Member Info for romaron

Nice phraseology though - “Labour don’t want to ban oil and gas, just British oil and gas. They would rather virtue signal to eco zealots than protect jobs here at home.”

The labour party has form when it comes to oil: https://boydellandbrewer.com/blog/african-studies/nuts-why-the-groundnut-scheme-still-matters/

After the war they had a brilliant idea to produce oilseed from Groundnuts. There are so many similarities with today.

History is a vast early warning system. -Norman Cousins, editor and author (24 Jun 1915-1990)

Are we still "oil and gas giants"?

"Due to their smaller size and limited ability to diversify beyond their core exploration and production work, independents will be less able to withstand the potential changes in fiscal regimes or fiscal uncertainty."

We are becoming almost like a private company and below the surface in a bunker. Might not be a bad place to be whilst the odd shelling continues. I think you're right KO with the remaining weaker holders biting the bullet and selling or reducing on Labour's manifesto which said basically nothing but by definition had nothing to raise hopes either. Default for a small number was to SELL. Traders would have gone with the trend and pushed it lower than intended. Baron didn't help by baling.

So if there is a Labour budget mid-September we can expect intense discussions between them and what remains of the UKCS O&G industry in the weeks running up to the budget especially the first 2 weeks of September. That is when the activity and leaks will happen. I'm expecting (hoping) Labour will bump into reality in this period and prioritise expediency over ideology.

If they do anything positive for the UKCS then we can expect a rerate.

Don't get carried away KO. I think the HYNs are pretty illiquid and on wide spreads anyway but stuff is always happening. I think very little major will happen until the election is out of the way and possibly Labour's first budget.

I'm watching ORIT's AGM. Quite interesting. Promoting a solar farm contract with Microsoft for 16 years and Sky for 10 years. They sold solar options in Spain and Poland to "pay down debt". My reading is that subsidies are more reliable in the UK. You'd only sell potential if it would fail to achieve the interest on debt imo.

Complaining that renewables are at a discount to their NAV and ORIT is around the sector average. They ignored my question on AR6 whether they considered the strike prices adequate.

1. https://edmhdotme.wpcomstaging.com/the-myth-of-cheap-uk-wind-power/

In the Summary the author writes: “Renewables” are routinely claimed to be “9 times cheaper than Fossil Fuels”.

A slight exaggeration as they don’t ‘routinely’ quote it now but I don’t disagree with using it. Labour did repeat it over several months and Ed Miliband and Keir Starmer shouldn’t be allowed to forget it. There is so much evidence that in fact renewables are MORE expensive than offshore wind. It is all in this report.

2. The HYN dropped today from 102.75 to 101.75. I prefer it rising obviously but that depends on interest rate direction among the many influences but to put a Panglossian view on it this it could just as easily be holders switching to the equity because the recent movement down triggered a lot of BUY signals. The bond holders do much more research than many equity holders imo.

3. Quite a large UT today. It is also rollover day for spread betting and I think that may have affected it.

4. I believe the AR6 applications are sealed bids. I’m only really interested in offshore wind but this time onshore might get some attention. I’m expecting shenanigans over the opening of them. I think the public (voters) should have the information before 4July

https://www.cfdallocationround.uk/ar6-timeline

National Grid ESO notify applicants of the results. 28 June – 1 July 2024

Everyone should put pressure on their candidates to make sure we are informed. I expect there will be plenty of leaks over that weekend which is only 10 days away.

5. Let's corner the market in scythes. Ecotricity has studied the feasibility of producing green gas from grass, using a green gas mill. The study found that there is enough spare land in Britain to grow enough grass to heat all of our 26 million homes. The grassland that is left after the solar farms is not suitable for combine harvesters and is marginal and difficult to access. This will add 75,000 jobs to the rural economy. Who will supply the scythes? (think shovels to the gold-miners). Another tip - hang on to your lawn clippings - they could be worth a fortune - plus global warming means we could be mowing in January.

