Member Info for romaron

Https://oeuk.org.uk/labours-new-windfall-tax-plan-sparks-job-loss-warning/

I'll repeat the final sentence. "This announcement was made without engagement with the industry."

Nuff' said. Looks like the industry is playing hardball back. It is generally not advisable to take on the government (or the next government). If you cannot trust the negotiator or the negotiator is acting in bad faith then your options are limited. It is actually a step forward that the O&G industry is taking the fight public.

Https://podfollow.com/evol/view

it sounds like these guys know what they're talking about. Keir Starmer is accused of duplicity and ignorance following his visit to Aberdeen 3 months ago (as mentioned by Dumbly). Not a good combination. KS has actually chosen a path the complete opposite of what the industry said is needed. Betrayal and the sound of investors running for the hills is the result. "Wilfully ignorant in favour of a populist policy" pretty accurate description of Starmer I'd say.

Thanks L7 - I didn't completely embarrass myself then (wouldn't be the first time). Many new businesses struggle to get traction (indeed Tesla was one) and we are c.14 years old. I read that companies have a corporate life of about 15 years so we're due a big change. We are fairly unique on the survival front and did better than Premier shareholders. I can't disagree with your Kraken not being profitable as I certainly haven't seen any profit. If we survive this change of government and the UKCS has a future in hydrocarbons, especially oil, then it will mean that common sense has returned and "energy security" becomes more than just a slogan. The costs of renewables are underestimated by multiples and are squared up by a quasi religious belief that physics and science will revolutionise real world technology. That in turn meaning we'll have an EROI that is acceptable and affordable. I don't see that happening before 2050 and 2030 is just laughable.

I think EnQuest has a value. Much higher than we're seeing but its future does not lie in the hand of its management. The price is what it is and there is little in it allowing for a friendlier government or tax treatment. I'm a natural optimist which is why I'm here. Doesn't mean I'm right.

The former Labour councillor, who quit the party last year in anger at its energy strategy, said raising the levy would spell “economic gloom” for the north-east.

“If you’re going to have the investment that’s required then you’re going to have to work with these companies and not work to destroy them which is basically Labour’s perspective at the moment.

“They’re trying to destroy the oil and gas industry at a time when they need it to be a partner in energy transformation. That will be catastrophic for this area.”

Well, he sees it the same way as me. I cancelled my Labour membership for the same reason. You only get a limited number of reasons for leaving and none were for "crackpot energy plans".

This is the full list for leaving, you can only choose one:

Financial reasons

Other personal reasons

Policy

Current party leadership

I'm not seeing enough benefits from my membership

Would rather not say

I'd say I'm middle of the road politically. Labour will lose more people like me who are put off by extremists on both sides. I can't forgive the Tories for EPL and Labour are pandering to the eco-zealots. Both are unprepared for the inevitable subsidies required as their strategies on energy fail.

Hi L7 - I can't find or remember the link but I read that it is common practise in accountancy to allow depreciation and decommissioning to be allowed over a number of years. However, in an earlier attack on oil companies they changed this so that through financial chicanery the rebates/refunds/credits whatever you want to call them were cancelled out and speeded up so the Internal Revenue received most of the money up front. It meant that when fields were decommissioned the cost was offset against profits then to balance it out. It made sense to me because expediency is also another method politicians employ - it is usually better known as an investment allowance. Not sure this helps but throwing it anyway. I'm probably completely wrong.

You may remember that I was trying to get a breakdown on 10 homes retrofitted in my Borough, Enfield. It is still continuing and I have hit an impasse. They think I'll go away. They think wrong.

I expect at some stage we will have some detail from Labour just how much they're going to pump into insulating millions of homes. I just hope that Enfield aren't part of the scheme. The 10 retrofitted here cost £127k each. Being fair-minded I rounded it to £100k per property. I realise many properties won't need anywhere near that amount but the 10 homes retrofitted looked awfully like the council house I was raised in. Anyway, at £100k you could retrofit 10,000 similar homes for just 1 billion pounds. It will have no problem attracting private sector involvement at those prices. Problem is it won't leave much for hydrogen development, battery farms, tidal, wind subsidies (CfD's going up) and kite flying.

