Roan Plateau in Colorado. Photo: CORBIS

By Garry White

8:00PM BST 05 Aug 2012

4 Comments

An excess in the supply of natural gas has led three of Britain's biggest companies to write down $6.2bn (£4bn) of assets in the last two weeks. Given the significant expansion plans being pursued by mining companies across a wide range of commodities, it's worth asking whether the supply surfeit problem is going to be replicated elsewhere.

On Friday, BHP Billiton became the latest UK blue chip to slash the value of its US shale gas business, taking a $2.84bn hit. The resources giant only bought the assets last year – spending $4.75bn buying Fayetteville from Chesapeake Energy. Shale gas prices have plunged by about 50pc since the purchase and Marius Kloppers, BHP's chief executive, has forgone his bonus as penance.

BHP's move to slash the value of the assets was not a surprise, following on from a $2.1bn writedown from BP and $1.3bn from BG Group over the last fortnight.

The problem is an excess of supply. Large companies including Exxon and Chevron bought a series of shale assets from independent companies, with a view to using their superior financial firepower to develop the assets quickly.

The majors delivered on their promises, resulting in a glut of gas that has kept prices low. In effect, shale gas producers have been a victim of their own success and the country does not have the infrastructure in place to export the gas to Asian markets in the form of liquified natural gas (LNG). That will be several years in the making.

US natural gas prices, as measured at the Henry Hub in Louisiana, peaked at $14 per thousand cubic feet in 2005. Earlier this year the price slumped to a lowly $1.80 after a warm US winter, but has since recovered to about $3.

Essentially the rush for shale gas assets turned into a classic bubble. A bubble that has now gone pop.

So, with miners all over the world ramping up production of everything from iron ore to coal to copper, is the supply situation for all these commodities going to get ahead of itself in the next few years?

Mining companies say no. They believe that, unlike natural gas in the US, demand will remain amid the urbanisation of China, India and other Asian nations.

Iron ore in particular has seen heavy investment. Rio Tinto plans to spend more than $15bn over the next five years to expand its operations in the Pilbara region of Western Australia. BHP itself produced 159.5m tonnes of iron ore last year and aims to increase this to 220m by 2014 and 350m by 2020.

Last week, Brazil's Vale received a preliminary environmental license for an $8bn project to double output at Carajas, the world's largest iron-ore mine, in northern Brazil.

There is no doubt that supply of iron ore – crucial for making steel – will increase sharply in the next few years should all the projects proceed. However, there are increasing signs that miners are reining in their spending. This has been prompted by a slump in commodity prices, as fears of a slowdown in China mounts. China imports 60pc of the world's supply of iron ore and the spot price has fallen by a third over the last year, as concerns about the health of the Asian nation's economy increased. Some shipments of ore into Chinese ports have also started to be deferred.

However, iron ore bulls believe current price falls are just a blip and point to the fact that demand for metals increases in line with increasing income. Global wealth per capita is expected to rise substantially over the next few years as developing economies mature, so demand for iron ore should remain strong.

Urbanisation is also a key driver, with data from Rio Tinto suggesting a Chinese urban household requires 10 to 15 times more steel than a Chinese rural household.

Urbanisation is not only going on in China. The UN estimates that by 2050, 6.3bn people will be living in cities, the equivalent of the whole global population today. The UN reckons Tokyo will be largest city in the world by then, followed by Delhi, Shanghai, Mumbai and Mexico City.

But the reason why commodity prices have been in a supercycle since 2002 is not just that there was a surprise upturn in demand from China, but also because there had been limited investment in mines and new supply prior to that.

If supply increases more than the increase in volumes sold over the next few years, miners could face falling prices at a time of increasing demand.

It seems increasingly likely that a number of projects will be shelved instead – no chief executive wants to see a repeat of the shale gas issue.

 

Telegraph

The UK government can't afford to say no to China's North Sea oil deals

History is being made in the North Sea, as China makes its first significant investment in its oilfields through two major deals.

The driving force is that China is moving from a focus on untapped reserves to assets that are up and running Photo: Alamy

By Emma Rowley

7:00AM BST 30 Jul 2012

Comment

State-controlled energy giant CNOOC last Monday unveiled a $15.1bn (£9.7bn) bid for Canada’s Nexen, the second biggest oil producer in the North Sea. If successful, the takeover will be China’s largest ever foreign investment.

That same day, Chinese refiner Sinopec said it would pay $1.5bn for a 49pc stake in the UK unit of Canada’s Talisman Energy, also a top 10 oil and gas producer in the North Sea.

Given the sums, no surprise that the cry from oil industry analyst Malcolm Graham-Wood at VSA Capital was: “The Chinese are coming with their wall of money!”

Still, money is not the only consideration in purchases of this kind, which will have to be signed off by the UK Government, among other authorities around the world. Eyebrows inevitably raise at the political niceties of having North Sea energy reserves in the hands of Beijing.

Consultancy Wood Mackenzie calculates that together the two Chinese firms will directly own 13pc of all UK oil production if both deals go through.

But for all the nervousness around China buying up local energy assets – urged on by a Chancellor looking outside the UK for much-needed investment – the reality is that Beijing is looking at a bigger picture.

After all, production from the North Sea oilfields peaked years ago, a change accompanied by a shift from bigger to smaller operators. The thinking is that China has not been seen in the North Sea so far, because it has not viewed the reserve potential as big enough.

There is also another consideration. From Beijing, political risk looks rather different to someone working out of say, London, or Washington.

For China, the high tax rates levied on North Sea oil producers are not offset by the sweetener of operating in a country seen to be, in Western eyes, without much political risk.

So what has changed, to make the Chinese want to take a dip? Nothing much for CNOOC, suggests Alex Grant, managing director of oil & gas investment banking at Jefferies. “I don’t think that [getting into the UK] was the driver for the deal – although the question now is whether they will seek to expand on their position,” he says.

Nexen, he points out, has significant assets across Canada, Nigeria and elsewhere. The Sinopec deal looks different, however. Through that purchase the Chinese are clearly getting into UK waters deliberately.

The driving force is that China is moving from a focus on untapped reserves to assets that are up and running, Grant argues.

“Historically, the Chinese have been chasing big resources. They want molecules in the ground – that don’t lose their value as US Treasuries could,” he says. “I think the near-term focus has now moved to producing assets. They have acquired a lot of long-term resource in places such as Brazil and West Africa, and want production to fill the near-term gap.”