Was on Newsnight with Victoria Derbyshire last night. He had this to say:

"If you look at economics behind Net Zero there is no rationale, no logic in saying its expensive and we can’t afford it because for every £1 we spend on renewable energy we get 2.5 times more jobs and twice the GDP growth that we get if we spend that same £1 on fossil fuels – THAT’S A FACT" (15:30)

He even has an answer to fuelling the existing gas boilers – “we can make the gas we need from grass and we have an abundance of grass in this country – we have enough grass to make all the gas we need.”

This is the man who has made a fortune out of renewable subsidies and said on the Iain Dale Cross Question show on LBC last September regarding the dangers of Putin getting weapons from Kim Jong Un responded with – “bacon will kill you first is my answer – it won’t be Kim Jong Un’s missiles that kill us or harm us; it will be bacon – bacon will kill you first.”

Why does the BBC not challenge this crackpot?

No I don't KO. Sorry - maybe others attending can remember?

But the market isn't [bullish]. I think we don't need to do anything. We are in a good position with a main business in recycling old fields and Kraken with a sideline in decommissioning. DCF and NPV might be old fashioned but then so is recycling. I'm not even sure the industry is sticking together. I think the capital providers are though and have said that with the hostile stance from Labour (and Tories) their are safer and more predictable homes for their money. I suggest that even if the O&G wanted to explore and drill the money isn't there. We're organic from now on.

I got this from another message board so cannot vouch for its accuracy but it seems pretty sound; if only that I got lost halfway through:

"The UK Labour party recently released its election manifesto, including additional detail on its plans for UK oil and gas fiscal terms. In our interpretation, these plans would represent a limited, though still significant, deterioration in fiscal terms, and, on confidence from the industry that these would be unlikely to change again, we believe incentives to invest in new projects remain. The following is a direct quote from the manifesto: “Labour will therefore extend the sunset clause in the Energy Profits Levy until the end of the next parliament. We will also increase the rate of the levy by three percentage points, as well as removing the unjustifiably generous investment allowances. Labour will also retain the Energy Security Investment Mechanism”. Two elements of what Labour has said appear straightforward. First, under a Labour government the EPL would be increased to 38% from 35%. Second, the EPL would be extended to the end of the next parliament in mid-2029 (current end date is March 2029). These elements have both been announced as Labour policy previously, and are not very surprising. Indeed, we are encouraged that the 2029 end date is again reiterated, lending this further credibility. Third, there is also greater clarity around tax allowances. Labour has previously talked about closing “loopholes” in the EPL structure. The manifesto appears to clarify what is meant by this, where it talks about removing the investment allowance. In our view, the language used is important here. Labour has specifically talked about “investment allowances”. If we look at the current UK oil and gas tax structure, as published by the UK government , there are only two elements referred to as an “investment allowance” – the 29% uplift for capital allowances against the 35% EPL, and the 62.5% uplift for capital allowances against the 10% Supplementary Charge. Given that Labour speaks about investment allowances alongside the EPL, we assume it is only referring to the 29% uplift granted against the EPL (with the uplift against the Supplementary Charge being a long-standing element of the fiscal regime). Under the current tax system, new CAPEX spending attracts 91p of tax relief per £1 of CAPEX spent. This creates significant incentives among existing UK producers for new CAPEX spending during the period of the EPL. If the 29% uplift against the EPL were to be removed, this 91p would become 81p of tax relief. If the EPL itself then rises to 38%, this 81p would become 84p of tax relief. So, in our view, it appears to be the case that under a Labour government, tax relief for new oil and gas CAPEX spending would move from 91p per £1 of CAPEX to 84p, and the EPL would still be expected to end in 2029."