Today from FT. Interview with Patrick Pouyanne CEO of TotalEnergies. Some picks.

However, Pouyanné was also adamant that he was not investing in wind and solar projects just to reduce the company’s emissions. Unlike some in the oil and gas industry, he sees power as an increasingly profitable opportunity, particularly as he expects the energy transition to result in permanently elevated electricity prices.

“I know that there is a theory which says renewables are cheaper, so it will be a lower price,” he said. “We don’t think so because a system where you [have] more renewable intermittency is less efficient . . . so we think it’s an interesting field to invest in.”

“I don’t need Ørsted. What do they bring to me?” he said, referring to the world’s largest offshore wind developer whose share price has fallen more than 70 per cent since peaking in 2021 at the height of investor frenzy over environmentally friendly stocks. “This question could have been asked three years ago, but we have developed our own portfolio.”

The company plans to increase oil and gas output by a combined 2 to 3 per cent a year until 2030, a strategy that has alienated some investors but won over others. The number of US-based shareholders in the company has increased from less than 40 per cent to 47 per cent over the past two years, Pouyanné said.

BP, in contrast, has committed to cut oil and gas production by 25 per cent by 2030, compared with 2019 levels, although that is down from a previous target of 40 per cent after it pared back the ambition last year.

Vive la France

We went from coal to gas. Improvement quickly noticed and not such a great differential in cost and energy. Totally different with renewables. The truth is that offshore wind is more expensive than nuclear. The answer by Labour is to carpet the countryside with wind turbines and solar farms. Truth will out.

L7 - they must be running around in circles at Labour HQ. Their manifesto was meant to be signed off by the 8 February I believe. Are they prepared to die on the hill called "renewables"?

Hi Stevo - I think you're close with Miliband. He either has the negatives or Starmer is prepared to risk anything to achieve power. Miliband is an eco-zealot and still has his eye on the top spot imo. Just as you cannot say "there is no God" if you want to get elected in the US we have the equivalent in the "climate crisis". I didn't even enjoy adding "climate" there but climate is the adjective and the emphasis is on "crisis". Everything nowdays is described as a crisis by some protest group or other. They have been conflated and I don't believe that it has been proven that the climate has got worse. Whose to say that we haven't help bring the CO2 back from a dangerous decline and have started regreening the planet? It has led to overpopulation but mass starvation isn't really an option.

Both Tories and Labour are threatened by fringe groups in their party but I think it is a bigger threat in the Labour Party. Be under no illusion; Starmer is ambitious and will do almost anything to achieve power. He has unfortunately allowed himself to become joined at the hip with climate activism and Ed Miliband & friends.

This bit is interesting:

" CNOOC meanwhile could see its value drop 25% as it has even less shielding via the Energy Profits Levy (EPL), going from $1.1bn to $803m." Opportunities popping up - shame we're potless.

The drop today was because we are one of the few companies hanging on in the NS and actually one of the better placed due to us surviving the past decade. we got included in the broad sweep.

Sometimes the answers are so easy in retrospect. When Labour use as an excuse that Norway has a successful industry with higher taxes it might be germane to ask why don't Equinor then have more O&G investment in the UKCS?" (15% oil, 27% gas from their website). Could it be the ever changing regulatory and taxation regime?

Hi Jeffrey - Once stuff reaches the media the event has happened. Labour made their move. The pressure was intense. For those with half a brain in Labour they realise that clean energy (renewables) won't be oven ready by 2030. In fact the prices won't be coming down in 2025, 2026, 2027, 2028, or 2029 either. I reckon they wouldn't last a full term because the people would kbnow they have been lied to and bills would keep rising. How can you trust a leader that said in his NY speech Jan 2023 said "renewables are 9X cheaper than IMPORTED fossil fuels" and later that month said in front of the world at the WEF in Davos that "“in the UK renewables are 9X cheaper than oil and gas”. Not just wrong but amateurishly wrong and reliant upon bogus data and physics. Are renewables only cheaper in the UK. What is special about our sun and wind?

