I’ve been to see “No Such Thing as a Fish” at Leeds City Varieties. It’s the stage show of a podcast. Watch out for the stage show of this podcast, the Sustainable Futures Report, coming soon to a theatre near you.
In this edition for Friday 19th February 2016 I’m talking about why the new nuclear power staton at Hinkley may never be built and how China is closing coal mines, but the UK is planning to open a new one. PwC is taking the circular route to sustainability - Bridget Jackson tells us how - and Maggie Smallwood is leading Biovale on a similar journey. They say the road to hell is paved with good intentions. The French are planning to pave a road with solar panels. Why is Queen Street Mill closing, and should we be concerned? But first, Platts London Oil Forum.
Hello, this is Anthony Day with your weekly Sustainable Futures Report, brought to you as usual without advertising, subscription or subsidy. A big welcome to the increasing number of listeners from all over the world.
The Platts London Oil Forum is annual event where oil traders come together to review the market and assess how others see the future for the industry. I attended this year as the guest of James Spencer of Portland Fuels.
Of course, some people might express shock that I have been involving myself with the oil industry. Aren’t we all selling our investments in the oil companies? Don’t we need to decarbonise and abandon fossil fuels? Didn’t people come away from the Paris Climate Conference last year saying that the oil companies were finished? Well if they did, nobody at Platts seems to have heard them.
The truth is that we live in an oil-based economy, and that will continue to be true next week, next month and next year. Yes, we do need to decarbonise all forms of energy and eventually phase out oil completely. But for the moment, every car, bus, lorry, train and aircraft in Britain’s transport fleet, and across the world needs to start up tomorrow morning or the global economy will collapse. The people attending Platts London Oil Forum are the people who ensure that the right oil at the right price is in the right place at the right time, to make sure that there’s fuel for every one of the world’s vehicles.
The morning started with a review of oil markets by Joel Hanley. This time last year, he said, we were looking at $40-$50 a barrel. Now oil is down to $30 and it's difficult to see which way it's going to move. There was growth in US oil production in 2015 but stocks are up at record levels across the world. Even geopolitics seem to have stopped influencing the market. War in Syria and nuclear tests in North Korea have had little effect. The constant fall in prices is driven by OPEC's overproduction.
We had an instant poll: will OPEC agree to cut its production in 2016? 76% of people in the room said No.
In the face of low oil prices the industry is in cost-saving mode, cutting capital expenditure and reducing the rig count in the US by 62%. Even so, production remains strong. While some fracking companies have gone to the wall in the US, fracking is generally working well.
Until the end of last year it had always been illegal to export crude oil from the United States. This has now changed but again, with little effect on world oil prices. At current levels transport costs make this US oil uneconomic for most markets. At the same time, since there have been no crude oil exports from the United States for the last 40 years there is very little suitable infrastructure for getting the oil out of the country.
Global demand for oil continues to rise, although at a slower rate. Demand from China is falling, but remains significant. Diesel cars are losing market share rapidly following the VW scandal. New diesel car registrations in the EU are down by about 5% so far this year. In fact they will be banned from Paris altogether from 2020. Gasoline underpins product demand.
Where will the Brent crude price be this time next year? Another instant poll. 40% said between $45 and $55 a barrel. 30% said between $35 and $45. Maybe such a wide spread indicates that nobody really knows.
It’s only in the last few weeks that sanctions on Iran have finally been lifted and the next instant poll asked whether Iran would be able to regain its pre-sanctions European market share in 2016. 77% said No, which is unsurprising a) because Iran needs the money and b) because it has said that it will not cut its prices.
This week there have been talks between Saudi and Russia about working together to stabilise the price. Markets have hardly reacted because they know that Russia needs all the oil revenue it can get and it has a poor track record for respecting agreements.
