Sunday Times 16 February 2025
Dominic Lawson
We're Starting To Look Like Loonies On Energy
Should you be looking for someone to blame for your pension fund not performing as you might have wished, consider the name of Bernard Looney. This is — or rather was — the chief executive of BP who in 2020 declared the company would target a reduction of 40 per cent in its oil and gas output and go gung-ho for renewable energy. It was quite the fashion at the time but has been a disaster for shareholders in a company that traditionally supplies £1 in every £7 paid in dividends to UK pension funds by FTSE 100 companies.
BP’s dividend was slashed as a result of the Looney dash for “green growth”, and its share price plummeted relative to that of other quoted big oil companies. Those rivals are circling like sharks in the equity market, seeing the chance of a cut-price takeover. In reaction last week, having seen Looney off 18 months ago (for office relationship shenanigans rather than mismanagement, absurdly), BP announced a reversal of the Looney tune. “We have completely decapitalised renewables,” said its new chief, Murray Auchincloss. He went on to tell restless shareholders that BP would be restoring its traditional focus on hydrocarbon exploration and production: “We now plan to fundamentally reset our strategy.”
Meanwhile, at the helm of UK plc’s energy division, Ed Miliband is intensifying the strategy BP has jettisoned, having ended North Sea exploration. To make the analogy more piquant, the new boss of the US has abandoned his predecessor’s vast subsidies of renewable energy development, pulled the world’s largest economy out of the Paris climate change agreement and declared he will do everything to maximise hydrocarbon output.
In fact, it is the UK and not the US that is the outlier. Under Joe Biden, US oil and gas production had already reached its highest recorded figure. And what of the world’s second-largest economy? Last week China Daily boasted the headline: “Oil and gas output hits new peak”. Underneath we read: “China’s total oil and gas production surpassed 400 million tonnes of oil equivalent for the first time in 2024 … China accelerated efforts to ramp up oil and gas exploration and development throughout last year.”
China Daily is more reticent about the country’s booming coal output, but last week the Centre for Research on Energy and Clean Air reported that while China had added record amounts of wind and solar capacity, its coal plant construction had surged last year. The report concluded: “Instead of replacing coal, clean energy is being layered on top of an entrenched reliance on fossil fuels.”
China is just one of more than 170 countries that did not meet the deadline on Monday for notifying the UN of what are known as “nationally determined contributions” to the official target of keeping global warming within the limit hubristically set in Paris a decade ago. According to Bloomberg: “Seven of the world’s ten largest economies missed [the deadline] to submit updated emissions-cutting plans to the UN — and only one, the UK, outlined a strategy … that keeps pace with expectations staked out under the Paris agreement.”
But as the UK’s leading energy economist, Sir Dieter Helm of Oxford University, pointed out in his blog last week, virtuous Britain’s “industry energy prices are … higher than in the EU and around four times the prices in the US … No companies are flocking to the UK to gain access to the promised low energy prices, which were to be the result of switching from fossil fuels to renewables. On the contrary, what is left of UK energy-intensive industries are going for the exit.”
And, as Helm also points out, the claim that we are, at least, reducing global emissions is “all smoke and mirrors. By switching from home production to imports, our territorial emissions fall, but not, of course, the emissions of the stuff we import.”
A grotesque example of this smoke and mirrors is the way the equivalent of burning the entire New Forest every year, in wood imported across the Atlantic for use in the Drax power station, is counted as “zero carbon”, because the trees are not chopped down here, and as “renewable” energy: never mind that the smokestack CO2 emissions at the Yorkshire plant are greater than from the indigenous coal that used to be burnt there. Last week Miliband authorised an extension to the £7 billion in subsidies already inhaled by the world’s biggest quoted “biomass” company. Drax’s share price soared on the news.
However, it is depressingly certain that Miliband will show net zero enthusiasm for the news that a gas field discovered by Egdon Resources in Lincolnshire has been estimated to contain at least 480 billion cubic metres of recoverable gas, about seven times the UK’s annual consumption. The accountancy firm Deloitte suggested last week that developing the Gainsborough field would yield £27 billion in direct taxation — and CO2 emissions 218 million tonnes less than the alternative of importing liquefied natural gas (which is what we are increasingly doing).
Within hours of the announcement, the government had dismissed it: “We intend to ban fracking for good and make Britain a clean energy superpower.” Absurd. Meanwhile, it has given rapid approval to a gigantic solar farm in the same county of Lincolnshire, to be built and operated by Ecotricity, whose founder, Dale Vince, has given £5 million to the Labour Party. The solar farm will be hundreds of times more physically extensive than any facilities required for the gas field, and will generate nugatory amounts of energy when the sun is not shining on that part of Lincolnshire.
This is all part of Miliband’s pledge to make the grid almost fossil-fuel-free by 2030. It is regarded by those responsible for this business in the past as insanely ambitious: in November I quoted an acquaintance now retired from National Grid: “I fear we are heading into a word of incredible costs and at the same time putting the security of supply to our country in peril.” This was when Ed was hailing as vindication of his scheme a report by the National Energy System Operator that approved the policy while declaring it to be “at the limit of what is feasible”. Miliband crowed that this was “independent, expert analysis”.
Now look: a freedom of information request has uncovered emails between NESO’s chief operating officer, Kayte O’Neill, and Miliband’s department, in which Ms O’Neill says: “We are keen to get views on the messaging, tone and structure [of the report] as well as anything you think is missing and anything you strongly dislike or can’t live with.” And later: “Please find the very latest draft … we will ensure [we] are aligned on lines to take on costs.”
How independent! And what a racket. We are all going to suffer the fate of BP shareholders under Bernard Looney, only without the ability to bail out.