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Shell in major North Sea oilfield selloff

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Petrochemicals giant Shell has agreed to sell off a major tranche of its North Sea oilfield holdings to private-equity firm Chryasor in a deal valued at $3.8bn.

The deal, which is expected to close in the second half of the year, involves the sale of the Buzzard, Beryl, Bressay, Elgin-Franklin, J-Block,  Greater Armada cluster, Everest, Lomond and Erskine holdings, plus a 10% stake in Schiehallion.

The holding to be sold represents 115 thousand barrels of oil equivalent per day (kboe/d), with the Shell’s total North Sea production last year coming in at 211 kboe/d. “Following completion, Shell will retain a significant, more focused and strengthened presence in the UK North Sea, with production from the Schiehallion redevelopment and Clair Ridge project expected to come onstream,” the company said in a statement.

“Shell has a long and proud history in the UK North Sea, to which we remain committed,” said the company’s upstream director, Andy Brown. “This deal complements the great strides we have made over the last two years in improving the competitiveness of our UK upstream business.

“We believe this deal is a vote of confidence in the UK North Sea and offers proof that the industry’s increasing competitiveness, and improvements to the fiscal and regulatory regime, are starting to produce positive results. It will deliver value to Shell, Chrysaor and the UK as a whole, enabling us to continue to strengthen and optimise our UK portfolio and providing a springboard for Chrysaor to bring new investment and growth into the basin.

“It also contributes to the UK’s goal of maximising economic recovery of oil and gas from the UK North Sea, which will continue to be a source of energy, and revenue, for the country for many years to come.”

The deal will see around 400 staff move from Shell to Chryasor in a deal that is subject to partner and regulatory approvals.

“This deal shows the clear momentum behind Shell’s global, value-driven $30bn divestment programme,” said CFO Simon Henry. “It builds on recent upstream divestments in the Gulf of Mexico and Canada. It is also consistent with Shell’s strategy to high-grade and simplify our portfolio following the acquisition of BG, to ensure the company represents a world-class investment case.

“Importantly, the value here represents a profit against the book values of the assets, and a breakeven oil price above that for the BG acquisition.”

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Nissan Confronts Post-Brexit Reality With SUV Plant Decision

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The Japanese automaker’s decision on building its next car in Sunderland plant hangs in the Brexit balance

Nissan Motor Co., the U.K.’s top auto producer, will decide next month whether to continue producing one of its best-selling vehicles in the country preparing to leave the European Union.

The Japanese automaker is determining whether to build the next-generation Qashqai sport utility vehicle from the Sunderland plant, which employs about 6,700 people, Chief Executive Officer Carlos Ghosn told Ma Jie in an interview with Bloomberg Television. The factory’s competitiveness needs to be protected regardless of Brexit-related discussions, he added.carlos-ghosn

Take care of your competitiveness

“We’re at the eve of a sourcing decision,” Ghosn, 62, said Friday from Nissan’s headquarters in Yokohama, Japan. “If you don’t take care of your competitiveness, one day or the other you lose your sourcing.”

Nissan met with Prime Minister Theresa May last week after having called on the U.K. to compensate the company for any negative consequences resulting from Brexit as a condition for new investment in the country. Nissan built one in three of the vehicles the U.K. produced last year and exports more than half of them to Europe, exposing Japan’s second-largest automaker to risks.

While exporters including Nissan have benefited from the pound’s fall since the June referendum, May has indicated favor for a so-called hard Brexit, gaining greater control over immigration but losing membership in the single market. That’s raised concerns U.K. exports might face tariffs in the EU.

“We and the British government understand each other,” Ghosn said. “The future of Sunderland lies in the competitiveness of Sunderland. We have sent a clear message on that and there’s no confusion about that.”

About 61 percent of votes cast from Sunderland during the June referendum favored leaving the EU.

by Ma Jie

(Bloomberg)

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Four British power firms call for carbon tax extension

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Power generators call on government to maintain carbon tax until 2025

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LONDON, Sept 26 (Reuters) – Four British power generators have called on the government to maintain the country’s carbon tax until at least 2025, according to a letter seen by Reuters, putting them at odds with industrial groups who want it scrapped.

The carbon tax is paid by power generators for each tonne of carbon dioxide (CO2) they emit, and was frozen in 2014 at 18 pounds per tonne until 2021.

British chancellor Philip Hammond is expected to provide details on what will happen to the tax after 2021 in his autumn statement on Nov. 23.

Most British power companies support the carbon tax. Its cost is passed on to consumers through higher electricity bills, meaning companies with low-carbon generation such as nuclear or renewables can then benefit from the higher electricity prices.

“We are calling on the UK government … to maintain the carbon price floor beyond 2021, by keeping the carbon price support rate at least at its current level until 2025 to maintain secure and reliable energy supplies,” a spokesman for power generator SSE, one of the letter’s signatories said in an email on Monday.

The other signatories were Drax, Vitol owned VPI Immingham and Calon Energy.

Industrial groups have called for the government to abandon the tax, saying it has made electricity prices in Britain uncompetitive.