If true/accurate the Capex spending allowance moving from 91p to 84p has cratered the industry

In the UK, renewables are subsidised by three different schemes. Feed-in-Tariffs (FiTs) fund mostly solar power. The latest report for 2022-23 shows the scheme cost over £1.7bn and average total payment was ~£193/MWh, about 3X the current cost of gas-fired power at around £65/MWh

Contracts for Difference (CfDs) fund a range of technologies, but most of the subsidy goes to offshore wind. Latest data from the LCCC shows the subsidy per MWh fell dramatically during the energy crisis, but is now back at £95/MWh for offshore wind, £73/MWh onshore and £60/MWh for solar. April 2024 was a record month for overall subsidies with £268m paid out with average strike prices at £146/MWh for offshore wind, £113/MWh for onshore and £110/MWh for solar power

By far the biggest subsidy scheme is Renewables Obligations Certificates, costing over £7bn per year. This scheme awards certificates for each MWh generated, a different number depending upon technology. April reference prices for intermittent renewables have been around £53/MWh, meaning the average price paid for offshore wind under the ROC scheme has been £176/MWh, onshore £118/MWh and solar £146/MWh including the value of the certificates

Future renewables are also going to be more expensive than current market rates. The Government’s announcements of prices for their Allocation Rounds are often quoted in 2012 money. In 2024 money, Allocation Round 6 (AR6) is offering £102/MWh for fixed offshore wind, £246/MWh for floating offshore wind, £89/MWh for onshore and £85/MWh for solar power, all far higher than current market prices *

*The AR6 timeline started in December 2023. National Grid ESO is scheduled to notify applicants of the results 28 June - 1 July 2024. https://www.cfdallocationround.uk/ar6-timeline What's the betting that both major parties will delay or try to bury this pre-election news?

We are to believe that all these pipedreams are to be achieved by just £1.7bn per year of spending on Great British Energy, £1.5bn to the National Wealth fund to upgrade ports, build gigafactories, deploy CCS and support green hydrogen. However, they do hope that additional funds will be provided by the private sector, but they do not explain why public money is needed at all if these are such attractive investments. There will also be £1.1bn per year spent on the Warm Homes plan. This spending will be funded by extending and increasing the windfall tax on oil and gas companies by £1.2bn per year. However, the windfall tax brought in only £2.6bn in its first year. Since then oil prices have fallen, so it is difficult to see how adding 3% to the current 35% Energy Profits Levy will bring in an extra £1.2bn. In fact, their commitment to end new licences is more likely to reduce the tax take. Labour plan to fund the rest of their “Green Prosperity Plan” (which must be an oxymoron) by “borrowing to invest” an extra £3.5bn per year.

It is patently obvious that Labour’s plans are a fantasy. Their numbers on energy bills, the cost of renewables and sources of funding simply do not add up. If renewables really were cheaper, then private companies would be falling over themselves to install new capacity without Government subsidy. If Tory policy was dumb, Labour’s plans are dumber because they want to do more foolish things more quickly.

Source:

https://davidturver.substack.com/p/election-2024-energy-policy-by-party?utm_source=substack&publication_id=1285567&post_id=145612395&utm_medium=email&utm_content=share&utm_campaign=email-share&triggerShare=true&isFreemail=true&r=lx6e9&triedRedirect=true

There is however some good news. The Greens are (apparently) closer to a perpetual motion machine with a promise of rainbows every day and unicorns roaming freely over our green and pleasant land.

But isn't it boring M. We understand it but the average voter doesn't. You get lost among the TWh and "leading scientists agree" without naming the scientists or where to find the data/evidence. Today I heard an articulate green supporter say to the LBC presenter that fossil fuels are only 1/7th of the units of electricity we us/produce in the UK and mentioned this as one of his sources: https://grid.iamkate.com/

He is correct as I write. It can even go lower than 1/7th (15.2%) but the sun is out and the wind trickling along but the price is still £81.79/MWh on the page. I've seen the price go negative but it is all smoke and mirrors. The solar disappears as leading scientists are still struggling with the phenomenon known as 'night' and somedays the wind doesn't blow. The 1/7th is pretty much an average when I look but what happens if we dispense with gas and the wind doesn't blow and the sun is weak (another phenomenon known as 'winter'). It is likely to spread to Europe so our interconnectors will look after their domestic needs first and may not be available. Nuclear is at a similar baseload to gas and I do wonder if the French ever go "Vichy" on us could that be in jeopardy?

