Saturday, 12 July 2008

On its last legs (North Sea Oil)

By Ed Crooks
Published: July 12 2008 03:00

To appreciate the achievements of the North Sea oil industry, you really need to go offshore, flying an hour or more in a cramped helicopter above the churning waters that lie between Scotland and Norway.
Cat's cradles of pipework, planted on the sea bed up to 600 feet below the surface, the platforms are awe-inspiring feats of engineering. They are also fraught with hazards. Last weekend, memorial services commemorated the 20th anniversary of the Piper Alpha explosion, the world's worst offshore disaster, in which 167 were killed.
Yet for all the skill and bravery of the workforce, the industry is fighting a losing battle: the North Sea is in terminal decline. The challenge now is how to squeeze out as much oil and gas as possible before the wells finally run dry. With crude prices above $147 a barrel yesterday, any extra output would be more lucrative than ever - but is the industry there in shape to deliver?
As the world looks ahead nervously to the exhaustion of its reserves of fossil fuels, whenever that may come, the North Sea is an early indication of how that decline will play out. Oil & Gas UK, the industry association, warned this week that without heavy investment and the development of new fields, the UK sector of the North Sea would be "effectively over by about 2020".
Even if the industry does keep investing, and strikes lucky in finding fresh pockets of oil and gas, the iron laws of geology and economics cannot be turned aside. "The North Sea will continue to decline," says Mike Wagstaff, a former banker with Schroders who is chief executive of Venture Production, an oil and gas producer focused on the North Sea. "Whether we invest or not will change the rate of decline by maybe a couple of percentage points."
Opening up the North Sea in the 1970s helped break the power of Opec, the oil producers' cartel, and deliver two decades of cheap energy, from the mid-1980s to the mid-2000s. Now, the region is one of the fastest-declining oil provinces in the world, according to the International Energy Agency. On the UK side, oil and gas output peaked at the turn of the decade and has been falling by 7.5 per cent a year since 2002.
Today, the North Sea supplies about 4m barrels of oil a day from the UK and Norway, meeting about 4.7 per cent of global demand. That is about as much as Iran and more than Kuwait, Venezuela or Nigeria. By 2013, that will have dropped to 3m b/d or 3.2 per cent of demand, the IEA predicts.
While the Norwegian side was developed more slowly, and its peak came later, it too is in decline. Norway suffered the world's second-biggest drop in oil production last year, according to BP - exceeded only by the planned output reductions from Saudi Arabia.
Yet Aberdeen, the granite city on Scotland's north-east coast that is the capital of the British oil and gas industry, does not feel like the heart of a dying business. Record high oil prices mean the cash is flowing freely, making Aberdeen an oasis of prosperity in the increasingly bleak landscape of credit crunch Britain. The hotels are full all week, luxury car dealerships selling Mercedes and Land Rovers have been opening showrooms and the rush-hour traffic is horrendous. There are more Porsches per head in Aberdeen than in London's elite Kensington. Luxury two-bedroom apartments are on the market at £400,000 - about what you would pay in a reasonably desirable part of London.
Scotland's offshore workforce has risen from a low of about 19,000 at the start of the decade to about 28,000 today, while shortages of skilled staff have sent wages through the roof. An experienced diver can earn more than £100,000 a year.
Oil company profits are soaring, too. The industry will pay about £16bn in tax this year; about one-third of the corporation tax expected from the whole of British business. Office buildings are springing up across the city and its outskirts. BP moved into a new Aberdeen base this year and several subsea engineering companies - contractors that instal and maintain equipment underwater - have built head office buildings in Westhill, a suburb of Aberdeen that has been christened "surf city".
That impression of robust health, however, is only half the picture. Head offshore and the troubles of the North Sea are more readily apparent. The condition of the platforms and other installations varies widely. The best have the gleam of polished steel and fresh paint; the worst show every sign of exposure to the pitiless battering of wind and waves for three decades.