The logic does make sense. After all, if you have bought oil reserves which need to be developed before production starts, the costs of rigs, drilling and manpower gobbles up your cash before you start to see any returns. So why not buy a few fields already producing to make your balance sheets look a bit better in the short term?

The problem is that there is not an abundance of producing assets up for sale. Once an oilfield is in production there is little pressure to sell, as the profits cover running costs.

In that light, the UK’s oilfields, declining and lacking in scale as they may be, look more attractive. Industry watchers do not rule out the possibility of more acquisitions by China in the North Sea as it looks to build up its producing assets, whether through smaller bolt-on purchases or more large-scale buys.

That could signal opportunities for investors in the sector – provided that they back the right horses.

As for the practicalities if the deals go through, major changes are not expected.

Sinopec is buying into the North Sea through a non-operating interest, meaning Talisman will remain in charge. CNOOC, in contrast, will take over the show if it purchases Nexen. Still, the Chinese are well aware of the political sensitivities, so it would be a surprise if, say, CNOOC started cutting back on maintenance spending or do anything that might play into prejudices.

That is not to deny the deals bolster China’s position in many ways.

Just listen to the oil traders grumbling that CNOOC will be a step closer to information affecting crude prices, as Nexen’s Buzzard field plays a key role in setting prices for Brent, the benchmark London oil price.

But do not hold your breath for this to stop the purchases getting the green light from the UK. After all, where else is the money going to come from?

“They are both big credible companies, with good technical expertise and strong balance sheets,” says Grant, who does not expect them to be held up on the UK side.

“In a way they could not have come at a better time. Both deals bring well needed potential new investment to the North Sea.”

Telegraph

China dives into UK’s North Sea oil industry

China has made a dramatic swoop on the North Sea oil industry, buying up assets that account for more than 8pc of the UK's entire oil and gas production.

Both Nexen and Talisman rank within the top 10 oil and gas producers in the UK North Sea. Photo: Getty Images

By Emily Gosden

6:45AM BST 24 Jul 2012

8 Comments

Chinese state-controlled group CNOOC agreed a $15.1bn (£9.7bn) offer to buy Canada’s Nexen, which is the second biggest oil producer in the UK North Sea. Its net UK production of both oil and gas is 114,000 barrels of oil equivalent per day (boepd).

In a separate deal, China’s Sinopec splashed out $1.5bn on a 49pc stake in the UK unit of Canada’s Talisman Energy, which produced an average of 71,500 boepd last year. Talisman said its joint venture with Sinopec would “invest more in the UK than Talisman would have on its own”.

Both Nexen and Talisman rank within the top 10 oil and gas producers in the UK North Sea. The UK’s entire oil and gas output stood at 1.8m boepd in 2011, according to industry body Oil & Gas UK.

Nexen, which is listed in both New York and Toronto, also has assets in Canada, the Gulf of Mexico and off the coast of Nigeria. The CNOOC offer price of $27.50 a share is a 61pc premium to Nexen’s closing share price in New York on Friday.

CNOOC will require approval not only from Nexen’s shareholders but also from Canadian regulators, who can block foreign takeovers if they deem them not to be in Canada’s best interests. CNOOC has pledged to seek a listing in Toronto if the deal is approved.

Oil & Gas UK said Monday’s deals reflected “the renewed attractiveness of our province as a place to invest”. It added: “Given the new ownership, we would expect investment activity to remain high.”

The deals are the latest of a spate of Chinese interest in UK energy and infrastructure assets.

Two Chinese nuclear companies have backed rival bids for Horizon, the venture being sold by RWE and E.ON, which plans to build reactors on Anglesey and in Gloucestershire.

In January, China’s sovereign wealth fund bought a 9pc stake in UK utility Thames Water. 

    