But even this is not what confuses the public. They are told that fossil fuels are the enemy and dirty as well. What they don't tell the British Public is that electricity is only 20% of our energy needs. There is a transition going on but there's still 30 odd million ICE cars on our roads and the majority of dwellings are still heated by gas. That's without the cement, steel, plastic and fertilizer we get from fossil O&G.

He mentioned emissions too but what about the emissions from all our imports which include wind turbines and solar panels?

Practically every point made by these zealots can be rebutted but the media doesn't go by balance and even the good old BBC fails in its official guidance which states "“We should reserve the same scepticism for statistics as we would for facts or quotes. Avoid taking statistics at face value.”

“We shouldn’t always rely on press releases …”

“When explaining statistics, we should put them into context; a number used on its own is rarely meaningful.”

https://www.bbc.com/editorialguidelines/guidance/reporting-statistics/

What we need and is likely to happen if free rein is given to Ed is that we will suffer rolling blackouts and imagine the chaos if fuel deliveries are prevented - the Unions aren't happy.

One must give credit for how he controls his cabinet. Only a select few know exactly what is happening and they stick to the prepared script like sh*t to a blanket. They know they're gonna win so are playing ultra-safe and give little away, simply because they can. Growing up I remember the local advice if you were in discussions with the police - "I'm signing nothing, I'll say it in court".

Sir Keir is a trained lawyer. He is not daunted by the bundles of evidence that have to be prepared but realises that although evidence is one thing the most important is how it is produced and presented. He saves it for court and the court case is set for 4 July with a decision on the 5th July.

He wants to see what the witnesses for the defence have to say; especially the Scottish witness and the deplorable from Clacton. There will be appeals in the form of fresh opposition and attacks on obscure points of law and precedence but the heavy majority the jurors will give him (or not) will dictate his future plans and give shape to his actions going forward. He is precise and steady. He may be more ideologically hidebound than Ed. He is certainly slippery. Quite frightening really but as he becomes more politician and less lawyer he will have to start following set rule - expediency being the main one.

The present performance is not really imo how Labour will react post 4th July. The manifesto both praised NS workers and attacked "gas and oil giants". All options remain open. I hope that the O&G industry play hard ball. The real world is getting closer to Labour.

Because we don't trust Labour and neither does the market. They also said this today but it come over mealy-mouthed:

"Labour will maintain a strategic reserve of gas power stations to guarantee security of supply. We will ensure a phased and responsible transition in the North Sea that recognises the proud history of our offshore industry and the brilliance of its workforce, particularly in Scotland and the North East of England, and the ongoing role of oil and gas in our energy mix." - as they drive the knife in ever deeper.

Well, Keir got it safely across the dance floor. A man of principle; NO to private health, NO to private education so I’m by extension including NO to investing in anything without the highest ESG/woke rating and NO to anything that provides those despised “shareholder returns”.

He is calculating. The despised ‘big oil’ and ‘shareholders’ would likely not vote for Labour so who cares what impact the manifesto has on them? The singular aim is for him to be in power. The media circus and cycle will forget this in a couple of days. Ed is kept happy and juststopoil won’t throw paint over him. He has NO shame in changing his mind and plans are always flexible. Nothing is really in writing yet, just vague threats to keep his voters happy.

If this doesn’t galvanise resistance I don’t know what will. Running EnQuest into the ground with its UKCS assets is not only sensible it is the ONLY pathway for us and the Veri offshoot. For Labour it removes a troublesome sector that hurts his virtue-signalling leadership and what the party stands for. It isn’t public interest but public ownership that is their aim in core businesses. The NHS will get more money but people will live longer and more illnesses will be covered. What they call ‘Child poverty’ today is what I along with many others here grew up with; it was normal.

AB told me that running EnQuest into the ground wasn’t ‘how it works’ several years ago. Well, best he gets used to it. That is, unless the industry grows some b*lls and starts explaining to the public how the energy is brought to them and the true costs behind the numbers and subsidies involved in renewables. The investment allowances that Labour demonises are pretty common among all kinds of industries.