I came away from the event with the impression of a highly complex industry successfully serving a highly complex market. Don’t underestimate the effort involved in matching buyer with vendor and delivering petrol to a pump near you so that it’s always there when you want it. You could almost say there’s no such thing as oil. There’s light oil, there’s heavy oil; sweet oil and sour oil. There’s oil with high or low sulphur content, and high or low content of other chemicals. Then there’s a whole range of issues relating to where the oil actually is, and how it can be transported. Pipelines are one method, supertankers are another, and trains, lorries and barges complete the picture. Can the supertanker access a port near the buyer? Can the ship get through the Panama Canal? Can the train carry enough to keep up with the refiners’ needs? Will a given refinery be able to process a particular grade of crude? All these factors have to be managed to keep the distribution of oil running smoothly. When we do eventually transition from oil to cleaner fuels, the distribution of energy is likely to be every bit as challenging. Possibly more so, because everyone knows what they are doing with oil after many years of practice!
Thanks again to James Spencer of Portland Fuels for the opportunity to see the industry in action.
Green vision, part of the Centre for Knowledge Exchange at Leeds Beckett University, hosted an event on the circular economy at Bradford University. It was held in the Bright Building or re: centre. I’ve been to this building before, for events hosted by the Ellen MacArthur Foundation. It’s BREEAM Outstanding. BREEAM is Building Research Establishment Environmental Assessment Methodology, so the building is outstanding in all things environmental. It’s made of hempcrete and timber, and could theoretically be dismantled. It uses natural light and natural ventilation and rainwater harvesting. With a solar atrium and extensive insulation there is little need for a heating system. (Although it has a small one.)
Bridget Jackson, Director of Corporate Sustainability at consultants PwC, explained the firm’s commitment to going circular and how this would potentially involve changing products and services, the supply chain and operations, with the target of decoupling the impacts of operations from growth. They have set themselves three 5-year phases. The targets for the first is to send zero to landfill. For the second, to reuse and recycle 100% of all materials. The final phase is to achieve complete circularity. They are already advancing with re-use and recycling. For example, outdated paper archives are being converted to hand towels. corporate uniforms, which used to be thrown away by the user when they were no longer required, are now taken back - 3,300 of them each year. 30% go to new markets and 50% for industrial rages. Used cooking oil from the staff restaurant goes into a tri-generator combined heat and power unit. Since 2007 they have saved £14.1 million on energy. They send only 1% of waste to landfill.
The two office buildings in London are BREEAM outstanding; achieved by retro-fit, not new build.
In the 18th December episode of this podcast Tracey Rawling Church of Kyocera explained the concept of servitisation. This is where a consumer purchases the service that an asset provides, not the asset itself. The supplier’s responsibility is to ensure that that asset is providing the contracted service at all times. A classic example is Philips selling guaranteed lumens, light levels, and PwC has servitised its printers and copiers. They are leased and maintained by the supplier who takes them back for refurbishment or recycling at the end of their lives. (Not sure whether they are Kyocera printers.) PwC also uses Interface Floor. This company provides a flooring service based on carpet tiles. If parts of it get worn they are taken away for re-manufacture and replaced.
PwC has adopted the circular path because its clients expect it to walk the talk. They believe it is the right thing to do and there are commercial benefits as well. Apart from energy savings, the firm has saved £1m on the cost of paper. They find that the working conditions attract and retain employees. Of course, this is a very big organisation, and few companies will be able to power their building from waste oil from the canteen, to contract with specialist waste carriers or influence their suppliers. PwC does share its experiences. Search their website for “Going Circular”, the progress report they published last November. And increasingly, as we heard in last February’s episode, Sharing BESST Practice, there are clusters of organisations combining together to achieve the scale where environmental solutions can be viable.
Maggie Smallwood of Biovale was also in Bradford last week. And she’ll be leading a discussion at the Sustainable Best Practice Exchange in Harrogate in April. She spoke about the circular bio-economy. She explained how companies in the Biovale cluster were working on renewable resources and aiming to displace fossil-fuel feedstocks. Exploiting the full potential of materials was an avenue of research. For example, wheat straw has traditionally been thrown away. In fact it contains 75% of the crop’s energy. Straw may be no good for making flour or for animal feed, but it’s an energy resource which has previously been ignored. Biovale exists to build new supply chains and link organisations together to explore every opportunity for extracting value from materials, before finally classifying them as waste. To put things into context, the bio economy is worth £153 billion and employs some 4 million people. Aerospace is worth an annual £80 billion. More about all this in April.