CCNet – 3 August 2012 The Climate Policy Network Germany’s New Coal Boom Twenty-three new coal-fired power plants are being built across Germany, with the capacity to generate 24,000 megawatts. The German Environment Minister, Peter Altmaier of the conservative Christian Democrat Party, supports the construction of further coal-burning power plants. In order not to jeopardize the German economy, one would have to “be in a position to be able to offer energy at prices that can compare with that of the main power competitors in other industrialized countries.” --Deutsche Welle, 1 August 2012 Will America’s shale gas revolution ever spread to Europe? According to Chevron, it already has. The company has been quietly buying up huge swaths of land across eastern Europe, an area it believes could be the next great frontier for shale gas exploration. It is convinced that the economic arguments for shale will ultimately trump the environmental concerns. --Guy Chazan, Financial Times, 2 August 2012 In late July, the European Energy Commissioner Günter Oettinger spoke warmly of how the US is aiming to “re-industrialise the country first by oil” and “by accepting some risks with offshore drilling for own resources” including “tar sands and others”. The green lobbies, alerted to Oettinger’s “unguarded” comments, are plainly concerned that the UK’s energy policy schizophrenia has not only spread to Europe but is indicative of growing sentiment in Europe’s capitals. Europe is already undermining its own decarbonisation regime by investing heavily in coal, now the cheapest electric power fuel. the evidence that Europe’s biting economic crisis is driving a greater, fossil-fuelled, energy realism is mounting. –Peter Glover, Energy Tribune, 31 July 2012 Greenland's ice seems less vulnerable than feared to a runaway melt that would drive up world sea levels, according to a study showing that a surge of ice loss had petered out. The discovery of fluctuations casts doubt on projections that Greenland could be headed for an unstoppable meltdown, triggered by manmade global warming. --Alister Doyle,Reuters, 2 August 2012 The politicization of climate science is so complete that the lead author of the IPCC's Working Group II on climate impacts feels comfortable presenting testimony to the US Congress that fundamentally misrepresents what the IPCC has concluded. I am referring to testimony given by Christopher Field, a professor at Stanford, to the US Senate. What Field says the IPCC says is blantantly wrong, often 180 degrees wrong. It is one thing to disagree about scientific questions, but it is altogether different to fundamentally misrepresent an IPCC report to the US Congress. --Roger Pielke Jr., 1 August 2012 Alberto Boretti writes that the huge deceleration of sea level rise over the last 10 years "is clearly the opposite of what is being predicted by the models," and that "the SLR's reduction is even more pronounced during the last 5 years." To illustrate the importance of his findings, he notes that "in order for the prediction of a 100-cm increase in sea level by 2100 to be correct, the SLR must be almost 11 mm/year every year for the next 89 years," but he notes that "since the SLR is dropping, the predictions become increasingly unlikely," especially in view of the facts that (1) "not once in the past 20 years has the SLR of 11 mm/year ever been achieved," and that (2) "the average SLR of 3.1640 mm/year is only 20% of the SLR needed for the prediction of a one meter rise to be correct." --CO2 Science, 1 August 2012 1) Germany's New Coal Boom - Deutsche Welle, 1 August 2012 2) Europe's Quiet Shale Revolution - Financial Times, 2 August 2012 3) Peter Glover: UK’s Energy Policy ‘Schizophrenia’ Spreads To Europe - Energy Tribune, 31 July 2012 4) False Alarm: Greenland Ice More Stable Than Predicted - Reuters, 2 August 2012 5) IPCC Lead Author Misleads US Congress - Roger Pielke Jr., 1 August 2012 6) Earth’s Carbon Sinks Absorb More CO2 Than Thought - The Examiner, 1 August 2012 7) Rate Of Sea Level Rise: Predictions vs. Measurements - CO2 Science, 1 August 2012 1) Germany's New Coal Boom Deutsche Welle, 1 August 2012 In eight years, one third of energy in Germany will come from renewable sources. However, Germany's Environment Minister still wants to go ahead and build new coal-fired power plants - environmental groups disagree. More than a year ago, Germany decided to opt out of nuclear and fossil based energy. It was replaced by “cleaner” energy sources, namely solar and water power. Until 2020, 35 percent of German electricity is to come from renewable sources, boosted to 80 percent by 2050. Eight nuclear plants have already been taken off the grid, but at the same time, both brown and black coal are still needed to guarantee an ample supply of electricity. Burning coal to protect the environment? As far as the German Environment Minister, Peter Altmaier of the conservative Christian Democrat Party, CDU, is concerned, this situation is not going to change anytime soon. In fact, Altmaier supports the construction of further coal-burning power plants. In an interview with German weekly newspaper Die Zeit, Altmaier said “with 35 percent of power from renewable sources, that still leaves 65 percent to be covered. It makes sense to replace old brown and black coal-fired plants which aren't good for the environment with modern and efficient coal and gas-fired power plants.” Twenty-three new coal-fired power plants are being built across Germany, with the capacity to generate 24,000 megawatts. Campaigners for the environment protection group Greenpeace say these new plants will emit 150 million tons of CO2 each year. Plans by the minister to construct even more plants are being heavily criticized by the opposition and environmental groups, who believe high carbon dioxide emissions are the driving force behind climate change. “Whoever is serious about energy and climate change cannot be in favor of coal-fired power plants,” Jürgen Trittin, head of the Greens political party, said in an interview when asked about Altmaier's remarks. Fear of new plants being in the way Greenpeace too is concerned, “We don't support the building of new coal-fired plants at all, as they are likely to remain on the grid for around 40 years. This blocks the transition towards power from renewable sources for years,” said Gerald Neubauer, an energy expert with Greenpeace, in an interview with DW. Instead, he demanded stronger support for power from renewable sources, together with the use of gas-fired plants. According to Neubauer, such plants would also be easier to handle when it comes to balancing out contributions of power from renewable sources to the grid. Another point that favors the building of new coal-fired plants for Altmaier is cost, as electricity from renewable sources is still relatively expensive. In order not to jeopardize the German economy, one would have to “be in a position to be able to offer energy at prices that can compare with that of the main power competitors in other industrialized countries.” For this to be successful, it is necessary to convince pre-existing industry of it benefits. Full story 2) Europe's Quiet Shale Revolution Financial Times, 2 August 2012 Guy Chazan Will America’s shale gas revolution ever spread to Europe? According to Chevron, it already has. The company has been quietly buying up huge swaths of land across eastern Europe, an area it believes could be the next great frontier for shale gas exploration. It is convinced that the economic arguments for shale will ultimately trump the environmental concerns. “It’s like Goldilocks,” says Ian MacDonald, vice-president of Chevron Europe, Eurasia and Middle East. “The shale has to be at the right depth, have the right organic content and be in the right geological window. That’s what we believe we’ve identified in eastern Europe.” The shale boom has transformed the energy landscape of the US. Techniques such as hydraulic fracturing or “fracking” and horizontal drilling have unlocked huge reserves once thought too difficult and expensive to exploit. Shale now contributes a third of America’s gas supplies, and a glut of the stuff sent US natural gas prices to 10-year lows this year. Talk to the frackers, and it is only a matter of time before the shale revolution crosses the Atlantic. The size of the prize is huge: according to a study last year by the US Energy Information Administration, Europe has 639tn cu ft of technically recoverable shale gas resources – not far off America’s 862tn cu ft. Yet there are plenty of sceptics prepared to bet that the shale boom will never cross the pond. […] But none of that