Energy

Welcome to Russia’s real world, Mr Hayward

6 Jun 2008

Faced with a possible eviction from its Russian joint venture with TNK, the BP boss has finally noticed something is wrong and wants Russia to abide by the ruleoflaw. After cozying up to the Kremlin for years, it s a bit late to cry. Other investors in Russia, take note.

Noose may be closing on high oil price

2 Jun 2008

The soaring oil price at last looks vulnerable to a significant correction. Waning global growth, demand cuts induced by skyhigh prices and reduced fuel subsidies in Asia and a US investigation into market manipulation could soon change the market s direction.

BG should consider quasi-hostile move on Origin

2 Jun 2008

The UK gas firm s heady $17bn offer for Australia s Origin Energy was rebuffed at the eleventh hour. Origin s defence looks specious. BG may not want to go hostile yet but it can still put its case to Origin shareholders in public.

Asia’s fuel subsidy cuts may curb oil price

29 May 2008

Cheap fuel pleases Asian consumers, but governments can t keep up with the soaring cost of oil. India is set to follow Indonesia and Taiwan in pushing final prices up. Inflation might rise and growth fall for a while, but lower oil demand should bring down the global oil price.

Price elasticity suggests $200 oil is a long-shot

27 May 2008

Data on miles driven and oil products consumed in the US suggest the price elasticity of oil is currently around 16%. If that applies globally, $200 oil would cause a 12m bbl/day drop in consumption. Speculators who tried to hold the price there would run out of money fast.

Exxon split defeat a result of bad packaging

27 May 2008

At today s AGM, the motion to split the chairman and chief executive posts received even fewer votes than last year. That s the result of a good governance idea being misidentified as hostile to investors interests.

Transatlantic bid fever shows M&A not dead

23 May 2008

Expro and Enodis, two UK firms, have received dizzying cash premiums from US bidders of 65% and 100% respectively. Tight credit may have cooled the M&A market, but where there s industrial logic, or a hot commodity story, sellers can still work up fierce auctions.

Oil companies will have to get used to higher taxes

22 May 2008

Shell s boss says that too high taxes will lead to less investment. True, but disingenuous. Companies are used to paying a hefty share of cash flow to host governments. A healthy tax regime not too high and not too low keeps oil flowing and might prevent expropriation.

Enel’s Spanish adventure doesn’t look happy

21 May 2008

The Italian utility paid a high price to buy a stake in Endesa with Acciona last year. Now there are signs of increasing tension between the two, and the Spanish have the upper hand. An expensive put option means Enel's Endesa hangover won t go away anytime soon.

EDP shouldn’t be greedy on wind IPO

16 May 2008

Energias de Portugal plans to sell 25% of its wind business in what would be Europe's biggest IPO this year. The company has a lot of things going for it. But Iberdrola Renovable's lacklustre performance means the Portuguese will have to be flexible on price.

Shell’s Iran gas withdrawal can only benefit Russia

12 May 2008

Royal Dutch Shell and Spain s Repsol have pulled out of a $10bn Iranian gas project, partly under US pressure. Less gas from Iran will mean a greater EU dependence on Russia. The US could do with a more coherent approach to energy diplomacy.

Why is the British Energy auction such a damp squib?

12 May 2008

Only EDF has put in a bid and at a lower price than the market expected for the UK nuclear group. Its existing problematic reactors are a factor, as are antitrust issues, and the company s sheer size. But British Energy advisors might have done a better job managing expectations.

EDF wants British Energy – but maybe not all of it

9 May 2008

The French electricity group s bid for the UK nuclear group shows it needs to build up its powergeneration capacity in the UK. But EDF needs money for other projects, and doesn t want to raise competition concerns. That could still leave the door open to allies like Centrica.

No number too high for oil price forecast

7 May 2008

The price can keep going up and up, just as long as money flows freely to commodity buyers and the oil supply stays a bit squeezed. So experts can plausibly suggest $200 or more. But when the money's spigots tighten enough, the price will tumble. Even bulls expect $75 oil.

BG puzzles with $12bn bid for Australia’s Origin

30 Apr 2008

The UK oil and gas exploration group is paying a 40% premium to Origin s share price to bolster its presence in the fastgrowing Asian LNG market. Origin s gas reserves are attractive. But BG would also get more than 3m Australian retail customers, which looks less attractive.

Rockefellers’ Exxon governance clean-up worth supporting

29 Apr 2008

It s ironic the descendants of the man who created Standard Oil are lobbying Exxon to go green. That s exactly the kind of issue a nonexecutive chairman, separate from the CEO, would be in a position to evaluate. Of the four Rockefeller resolutions, this is the one to support.

Gazprom muscles in on TNK-BP

24 Apr 2008

The Russian shareholders of TNKBP, the oil producer, may be giving in. Vedomosti, the Russian daily, has reported that Gazprom, the Russian energy colossus, could buy them out by the end of the year. It only took heavy pressure from the Kremlin and a police raid on the company.

Oil price bubble keeps on expanding

22 Apr 2008

Oil isn t in shorter supply now than a month ago, but it s 18% more expensive. As always in bull markets, optimists can find semigood reasons for higher prices. But the main propellant is monetary. The credit squeeze hasn t hit commodity buyers and speculators, yet.

Berlusconi’s Putin mania is really worrying

21 Apr 2008

The new Italian PM s meeting with the new Russian premier underscored their longstanding chumminess and included a sick joke about shooting a journalist. As expected, Berlusconi s Russianleaning diplomacy threatens to take him away from European commitments.

Investors are rational to mark up Repsol and BG

15 Apr 2008

Shares in the Spanish and UK energy groups soared nearly $10bn on news that their Brazilian partner, Petrobras, had discovered up to 33bn barrels of oil off the coast of Brazil. The discovery can t be verified, but the market may not be irrational.