Thursday, 22 June 2017

Gas Storage: Rough Old Business

One of our esteemed Anon's asked what's up with Centrica closing down the Rough storage facility.  It wasn't a complete bolt from the blue.  But it's not small !  Rough represents getting on for 75% of UK's gas storage inventory - though a smaller % of total deliverability from storage, because Rough is a slow old beast and can't pump out very fast.  The new generation of 'fast cycle' facilities are smaller but can fill and empty in a couple of weeks, vs Rough which more or less took all summer to fill up, then months to blow down in winter.  'Seasonal storage' in the terms of the trade.  (Rough trade, geddit?)

Well, it used to be ...            graphic from Centrica

I wrote about some of this at fair length a few years ago when M.Fallon called Centrica's bluff and declined to subsidise them to build a new one.  So they didn't.  It was unusual for a politician to spurn a request of that sort in 2013, and it's even more unusual these days.  No-one builds a power station of any kind today without public money (via electricity consumers) being sent their way.

Rough was always an artificial thing, built by the old BG in the early 80's - the closing days of their monopoly, when they could just pass through the costs.   It's very debatable whether it was needed then: but they just did it anyway - because they could.  Engineers love building things.

Seasonal storage is not much wanted these days either - the spread between summer and winter wholesale gas prices is at an all-time low, which signals as much.  It's one of the reasons Centrica can't justify restoring Rough to health.  That and the one-off revenues (half a billion quid over a few years) they will make as they blow down the rather substantial amount of 'cushion gas' for the last time - the opposite dynamic to most offshore field abandonments, which only cost money and are therefore typically put off as long as possible.

How will we cope in winter?  We nearly found out in March a few years back when Rough temporarily conked out during a cold spell.  Extra LNG cargos should do the trick: we have very substantial LNG regas facilities in the UK - built by Mr Market Mechanism between 2000-2010 with narry a subsidy in sight - just a bunch of companies willing to follow through on the obvious fact that UK gas production started its terminal decline at the start of the century.  Glory be.  One of the great examples of the market being left to run its course that I often like to cite.  (It helps that regas is really cheap and quick to build.)

Come that freezing March month, and it may not be cheap in the spot market, though ...  then you find out who's hedged and who's shorts are dangerously exposed.  Chilly, it can be.  And of course if our good friends in Qatar are still in bother, well, hmmm.


Wednesday, 21 June 2017

is an empty Queen's Speech the best sort anyway?

There is certainly plenty of Government in the UK, different levels going right up to the EU and ECHR.

In our daily lives we are all affected by it, one truism of life too is that increasingly there is more Government than before.

Back say 100 years the Government share of GDP was well below 20%, now is pushes nearer 50%. The rise of Government, periods of austerity only being mere pinpricks, is inexorable.

So, given that the Country is not necessarily improved by constant tinkering, a welcome space of few new laws being put in place is probably quite a good thing. In fact, simple things like no fiddling with the tax code give certainty to business decisions for example and make planning easier.

So a minority Government's Queen's speech is in many ways something to be celebrated - because not much will happen, people will be freer of political interference. Perhaps, with the great repeal bill in the works as well, the lawmakers will be so obsessed with their craft for a few years that the rest of us are left alone to a greater extent than usual.

All things being equal, that should be a big plus for economic growth in the UK.

Tuesday, 20 June 2017

Brexit - at last, perhaps

So we are off, the first round of negotiations has started. David Davis, a solid pair of hands if not spectacular, has laid out the terms -

Leaving the EU
Leaving the Single Market
Leaving the Customs Union

This has not made Barnier very happy, nor the Remain media who are now starting on their long campaign of 'UK failing at negotiations" which will be a very dull and uninspiring commentary for the next two years.

It will, even if untrue, do for the Tory party. Their reward for achieving Brexit will be ballot box defeat, a la Churchill and 1945.

This of course is dependent on May holding on as Prime Minister for some time, which again the media are trying their best to prevent. I can only hope she is strong enough to realise that now the election is kind of won, she can really settle in for a year or two before quitting - enough to give time to the Brexit team to have more of less completed the negotiations.

Oddly, the piece I see a lot of commentators missing is that there is this 'negotiation failure' mantra. Actually, with the terms above there is little to negotiate in reality - basically we agree a big settlement payment, Irish border issue and EU citizens rights - then onto a trade deal. The trade deal may end up in a transitional agreement, but as it will be for goods and not services, this is really not that hard to do.

