Tuesday, 29 July 2014

Fracking & A Rare Example of Political Will

Fracking has the hallmarks of an issue best left until after the election, like Blair studiously did with Nuclear before 2005.  Swampy doesn't vote, so let him fester in his damp hole and get mistaken for a badger: but actual middle class people are known to take fright at the prospect of a drilling rig in their back yard.  In the likely scheme of any UK shale developments what practical difference does a year make?  I'm as big an enthusiast on shale as anyone, and a great believer in Political Will: and still my answer would be: not a jot.  The gas ain't going anywhere; and there's a good chance there may be nothing to show for any exploration conducted between now and next May.  But there could be some messy headlines.

Nonetheless, the government has got religion on this, and has been plugging on rather purposefully for a good few months.  Do they actually fancy running battles with Greens down country lanes  ? (I'm quite sure PC Plod does ...)  Is this part of the great Crosby playbook ?

For what its worth, I'd say the shale policy is being pursued fairly intelligently (everything is relative, mind) with a 50:50 chance of positive political outcome.  The most recent announcement (full steam ahead but careful of the National Parks) is sensibly cast.  There's a section of the population that likes the smack of firm government; energy security-of-supply is a well-known refuge for political scoundrels (and little Putin is certainly playing his part); and there's another part of the population that generally knuckles down to the inevitable, so long as it is mildly sugar-coated - which this one is.  Even the Guardian's critique is qualified, and resigned to the inevitable.

I can also tell you (from the front line, first hand) that the drilling companies have taken the signal and are intent on playing hardball: not Henry Ford-style, but with serious determination, based on the understanding the government has their backs.  Local councils will generally play along with a determined developer, particularly when there's that bit of sugar-coating on offer; so persistence will win out.  And the academics - who some assume are greens to a man - are in fact pragmatists to a man, always on the look-out for sponsored research opportunities.  They will largely be onside too, with a whole new industry in prospect. 

Yes, 95% go with whichever way the wind is blowing, and the government has decided to blow.  Of course, they're showing the same steely resolve with nuclear and all manner of 'renewables' lunacy too, so it may be viewed as all of a piece*.   Energy policy, misguided or otherwise, seems to have that effect on people.  You don't get forgiven for letting the lights go on the blink.


* Funnily enough, all of this - the fracking and the faffing - is undermined by falling gas prices, happening across Europe and Asia without any help from UK shale !

Monday, 28 July 2014

Hague rules against Putin

No, not William Hague, off to be as near as he can to Angelina Jolie, but the International Court of the Hague.

Many moons ago Putin seized a private company after accusing it for tax fraud, Yukos, which had grown to control much of Russia's oil and gas through likely dubious means after privatisation in 1993, was broken up and its CEO - the politically active Michael Khordokovsky, put in prison. The bits of the company were then sold to finance groups, who miraculously then sold it on shortly thereafter to Rosneft - controlled by Putin's ally.

So much, so murky, the numbers involved are fantastic. Yukos controlled 20% of Russia's oil and gas sector. The tax claim alone was for $27 billion!

Whilst there is not tax treaty for shareholders, meaning all Western claims are effectively defunct, the management have been appealing over the years at the various international courts. Today's ruling comes as a milestone and leave Russia with just one last appeal (so a few more years then....).

The timing for Russia could not really be worse, after the shooting down on MH17 and the proxy war it is sponsoring in the Ukraine. Little could it afford in its budget the $50 billion repayments sanctioned - all to oligarchs too, of all people.

It will be interesting to see if Russia ignores the court when push comes to shove, as it will set a dangerous precedent for any Russian company wishing to operate abroad as it will have abrogated key international treaties.

Friday, 25 July 2014

Tesco tantrums

Phil Clarke was an excellent CEO, continuing on from yesterday's theme which gerenated a lot of interest here is why:

- Clarke did not see Lidl or Aldi as the competition on the highstreet. The competition is Amazon and Ocado and Google.

- Tesco was investing lots of money in a digital strategy to develop a better at home expereince and try to own the customers of the future - by offering banking services but also home delivery and even a successful tablet. The tablet will be back to fight Kindle.

- At the same time Tesco had to sell out of its disastrous US adventure which has meant reduced returns.

- The overall debate yesterday about out of town dying is not really held up by recession figures of store closures - there are far more on the high street still. Bluewater, Stratford and Westfield dominate the retail market in the South of England - together with Oxford Street for the tourists.

- Clarke paid the price of being too visionary, as often happens with a CEO, particularly when the finances were in poor shape and with their domestic share so great it was only ever going to go down.

No doubt they will sell their land bank and try to reduce prices further, but the new CEO would be mad to stop the digital drive as that is focused on the next ten years rather than the next two.