Seen from the executive floors of the oil majors, the legal action launched against five of the world’s largest oil companies at the beginning of January by New York City is a pinprick. The case is obviously political – there must be an election coming. Taking on Big Oil signals a candidate’s stance and helps to raise money. Such grandstanding is nothing new. The lawyers will deal with it, while real business goes on elsewhere. But what if this view is wrong? The legal action against BP, Chevron, ConocoPhillips, ExxonMobil and Royal Dutch Shell triggered by superstorm Sandy’s devastation in 2012, is claiming compensation for the costs of improvements in infrastructure resilience necessitated by the risks of climate change and extreme weather. It is just the latest in a series of cases in the last two years. In California, two cases brought respectively by the cities of San Francisco and Oakland and by San Mateo and Marin county are claiming compensation from a long list of companies for damage knowingly caused by production of oil, gas and coal. This year, 21 teenagers will get a hearing in the California appeals court for their claim in Juliana v US that the government failed to protect their rights to life, liberty and property by promoting the use of fossil fuels. Meanwhile in Germany a Peruvian mountain guide, Saul Luciano Lliuya, is suing RWE for what he claims is its contribution to the melting of a glacier in the Andes that threatens to flood his home town of Huaraz. In his view, the utility has contributed 0.5 per cent of all emissions produced since the industrial revolution. So far, the oil and gas companies’ defence has been that the casual links are unproven and there are too many triggers of climate change for any court to attribute responsibility to them. Public policy may be incoherent in the absence of a carbon price but the direction of regulation, subsidies and other government interventions in the market has shifted not just in the developed world but also in China and India. For most of the companies (with one or two notable exceptions over the past year) replacement levels for the volumes of oil being produced have fallen to very low levels because too many areas remain closed and many of those that are open are not commercially viable. And in the North Sea and China, and soon across the world, renewables are approaching grid parity, with costs likely to fall still further as the sector is restructured and economies of scale kick in. Grid parity means that wind and solar – in the right places – will shortly need no subsidy at all. So, while oil demand continues to grow, the majors’ market share will decline, particularly in the growth markets of Asia. These groups think long term, and need to find a new business model. The small steps taken so far suggest that they see themselves becoming energy companies with a span of activities including electricity supply and renewables.
FT 22nd Jan 2018 read more »
Lloyd’s of London, the world’s oldest insurance market, has become the latest financial firm to announce that it plans to stop investing in coal companies. Lloyd’s will start to exclude coal from its investment strategy from 1 April. The definition of what is a coal company and the criteria for divestment will be set over the coming months.
Guardian 21st Jan 2018 read more »
It is the oil industry equivalent of a buzzards’ picnic. As the North Sea is drained of its oil and gas, so time is running out for the giant rigs that for decades have been piping fuel up from the seabed. Many of the basin’s workhorses are going to be little more than huge carcasses dotted across thousands of miles of open ocean and sharp eyes are turning to the potential feast on offer. You can see why. North Sea decommissioning is an embryonic £50 billion industry, a huge enterprise in which rigs and pipelines are removed, hauled ashore and painstakingly picked apart. According to Oil and Gas UK, 214 fields on the UK continental shelf are likely to be the focus of £17 billion of decommissioning activity in the period to 2025 alone. That will involve 98 platforms being removed, more than 1,600 wells being plugged and 5,500 kilometres of pipeline being taken apart. In total, the industry body expects more than 840,000 tonnes of material to be moved onshore to be recycled or disposed of. British companies, largely on the North Sea-facing coastlines of northeastern England and Scotland, might dream that this will be their own private party but, given the stakes involved, the scale of the work and the sums of money to be made, the market will be fiercely competitive. Players from Norway, Denmark and the Netherlands are watching with interest; so, too, are businesses in India and other parts of Asia. Indeed, this month three rigs stowed in the Cromarty Firth, north of Inverness, were due to be towed to India and Bangladesh and then scrapped, only for their journeys to be postponed while the Scottish Environmental Protection Agency investigates the likely disposal methods. That proved to be a cue for critics to question whether Britain is moving quickly enough to take advantage of the changing nature of North Sea oil.
Times 22nd Jan 2018 read more »
Leaving the largest oil rigs in the North Sea rather than decommissioning them could save taxpayers billions of pounds, according to experts. International rules mean that every structure should be removed once a field has stopped producing, although each case is examined individually.
Times 22nd Jan 2018 read more »