Britain is incapable of building the wind farms, solar farms and transmission networks essential to net zero, a government report has warned.
A shortage of ships, steel and concrete in the quantities needed to build new infrastructure casts doubt over government targets to decarbonise the energy system, according to a study by management consultancy Baringa.
The problem is compounded by a shortage of skilled workers who can install the new structures.
https://www.telegraph.co.uk/business/2024/04/17/britains-shift-net-zero-threatened-shortages/
U.K. engineering and oilfield services firm John Wood Group (OTCPK:WDGJF) (OTCPK:WDGJY) should either move its listing on the London Stock Exchange to the U.S. or consider a sale, activist investor Sparta Capital Management said Tuesday.
Wood's (OTCPK:WDGJF) (OTCPK:WDGJY) shares have fallen a third to all-time lows since Apollo Global Management abandoned its attempt to buy the company last year, but traded +1.5% in London following Sparta's letter to Wood's board.
Sparta founder Franck Tuil said he was "frustrated" by the stock's continued underperformance, and "if the U.K. public markets are unwilling or unable to engage in Wood's story, we believe you should undertake a strategic review and actively seek alternative solutions."
Tuil said it is "time to recognize that the next chapter of Wood's journey could be best supported by different owners," and urged the company to "explore the best way to maximize shareholder value, including a sale of the company."
Sparta said the company has begun a turnaround but the share price is struggling under the "U.K. mid-cap curse."
U.K. stocks have lagged the valuations of U.S. peers, causing frustration among executives and investors, including at Shell, whose CEO said recently the company has "a location that clearly seems to be undervalued."
Wouldn't this be one of the reasons why ENQ wants to ditch the GE-stake?
https://www.energyvoice.com/oilandgas/north-sea/551646/the-threat-alone-is-something-security-experts-weigh-chinas-role-in-north-sea/
"Strain in the relationship between China and the UK has raised concerns about whether Chinese state-linked companies like CNOOC pose a potential threat to the UK’s energy security.
The UK and the EU have both taken recent actions against Chinese groups, ranging from accusations of cyberespionage to dominating energy supply chains. Against a backdrop of the Russian invasion in Ukraine, the role of foreign companies controlling energy infrastructure is coming under scrutiny. This is especially true for the UK, as the last decade has seen Chinese companies gain a larger presence in the North Sea."
"The issue is not a new one – politicians have warned that Chinese companies working in the North Sea pose a threat to the UK’s energy security. In 2023, chairman of the cross-party policy group Inter-Parliamentary Alliance on China (IPAC) Iain Duncan Smith said the government was “failing to take seriously” the energy security threat posed by the involvement of China-backed groups in the UK’s oil and gas sector."
Other news, probably not so important : Steve Bowyer is appointed to the OEUK-board
https://www.energyvoice.com/oilandgas/551724/oeuk-appoints-trio-of-north-sea-bosses-to-its-board/
Britishvolt’s gigafactory site sold off in electric car blow
US private equity investors have bought the site of what had been hoped would become Britain’s first electric car battery gigafactory in a blow to Britain’s net zero ambitions.
Land in Cambois near Blyth in Northumberland had been expected to become the home of the £3.8bn Britishvolt factory before the company fell into administration last year.
However, Northumberland County Council revealed it has sold the site to Blackstone, which plans to turn the site into a data centre.
Britishvolt, which was backed by mining giant Glencore, collapsed with the loss of more than 200 jobs and had been in line for £100m in funding from the Government via its Automotive Transformation Fund.
"The claim that abandoning fossil fuels will make this country safer in a hostile world is a perversion of reality; it should be treated with contempt. "
https://www.telegraph.co.uk/news/2024/04/15/true-british-patriots-have-gas-boilers-and-petrol-cars/
In US not so different : Bets against energy stocks were higher at the end of March. Average short interest across energy stocks in the S&P 500 index rose 14 basis points to 2.56% of shares floating at the end of the month from February end.
Oil, Gas, and Consumable Fuels remains the most shorted industry within the energy sector, with 2.66% short interest as of March-end, up from 2.50% at the end of February. Energy Equipment and Services was the least shorted industry within the sector, with 2.07% short interest as of March-end, up from 2% during February end.