You’re listening to me, Anthony Day, and the Sustainable Futures Report. Still to come: Hinkley Power Station, coal mines in China and the UK, the solar road and Queen Street Mill.
The planned power station at Hinkley C is constantly in the news. Latest word is that the board of EDF, the only company that bid for the contract, cannot raise the finance and is looking for a way out. This in spite of the fact that the Chinese have been persuaded to put up 30% of the money and the government has guaranteed that it will buy the electricity produced at twice the current rate under a 30-year index-linked agreement. The French government owns 82% of EDF and will not let it withdraw. However, with technical problems at Flamanville, where a similar plant is under construction, overdue and substantially over budget there are growing doubts that Hinkley C will ever go ahead. What will we use to fill the energy gap instead I wonder?
According to Bloomberg, China is to stop approving new coal mines for the next three years and continue to trim production capacity by closing 1,000 mines. You will remember that Beijing issued its first red alert for dangerous air pollution at the time of the Paris conference. This has reinforced China’s intention to shift away from coal. It plans to cut coal’s share of energy consumption by nearly 3% in 2016, although it will still be at 62.6%
Meanwhile in the UK the Coal Authority licensing body has backed a plan to build an opencast coal-mine on the northeast coast of England. Over its 7-year life the mine is expected to produce 3m tonnes of coal. According to the BP Statistical Review of World Energy, UK coal consumption fell by 20% between 2013 and 2014, the latest year reported. Those 3m tonnes represent 10% of the UK’s consumption at 2014 levels, but only 1.5% per year over the life of the mine. Is it really worth devastating an unspoilt tourist area for just 1.5% of the nation’s coal requirements? We’ll still be relying on the USA, Colombia and Russia for the rest, until we phase out coal power stations as the government plans, in 2025.
Of course 3m tonnes of coal at £33/tonne comes to about £100m. So perhaps that’s got something to do with it. Certainly good for the balance of payments, but not so good for road congestion and air quality in rural Northumberland.
Building on the Climate Accord reached in Paris last December, France’s minister of Ecology and Energy recently announced that it will pave 1000 km of road with solar panels over the next five years. The goal of the project is to provide enough energy to power homes for 5 million people – roughly 10 percent of the country’s population. Do you remember I told you a while ago about a YouTube video on something called Solar Freakin’ Roadways? It’s still there. https://youtu.be/qlTA3rnpgzU Seemed a bit wacky at the time. Maybe it was just ahead of its time.
“Those who fail to learn from history are doomed to repeat it.” That was said by George Santayana in 1863, and many other people subsequently. I mention it because a piece of history is set to disappear. Queen Street Mill in Burnley is the last surviving 19th century steam powered weaving mill in the world. Queen Street Mill is a Grade 1 Listed building and is designated as having an Outstanding Collection of National Importance, but along with a number of other museums in Lancashire it will close for good at the end of next month. This has been known since last November and I’m amazed that nothing has been done, but there’s a shortfall of some £1.3m due to government austerity policies. There’s a petition on change.org, but it’s struggling to reach 500 signatures. The press has noted that at the same time £60 million of public money is being donated to the new “Garden Bridge” in London, which will serve very little purpose, will be managed by a private company and will be closed to the public for part of the time.
Sustainable Futures is about the future, but I wonder if a future can truly be sustainable if we abandon our past.
And that’s it for another week. I’m Anthony Day. Get in touch with me to talk about planning your sustainable future, or to talk about topics you’d like to see covered in future. email@example.com Remember to sign up for the Sustainable Best Practice Exchange at sbpe.co.uk - some places still available - and remember that the full archive of these shows, going back to 2007, is at susbiz.biz.
Bye for now!
3m tonnes coal = 2.1m tonnes oil equivalent or 7% of 2014 consumption
29.5 down from 37.1 (20% fall)
Coal is at £33/tonne ($43/short ton) - value of output is therefore £100m.