Hill+Knowlton Strategies

As December approaches, I have the honour of getting excited about Xmas, as well as the infamous Vale Day.

Running the media element of the flagship Investor Relation day for Vale (CL), the second largest mining company in the world, in London I get to be part of a fantastic event held at the NYSE Euronext.

This year Murilo Ferreira (CEO) and Luciano Siani (CFO) made their first appearance in london in front of the media since their appointments. The media which included attendance from key newswires, nationals and trades were ecstatic at the opportunity of speaking with the Executive team which do not often travel to London.

On the back of the event, 23 significant pieces of coverage were secured mainly focused on the fluctuating price of iron ore. Murilo Ferreira suggests that  in 2013 “Prices will not change so much. We expect only minor movements”.

Below i have included a few pictures from the event.

I am already looking forward to Vale Day 2013! 

Vale Day 2012: Official picture at NYSE Euronext

Vale Day Press Conference

Today, I flew back from Bergen, on the West coast of Norway, after 24 incredible hours visiting Statoil’s (CL) impressive Troll platform.

Now it has taken me a few years to get this trip organised, but I must say, it’s all been worth it.

Taking a helicopter with Statoil’s CFO, Torgrim Reitan, and seven other very keen journalists, including the Economist, WSJ Europe and Petroleum Economist, we flew 25 minutes to reach Troll’s Platform A.

Troll A Platform

On board, the platform manager gave us a tour of the sites. The highlight of which, can only be the shaky 8 minute elevator ride down 303 metres below sea level to walk on the North Sea bed. Down there, separated by the Sea by only 1.5 metres of concrete, you could hear the force of the waves hitting against this incredible platform’s pillars. You could also hear (or more likely feel) the gas being pumped upwards as you touch the platform’s main pipelines.

Torgrim Reitan, Statoil's CFO feeling the gas being pumped through the platform's pipelines

The Troll platform delivers gas to 10 million households in Europe and accounts for 40% of gas used yearly in the UK. As such it plays an important role in the UK energy market. To commemorate the experience we all signed our names on the inner walls – next to Norway’s ex-prime minister and Norway’s King and Queen.

signing my name at the bottom of the North Sea

Coming back above sea level (all feeling a little relieved), we were shown the health and safety equipment – including emergency life boats which drop into the sea within 3 seconds of release – and the gas compressor room.

I am hoping by now you have a pretty clear picture of my experience yesterday, what you may not imagine though is how clean and comfortable the platform is designed to be. With recycling bins on every level, lounges that could rival those of a cruise ship and bedrooms bigger than some in London – it is certainly state of the art for a rig!

I am grateful to Statoil for the privilege of such an experience and grateful to all those who attended and made it an even better event. Definitely a career highlight!

the lovely visiting group

 In its report on the Electricity Market Reform (EMR) of April 2011 the Energy and Climate Change Select Committee recognised the “potential” of the new low carbon generation delivery mechanism, but cried out that the consultation paper’s proposals were “overly-complex, potentially expensive and fail to recognise the urgency of the transformation that needs to take place”. In short, EMR for all its innovation and cross-party political support would not attract the investment needed soon enough.

 Fifteen months later and the committee have had another chance to review the government’s plans to attract new investment in the UK’s electricity market. In today’s report Draft Energy Bill: pre-legislative scrutiny the committee cast their judgement on every aspect of the government’s 2012-13 Energy Bill and its central tenet, the EMR.

 Tim Yeo, the chair of the committee, and his colleagues did not hold back. “Unworkable,” “unacceptable” and “counter-productive” where just some of the salvos fired at DECC, who will sponsor the bill, and HM Treasury, who will have the final say on the financial instruments under-pinning so much of the Bill. In his statement accompanying the report Yeo concludes:

 “The Government has a lot of work to do over the summer to make sure that the Bill is fit for purpose in the autumn and is not subject to any further delays.”

 Select committees tend to find provocative language in order to help them secure media interest in their often very dull reporting but this is pretty strong stuff from the ECCC. The damning report picks holes into several of EMR’s central components and takes aim at the lack of detail provided by the Government. The later charge is hardly surprising to those following the committee’s progress with the Bill. Its chair Tim Yeo has complained very publicly in recent weeks about the Treasury’s refusal to give oral evidence to his committee on the essential features of its measures in the Bill over which it has control.

 Today’s report addresses those measures by attacking the government for failing to back the EMR’s new system of long-term contracts. These new contracts seek to give power companies a guaranteed price for the low-carbon electricity they produce. The theory goes that the long-life of the contracts will reduce the risk of investment in projects with high up-front capital costs – a key barrier to investment in the sector – by providing certainty for a longer-period of time.  