has deterred Chevron. For years, it has been snapping up exploration acreage along a geological faultline that stretches from the Baltic to the Black Sea. A crucial piece of its jigsaw fell into place in May when it won the right to negotiate a big shale gas contract in Ukraine. That left it with an almost continuous arc of concessions stretching from Bulgaria in the south-east to Poland in the north. The blocks in Romania alone cover 2,700sq km. Chevron is pressing ahead despite strong opposition from locals. Shortly after it entered Bulgaria, the country was rocked by anti-fracking protests. In January, the Bulgarian government withdrew one of Chevron’s shale exploration permits. Some companies would be discouraged by all the opposition. But Chevron takes a long-term view. It is convinced that the economic arguments for shale will ultimately trump the environmental concerns. Chief among the former is eastern Europe’s overwhelming desire to reduce its reliance on imports of Russian natural gas. Already there are some signs of a thaw. In June, Bulgaria’s energy minister Delyan Dobrev said the country should focus on achieving “energy independence” through greater domestic production of gas. Full story 3) Peter Glover: UK’s Energy Policy ‘Schizophrenia’ Spreads To Europe Energy Tribune, 31 July 2012 Who’d have thought it? The medievalists at Greenpeace have finally made a useful contribution to the energy debate by insisting Britain has two energy policies. They’re right. As the ideological fault-line in the UK coalition government is increasingly laid bare by the in-fighting between (Conservative) Chancellor George Osborne’s Treasury Department and (Lib Dem) Ed Davey’s Department of Energy and Climate Change (DECC), the signs are that a new economic energy realism is also biting in Europe. In late July Davey’s DECC won a pyrrhic victory against the UK Chancellor’s Treasury Department keeping a proposed cut of 25 percent to wind subsidies to a mere 10 percent. But the price for Davey was green-lighting a UK government push in support of natural gas; a move that will, ultimately, prove devastating to the anti-fossil fuel ambitions of Davey and his Lib Dem colleagues policies – although not for the free market and the UK economy. UK onshore wind farms still depend on the lifeline of 100 percent taxpayer subsidy, with offshore running at around 200 percent. In 2012, UK wind farm subsidies will hit £1 billionfor the first time. With end consumers footing the tab for this exercise in ideological economic plunder, power companies and wind farm developers alike are clearly greatly ‘incentivized’ to maximise their windfall ‘dividend’. According to Renewable Energy Foundation (REF) figures, current renewable energy targets are on course to provide the power companies with a windfall of £100 billion from the subsidy regime by 2030. The top ten wind farm developing companies are set to net a mere £800 million between them in the next year alone. The Danish company Dong is the chief beneficiary of this government largesse, expecting to rake in over £156 million. And that’s before the additional guaranteed profit from its power sales to the National Grid via the market-skewing Renewables Obligation scheme, which guarantees ‘green’ electricity producers a fixed price. Chancellor Osborne knows that UK industry has been hit hard by energy costs, especiallythe steel and chemical industries. Osborne knows he has little control over international energy prices. But he knows he can do something about the network of green levies augmenting those prices. Of late he has promised to help local communities block onshore wind farm developments against revised planning regulations which have effectively disenfranchised local communities. Osborne has called for an end to the UK’s unilateral climate and renewable targets and ditch entirely the post-2020 EU-imposed decarbonization strategy. Coupled with the Treasury’s austerity programme that is imposing much-needed cuts to the UK’s bloated public sector, the call for Osborne’s political head is, not surprisingly, on the increase, aided by a strong leftwing media. Business Green’s James Murray is typical; recent commentaries being replete with the kind of anti-intellectual bunk that only a Guardian network publication could muster. If Osborne is successful, Murray has it, “the history of UK climate change policy” will ultimately be written “probably from a bunker in Northern Scandinavia”; Osborne having “finally shattered” the political climate consensus. For Murray, the Climate Change Act that currently enshrines the UK’s ludicrously over-ambitious, economy-sapping, decarbonisation targets is an inviolable bulwark against the “Tea-party-fication of British politics” and Osborne’s “fossilised vision for Gas-land UK”. But the fact is, George Osborne’s Treasury is acting in the interest of the country. Osborne and the Treasury are proceeding on solid market advice that gas-fired electricity will remain far cheaper than renewables. This is clearly borne out by the revolutionising of manufacturing industry and reduction in energy costs in America – the direct result of the U.S. shale gas revolution. Osborne is also well aware that Britain is sitting on at least 20 trillion cubic feet of shale gas of its own, enough on its own to meet the country’s gas needs for two years without factoring in North Sea or other imported gas supplies. Meanwhile, North Sea energy is – due to ever-developing technology – the national gift that just refuses to quit. The recent acquisition of 8 percent of North Sea resources by China’s SINOPEC bearing out the fact. But while George Osborne’s vision is certainly aimed at derailing the Green Deal Decarbonization Gravy Train, the accusation of climate ‘vandalism’ must be levelled far wider than just at him. The U.S. economy is in severe danger of being revived by what is happening in its shale gas and oil sectors. Just for good measure, the switch to gas has had a surprising ‘green’ benefit; a significant reduction in carbon emissions; a decarbonising ‘success’ story that appears not to have been missed at EU HQ. A similar tension to that causing rift among UK government departments has emerged at the EU. In late July, the European Energy Commissioner Günter Oettinger spoke warmly of how the US is aiming to “re-industrialise the country first by oil” and “by accepting some risks with offshore drilling for own resources” including “tar sands and others”. In contrast, laments Oettinger “we import oil and have high taxation”. Europe’s energy minister has also recently mooted the notion of increasing European industrialisation from 18 to 20 percent by 2020; an achievement that would have to be fossil-fuel driven. The green lobbies, alerted to Oettinger’s “unguarded” comments, are plainly concerned that the UK’s energy policy schizophrenia has not only spread to Europe but is indicative of growing sentiment in Europe’s capitals. Europe is already undermining its own decarbonisation regime by investing heavily in coal, now the cheapest electric power fuel. Perpetuated by its own anti-fracking, anti-shale gas policies, Europe continues to remain largely dependent on Russia’s gas imports. Yet, late last year, the IHS Cambridge Energy Research Associates (IHS CERA) released a report showing that Europe’s shale gas and coal-bed methane prospects rival that of North America. However, the evidence that Europe’s biting economic crisis is driving a greater, fossil-fuelled, energy realism is mounting. Spain has not only been forced to terminate its renewable energy subsidies, it has recently committed to imposing a tax on renewable-sourced energy. Bulgaria has eased a ban that prevents exploitation of its shale energy potential. But, most significantly, for Germany, Europe’s largest economy, energy is fast-becoming a key issue in the run up to next year’s election with the country’s politicians stalling over the switch from nuclear power to reliance on renewable power. Germany’s banks have recently been banned from financing offshore windfarms. And with over 600,000 households being disconnected annuallyas electricity bills soar, Germans voters are well aware that up to 22 trillion cubic meters (780 Tcf) of shale gas reserves may lie right under their feet. Ultimately, Joe Citizen is going to have to resolve the growing ‘schizophrenia’ at the ballot box as the issue of green energy taxes rises up the political agenda. And which way ‘Joe’ votes ought to be guided by one of two beliefs: one in the transformational gas-fired US experience – the other in the Greenpeace-Murray “bunker in northern Scandinavia”fantasy. Tough call that.