1) With the exception of the Saudis, the OPEC+ cut is not real. Supplies are higher than what's being penciled in, so the risk of supplies surprising to the upside is significantly lower than what people think.
2) US oil production growth is nowhere near what headline figures show. As a result, the decline will be larger and more severe than people expect. This will directly impact how we exit 2024 and 2025.
What Does that Mean for Price?
Even with our variant perception, we still see oil prices being rangebound this year. Why? Because the Saudi cut is real and they have every incentive to start unwinding it by H2 2024. This means supplies could surprise by ~500k b/d to ~1 million b/d.
This year is an election year and if oil prices get too hot, the US could use SPR again to combat higher prices. China is also capable of releasing SPR this year, which could complicate things.
However, once the market sees what we are seeing, the unwinding of the voluntary cut will be bullish for balances in 2025. People will realize that this production cut is not real, and the reversal of it will have no real impact on the market. Analysts will have to readjust their modeling for 2025 and oil traders will see that despite the production increase, exports are the same. Physically and financially speaking, oil prices will get a tailwind because of this (unwinding of the voluntary cuts).
Lastly, because of the overstated growth in US oil production, market participants will be surprised to see both the drop in US oil production this year and the subsequent lack of growth. This will alter people's perception of supply growth in 2025. Once US shale production peaks, non-OPEC supply growth also peaks. The peak supply thesis is going to come much sooner than the peak demand thesis.
What does it mean for price?
It's going to be a lot higher than $90/bbl WTI.
https://seekingalpha.com/article/4683659-two-variant-perceptions-in-the-oil-market-today-and-why-they-are-so-important-for-where-we-are-headed
"
As rising oil prices complicate the UK’s escape from this ghastly cost of living crisis, it was noteworthy a British energy company announced last week it is to start drilling at the biggest oil field discovered in the North Sea in at least 20 years.
EnQuest plans to bring two fields onstream with the potential to produce 500 million barrels of crude over coming decades. This reignites the political battle over the UK’s energy future, with the Tories having just extended the 75pc “windfall levy” on North Sea output and Labour threatening to block new production completely, citing environmental concerns.
This makes no sense. There are around 300 active North Sea oil and gas fields, over half of which will cease production by 2030. The North Sea currently delivers the equivalent of 83pc of UK oil demand and 54pc of our gas use. What are our plans to replace those supplies?
Even the Climate Change Committee, the official green watchdog, acknowledges fossil fuels will still account for around half of Britain’s energy needs by 2030 and a quarter by mid-century. And that’s if the proposed net zero 2050 transition to renewables is achieved, which looks pretty unlikely.
So if that’s the case, that we’ll be using oil and gas for at least the next three decades, why not drill our own? Even if such energy is exported, at least UK energy workers would keep their jobs and the Treasury would get the tax.'
Ready reserves can cushion the blow – but only if we are prepared to use them.
Hoping the narrative keeps changing...
https://www.telegraph.co.uk/business/2024/04/14/britain-north-sea-oil-resources-protect-rising-fuel-prices/
Guessing a SP for ENQ or other British oilers is a fool's errand as politics and enfollowing money streams play such an important role. I can only say our actual valuation is abyssmal. I even don't want to start comparing our valuation to that of US mid- and small cap oilers. A small French oiler with operations in "risky" jurisdictions -that is my sarcasm, sorry- of Tanzania, Gabon and Angola that is only pumping 28 000 BoE/d has a market cap of 1.28 Bn euros and net debt of $ 120 million, they had FCF of $157 million. Wowwowwow!!!!
How strange how sentiment turns. Someone -i won't mention his name- who has been calling names at "stupid" Enquest just few weeks ago because of the share price not following the operational excellence would not object to a big acquisition by ENQ now and wouldn't mind the share price reaction down....I own several millions of shares and would object being buried under a new debt burden, i can assure you. LTH 's have paid 21 p merely for the Golden Eagle acquisition...
A spokesman for Offshore Energies UK, the industry trade body, said: “Continued investment in UK energy opportunities, including oil projects, is necessary to ensure UK security of energy supply, support hundreds of thousands of jobs and contribute to the UK economy.”