 The prospered ‘Feed-in Tariffs with Contracts for Difference’ mechanism in the Bill was declared “too complex” and “unworkable”. The committee also warns that the proposed reforms will probably consolidate the dominance of the big six energy companies. Instead the Committee would like to see the Government use its strong credit rating to underwrite the new contracts in order to keep the costs of energy investment down for customers. The report also criticises the Treasury for the spending cap on green levies that can be passed on to consumers in energy bills as they “could mean unacceptable risk to investors”. This is because the levy cap will ration the number of contracts available to the various competing low carbon technologies.

 Other concerns around the Bill include:

 The draft Bill and its associated documents are fundamentally flawed by the lack of consideration given to demand-side measures – potentially the cheapest methods of decarbonising the UK’s electricity system.

• Given that the Government (and the Committee on Climate Change) see nuclear playing a key role in the future energy mix, Government should consider how carbon and security objectives could be delivered if no new nuclear is forthcoming.
• The ECCC want a clearer understanding of the likely impact of the EMR proposals on the future role for gas. They recommend that the Government, in its forthcoming Gas Strategy, considers the interrelationship between EMR and the capabilities of the gas infrastructure, in particular the potential need for more gas storage.
• They do not believe that it is appropriate for National Grid, a private company, to act as the EMR delivery body.
• The FT quotes Mr Yeo as saying: “If the energy bill does not set a target to largely decarbonise the electricity sector by 2030, then the UK may miss one of the biggest opportunities it has to create a low-carbon economy in the most cost effective way.”

 The report comes at a time when the UK media are also reporting on George Osborne’s blocking of a new subsidy regime for renewable energy, as he fights another coalition battle with the Liberal Democrats, this time to ensure that gas remains central to Britain’s future power needs. The FT reports that the stand-off between Mr Osborne and Ed Davey, the Lib Dem energy secretary who wants to prioritise renewables, has infuriated business. John Cridland, head of the CBI employers’ group, claims the “political row” is holding back investment in Britain’s energy infrastructure.

Having closely followed the February IP week conversations that were taking place around the risk of supply disruption and forecasts on the price of oil, I am not surprised to see the escalating price of fuel driven by the on-going tensions with Iran.

According to This is South Wales, the average price of a litre of petrol on Wednesday last week was 137.34p. Moreover, the AA  predicted that the record high price of 137.37p, achieved last May, will soon be passed. The price of petrol rose 1.25p a litre last week alone.

Overall UK drivers are spending £6.81 million extra a day on fuel compared to a year ago, and £24.2 million more a day than they were two years ago.

The trade body for independent petrol stations, RMI Petrol, has joined the debate over the weekend, predicting that petrol could reach 142p per litre and diesel 150p per litre in the next month due to several factors, including: the situation in Iran, uncertainty over the ownership of Coryton refinery and threat of a strike by tanker drivers. The RMI group of 6,000 independent fuel retailers warned that the rise will push up UK inflation levels and potentially cause more damage to the currently unstable UK economy.

RMI have joined the AA in calling for the government to abandon the 3p increase in fuel duty, planned for August. They AA are also asking that the government remove the annual RPI increase in fuel duties.

This all comes ahead of National Fair Fuel Day tomorrow, where FairFuelUK will conduct a “Mass Lobby” directed at MPs to help convince the Government to cut Fuel Duty. The campaign group intends to deliver a report to 10 Downing Street tomorrow, claiming that a 2.5p-a-litre fuel duty cut would create 180,000 jobs. Alongside the report is a petition with over 130,000 signatures in support of the Fair Fuel UK Campaign which have already been handed in at No 10. Another 40,000 have been collected since then.

All of the above puts more pressure on Chancellor George Osborne to reduce the tax burden on drivers in his Budget later this month.

As some of you know, International Petroleum Week took place in London this week.

For the second year in a row, the risk of supply disruption was the dominant theme at the conference, where the main worry was Iran (a shift from Libya in 2011).

The event, which brought together influential traders and executives in the energy industry, led to many talks and forecasts on the price of oil – with some ventured forecasts hitting $150 a barrel or higher dependent on the large supply disruption involving Iran influences the energy market.

The FT reports that Wall Street banks briefing their clients during IP Week have painted a bullish outlook. However, Christophe de Margerie, Chief Executive of French oil group Total, tried to calm the market by claiming it had had no trouble finding alternative sources of crude since it ceased trading with the country earlier this year. That message was supposedly reinforced by the International Energy Agency.

Another topic of interest at the conference was minister of state for energy at DECC, Charles Hendry’s opinion on the Coryton refinery.

The Global technology Forum published an interview with the minister. “We think Coryton has a very real future in the UK economy. Of the Petroplus refineries, it’s probably the stronger one and therefore while there is clearly  challenges facing the refining sector across the whole of Europe, Coryton is in a strong position to survive in the future.”

He added that they are currently preparing a strategy paper which will be published in Autumn of this year about “how we view the importance of that industry and we have an organisation called the Downstream Oil Industry Forum which brings together industry and government to work on that.”

Other highlights of this year’s programme included a focus on Russia, The Arctic and CIS, with a presentation from Jonathan Kollek, Senior Vice President of Sales, Trading and Logistics at TNK-BP, and a talk from Paul Corcoran, Financial Director at Nord Stream AG about Nord Stream’s ability to help companies meet European Gas Demand.