Telegraph

George Osborne pledges £500m-worth of tax breaks for gas fields

Chancellor George Osborne has pledged hundreds of millions of pounds of tax breaks to encourage more drilling for gas off the coast of the UK.

Centrica suggested this week that it may keep its Morecambe Bay South gas field closed after the completion of maintenance this month Photo: PA

By Christopher Hope, Senior Political Correspondent

5:26PM BST 25 Jul 2012

1 Comment

The news came as the Department for Energy and Climate Change confirmed a 10 per cent cut in payments for new wind farms.

However more cuts could be made following a further review of costs of renewable energy in 2013/14.

The Treasury announced that new gas fields found at depths of less than 90 feet will be exempt from a 32 percent tax on the first £500million of income.

The pledge appeared to pay off almost immediately with British Gas owner Centrica saying that it had helped to unlock new investments worth over £1billion.

Hours after the announcement Centrica pledged to plough £1.4 billion into developing its Cygnus gas field in the North Sea.

The company said the tax break removed “a major obstacle” which had prevented the field from being fully developed.

Mr Osborne said: “Gas is the single biggest source of energy in the UK. Today the government is signalling its long-term commitment to the role it can play in delivering a stable, secure and lower-carbon energy mix.”

Centrica said it was expecting to pay the Treasury £1 billion in tax revenues from Cygnus, as well as creating 4,000 jobs.

The Government said the gas would continue to play an important part in the energy mix beyond 2030, to complement “intermittent” supply from renewable sources.

The deal was a compromise between the department – which is led by Liberal Democrat Cabinet minister Ed Davey - and Mr Osborne, who had been pushing for cuts of 25 per cent.

Mr Osborne had offered to drop his demands for deeper cuts in subsidies for onshore wind farms if the Lib Dems compromised on retaining a big role for natural gas rather than commit to the virtual de-carbonisation of the power sector by 2030. 

Telegraph

Ministers back 10pc cut in wind farm aid and say gas is future

Conservative ministers have backed down on big cuts in subsidies for wind farms in exchange for another review next year and the prospect of a bigger role for gas in Britain’s future energy mix.

Conservative ministers have backed down on big cuts in subsidies for wind farms in exchange for another review next year and the prospect of a bigger role for gas in Britain’s future energy mix Photo: AFP/GETTY

By James Kirkup, and Louise Gray

6:30AM BST 25 Jul 2012

8 Comments

The Coalition will today announce that subsidies for onshore wind turbines will be cut by 10 per cent this year, as proposed by Ed Davey, the Liberal Democrat Energy Secretary. That will disappoint Conservative backbenchers, many of whom had called for much larger cuts in subsidy, with some Tories backing a 25 per cent reduction.

Today’s announcement, which follows negotiations between the Coalition parties, will be some relief to the renewable energy industry, which has warned that uncertainty about government support has been putting off investors.

However, more cuts could yet be made following a formal review of the costs of renewable energy to be held in the financial year 2013-14.

In another concession to George Osborne, the Chancellor, today’s statement will contain a clear commitment that “unabated” gas supplies will form a major part of Britain’s energy mix.

Mr Osborne has angered environmentalists by pushing for gas-fired power stations to produce more of Britain’s electricity. Advocates of gas say it is more reliable and cost-effective than renewable sources, but critics say it could leave the UK dangerously dependent on an imported energy source.

Mr Osborne has also opposed the imposition of any new targets for reductions in Britain’s carbon emissions, which he says are “inefficient.”

New planning laws could also make it easier for residents to oppose new wind turbines, and to receive a financial benefit from those that are built.

Because the cuts in subsidy will not exceed 10 per cent, Lib Dem ministers are likely to present the announcement as a victory for their party.

The deal has emerged as Conservative ministers look for ways to shore up the position of Nick Clegg, the Deputy Prime Minister. Senior Tories are worried that Mr Clegg could yet be toppled as party leader, threatening the Coalition.

Tim Yeo, the Tory chairman of the Commons energy committee, said a 10 per cent cut was a sensible reduction in subsidies for now.

“There is general agreement that 10 per cent is perfectly acceptable to reflect growing efficiency and falling costs of turbines,” he said. “In the long term a signal for sharper cuts post-2017 will give the industry time to adapt.”

Renewable UK, the trade group for “green” energy companies, warned that under the Electricity Act the Secretary of State was obliged to justify cuts in aid for renewable energy with economic evidence. Otherwise the Government could be open to legal action, it said.

Telegraph

EDF looks to spread UK nuclear costs

French energy giant EDF may seek more partners to share the costs of new nuclear plants in the UK and has appointed a financial adviser to consider its options.

EDF has declined to put a pricetag on its proposed new UK nuclear plants. Photo: PA

By Emily Gosden, and Denise Roland

6:00AM BST 01 Aug 2012

5 Comments

The company plans to invest tens of billions of pounds in building two nuclear reactors at Hinkley Point in Somerset and two at Sizewell in Suffolk.

It has declined to put a price tag on the projects, but some estimates suggest the cost of the reactors has spiralled to as much as £7.5bn each.

Hinkley Point is the only proposed new UK nuclear power station anywhere near to being built. EDF is in negotiations with the Government over subsidies for the plant and plans to take a final investment decision this year.

Centrica has an option for a 20pc stake in the plants, but says it will only invest if there is a clear business case and has warned that much work remains to be done on the plans. Analysts are sceptical that it will take the option.

Ratings agencies have warned that they could downgrade both EDF and Centrica if they go ahead with the project.

Thomas Piquemal, chief financial officer for EDF, said yesterday that the company was “looking into opening up a little bit more of our capital in these projects by finding new partners”.

He told reporters: “Our goal has always been and remains to be in control of the operations, to control the projects, but this does not mean that we absolutely need to control 80pc of the projects.”

An EDF spokesman said it had always said it might look for new partners but confirmed a financial adviser had been appointed recently to consider the options.

Britain’s nuclear ambitions were dealt a severe blow in March when German utilities RWE and E.ON withdrew from plans to build two new plants.

However a sale of their joint venture, Horizon, is understood to have attracted interest from two consortia backed by rival Chinese nuclear corporations.

EDF controls 15 of the UK’s 19 existing nuclear reactors, at eight sites – all but one of which are due to shut down by 2023. Centrica owns a 20pc stake in the existing sites.

EDF’s half-year results yesterday, showed a 4.6pc rise in net income to €2.8bn (£2.2bn), as demand for hydroelectric power offset nuclear outages.

Telegraph

Rosneft enters talks with BP over buying TNK-BP stake

Rosneft, the Russian state oil company, has expressed its interest in buying BP's stake in its troubled Anglo-Russian joint venture TNK-BP.

Rosneft said the acquisition of BP's interest in TNK-BP would be in the best interest Rosneft and BP shareholders and TNK-BP.

7:55AM BST 24 Jul 2012

Comment

The British oil group announced that it planned to sell its 50pc stake in TNK-BP in June amid escalating tensions with its Russian oligarch partners.

BP

Rosneft said in a statement on Tuesday: "The parties agreed to comment negotiations on this matter and signed a non-disclosure agreement."

The Russian state oil company said it believes that an acquisition of BP's interest in TNK-BP "would be in the best interest of both Rosneft's and BP's shareholders and would lead to further development of TNK-BP".