When the first platforms were built in the 1970s, they were designed for a life of 30 years or so. Few people believed they would still be active well into the 21st century. Many installations have had their lives extended for 10 years, some for 20.
A report last November from the Health and Safety Executive, which has responsibility for safety in Britain's sector of the North Sea, was scathing about the state of some platforms. "Fabric maintenance is very poor on many platforms, showing inadequate long-term planning by the operators for the lifetime of installations, a lack of regard for the working environment of offshore workers and the risks to the individual of injury," it said.
On the worst installations, handrails are pitted with rust and held together with scaffolding clips, while grating floors are crumbling and covered with board walkways. Paintwork is peeling and bubbling with corrosion. In the past few years, the industry has begun to get to grips with the problem: it is now spending about £1.5bn a year on "asset integrity". The biggest problem with the North Sea, however, is below the surface: the fields are running dry. The giant areas developed in the 1970s are producing a fraction of their peak output and the fields being discovered today are tiny by comparison. The Forties field held 5bn barrels of oil, Brent about 4bn: more than 100 times the volumes of today's typical discoveries in the UK sector. A new field of more than 50m barrels is a rarity.
The newer fields are also generally harder to exploit. The oil is heavy, so it will not flow easily, or is held in what is known as a "high pressure high temperature" reservoir: at 150 degrees Celsius or more. Producing oil and gas from these fields means constantly pushing back the technological frontier.
Hopes for the future of the North Sea rest on new entrants: companies that can make a business out of investing in smaller and older fields that are no longer worth the time or trouble for the big international oil companies. This week, for example, Shell and ExxonMobil sold six fields to Taqa, a fast-growing energy group based in Abu Dhabi. Peter Barker-Homek, an ex-BP man who is Taqa's chief executive, says he plans to invest up to £1.5bn in the fields to raise production from 40,000 barrels a day to 60,000 b/d - a decision that would not have made sense for Shell or Esso.
"They were looking at those assets in a completely different way," he says. "For a major, the problem is how to replace 1bn barrels of reserves. Taqa only needs replace 100m barrels."
New entrants' contributions are vital to sustaining the life of the North Sea. About 40 per cent of investment in the UK sector comes from companies that were not there eight years ago. Venture and Oilexco, a Canadian company that is another relatively recent arrival, were the most active drillers of new wells last year.
Recently, however, the number of new entrants has been falling, although it picked up a little last year. The number of fields changing hands has dropped to its lowest for more than a decade.
Costs are one obstacle: the North Sea is one of the most expensive places in the world for an oil company and costs have been rising fast. Tax is another. Oil executives observe wryly that while Venezuela and Russia have hit the headlines by grabbing a bigger share of their oil revenues, Gordon Brown did much the same thing with two tax increases imposed on North Sea companies when the prime minister was Britain's chancellor of the exchequer.
Malcolm Webb, the chief executive of Oil & Gas UK, talks about a "window of opportunity": the period when it is still possible for companies to develop fields in the North Sea by hooking up to existing infrastructure, before those ageing installations crumble away completely. "We don't have the luxury of a great deal of time," he says. "If the developments don't come forward, if we are not making use of the infrastructure, then there is a real risk it will be decommissioned."
Not everyone is so worried. Venture's Mr Wagstaff thinks there will still be significant production in 2050. But the North Sea is showing how the whole of the global oil and gas industry is becoming more difficult and more expensive. As it fades away, the dependence of Europe and the US on Russia and the Middle East for their oil and gas is inevitably going to grow.
Copyright The Financial Times Limited 2008