“The UK has some of the highest electricity wholesale prices in the EU and this is in large part due to the carbon price floor,” Richard Warren, senior energy and environment policy adviser at Britain’s manufacturers’ organization EEF, said in an email.

EEF estimates the carbon tax adds around 8-10 pounds per megawatt hour (MWh) to British wholesale power prices, which currently trade at around 40 pounds/MWh.

The power firms said the carbon tax encourages them to invest in low-carbon power generation and said it is central to the country’s efforts to meet its climate change goals.

But EEF’s Warren said the government already helps low-carbon investment though other schemes, such as its contracts-for-difference which provides a guaranteed price for electricity production.

Power generators pay the carbon tax on top of their obligations under the EU’s Emissions Trading System, which forces companies to surrender one carbon permit for every tonne of carbon dioxide (CO2) they emit.

Benchmark prices in the EU ETS have plummeted from around 30 euros a tonne in 2008 to below 5 euros, rendering them too cheap to encourage investment, the power firms said.

Britain has a legally binding target to cut its emissions by 80 percent on 1990 levels by 2050 and has embarked on electricity market reforms aimed at spurring investment in low-carbon nuclear and renewable power.

Britain also plans to phase out coal-fired power generation by 2025.

(Editing by Susan Fenton)

Copyright(c) Thomson Reuters 2016.

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Hinkley Point nuclear power plant contracts not enough to save UK steelmakers

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Survival of the British steel industry needs more infrastructure projects, amid worries that Chinese-backed Hinkly Point project will be supplied by Chinese steelmakers

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LONDON, Sept 22 (Reuters) – UK steelmakers will likely get lucrative deals to supply the 18 billion pound nuclear power plant at Hinkley Point, not enough though to secure the future of Britain’s troubled steel sector, industry experts say.

UK steel firms are slowly emerging from a crisis that has seen some 5,000 jobs, or a fifth of the workforce, axed since last October, thanks primarily to rising steel prices and a falling pound making exports more competitive.

Britain approved the controversial, China-backed Hinkley Point project last Thursday, firing optimism its construction will also help arrest the steel sector’s decline.

But to ensure its ultimate survival, the industry needs more infrastructure projects that use British steel, lower energy costs and crucially, more measures to prevent dumped or subsidised steel from the likes of China from entering the country.

“It’s good (news) … but I don’t think a Hinkley Point can sustain British steelmaking for the next decade,” Ben Orhan, senior economist at consultants His, said.

EDF, the French utility that will build Hinkley Point C in southwest England, has said more than 60 percent of the project’s construction spend will go to British companies.

Wales-based Express Reinforcements was named preferred bidder to supply Hinkley Point with 200,000 tonnes of reinforcing steel, which it will source from Celsa Steel UK.

This is 25 times more steel than was used in London’s Olympic Stadium and is worth some $84 million, according to Reuters calculations.

EDF declined to comment on Hinkley Point’s total steel needs, but even if, as some experts expect, the project will require at least a million tonnes of steel, this will be spread over nearly a decade.

That is a fraction of the 10.8 million tonnes of steel produced last year in the UK, according to the World Steel Association.

TRADE DEFENCES

EDF also declined to comment on whether Chinese steelmakers will supply the project, though some worry this might be the case given Hinkley Point is backed by $8 billion worth of Chinese funding.

The European Union has ramped up trade defences in steel over the past couple of years. It currently has 37 anti-dumping and anti-subsidy measures in place for steel products, 15 of them concerning China.

Since April, UK government rules mandate that all public sector projects must consider the social and environmental impact of the steel they source, and cannot just opt for the most cost-effective bidder.

“This is the first major project announced since the (government) procurement rules changed. As such it is the first test for government,” Gareth Stace, head of industry group UK Steel, said.

The UK government was not immediately available to comment on how it will enforce its rules as regards Hinkley Point.

EDF has said the largest forgings, used in the nuclear reactors, will be procured overseas as UK steelmakers do not produce them.

An industry source said French engineering group Areva and a Japanese firm will supply the forgings. EDF has a controlling stake in Areva NP, the group’s reactor business.

Areva was not immediately available to comment.

Tata Steel UK, Britain’s largest steelmaker, said it has the capacity to supply much of the high-quality steel required for Hinkley Point.

“We hope the wider value of using local supply for projects like this is fully taken into account,” a Tata spokesman said.

The UK’s Liberty House Group said it will look to supply products like plates for Hinkley, while British Steel, owned by Greybull Capital, makes construction steel ‘sections’ and is expected to bid. It was not immediately available to comment.

EDF estimates it will need 600,000 embedment plates and about 50,000 tonnes of structural sections.

“Whenever something big comes up people get excited but we need a multitude of infrastructure projects,” a UK-based steel industry source said. “No one project is ever going to solve an industry’s problem.”

(By Maytaal Angel. Additional reporting by Susanna Twidale; editing by Pratima Desai and Susan Thomas)

Copyright(c) Thomson Reuters 2016.