Rosneft said it had been informed that TNK-BP's Russian partners have also indicated their interest in buying BP's stake and that BP has an obligation under the shareholders' agreement to negotiate in good faith with the other shareholders. 

It said there can be no assurance that the talks will end in a deal.

Shareholder relations, which have often been rocky at TNK-BP since BP came in as an equal partner in 2003, worsened last year when the British major tried to reach a strategic alliance with Rosneft to drill in the Artic.

AAR blocked the deal in the courts, successfully arguing that it violated an exclusivity clause in the TNK-BP shareholders' agreement.

The ensuing fallout has left the company without a board quorum, blocking dividend payments.

Michael Fridman, one of the quartet of investors who own half of Russia's third-largest oil company through the AAR consortium, quit as chief executive in May.

Earlier this month Mr Fridman told BP investor meetings in New York and Boston that the partnership has run its course. He said the Russian co-owners would be willing to sell their stake to BP for cash and stock to put an end to a bitter shareholder conflict.

Last week tensions between BP and its Russian oligarch partners escalated after the first TNK-BP board meeting in seven months ended in a stand-off over one of the joint venture’s key projects.

The two sides also failed to resolve an impasse over the payment of dividends, which are currently suspended – leaving BP without an important source of income.

Telegraph

Drivers are 'victims of speculators' as petrol prices rise

Petrol prices are rising again following 10 weeks of falls, the AA has warned,

Those owning diesel cars has seen the price over the same period rise from 136.12 a litre to 137.33 pence Photo: PA

By David Millward, Transport Editor

6:30AM BST 19 Jul 2012

Comment

According to the latest analysis by the AA drivers were paying 132.28 pence a litre for unleaded on Tuesday, compared with 130.81 pence on July 1.

Those owning diesel cars has seen the price over the same period rise from 136.12 a litre to 137.33 pence.

Underpinning the rise has been an increase in both the cost of crude oil, which has increased from $90 a barrel in mid-June to $104 yesterday.

The increase in crude oil prices has been explained by continuing political uncertainty in the Middle East, some shortages because of a strike in the Norwegian oilfields and some market speculation.

But drivers’ misery has been compounded by a sharp rise in the wholesale price of petrol when it leaves the refinery.

On June 26 it was selling from $920 a tonne, by July 5 the price burst through the $1000 a tonne barrier.

Luke Bosdet of the AA said: “There has been the increase in the price of crude, what dealers claim is higher demand because of the US motoring season and the tighter supply following the closure of the Coryton refinery in Essex.

“But this doesn’t hold water. Petrol sales in the USA have been falling and the Government assured motorists that surplus petrol production at other refineries meant that the loss of Coryton should have no impact on prices.

“Once again it looks as if motorists are falling victim to market speculators.”

 

 

Telegraph

 

Shell faces $5bn fine over Nigeria Bonga oil spill

Royal Dutch Shell faces a $5bn (£3.2bn) fine in Nigeria for an oil spill off the coast of the western African country last December.

NOSDRA said the spill was caused by a failure in Shell's oil export hose. Photo: AFP

By Emily Godsen and Richard Blackden

7:00AM BST 18 Jul 2012

Comment

Nigeria's National Oil Spill Detection and Response Agency recommended the fine to the country's MPs this week. The fine would be the largest Shell has ever received in Nigeria and amount to about $125,000 for each barrel of oil split in the Bonga field. By contrast, BP is facing a maximum fine of $4,300 per barrel in the US following the Gulf of Mexico.

Shell reacted angrily to the recommendation. "We do not believe there is any basis in law for such a fine," the company said. "Neither do we believe that Shell has committed any infraction of Nigerian law to warrant such a fine."

The Anglo-Dutch company estimated that about 40,000 barrels were spilt at Bonga, making it Nigeria's worst offshore spill in more than a decade. However, Shell disputes claims that any of the oil reached the shore and says that its response to the spill was rapid. The fine will need approval by Nigeria's parliament.

The prospect of Nigeria trying to impose the fine is troubling for Shell, which has been producing oil in the west African country since the 1950s.

Shell's fight in Nigeria came as Argentina stepped up its legal battle against UK companies trying to develop oil reserves off the Falkland Islands. The Argentine government said it is preparing to launch legal action against Premier Oil, which last week signed a $1bn deal last week to develop Rockhopper Exploration’s Sea Lion field and intends to have first oil flowing by 2017.

Argentina said it had written to Premier Oil to warn it against the "illegal" activities in the islands it calls Las Malvinas. 

Telegraph

Energy subsidy row 'may deter UK investment’

Delays and political interference in the setting of subsidies for wind farms may deter investment in the UK, energy companies have warned.

A row over onshore wind farms is understood to be behind the delay to the subsidy level announcement. Photo: Getty

By Emily Gosden

7:00AM BST 18 Jul 2012

Comment

Ministers had been due to announce revised subsidy levels for renewable energy technologies yesterday - a decision originally due in the spring but delayed amid political infighting over the scale of cuts for onshore wind farms.

However The Daily Telegraph revealed yesterday that the decision had been delayed again, with Chancellor George Osborne demanding cuts of 25pc, to be phased in over several years, but Deputy Prime Minister Nick Clegg thought to insist the cut be limited to the 10pc recommended by the government’s review.

Keith Anderson, ScottishPower’s chief corporate officer, said the company was “worried” by the delay and warned: “One of the key advantages of the UK as a place to invest is the predictable nature and stability of its regulatory regime. Sticking to the evidence and the timetable is key to investor confidence.”

He had previously warned that, if political intervention were to override evidence-based outcomes, the company might have to start considering “political risk” when deciding whether to invest billions of pounds in the UK.

While the political row is understood to centre on onshore wind farms, the review will also determine subsidies that are crucial for other renewable technologies such as biomass.

Drax, whose future strategy hinges on increased use of biomass, saw its shares fall 5.67pc yesterday. In February it cancelled plans for a dedicated biomass plant because proposed subsidies were too low, and said it needed higher subsidies if were to invest £450m on converting its existing coal-fired power station to run mostly on biomass.

Gaynor Hartnell, chief executive of the Renewable Energy Association, warned yesterday that the delay to the subsidy decision was “immensely damaging to the industry” as “developers need certainty and soon”.

Phil McVan, of turbine provider Myriad CEG Wind, said the situation “hugely affects the confidence of businesses and investors”.