There are 3 weeks to go to the election and I don’t see any respite (if any) until Kier is ensconced in No.10.

And pension companies didn't speak out - to paraphrase Martin Niemöller

There is little trading in the UKCS oilies and there is only really activity when RNS's come out plus political and world events. We were expecting an olive branch or at least an acceptance that the UKCS O&G industry still has a part to play in the energy transition. There was neither. In fact they double downed on the demonization of the industry and said this “Companies have benefitted from enormous profits not because of their ingenuity or investment, but because of an energy shock which raised prices for British families.” We are not oil giants as they like to describe us, unlike Shell, BP, Equinor and Total are; but they’re not much exposed to the UKCS anyway. We have cratered today whilst they have not. Even Energean who are UK based but drill elsewhere were largely untouched.

The callous treatment of an industry that provides many jobs and regular tax revenues, especially in Scotland,

will not have gone unnoticed. The Unions affected will have common cause with the SME’s that make up the UKCS producers. That is something that needs correcting in the public domain. Labour is out to destroy SME’s if they don’t like the cut of their jib or match their ideology. Traditional measures of profitability and energy security no longer matter.

It doesn’t matter to Labour. They talk about growth but show scant regard and NO respect to any company that fails their “woke” criteria or spurious targets. Who can the companies go to for support? Along with O&G the Labour party spits jealousy and bile when talking about “shareholder returns”. They don’t like O&G or them, a double-whammy. There is only ONE direction for the UKCS O&G and that is to agree with Labour and cease investment. Some will go into renewables but without subsidies they are uninvestable. Who will trust a government that thinks the Stalinist 5 year-plan is a useful model to follow?

EnQuest will be fine purely because the administrator for the sector will need professional assistance and there are few competitors (left). Our tax losses for now are keeping us alive. The only clean energy we’ll get by 2030 is NO emissions from a dying industry that once was the proud UKCS O&G industry. NSTA should hang their head in shame for not taking a stronger stance. I hope the financial commentators can add up how much money was lost today by “working people and pensioners” and the completely logical reaction of the industry. No investment allowance – NO investment.

Hi Auson, I've asked IR for clarification.

As normal there is more unsaid from Labour apart from repeated slogans and sound bites. GB Energy will invest in Hydrogen, Tidal, CCS because the private sector cannot make it work (they don't mention that). The manifesto (P.128) continues to demonise the fictional "oil and gas giants"

"The Green Prosperity Plan will be funded in part by a time-limited windfall tax on the oil and gas giants making record profits, with the rest of the funding coming from responsible borrowing to invest within Labour’s fiscal rules – catalytic investment that will leverage higher private investment and boost economic growth."

They expect the WFT to provide £1.2bn annually towards the £4.7bn annual cost of the Green Prosperity Plan. The rest somehow translates into cheaper energy bills (sadly not 9X cheaper). They are destroying the UK O&G industry to spend £1.7bn annually on GB Energy. Talk about 'burning your bridges'.

I can only hope the response to their actions will finally galvanise the opposition into informing the public of the true costs of ideology.

There was some leakage which helps explain the gradual drop prior to the announcement but I am left nonplussed. There is no real breakdown and the 3% was signposted because of Norway's highest rate.

How will GB Energy bring down energy prices. How will it operate? What is meant by "removing the unjustifiably generous investment allowances" whilst the Norwegians will keep their version of allowances. I don't understand the reference to keeping the ESIM that was tacked on.

I read it as Starmer is still crossing the floor holding the Ming vase. He is keeping ALL options open until he is ensconced in No.10.

We need details. And I imagine so does the O&G industry and the Unions.

Found it on P.53 You left off the final sentence - "Labour will also retain the Energy Security Investment Mechanism."

I suppose that relates to this "The Energy Profits Levy is a temporary tax on the exceptional profits of oil and gas companies. This measure provides for the Energy Investment Security Mechanism ( ESIM ). It will end the Energy Profits Levy early if the 6-month average price for both oil and gas is at or below the ESIM threshold prices."

I'm digesting it. All help appreciated.