First oil

As new British prime minister Boris Johnson took office last month, we wondered if his administration might change any upstream policies. After several days of research, we can say that no one seems to know at this early juncture. Indeed, we checked with a spokesperson at the association, Oil & Gas UK, who seemed rather irritated that we even posed the question: “It’s early days, so we’re not going to have a comment at this early stage. We’ll have to wait and see—talking about it now would be much too speculative.”

Perhaps some of the quandry is that Johnson is focusing most of his energy (pun not intended) on Brexit. That having been said, some confusion may be due to previous, conflicting statements made by Johnson, both as former mayor of London and as UK foreign secretary. While London’s mayor, Johnson issued a report in October 2011, speaking of his green credentials and touting policies to reduce the city’s greenhouse gas emissions.

Yet, in December 2012, Johnson told The Telegraph, “It [fracking] is glorious news for humanity. It doesn’t need the subsidy of wind power. I don’t know whether it will work in Britain, but we should get fracking right away.” Later, he was criticized for writing articles favoring climate skepticism. And environmentalists criticized his record in Parliament, where he voted against carbon capture and storage technology investments, and in favor of taxing renewable energy projects.

But he flip-flopped yet again during his tenure as foreign secretary (2016-2018). When the Trump administration withdrew the U.S. from the Paris Agreement on climate change, he told Sky News during 2017, “We continue to lobby the U.S. at all levels to continue to take climate change extremely seriously.” Suffice to say, we won’t see the P.M’s stance on energy sorted out anytime soon.

Bureaucracy triumphs again. In what can only be described as an unfortunate example of “group think,” the European Investment Bank (EIB), the European Union’s lending arm, said that it plans to stop funding fossil fuel projects in 2021. This is part of Europe’s effort against climate change, according to a draft of EIB’s new energy strategy, seen by the Bloomberg news service.

In the draft, the EIB plans to increase support for “clean-energy” projects. “The bank will phase out support to energy projects reliant on fossil fuels: oil and gas production, infrastructure primarily dedicated to natural gas, power generation or heat based on fossil fuels,” the document says. “These types of projects will not be presented for approval to the EIB board beyond the end of 2020.” The EIB board will discuss the plan next month.

Some observations: 1) just a few years ago, the EU was touting natural gas as a “bridge fuel” for multiple decades. EU bureaucrats now lump natural gas in with coal and oil as “undesirable;” 2) the EU/EIB efforts will have limited impact, unless far greater cooperation is gained from the largest carbon-emitters, as in China, India, etc.; 3) by taking energy choices off the table for its residents, the EU may be setting them up for electricity shortages down the line. An IEA report, issued in late May, indicated that some countries may be shedding nuclear power capacity too quickly. This could result in electricity shortages, particularly if natural gas is eliminated for generation.

Lastly, 4) There is a more strident EU attitude on hydrocarbons. The incoming president of the European Commission, the EU’s executive arm, vowed last month to turn the EIB into a “climate bank,” to gain access to 1 trillion euros ($1.1 trillion) of investment over the next decade.

Comments from Senator Cruz. We are pleased to host a guest commentary this month from U.S. Senator Ted Cruz (R – Texas) on our Executive Viewpoint, page 23. Tying in with our report on the Eagle Ford shale, Sen. Cruz describes how production from that play and the Permian basin are ushering in a new era of energy prosperity for Texas and the U.S.  WO

About the Authors

Kurt Abraham

World Oil

Kurt Abraham kurt.abraham@worldoil.com