But Energy Secretary Edward Davey played down the wind farms row, insisting there was “no one” arguing for cuts on the scale of 25pc and blaming the delay on a “logjam”.

He claimed the Treasury had been working “very well” with his department, adding: “The critical thing is that, when we announce it, the decisions are evidence based.”

 

Telegraph

Siberian court orders BP to pay TNK-BP $3bn in damages

BP’s involvement in Russia and its troubled joint venture TNK-BP hit a new low after a Siberian court ordered the oil major to pay $3bn (£2bn) in damages to the business.

BP said the award damages the reputation the Russian legal system and its ability to protect the rights of bona fide investors from illegal corporate attacks.

By Jonathan Russell

1:22PM BST 27 Jul 2012

54 Comments

The decision, described as an “illegal corporate attack” and “damaging the Russian legal system”, could open BP up to further multi billion dollar claims.

BP

It also risks further destabilising BP’s attempts to exit TNK-BP through a sale of its stake to its joint venture partner AAR or another party.

Russian state-owned oil company Rosneft said on Tuesday that it is to begin talks to buy BP’s stake in TNK-BP, in a move that confirmed the Kremlin’s central role in determining the fate of the troubled joint venture. In June BP announced it was putting its 50pc stake up for sale having received “expressions of interest”. 

BP’s Russian lawyer Konstantin Lukoyanov said in a statement on Friday: “The court award seriously damages the reputation the Russian legal system and its ability to protect the rights of bona fide investors from illegal corporate attacks.”

The Siberian court found that BP had damaged the interests of shareholders in TNK-BP through its failed attempt to carry out a share swap with rival group Rosneft in 2011. The £10bn share swap failed after it was found to have breached BP’s agreement with its TNK-BP partners AAR.

The case against BP was brought by TNK-BP minority shareholder Andrei Prokhorov on behalf of the joint venture. It came after three similar legal challenges had been rejected.

The success opens up the possibility of a second legal challenge from the four oligarchs behind AAR, led by Mikhail Fridman.

The partners are currently pursuing legal action against BP through an arbitration court. If they win that action they could be able to take a lawsuit to the courts.

The parties are currently in negotiations for AAR to buy out BP. The oligarchs are understood to be considering bidding $7bn for half of BP’s 50pc share in TNK-BP. The offer values the 25pc holding at $10bn minus the $3bn claim AAR is pursuing.

The lawsuit comes as TNK-BP released results showing profit had fallen to $808m from $2.2bn in the second quarter. The result was down to changes in export taxes.

On the legal decision a spokesman for BP said: “We consider the Court decision as unjustified. Today's ruling will be challenged in the court of appeal. All the plaintiff's arguments are based on absurd assumptions, and are not related to either the company's interests, or the interests of its shareholders.”

 

Telegraph

BP stand-off over Russian dividend

Tensions between BP and its Russian oligarch partners escalated after a TNK-BP board meeting ended in a stand-off over one of the joint venture’s key projects.

Tensions between BP and its Russian oligarch partners have escalated Photo: Sarah Brook

By Emily Gosden

9:45PM BST 21 Jul 2012

1 Comment

Tensions between BP and its Russian oligarch partners have escalated after the first TNK-BP board meeting in seven months ended in a stand-off over one of the joint venture’s key projects.

The two sides also failed to resolve an impasse over the payment of dividends, which are currently suspended – leaving BP without an important source of income.

The four senior BP executives and four AAR oligarchs on the TNK-BP board held a video conference call on Friday – intended to keep the company’s operations functioning – amid manoeuvring by both sides over BP’s plan to sell its stake in the venture.

TNK-BP’s management presented the board with plans to invest up to $3bn (£1.9bn) in developing two vast gas fields in western Siberia, owned by its subsidiary, Rospan.

The Sunday Telegraph understands that BP’s directors told management – which is dominated by AAR – that more work must be done before they would approve the plans, although they would support it going ahead in due course.

AAR is understood to have insisted the project should proceed in its current form or not at all, leaving a question mark over its fate.

The partners also discussed, but failed to agree upon, the payment of dividends. Regular dividends were suspended in May and as a result BP will be missing about $430m of expected earnings from TNK-BP when it reports its first-half results on July 31.

TNK-BP said in a statement that BP had proposed the payment of a $1bn special dividend and that AAR “agreed to study BP’s proposal and make a decision during the course of the coming week”.

The stalemate over Rospan at Friday’s meeting typifies the disagreements that have dogged the venture but have worsened in the past 18 months since BP angered its partners by bypassing the venture in an attempted tie-up with state-controlled Rosneft. AAR blocked that deal and is seeking damages from BP over an alleged breach of the terms of TNK-BP’s shareholder agreement.

At the last board meeting in December, AAR argued that TNK-BP should sue BP – its own shareholder – prompting the resignation of two of TNK-BP’s three independent directors.

The replacement of one of those enabled the board to reconvene on Friday. 

Telegraph

Call it right and Russia will be BP’s pot of gold

One of the risks of wrestling a bear is that they have a tendency to give you a bloody nose.

BP chief Bob Dudley and Rosneft president Eduard Khudainatov seal their ill-fated deal Photo: Reuters

By Kamal Ahmed, Business editor

9:30PM BST 28 Jul 2012

3 Comments

BP’s Bob Dudley is something of an expert Russian-bear wrestler and has been on the receiving end of a couple of smarting hooters in the past.

The most recent was in 2011, when he faced the embarrassment of announcing a $16bn share swap deal with the state-backed oil giant, Rosneft, to explore the Arctic, only to see it slowly unravel in the teeth of legal action from BP’s Russian partners in TNK-BP. Three years earlier, Mr Dudley was reaching for the bloodied cotton-buds when he had to leave Russia hurriedly (some reports suggested he was bundled out in a car boot) when ousted as chief executive of the very same TNK-BP following a boardroom coup.

Mr Dudley is nothing, however, if not persistent and the news last week that Rosneft was interested in buying up BP’s TNK-BP stakeputs Mr Dudley back in the wrestling ring. This time, however, BP’s chief executive looks as if he has a few more moves up his sleeve.

Mr Dudley, who is not apparently on the list to meet the Russian President, Vladimir Putin, when he is in town for the Olympics judo, is eyeing a big strategic change for Britain’s leading oil major. Speaking to those at the very top of BP’s Russian division, there is still enormous enthusiasm for the nation and the thousands of miles of untapped hydrocarbon wealth lurking just under the soil of the world’s largest country. The problem is, who is the best partner to deliver that wealth to BP’s investors, who have certainly had a torrid time since the disaster in the Gulf of Mexico?