However, it is thought that almost all that oil is likely to be exported, partly because the Kraken field is not linked to a pipeline meaning its oil is likely to be collected by ship and taken to whichever refineries buy it.
It means the main benefit for the UK will come from any taxes paid by EnQuest. The windfall taxes imposed by Jeremy Hunt, the Chancellor, currently stand at 75pc of profits.
Craig Baxter, of EnQuest, said: “EnQuest continues to explore ways to progress the respective development of the Bressay and Bentley fields.
“EnQuest is committed to supporting the energy transition in the UK and any future field development will be conducted in line with EnQuest’s commitment to reaching net zero scope 1 and 2 emissions by 2040.”
Mr Baxter added that the gas initially extracted from the Bressay field would be used to power the Kraken operations, replacing the diesel fuels currently used and so cutting emissions.
He said: “This would significantly reduce Kraken’s emissions, by displacing diesel that is currently being used to power field operations.”
A Department for Energy Security and Net Zero spokesman said: “As data from the independent Climate Change Committee shows, we’ll still need oil and gas for decades to come, even when we reach net zero in 2050.
“That’s why we’re backing the UK’s oil and gas industry with annual licensing rounds, supporting around 200,000 jobs, generating billions in tax revenues to fund public services and support with the cost of living and retaining the skills and expertise needed for the green transition.
“Even with new oil and gas licences, we have been clear there will be a managed decline in UK production, projected at 7pc per year, and they will not make us a net exporter or increase carbon emissions above our legally binding carbon budgets.”
Biggest North Sea oil find in decades to be drilled for first time
Sites expected to produce 500m barrels of oil despite net zero crackdown
A UK energy company is to start drilling at the biggest oil field discovered in the North Sea in at least 20 years in spite of a net zero crackdown on the industry.
EnQuest plans to bring two fields onstream which have the potential to produce 500 million barrels of crude oil over coming decades.
The sites, which neighbour Kraken oil and gas field, 80 miles east of Shetland, will reignite the political battle over the North Sea’s future in which Labour has threatened to block new production citing environmental concerns.
Their planned intervention has prompted warnings from energy companies that the UK risks cutting off its own energy supplies before it has a replacement.
The resulting “Kraken cluster” will have combined reserves larger than either Rosebank or Cambo, the controversial fields west of Shetland which attracted a backlash from environmental campaigners. Cambo was discovered in 2002 with discovery drilling at Rosebank taking place two years after.
Rosebank, which is predicted to yield 350 million barrels of oil, won a production licence last September after months of political wrangling. Cambo, with 170 million barrels of oil, has been in limbo since 2021 when energy giant Shell pulled out of the project because of the green backlash.
It comes as Labour plots a £11bn raid on the UK’s oil and gas industry as part of proposals to increase and extend the windfall tax, with the funds invested in “clean power to cut bills for families”.
The party has also proposed to ban new oil and gas drilling licences.
Energy companies are under intense pressure to cut back on oil and gas production and boost investment in renewables as governments race to meet net zero targets.
Wael Sawan, the chief executive of Shell, warned last month that the world is at risk of energy shortages unless more money is invested in drilling for oil and gas.
EnQuest’s two new sites, Bressay and Bentley, are so close to Kraken that they can all be connected to the same production system, based around the giant ship already serving as a floating oil platform for the Kraken field.
EnQuest said Bressay was “one of the largest undeveloped oil fields in the UK continental shelf” with so-called oil-in-place estimated to be between 600 million and one billion barrels.
Oil-in-place measures the total oil in a reservoir but the amount extracted from Bressay is likely to be around 200-300 million barrels.
Bentley, the second nearby field, is thought to be even larger, capable of producing more than 300 million barrels, putting it on a par with Rosebank.
Those amounts are in addition to the 137 million barrels already being extracted from the original Kraken field. It means the cluster could produce more than 700 million barrels of oil.
To my disbelief :
Flatulent cows targeted in M&S net zero push
Retailer to spend £1m in drive to cut 11,000 tons of harmful gases from dairy supply chain
https://www.telegraph.co.uk/business/2024/04/09/marks-and-spencer-cows-flatulence-net-zero-push/
The early cessation of platforms could also see decommissioning liabilities kicking in, at a cost to the exchequer.