Canadians ponder cost of rush for dirty oil

As oil prices continue to reach record highs, the search for new sources of energy has led the world to Alberta, Canada, and its vast oil sands. Now, John Vidal finds, the country famed for its wilderness and clean living finds itself caught between fuelling the world's oil-hungry economy and the ecological devastation and soaring greenhouse gas emissions that exploiting the tar sands produces
John Vidal, environment editor, in Fort McMurray
The Guardian,
Saturday July 12, 2008

The Caterpillar 797B heavy hauler is the world's biggest truck. It's taller than a four-storey house, as wide as a tennis court and it removes nearly 35,000 tonnes of oily sand a day from a deep open cast mine in northern Alberta in western Canada.
Truck number 108 is driven by Norman Johnson, 63, a long-time Shell man who is planning to spend his retirement fishing, camping and "hunting the critters" in the vast boreal forests and bogs that stretch across the region. "It's just like driving your car. Couldn't be easier - once you get used to its size," he says from his cab, 40ft off the ground. He won't let the Guardian start up either of its two great engines.
But the future of northern Alberta's aspen and pine woods, its rivers and animals are in doubt as the world's greatest modern oil rush accelerates. Shell, Chevron, Exxon, Total, Occidental, Imperial and most other oil majors have so far invested nearly $100bn Canadian dollars (£50bn) in the 1,160 square mile (3,000 square kilometre) "bitumen belt", which is being called the "new Kuwait".
A decade ago, the vast landscape of forests and lakes around Fort McMurray and the Athabasca river provided a fairly minor and barely profitable sand oil industry. But it is now pitted with hundreds of square kilometres of toxic waste ponds, mines that are 300ft deep, hundreds of miles of pipes and burgeoning petrochemical works. Every day brings a bumper to bumper stream of lorries carrying the world's largest plant, pipes and machinery to the area, as well as young men seeking fortunes, and, say critics, the devastation of a pristine land.
The companies are now mining 1.3m barrels a day of heavy crude oil from the sands, which are saturated with bitumen. But they expect to spend another £50bn to more than double production to 3.5m barrels by 2011. The surge is expected to attract 100,000 more workers to the northern wilderness where the wolf and bear are still common.
And that would just be the start. By 2030 they plan to produce at least 5m barrels a day, and export more than Nigeria, Venezuela or Norway, which would make Canada one of the world's largest oil producers.
If the oil price stays high and new technology permits, oil companies will move, with the Canadian government's blessing, to extract the estimated 180bn barrels of crude to be found far deeper under 140,000 sq km of Alberta in what are the world's largest proven oil deposits after Saudi Arabia.
By 2050 Canada could be the second largest oil producer in the world, shifting the global energy security equation but exacerbating global climate change in a way that has scarcely been considered.
The tar sands industry could pump vast amounts of money into the local and national economies. Alberta is the fastest growing Canadian province, and more than 40,000 people have moved to the oilfields in the last five years.
Only 20 years ago Fort McMurray was a homely, tumbleweed-blown place with a population of 25,000 people. It is now at the epicentre of the rush and its newfound wealth is visible everywhere with its casino, upmarket bars and new hotels. It is expected to grow to a city of 250,000 people within 20 years.
"There are four-hour traffic jams and companies can't give away jobs. Kids out of school can earn $100,000 a year; people pay $400 a week to share a room; companies pay people $4,000 a month to lodge and $80,000 to just come here," said one estate agent in Fort McMurray. "There's money galore but the town can't cope."
The average price of a three-bedroom house, she says, is nearly $650,000 [£320,000] and rising.
The downside is ecological devastation and soaring greenhouse gas emissions on a scale that is beginning to alarm Canadians and other western countries trying to reduce the intensity of their carbon economies to counter climate change. Canada, alone, of developed countries, is expecting to increase emissions for 30 years and ignore its commitments to Kyoto.
So far, nearly 180 sq miles (470 sq km) of forest have been felled by tar sands miners and giant lakes of toxic waste water cover a further 130 sq km. Environmental campaigners, first nation groups, and doctors accuse the companies of creating massive air pollution, threatening river ecologies and killing fish, and even causing human cancers.
"This is the dirtiest source of oil anywhere in the world and there are barely any regulations," says Simon Dyer, a researcher for the University of Alberta's Pembina Institute.
He says the greater energy needed to produce a barrel of oil from the sands means three times more greenhouse gas emissions than producing a barrel of conventional oil. The greater energy is needed because the oil has to be dug out and then separated from the sand, and because it is low grade it has to be heavily refined. Tars sands mining "is the fastest growing source of greenhouse emissions in Canada", Dyer adds.