An actual negotiation, which Labour and others are ignorantly promoting as part of their populist binge, of trying to stay in the Single Market but with restricted immigration - that would be tough to do! Sensibly, we are not even trying it.

As a final anecdote, I did meet a junior UK negotiator rather randomly the other day (civil servant, not politician), they were of the view if the media just dropped the pressure a bit everyone would be pleasantly surprised at how successful the chosen strategy will be.

Saturday, 17 June 2017

Say You Wanna Revolution ...

Context for younger readers:  those of us who gew up in *ahem* the late 60's became accustomed to assorted Communists, Trots and even Maoists who were seriously and openly "plotting The Revolution", in the UK as much as in Vietnam.  This state of affairs persisted here until, well, essentially its last outing was the Miners Strike 1984-85.  As a university student in the '70s one would hear this stuff in SU debates, pubs, sit-ins and al fresco riots, to the point where one knows what it all means - at least, by the lights of the wannbe Revolutionaries.

And so to 2017, where we have a lot of indicators that have turned to Red:
  • deeply unpopular government of the Right (notionally)
  • a fractured Establishment with no effective leadership 
  • Unions fancying their moment has come 
  • public sector pretty hacked off
  • widespread economic discontent, all the way to outright misery
  • popular upswell of resentment across all sectors of society, even beyond the economically miserable
  • recent history of fuck'em-all-who-gives-a-toss political gestures (Brexit vote, late surge for Corbyn)
  • many student bodies in the grip of particularly unpleasant leftists, and the summer hols about to start
  • readiness to turn nasty at the drop of a hat: plenty of criminal-underclass street-warriors and rentamob leftie bedsit-youth available
  • plenty of other cannon-fodder too: jobless locals and migrants swirling around
  • hot weather

Yep, that ticks very many boxes on the classical Marxist-Leninist check-list.  Certainly febrile, and apparently fertile.  Stew into that mix the altogether new phenomenon of Social Meejah and mobile 'phones ... and we're hot to Trot.

So what's lined up on the other side?  One of the most interesting factors is that the Police is being near-idolised, even by many on the left, as an heroic component of the revered Public Services for their selfless responses to recent terrorist outrages.  (Obviously the other uniformed civilian services - fire-fighters, ambulance crews & hospital staff - get all this adulation and more.)   There may be strange things yet to come; but even with a degree of politicisation in ACPO etc, there's not an obviously mutinous situation brewing (we're not a country where the police are all owed 3 months wages etc).  And they are armed to the teeth these days: firepower that can't be matched in a hurry by, well, anyone (though watch out for Irish developments).

Likewise, the military is in relatively good odour, and has no history of being a political factor in the UK since the General Strike (and even then, not in any autonomous Praetorian, or mutinous, sense).

Finally, there's the Great British Public, which is extremely conservative and phlegmatic au fond, and saw off the first Labour government, the General Strike, the Nazis, the IRA ...

Who else is having such thoughts?  John McDonnell, that's who.  But you know what - even though this will all be coursing through his mind (and his veins, and his guts) - I'm willing to bet he hasn't done any serious planning for turning this into the Revolution.

Which is not to say he couldn't, and in quite short order (Drew's 4th Law of Politics), because the templates are all there to be dusted off - though he needs more than just political logisitics for a serious effort.   The Leninist / Bolshevik approach is of course to let chaos reign, then purposefully muscle to the front of the queue as the most prepared and disciplined force on the field.  Unceremoniously bump off any rivals on the left, and after a period of turmoil emerge as the only coherent political entity in the land.  Let the Right retreat to the countryside and pick it off at leisure. 

(By the way, the Iranian Revolution of 1979-80 took a very similar course: it's not remotely the case that Khomeini swept to power on Day 1.  Several other anti-Shah factions had a crack at it first: he came up on the inside many months into the piece.)

And still we wait for leadership to emerge on the Right.  As I said BTL yesterday, in an important sense the Conservative Party doesn't even exist right now - just a couple of baronial factions circling the wounded and dying in No10.  

Several scenarios come to mind, and many historical illustrations that may or may not be germane; but I can't even guess what will happen next.


PS - enjoy the original

Friday, 16 June 2017

Friday Quiz - May Day!

How long will May as UK Prime Minister last?

A) 5 days

B) 5 weeks

C) 5 months

D) 5 years

Answers and Comments in the comments.