RIFT’s analysis noted that North Sea oil and gas had already been in decline prior to the implementation of the EPL.
However, Westwood Energy Research Director Yvonne Telford said: “Oil and gas production in the UK is in decline, but the rate of that decline will be determined by the level of investment to maximise economic recovery from the basin.
“The impact of the EPL may deliver a short-term revenue win to the UK, but it has impacted investor sentiment and therefore in the longer term there is likely to be lower recovery, shorter field lives and therefore less revenues for tax payments.”
Falling investment
Numerous groups have already warned that the EPL is driving them to slash investment budgets and cut jobs.
Ithaca Energy said the EPL has “severely dampened” North Sea investment, warning the firm’s production will drop next year, pointing to its own Greater Stella Area (GSA), along with developments with partners like TotalEnergies’ Elgin-Franklin and Repsol Sinopec’s Montrose/ Arbroath fields as having suffered “deferral or cancellation” on their investments.
The company warned in its full-year 2023 results that it had taken a $500 million impairment against GSA “as a direct result” of the EPL.
Ithaca said the impairment charge for GSA follows the decision not to proceed with further infill drilling at the Harrier field, as “a direct result of the EPL and falling gas prices”.
Harbour Energy reported an $8m loss after tax in the first half of 2023, down from $1bn profit in the same period of 2022, with the company scaling back activities and cutting hundreds of jobs in Aberdeen.
It said it would “re-phase” up to $100m per year of decommissioning spend in the wake of the windfall tax.
EnQuest also reported a loss after tax for the first half of 2023 after seeing a profit in the same period of 2022, citing the impact of the EPL.
And Neptune Energy predicted the EPL would see it take a £53m tax hit.
March’s Spring Budget extended the EPL until March 2029, or until such time that oil and gas prices return to ‘normal’ levels for a sustained period of time.
The UK government also boosted it to 35% in January 2023, up from the original 25%.
https://www.energyvoice.com/oilandgas/north-sea/551429/industry-challenges-short-term-epl-boost-to-oil-and-gas-tax-revenues/
Industry boffins have challenged analysis that the windfall tax will deliver a win for the UK Treasury.
Research from accountancy RIFT has highlighted that tax revenue for the Exchequer hit their highest in the last 25 years due to the Energy Profits Levy (EPL).
However analysts have warned that the long-term harm of the windfall tax will outweigh short-term gains.
During the 2022/23 financial year, official figures show the industry provided around £9.4 billion in revenues for the economy, a 284% annual increase.
The EPL boosted this figure, contributing just over £4bn to the total.
This compares to £2.45bn in 2021/22, which itself was up 225% compared to year before, driven by increasing oil prices in the wake of the Russian invasion of Ukraine.
Bradley Post, managing director of RIFT, commented: “While North Sea oil and gas is far from the only pillar of the Scottish economy, it’s been a historically important one and so the sizable boost in revenues that has come from the Energy Profits Levy will be a very welcome one.
“While some may be calling the death of the industry as a result of the Energy Profits Levy, many more believe that the tax paid is far better off benefitting the Scottish economy than it is sitting in the back pockets of energy provider execs.”
Short-term thinking on windfall tax
However, Welligence Energy Analytics vice-president of operations David Moseley warned that any short-term rise in tax revenues due to the EPL could come at the expense of additional revenues in years to come.
“The introduction of the EPL made companies a lot more uncertain around progressing greenfield and brownfield projects,” he said.
“You’ve got a big increase in tax in the short-term through the EPL, which has effectively made companies quite risk averse, with the sector now quite unstable when it comes to taxation and companies are very uncertain about what the future will hold.
“As a result of that, we’re seeing companies pulling investment. So long term, over the next 10-15 years for example, tax receipts could be less.”
Offshore Energy UK (OEUK) previously predicted that 90% of companies working in the North Sea could cut their investment plans due to the EPL, risking cutting production by 80% by 2030.
Https://www.telegraph.co.uk/news/2024/04/08/evs-electric-cars-green-energy-transport-failure/