Environmentalists from round the world last month called for a moratorium on all new oil sand mines to impose higher standards. In the next 30 years, says Dyer, the oil works in Alberta could extend to an area as large as England. He says "hundreds of millions of extra tonnes of greenhouse gases will be emitted" just from the extraction process.
This month the province of Alberta and the federal Canadian government came under pressure to clean up the environmental mess already made and to urgently lower the carbon intensity of exploiting the oil sands. US presidential contender Barack Obama and, separately, hundreds of US mayors, have questioned the wisdom of making oil from bitumen.
Jason Grumet, Senator Obama's senior energy adviser, said the presidential candidate, if elected, intended to break America's addiction to "dirty, dwindling, and dangerously expensive" oil.
"If it turns out that the only way to produce [resources] would be at a significant penalty to climate change, then we don't believe that those resources are going to be part of the long term, are going to play a growing role in the long-term future," he said.
His statement followed a direct attack on the oil sands by more than 1,000 mayors of large US cities who voted last month to boycott energy with a large carbon footprint.
In addition, California's governor, Arnold Schwarzenegger, last month signed agreements which will cut the use of high carbon petroleum sources from Alberta and elsewhere. Ontario and British Columbia must now meet California's low-carbon fuel standard and other provinces and US states are expected to join the standard, shrinking the market for oil sands.
In late June, the Canadian federal and Alberta provincial governments joined the Canadian oil industry to play down the impact of the sands on the environment. "Canada only produces 2% of the world's greenhouse gas emissions, and the oil sands are only 8% of these [2%]," says a spokesman for the Canadian association of petroleum producers.
"We are only 15% more intensive with greenhouse gas on a lifecycle basis than conventional oil. We have to reduce emissions by 15% to get to parity. We are doing this by tree planting, installing carbon capture programmes and through hydrogen [mixed into bitumen in processing]," said a spokeswoman for Albian Sands, a consortium of Shell, Chevron and Marathon, which is working the 8 sq mile (20 sq km) Muskeg river mine 50 miles north of Fort McMurray.
The company produces 155,000 barrels of crude a day from the estimated 5bn barrels of oil under the land the company has leased. In 2007 they extracted 250m barrels of oil.
A Shell Canada spokesman in Calgary said that the company was planning to reduce its emissions by 50% and was seeking to develop carbon capture technology. But he admitted this was at least five years away and possibly much longer.
"We recognise that mining, extracting and upgrading bitumen has a significant footprint. Large areas must be cleared and excavated, while large volumes of water and natural gas are used to mine, process and upgrade it," said a spokesman. "Each project undergoes stringent environmental assessments," he said.
But green groups responded that although the companies were voluntarily reducing the carbon emissions associated with their operations, all the improvements were being undermined by the daily increase in the scale of their operations. "Every environmental parameter is worsening," said Dyer.
"The companies are seeking to blame drivers for the oil they burn. The reality is that producing each barrel of oil from oil sands emits between three and five times as much carbon dioxide as a conventional barrel of oil. [Producing] a conventional barrel emits about 30kg of CO2, but the two biggest companies in the oil sands, Syncrude and Suncor, have said they emit 120kg a barrel," he said. The companies last week also sought to minimise their impact on water. Oil sands need to be washed and more than 12,713m cubic feet (360 million cubic metres) are used a year - the equivalent used in a city of 2 million people.
"Our impact is near negligible," says an Albian spokesperson. "Yes, we use a lot of water but Canada has decided that 2.5% of the river is acceptable. We release no processed water into the environment." The water is held in settling pits for 20 years before being released.
But the companies' record on water is disputed strongly by environment organisations. "They may be taking only 2.5% of the water from the Athabasca river, but that's over the year. In late winter when the flows are the lowest, that can be 16% of the river. The river is already being affected, and this will be cumulative," says Dyer.
The speed and scale of the growth of oil sands mining have shocked Canadians who regard themselves as living in one of the most environmentally responsible countries in the world. But record oil prices are posing a serious dilemma between supporting today's oil dependent economy and moving to cleaner energy sources to avoid a future climate catastrophe.
"Sure, I am worried about the Alberta environment. We all are. Canada's image is all tied up with wilderness and clean living. Now we have to accept we depend on dirty industry. The oil sands are making us rethink who we are. But it's like no one can say no to oil," says John Davidson, a graduate mechanical engineer who moved to Fort McMurray to help build a new plant.
"But if you can pay your mortgage off in five years, then I have to say I can't resist either," he says.