The fight back needs to power on. I'm emailing Craig Baxter because I know he reads them. Labour will be on the run from here and you know the saying - "when your enemy is drowning - stick a hose in his mouth." If your investment means anything to you write nto your MP and anyone who counts - don't email.

The headline read "Analysis: Labour windfall plans will slash value of North Sea portfoloios"

This is GOOD NEWS finally!

In it you have Equinor stating that they can operate in Norway BUTNOT IN THE UK

This makes a mockery of the comparison that Labour makes with the taxation in Norway. The basins are different too. We wanted a fight back and now it is on. We have our tax losses so are behind a temporary moat. I cannot believe that Labour are trying to lose the election when they were so close.

*from a lifetime's experience - once articles like this appear the threat is over. The bottom has just been announced. Labour have it in their power to keep the transition alive with the contribution of the O&G sector. At present they think they can go it alone. Ed Miliband has destroyed UK competitiveness for a generation if he gets his way.

“This latest announcement from Labour seems to serve only one purpose – to further destabilise and erode confidence in a region which is already struggling. Should Labour win the next General Election it may very well herald the end of oil and gas investment in the North Sea, but even if it does not, this latest announcement does the sector no favours.”

In Energy Voice this morning:

North Sea operators would see the values of their portfolios slashed if Labour plans for the windfall tax come into effect, according to analysis.

Welligence said the move “may very well herald the end of oil and gas investment in the North Sea”.

Labour said on Thursday that, should it win power in the general election, it would stop all investment allowances, hike the North Sea windfall tax 3% to a headline 78% rate, and extent the levy’s life until the end of the next parliament (from its current sunset of March 2028).

Trade body Offshore Energies said this would wipe out investment in the UK North Sea and could lead to tens of thousands of job losses.

Analyst firm Welligence said the loss of “shielding” from investment incentives will slash hundreds of millions of dollars of value from portfolios, as the sector is dealt a “triple body blow” after two earlier impacts from the levy’s introduction and its later hike in 2022.

It has modelled the impact of such measures on three operators – Apache, Equinor and CNOOC – on an “NPV10” basis; an approximation for the value of oil and gas reserves.

Apache, a firm with ageing assets and is already cutting jobs and decided to cease drilling due to the levy, would see its portfolio value drop by 43% to $436m, according to Welligence.

This is primarily a function of the assets having minimal productive life beyond the extended windfall duration” it said.

Equinor, which owns new assets including the Rosebank oilfield in the West of Shetland, would see its value drop 18% from $3.87bn to $3.18bn.

That means much of the “shielding” linked to investment incentives for Rosebank are eliminated and the value of the asset is eroded.

As such, it added, it makes Equinor’s “previous acquisition of Suncor’s UK business less attractive and illustrating how the tax change will also negatively impact M&A activity”.

CNOOC meanwhile could see its value drop 25% as it has even less shielding via the Energy Profits Levy (EPL), going from $1.1bn to $803m.

Welligence said: “Already the UK sector has seen key players significantly reduce if not cease activity, including Apache, Harbour and TotalEnergies. Should more companies join this trend, the consequences would be numerous including earlier abandonment of facilities, job losses associated with a diminishing sector, reduced energy security and potentially a requirement to import more fuel.

“The UK sector has, in the last decade, undergone numerous tax changes making medium to long term fiscal planning difficult, if not close to impossible. Any company attempting to conduct M&A faces serious unknown elements around the fiscal regime due to its instability, something usually associated with countries with significantly less developed oil and gas sectors. (cont)

Now look at the sequencing: on December 18, 2021, Russia continued its “pivot to the east” with a video conference between Putin and President Xi hailing Gazprom’s mega-pipeline across Mongolia; on February 15, 2022, the Duma passed a resolution effectively recognising Donetsk and Luhansk as Russian republics; on February 22 that year Germany finally called a halt to NordStream 2; two days later Russia invaded Ukraine. In other words, Russia’s lust for Ukraine’s energy assets coalesced into military action once it had secured gas inroads to China and judged (wrongly) that the West was too decadent and dependent to resist.