There was also a focus on deep-water offshore with presentations from Ali Moshiri, President, Africa and Latin America E&P Company at Chevron  and a discussion on partnerships with Kjell-Erik Oestdahl, Executive Vice President Operations at  Schlumberger.

We will be closely monitoring the shift in crude oil prices over the coming months as the relationships between Iran and other European states develop.

As the summer festivals approach and we get all geared up for the season, this year we should think about the quirky bits and pieces we can take along to do our bit for the environment. 

Eco Ark is a good starting point – the family run company provides a variety of innovative products which lead to a greener existence.

My favourite must be the Voltaic Converter Solar Backpack which has the ability to charge all handheld electronics with its 4 Watts of power (ie. 1 hour of sunshine = 3 hours of phone time). Not too bad if you ask me…

Or if you really wanted to make a statement then check out the environmentally friendly tents from Green Outdoors.

Obviously energy efficiency is no longer limited to the office and the home. With all these new products about we can be seen to ‘be green’ even as we head to this summer’s big parties…you really can’t go wrong here!

Most of us have heard of the earthquake that took place in Japan last Friday. We have all also seen images here and there of the devastation…but none quite like those presented  in the link below.

The interactive images of Japan, before and after the earthquake took place, speak much louder than words…

 http://www.abc.net.au/news/events/japan-quake-2011/beforeafter.htm

Last week Japan was hit by a an earthquake which has had devastating effects on the country and its residents – I think I speak for everyone on my team when I say our thoughts go out to all individuals that have been affected by this catastrophe.

Most of you will also know that the natural disaster affected the nuclear power stations in the country causing an added threat to residents. The event has sparked interesting conversations in the UK and globally about our dependency on nuclear power stations.

The Guardian has reported that as natural disasters such as storms, hurricanes, and tsunamis are becoming more common, in their opinion owing to climate change, nuclear reactors are becoming even more vulnerable and therefore a riskier energy alternative. However, the Times have taken a different perspective on the matter at hand, with Matt Ridley reporting that nuclear energy is “pretty harmless and its environmental footprint is minuscule”. He suggests that the problem with nuclear power is not safety but rather the full cost of nuclear electricity, decommissioning, waste storage and insurance which makes nuclear power uncompetitive in any free market.

But actions speak louder than words as nations reconsider their position on nuclear energy. Germany’s Angela Merkel has temporarily shut down seven of the country’s nuclear power plants. Only a few months back, against much controversy, plans were made to extend the life of its older nuclear power plants to 2021, while it was agreed more recent ones should stay online for an additional 14 years. Moreover, the Chinese government announced on Wednesday that it too has suspended approval for nuclear power plants, putting the brakes on a nuclear development programme that accounts for almost 40% of the world’s planned reactors.

The revival of the debate about the safety of nuclear power has also affected nuclear operators’ shares, which have declined sharply as investors grow concerned over the industry’s prospects and governments’ decisions to halt plans for a new generation of nuclear plants. European markets were especially affected with Areva SA’s shares sinking 9.6%, as RWE and E.On AG fell 5.3%.

So, what now for the future of nuclear power in the UK? A report commissioned by Chris Huhne, which will be compiled by Dr. Mike Weightman, the chief nuclear inspector, will analyse whether Japan’s nuclear crisis will have repercussions on Britain’s investment into a new generation of reactors. As far as I’m concerned, the conclusions drawn in the report will greatly influence, if not dictate the future of nuclear energy.

 However, one could question whether the decisions being made by governments in response to this catastrophe are led by lessons learnt from this event, a knee jerk reaction, or rather a response to the campaigns being led by the millions who have suddenly jumped on the environmental bandwagon. I am not sure that the events have really taught us anything that we didn’t already know about nuclear power, but they have certainly provided a platform to broadcast opinions on the state of our nuclear industry.

This weekend I decided to spend my Sunday afternoon doing a little more than catching up on the X factor so I ventured to the London Museum to visit the London Futures exhibition. The exhibition displays a number of digitally modified photographs of London adapting to the effects of global warming.  One of my favorite photographs, depicted below, represents the need for renewable energy to provide electricity to the remaining buildings in the flooded centre of London.

I found the images beautiful but frightfully worrying all the same. Each picture suggested that London would be taking steps backwards, where food scarcity will force Londoners to heavily rely on agriculture and where overpopulation will cause living standards to drop as citizens move into small spaces much like slums.

I believe the pictures, although not necessarily accurate, will encourage people to consider the state of our environment and perhaps begin to take a more proactive stance in combating global warming. Most of you may well not agree with me, so I would suggest you make your way down to the exhibition, which will be at the museum until March 6^th, and draw your own conclusions.

For more information visit the Museum’s website on http://www.museumoflondon.org.uk/English/EventsExhibitions/Special/LondonFutures.htm