Biggest steelmaker sets up "green" funds

Bloomberg News
Published: July 11, 2008

ArcelorMittal, the world's biggest steelmaker, set up two funds to invest in so-called clean-energy technology like solar power to help it meet European Union rules on cutting emissions of greenhouse gases.
The company's venture capital fund will invest $20 million in the U.S. solar panel developer Miasole, the Luxembourg-based steelmaker said Friday in an e-mailed statement. Its carbon fund will have an initial €100 million, or $158 million, to invest in renewable energy and greenhouse-gas reducing technologies.
Steelmakers are seeking cleaner sources of energy to comply with government policies to curb climate change. The 27-nation EU aims to cut greenhouse-gas emissions by 21 percent in the 15 years from 2005. ArcelorMittal will work with venture capital firms including Bessemer Venture Partners and Khosla Ventures.

Hydrogen station is a lot of gas to investors

By David Blackwell
Published: July 12 2008 03:00

ITM Power did not shrink from hyperbole at the launch of its home hydrogen station this week in Belgravia. Peter Hargreaves, chairman of the clean energy group, said that history might one day record the device as one of the greatest British inventions. Jim Heathcote, chief executive, chimed in with: "Thermodynamics is for cissies - this is all about economics." The devices, a lurid green and about the size of a telephone box, use the company's patented electrolysers to make hydrogen from water and cheap overnight electricity. A Ford Focus fitted with a special tank can run for 25 miles, equivalent to the average commute, on the hydrogen produced, and can switch back to petrol for longer journeys. The shares have fallen from 116p to a record low of 36½p this year as investors have lost patience with the company's progress. They moved above 60p ahead of Wednesday's news, but have since fallen back to 56½p.
Copyright The Financial Times Limited 2008

Dancing to save the planet: the world’s first sustainable nightclub

We were dancing to save the world. I know this because it said so on the dancefloor, in yellow and green lights. In a strictly prosaic sense we were dancing to save the electricity bill of the club and half a dozen residents in the flats upstairs – the energy of our thrusts and shimmies was being captured beneath the reclaimed wooden floor and transferred to power the lights. When I thought about it too hard, I felt rather like a hamster.
But this was no time to be small-minded. On our jiggling shoulders rested the future of the planet. It was quite a responsibility, being on the front line of the climate war and, as someone with a limited arsenal of boogie, I found myself deploying all three of my patented manoeuvres again and again and again. As we worked ourselves towards an ecstasy of responsible dancing, high on one too many organic beers, messages on plasma screens informed us that “a child dies every ten seconds due to hunger” and that “more than 200,000 acres of rain forest are burnt every year”.
We were in Surya, in King’s Cross, North London, a venue that claims to be “the world’s first sustainable club”, a place where one is never allowed to doubt the ecological significance of one’s actions. Even in the gents, as each man took aim at the waterless urinals, he was informed that he was helping to save 90 gallons of water per day. There were signs everywhere. The cubicles were made from linseed oil, resin and soda. All who entered to perch on “low-flush” toilets were enjoined to help “set new parameters for our existence . . . before the eighth day, the day of global Armageddon”. It was quite a thing to worry about, on top of general anxiety over whether there would be any loo paper.
The landlord, Andrew Charalambous, a millionaire property developer, had dressed for the occasion in a white suit and kept referring to himself as “Dr Earth”. There were wind turbines and solar panels on the roof, he said. The DJs for the evening had all been sourced locally and reared on organic produce. (If they were not free range, they had almost certainly been allowed to roam on broken ground).