What is perhaps most astounding, however, is not merely Carlson’s ignorance of this context but that of so many pundits and politicians. It is as if we are “energy blind”. While Putin is evil, he at least grasps the material interests of his kleptocratic clique (all that waffle about ancient history is just a smokescreen); Xi’s Belt and Road initiative demonstrates similar insight. This lens also helps to explain the Wagner group’s actions in Africa, resource nationalism in Latin America and China’s cornering of the processing of critical minerals. The frantic geopolitical motion of today is calibrated to the demands of an overpopulated world of eight billion people seeking to reinvent its energy system.

Perhaps the key imperative is to wake up. Carlson is a pawn being played by forces he doesn’t understand (while raking in advertising revenue), but the West is making a succession of unforced errors. Hell, the US sold its last cobalt mine in the Democratic Republic of Congo to the Chinese in 2016 without seeming to grasp the significance. The West still has many advantages, but the noses of our politicians are pressed up so close to the ephemera of culture wars and 24-hour news that they seem incapable of stepping back and seeing the bigger picture. That picture has one fundamental constituent: energy.

It’s time to put it front and centre of everything we think and do.

And here we glimpse the geopolitical significance of Ukraine. In the coming decades two things will prove crucial. First, we’ll need fossil fuels to keep the lights on in the short term; second, in the medium term we’ll need access to a wide variety of materials to build a renewable energy infrastructure (we can argue about the speed of the energy transition, but the transition itself is non-negotiable). This means that fossil fuel prices will continue to rise, providing a final windfall to suppliers (look at the money flowing to Saudi Arabia). But it also means that the price of some materials is set to spiral. These include lithium, cobalt, nickel, copper, manganese and “rare earths” like neodymium, used in electric vehicles and the magnets of wind turbines.

It’s worth pondering this. Renewable energy may be clean at the point of delivery, but it is also materially intensive in production. An electric car can use six times more minerals than a combustion-engine equivalent, with up to 250,000kg of raw materials just for the battery. Now widen the lens to consider the staggering requirements to build wind turbines, solar panels and more at scale. You can perhaps now see why the International Energy Agency estimates that demand for lithium will rise by 2,700 to 4,300 per cent and that of cobalt and nickel by 2,500 per cent. These are the new gold.

Let’s circle back to Ukraine. Did you know that it has been described by Jonathan Maxwell in his superb book The Edge as a “mineral superpower”? Did you know it has the second-largest gas reserves in Europe after Norway? Or that the Donbas boasts one of the largest coal deposits in the world? And that Ukraine has stocks of 117 of the 120 most widely used metals and minerals, including manganese, sulphur, graphite, titanium and nickel? Did you know that one think tank has estimated the mineral wealth now under Russian control in Ukraine at $12.4 trillion, which is nearly four times the UK’s GDP (albeit the former is a stock, the latter a flow).

Now do you see the geopolitical importance of Ukraine? Carlson asked briefly about gas pipelines but grasped nothing of their significance. Russia has historically sold its gas to Europe (principally Germany), but it was already diversifying its base. Perhaps the key geopolitical fact of the world today is that China (a net energy importer) runs on 60 per cent coal and 6 per cent gas, a position it must reverse. Russia had long been preparing the ground for an invasion of Ukraine (it would, of course, have preferred to engineer a puppet government) by frantically building pipelines into China in case of of western sanctions.

Thanks M -

Don’t know about you but I felt nauseous watching the “interview” between Tucker Carlson and Vladimir Putin. This wasn’t an opportunity to gain insight into the mind of a tyrant but a string of softball questions by a fawning supplicant with no idea of how and why he was being used. The people who’ll be most angry are those Russians not yet brainwashed by Putin’s propaganda machine, who must have been hoping that Carlson might ask one question — just one — about Putin’s claim to be a patriotic leader as he plunders the wealth of the nation in cahoots with oligarchs and cronies while millions live in squalor. Carlson isn’t a journalist; he’s a stooge.