At present, BP’s major partners are Alfa Access Renova, a consortium led by four Russian oligarchs for whom the word “compromise” comes just under “weakness” in the Russian dictionary. You could write 50 columns on the legal battles between AAR - joint stakeholder in TNK-BP - and BP, and still be little clearer on who is actually right or wrong. What you do know is that whatever progress is made with AAR, for BP it is never easy.

It is for that reason that BP is looking towards a post-AAR era in Russia with a veritable bounce in its step. Whatever the outcome of the talks its TNK-BP shareholder agreement demands that it has with AAR until October 17, BP can sense that a new deal with Rosneft is now far more likely than it was a week ago.

Any eventual deal that puts Rosneft and BP back together maintains the possibility of significant Russian revenue flow for BP and opens up a whole host of possibilities in Siberia. Look at an oil exploration map of Russia and there are some awfully large blank spaces, and that’s even before considering the possibilities of shale gas. Some 60pc of the Arctic, the next great frontier in oil exploration, is in Russian hands, east Siberia is ripe for development, and the hothouse fuel demands of China are on the doorstep.

As one person close to BP put it, Russia has “gold coins turning up on the pavement”.

What BP must not do is lock itself out of Russia. The TNK-BP joint venture at present accounts for 29pc of BP’s global production, and since its birth in 2003 has provided $39bn in dividends. That partnership may be nearing its end, but replacement, not exit, should be Mr Dudley’s priority.

Rosneft is no cuddly teddy, but the direction of travel is clear. Mr Putin’s ally, Igor Sechin, is back in charge at the oil major and the operation is cementing its position as the power broker in all things oil and gas. As Marshall Goldman’s book on the rise of the Russian oil giants, Pirates Unleashed, reveals, Rosneft has been consolidating since the early 2000s, buying up many of the plethora of companies that exploded on to the scene following market liberalisation in the 1990s.

Resource nationalism is alive and well in Russia and Rosneft is the partner of choice. Mr Dudley needs to keep the door to the bear open, even if it means some rather nifty wrestling moves. 

Telegraph

BHP Billiton writes down shale gas assets by £2.8bn, chief Marius Kloppers forgoes bonus

BHP Billiton has writen down the value of its US shale gas assets by $2.84bn, prompting the head of the world's biggest miner Marius Kloppers to forgo his annual bonus.

Marius Kloppers was reportedly paid more than $15m last year Photo: Bloomberg News

6:18AM BST 03 Aug 2012

2 Comments

The head of BHP's petroleum division Mike Yeager will also not be paid any extra for the past financial year after the massive impairment charge on the assets bought in 2011.

The FTSE 100 giant also cut the value of its Australian nickel division by $450m (£290m), with the price of the commodity down and costs rising, AF reported.

Plunging US gas prices forced the global giant to book a writedown on the value of the Fayetteville shale gas assets in Arkansas that it acquired from Chesapeake Energy.

But it did not write down its other shale liquid and gas assets in Texas and Louisiana acquired through Petrohawk Energy, also last year.

It comes after British energy giant BP was hit by a huge impairment charge on its US shale gas assets.

Kloppers, who was reportedly paid more than $15m last year, said it also reflected BHP's decision to adjust its development plans by shifting drilling from dry gas to more liquid-rich fields.

"While we have responded appropriately to the changed market conditions today's impairment is clearly disappointing," he said, adding that he believes the assets will still prove their worth in the longer-term.

"We believe that our dry gas assets are well positioned for the future given their competitive position on the industry cost curve."

Shale gas is produced by tapping gas from shale rock using a technique called hydraulic fracturing, or "fracking".

Little-known even five years ago, natural gas trapped in sedimentary shale rock is seen as having the potential to transform global energy markets.

BHP chairman Jac Nasser welcomed Kloppers' and Yeager's decision to forgo any bonus as the company's share price dropped more than 2pc to AS$31.31 by early afternoon, near three-year lows.

"As a result of the writedown both Marius Kloppers and Mike Yeager have advised the remuneration committee that they do not wish to be considered for a bonus for the 2012 financial year," he said.

"The remuneration committee and the board respect and agree with that decision."

Nasser added that the writedown demonstrated the company was operating in "difficult times", but threw his support behind Kloppers.

"We are fortunate to have Marius' leadership, together with a strong management team supporting him, in these challenging times," he said.

"Notwithstanding the prevailing environment we are confident in the outlook for the United States natural gas market and the role our shale assets will play in BHP Billiton's portfolio in continuing to deliver long-term shareholder returns." 

Telegraph

BP invests in UK research to help it drill deeper

BP is to invest $100m (£60m) over ten years in a UK-led research centre to help its search for oil in deeper and more challenging environments.

BP chief executive Bob Dudley said the new centre would develop materials for use drilling deeper wells. Photo: PA

By Emily Gosden

7:00AM BST 07 Aug 2012

2 Comments

The oil major said it had picked the University of Manchester as the 'hub’ for the BP International Centre for Advanced Materials, following a “global search”.

The University of Cambridge, Imperial College London and the University of Illinois Urbana-Champaign will also partner in the project, which is expected to support 25 new academic posts, 100 post-graduate researchers and 80 post-doctoral fellows.

The centre aims to develop new materials for use across the oil and gas industry. Bob Dudley, BP’s chief executive, said that advanced materials would be “vital” for the safe and efficient future of the energy industry as energy producers “work at unprecedented depths, pressures and temperatures”.

The materials would also aid refineries, manufacturers and pipeline operators to “combat corrosion” and improve their operations.

Chancellor George Osborne said BP’s decision showed the Government was “creating an environment where innovation can flourish”. It was committed to “putting innovation and research at the very heart of its growth agenda”, he said.

Mr Dudley will announce the investment a UK Trade & Investment (UKTI) event in London.

Ministers will hail a raft of deals including GDF Suez, Centrica and Bayerngas formally signing the field development plan for a £1.4bn investment in a gas field in the North Sea.

Speaking at the UKTI event yesterday, Deputy Prime Minister Nick Clegg denied that the coalition was riddled with division over energy policy, insisting the Government supported low carbon targets. He said the UK offered “political stability - most of the time, anyway”.

Want your politics with the cant taken out? Then try my blogs:            

     

                   http://www.livinginamadhouse.wordpress.com/      

                  http://www.englandcalling.wordpress.com/

                  http://www.ukcmri.wordpress.com/