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BP should be forced to….

At The Guardian:

But if these corporations really are part of Britain\’s industrial fabric then it is time to press them into \”greener\” action, too: encourage BP to rebuild its UK carbon capture and storage interests

Erm, you do know why BP gave up on those? They were going to take natural gas, strip out the C, burn the H in a power station and then pump the CO2 down into old oil fields. This would force up the last of the oil in those fields and also store the CO2.

In order to make the scheme work financially, they didn\’t need a subsidy. All they needed was a lower royalty/tax rate on the oil that was pumped up. After all, if they don\’t pump the CO2 down the oil will never come up so no tax at all will be paid.

Gordon Brown said no. Even though it would have been extra money to The Treasury, he said no.

Forget \”pressing\” them into action. Why not just undo one of the more lunatic decisions of the Labour years?

9 thoughts on “BP should be forced to….”

  1. The worst nightmare of the greenies, is that industry will find ways of reducing carbon emissions that don’t require subsidies or threats of violence. That would destroy all of their hopes and plans.

    This is why they are spreading so much negative publicity about shale gas, because it looks like a cheap stop gap measure until other green technology catches up.

  2. In defence of Gordon Brown (I never thought I would write that!) it is conceivable that the oil companies could have abused such a scheme by pumping CO2 into fields that didn’t really need it to get the oil out, thereby benefiting from a lower royalty rate.

  3. The Pedant-General

    And the govt similarly f*cked up with the scheme to capture petrol vapour from petrol pumps.

    When you fill up, petrol vapour in the empty tank in your car is expelled and currently just vents into the air. There was a scheme proposed to capture this and return it to the petrol station tank, but the govt wanted it taxed again, thus scuppering the return on the investment to do it.

  4. Gordon Brown said no. Even though it would have been extra money to The Treasury, he said no.

    While I agree wholeheartedly with your sentiment I have to ask if the above statement is strictly true? After all, 1 barrel of oil pumped from a CO2 well would replace another barrel pumped from somewhere else.

    Obviously that other barrel might come from a Saudi oil field or a Norwegian one, but it might also come from a British field.

  5. While I agree wholeheartedly with your sentiment I have to ask if the above statement is strictly true? After all, 1 barrel of oil pumped from a CO2 well would replace another barrel pumped from somewhere else.

    Outside of Saudi and one or two other OPEC members, oil production runs pretty much at maximum capacity. I don’t know a single field outside OPEC that, if not actually running at maximum production rates, is not operated with maximising production as the aim. If BP could produce another barrel a day from any one of its fields, the global quantity produced would increase by a barrel per day, unless the Saudis or another OPEC member produced one less to compensate.

  6. BP is/was one of the world leaders in developing solar photo-voltaic cells which are the long-term answer to the problems with fossil fuels (finite supply and global warming). The sunlight falling on earth each day provides many times more energy than mankind can use – converting some of this into electricity and using that creates no net effect on global warming.
    The Grauniad is, as usual, advertising its ignorance.
    [Footnote – AGW is a fact – we have burned 1.8 Billion tons of coal (and a bit less oil) in the last 40 years: that has warmed us up – but as anyone who has been outdoors in the last few months can tell you it is much much less important than the solar cycle.]

  7. @ Remittance Man
    “Obviously that other barrel might come from a Saudi oil field or a Norwegian one, but it might also come from a British field.”
    There are two simple things to remember about oil production (i) Saudi Arabia is the swing producer. (ii) Prudhoe Bay’s costs are the floor for the oil price.
    Sometimes Kuwait and others co-ordinate with Saudi so that its management of global oil supply is not too painful for any one country’s budget but no UK oil producer ever alters its production in response to changes in production elsewhere.
    Of course if the oil price dropped below the marginal production cost for that field then the oil company might suspend production but as marginal production costs are a fairly small fraction of total costs per barrel – capital costs dwarf them – this is pretty implausible for UK fields. There are a lot of marginal fields in the USA that close and reopen in response to movements in the oil price and more that decide whether or not to invest in stimulating production to offset natural decline based on the current oil price and short-term projections. Add in the tar sands and you get a modest amount of non-OPEC response of supply to price but the vast majority is OPEC. While OPEC could force up the oil price by restricting supply, it can no longer force down the price below the break-even point for a North Sea field since OPEC no longer has the capacity to meet world demand if they lower the price to knock out shale oil, tar sands, marginal “nodding donkey” fields and Alaska (Prudhoe Bay et al). If you can name me a single UK field that has a higher break-even point than Prudhoe Bay, whose well-head price is WTI less blend differential less TAPline charges less cost of shipping from Valdez to the lower 48 using expensive US-registered ships, then I might think that you had an academic point and GB was not necessarily just being pig-headedly stupid.
    The vast bulk of the cost of North Sea Oil is tax so the Treasury loses more from each barrel that is not produced than the oil company. In the mid-70s I was talking (well, mostly listening) to the CEO of a British Oil Company and he was enthusing about the tertiary recovery project from his North Sea field that would follow when production rates from secondary recovery declined with a pre-tax rate of return on capital of more than 40% per annum. Thanks to Dennis Healey it never happened because the after-tax return to the other oil companies dropped below their threshold for approving investment spending.

  8. Mr Newman,

    What you say is true, but ultimately, surely the demand side of the equation would limit any future expansion in output. Oil companies don’t produce oil for fun, if they can’t sell that barrel at a satidfactory price they ain’t going to produce it.

  9. <emWhat you say is true, but ultimately, surely the demand side of the equation would limit any future expansion in output. Oil companies don’t produce oil for fun, if they can’t sell that barrel at a satidfactory price they ain’t going to produce it.

    Aye, but the investment decisions on their projects assuming something like 20-30 dollars per barrel. It needs to fall one hell of a lot in order for a project to shut in, and I’ve never heard of it happening. All projects I’ve been associated with have had a single ultimate goal: achieve and maintain design production plateau.

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