I asked how he would ensure efficient energy production on the dancefloor. Would there be a ban on Chris de Burgh? “I’m not sure,” he said. “Arguably people dancing two-step could generate a lot of power.”
Gregory Barker, the Conservative environment spokesman, observed walls pasted with newspaper and old CDs and a chandelier of green Biros. “I’m afraid I thought of Dolly Parton, who said, ‘I spend a great deal of money to look this cheap’,” he said.
But he was impressed. “Politicians can’t solve the problem of climate change alone,” he said. This seemed true. Even if they were all splendid dancers, they would need our help.
There were sceptics among the assembled clubbers. One young environmental activist pointed at the Biro chandelier. “Have they been used?” he asked, pointedly. “No. Someone went out and bought them. They could have bought recycled Biros.”
He was also upset about the bar, which served organic beer and wine. “There is no option for organic vodka,” he said. “There is not even any organic cola.”
Elsewhere there were earnest discussions about the sustainability of other people’s outfits. A young lady asked me what I was wearing. I was delighted. I informed her that I was attired in an organic cotton T-shirt and organic trousers from Marks & Spencer. My sandals contained no animal products. Vegans could literally eat my shoes.
“What about your underwear?” she asked. Alas, I could not vouch for the sustainability of my Y-fronts. She said she had to get back to her friends.
Chyna, 26, who described himself as an estate agent and womaniser, offered some much needed advice. “I love eco-ladies,” he said. “The way you are with the environment, that’s the way you have to be with them.”
With these words in mind I ventured back to the dancefloor where, besides three environmental consultants, a male nanny from Devon and an acupuncturist, I saw a tall willowy Canadian who had been stomping and gyrating all night. She was literally lighting up the dancefloor.
She was Daphne Lorian, 29, an “alternative events producer”. “It’s all about how hard you stomp,” she said.
If we were generating power for a handful of flats, think what Michael Flatley could achieve. When you add in the entire cast of Riverdance, Ireland suddenly appears to be sitting on a goldmine of untapped green energy.
“This is just the tip of the iceberg,” said Ms Lorian. “Eco-clubs will soon be springing up everywhere.” As I stomped to Amy Winehouse’s version of Valerie (a recycled song!) and the screen told me that “300 million children have no access to health services”, I contemplated the scope of this revolution that will turn us all into human hamsters. Energy-absorbing pavements, pedal-powered trains and thermal-capture lavatory seats: all of these seemed only a few beats away.

Water bills to rise £450m to save wildlife

Consumers face increases of up to £30 a year as firms told to find new supplies
Juliette Jowit
The Guardian,
Saturday July 12, 2008