But what was also conspicuous about the interview was Carlson’s stunning lack of insight into what’s happening in Ukraine and why Russia invaded. Yes, it’s partly to do with empire-building, but why, did he not wonder, is Ukraine so central to this objective? Why risk war for this patch of land? The explanation, I’d suggest, can be expressed in a single word: energy. Energy, after all, is central to all human activity; indeed to all life. A cheetah must gain more energy from the meat of a kill than is expended in the chase or it will eventually die. The same is true for societies. Rome declined as it ran out of wood via deforestation; the Maya civilisation was finished when it eroded its soil with agriculture. If you don’t have enough energy to serve the “metabolic” needs of a complex society, you vanish.

It perhaps goes without saying that today we live in a fossil fuel civilisation. After 12,000 years of using wood and plants for fuel, effectively relying on the flow of solar energy captured by photosynthesis, we suddenly realised we had a treasure trove of billions of tons of stored energy in the form of geologically compressed phytoplankton and plants under our feet. At first we weren’t too keen on coal — why dig for energy when you can cut down a tree? It was only when England faced deforestation that we dug out of necessity. As the scholars Joseph Tainter and Tadeusz Patzek put it: “It is one of history’s great ironies that industrialism, that great generator of economic well-being, arose in part from steps taken to alleviate resource depletion.”

For the past 200 years we have basked in this bonanza as we enjoyed exponential growth, together with a global population boom and the creation of a technological civilisation utterly different from any that went before. But here’s the hard truth: we are living in the twilight of this age. There is probably enough oil for one more century (gas for perhaps 50 years) but we are having to drill deeper and frack harder to reach what’s left. In other words, we are expending ever more energy to gain energy, like a cheetah running further to track down ever smaller prey. This is why global prices for hydrocarbons are steadily rising, albeit with fluctuations.

The first article was by Dominoic Lawson. The subheading was "It's pledge to decarbonise by 2030 remains the entirely implausible goal."

Hi L7 - you wrote "romaron, you touched on a very important aspect - the economic life of fields". It is very important and is a moveable number. Reserves are not valued geologically but by the costs of production and of course political interference. As things stand the future for the UKCS is bleak but this isn't the reason for this post. Could anybody who gets the Sunday Times online please give more details of 2 articles. 1. "£28bn, a drop in Labour's imaginary green nocean." He explains why 2030 cannot happen and for it to happen the average energy bill would be between £3,000 and £4,100. The much vaunted idea of private-sector investment needs to be rewarded and that simply is the cost passed on to consumers. He quotes leading figures who deaol in hard facts rather than fairytales. He destroys Barry Gardiner who is to the left of Corbyn (as is Miliband imo).

The second article is by Matthew Syed titled "Tucker Carlson seemed clueless about our energy crisis. Putin certainly isn't." MS is a more acceptable voice than DL imo and has appeared on Question Time and other programs where his intellect and breakdown of complex arguments stands out. He is trusted.

In the DL article he actually quotes Gary Smith of the GMB Union. GS comments about 2030 and said "I don't even worry about it. It can't be done." but what really grabbed me was this: "Smith also referred to the idea of "green levies" on electricity consumers to fund the transition to renewables as "a modern-day poll tax."

Excellent. Exactly what needs to get out into the public domain. Labour have made so many missteps and are doubling down. They are sleep-walking into a Tory trap. Huge lead in the polls can make you complacent.

*After Kuenssberg this morning I left the BBC on. A vicar with a dog collar and trimmings said - "those who truly give their life to Christ will be rewarded on judgement day". That's fine if religion is your business but basing the country's future on a belief that doesn't stand up to financial scrutiny and with judgement day being 2030 (is it January or December?) feels a little unwordly. I remember when Labour was a party for the working man; not a cult.