Householders face a bill of nearly half a billion pounds after water companies have been asked to slash the amount of water they take from rivers and aquifers and find alternative supplies.
The price rises follow a review by the Environment Agency, which found widespread damage and threats to wildlife, including precious chalk rivers and wetlands, and other protected habitats for water voles, salmon and other wildlife.
The move raises the prospect of new investment in controversial schemes including pumping water from the wet north of England and Wales to the south, energy-hungry desalination plants, and new reservoirs.
The Consumer Council for Water said customers faced price rises of up to £30 a year in the worst affected areas. The rises come on top of big hikes in the price of domestic energy, fuel and food. Deryck Hall, the council's policy manager, said in the worst cases customers faced the threat of more hosepipe bans, more drought orders on businesses like car washes and sports grounds, and even water supplies to homes running out.
One water company has been asked to reduce the amount it takes from a river supplying 740,000 people by half during the summer months.
"The threat to public supply is big one," said Hall. "We know there needs to be a balance between the environment and public supply... but it needs to be done in a very sensitive and pragmatic way, and in some cases, unless the agency and companies come together and work out what needs to be done, we end up with some difficulties facing public water supply."
The Environment Agency said that to protect public supplies, the government had agreed that companies could ask the water regulator, Ofwat, to increase bills to pay for alternative supplies.
Water UK, the industry body, said it expected the bill to top £450m because of problems finding new supplies. Affected companies tend to be in dry areas where other rivers and groundwater are already tapped to the limit, and alternatives such as piping-in water, new reservoirs and desalination face opposition because of high energy use and threats to habitats.
Water bills could rise even further because the first round of licence cuts is only to help sites designated a priority.
The Environment Agency carried out two reviews of so-called abstraction licences owned by water companies, farmers and other businesses in England and Wales, the first review of its kind for a generation. The "habitats directive" review looked at thousands of abstraction points near protected sites, and found more than one in 10 were causing damage, or a threat.
Another, wider review of all 20,000 abstraction licences on rivers and groundwater found 15% were over-abstracted and already causing damage, 18% were over-licenced and so posed a threat if the quotas were fully used, and one-third were on the limit.
Damage was caused when water dried up or fell so low that plants and other species were unable to thrive in more polluted and warmer water, or choked by sediment, said Kathryn Tanner, an Environment Agency policy advisor. "You might find you'd go from a nice big wetland to something which was mixed grasses, those sort of things, which may be less valuable in terms of its biodiversity," said Tanner.
The cost so far would add £20 a year to the average £157 water and £174 sewage bill. However, customers of the worst affected water companies are expected to have to pay more. Problem areas are thought to include those covered by Anglian Water, Southern Water, Thames Water and South West Water, said the CCW. Northumbria and Yorkshire are believed to have few or no cases of over-abstraction.
One of the most extreme problems found was on the Lower Itchen river in Hampshire, which supplies 740,000 Southern Water customers. The company has been asked to reduce water withdrawal by up to half in the summer, and estimates it will cost £70m-£100m to replace the supply from this one site alone. A company spokeswoman said they were proposing compulsory metering to reduce demand, but would also need other measures.
Other sites studied included the Ouse Washes and the rivers Derwent, Avon and Usk, though the EA has not said if problems were found at these sites.
If alternative supplies were not found and drought measures failed, consumers faced reductions in supplies to homes, said Deryck Hall, of the Consumer Council for Water.
At the end of older water mains, water could literally dry up, while in more modern homes built on ring mains they could to see a drop in pressure, he said. "They would see a reduction in pressure and possibly a trickle of water coming through rather than the full flow they are used to getting."
Ofwat will rule next year on how much companies can increase bills to pay for new supplies and other demands, including higher water-quality standards and better sewers and drains to protect against urban flooding. The new charges would come in from April 2010.
Anglian Water said it could transfer water from the wetter northern part of its region, and was also proposing a new reservoir in Lincolnshire.
South West Water said so far it had only been asked to reduce abstraction at one site, on Dartmoor, and by "not a large amount".

Climate deal still remote after US rebuffed

By Fiona Harvey in London
Published: July 12 2008 02:10

The prospect of an international agreement on climate change appears as remote as ever after a week of frantic negotiations in which a US concession met a rebuff from developing countries.
Negotiators were on Friday trying to regroup for the next stages of the United Nations negotiations on a successor to the Kyoto protocol, the main provisions of which expire in 2012.

In six weeks, they will meet in Ghana to resume talks on the shape of a global agreement which must be finished at a UN meeting in December 2009 in Copenhagen. But the deep divisions between the G8 and rapidly emerging economies that became apparent in Japan will hinder progress.
The G8 agreed to “consider and adopt” a target of halving global emissions by 2050. The consensus marked a significant shift from President George W. Bush, who had previously refused to set a figure on future emissions.
But India, China, Brazil and Mexico strongly rejected the proposal, arguing that the G8 should agree to cuts of 80 to 95 per cent.
Stephen Hale, chief executive of the think-tank Green Alliance, said: “We are worse off than a week ago.”
Barbara Helfferich, a European Commission official, said the G8 had produced “a half step forward”, not the “full step forward that we would have liked”.
Yvo de Boer, the official in charge of the UN talks, said he was most concerned with the failure of the G8 to set any mid-term emissions targets for 2020. But Mr Hale said the real shift in negotiations would come later this year, with a new president in the White House.
Copyright The Financial Times Limited 2008

Sellafield contract won by URS-led consortium

Published: July 11, 2008

LONDON: The Nuclear Decommissioning Authority (NDA) has awarded the contract to manage nuclear sites at Sellafield to a consortium including U.S. company URS Corp's Washington International unit, AMEC and France's Areva .
The NDA said the contract was worth around 1.3 billion pounds a year, plus an associated fee of 50 million pounds, and would involve decommissioning and waste storage work on the country's biggest nuclear site.
The award of a contract is a key development in efforts to clean up recently decommissioned nuclear plants. The government gave the green light in January to the building of a new fleet of nuclear power stations, likely to be located on land surrounding existing sites.
"We have successfully completed an intensive evaluation process aimed at securing the best possible parent body for Sellafield, where the most complex challenges we face exist," NDA Chief Executive Ian Roxburgh said in a statement.
He added that the organisation, created in 2005 with a remit to clear up after the nuclear industry, had looked at four bidding consortiums before deciding on the Washington entry.

Areva team wins Sellafield clean-up deal

By Rebecca Bream, Utilities Correspondent
Published: July 11 2008 12:47

A consortium of Areva, the French nuclear group, Washington Group of the US and Amec, the UK engineering company, was on Friday named preferred bidder for the contract to manage the clean-up of the UK’s most radioactive site.
The contract to run the Sellafield complex in Cumbria, north-west England, is for a term of up to 17 years and will be worth around £1.3bn a year. The successful bidder is expected to earn around £50m of profit a year from the contract, although this will vary depending on hitting performance and efficiency targets.

As well as cleaning up 60 years’ worth of military and civil nuclear waste, the new manager of Sellafield will be in charge of the site’s spent fuel reprocessing and fuel fabrication activities.
The Nuclear Management Partners consortium was named preferred bidder for the contract, the biggest in the UK nuclear decommissioning industry, by the Nuclear Decommissioning Authority, the government agency that owns Sellafield and 18 other nuclear sites around the UK. The contract will be awarded in October.
Areva, Washington Group and Amec beat three other bidders to win preferred bidder status. CH2M Hill, the US engineering and construction company, submitted a solo bid, while Fluor of the US teamed with Toshiba of Japan, and Bechtel of the US formed a consortium with Serco of the UK and Babcock & Wilcox of the US.
Ian Roxburgh, chief executive of the NDA, said the selection of Nuclear Management Partners was “a significant step forward in the NDA’s drive to attract world class management and innovation to the UK’s nuclear decommissioning industry”.
Samir Brikho, chief executive of Amec, said: ”Amec is delighted to be part of the consortium successfully selected as preferred bidder for one of the most important public sector contracts in the UK. Amec and our consortium members will be contributing world class skills to Sellafield, ensuring that this programme is carried out safely and effectively to the benefit of the taxpayer.”
Amec shares rose 10p, or 1.2 per cent, to 871p on the news.
Unions representing workers at Sellafield welcomed the announcement.
Mike Clancy, assistant general secretary of Prospect, said: “Sellafield makes up the most complex nuclear organisation in the world so good relations between the management and the workforce will be key to its successful future. We have already been involved in regular dialogue with the Nuclear Management Partners during the lengthy competition period and look forward to building on that relationship.
“Staff want a partnership that looks beyond the gates of the Sellafield sites and is willing to invest in local communities and to promote employment opportunities for local people. As far as Sellafield is concerned, our members are looking for investment in new commercial opportunities, such as fuel reprocessing, new build, as well as investment in staff.”
Copyright The Financial Times Limited 2008

Sinclair sows seeds of a green revolution

By Lucy Killgren
Published: July 11 2008 18:32

Bernard Burns, the chief executive of William Sinclair, might, on the one hand, be accused of a lack of imagination.
His father was called Bernard, like his grandfather. He has a sprinkling of cousin Bernards and even a couple of cousin Bernardettes. When his son was born, he lobbied hard (without success) to name him Bernard, too, before his wife put her foot down.
“I don’t know if it’s so much a lack of imagination. More like sheer cussedness, I suppose,” Mr Burns says. “Bernard is not an easy name to grow up with and I think having a name like that builds character. It’s a bit of a badge of perversity, if you like, like driving a Skoda.”
The Skoda-driving Mr Burns has put cussedness to good use at some of the companies where he has worked. He has completed successful stints at Silentnight, the bed group, and Churchill China, the tableware company, where he was featured with the late Sir John Harvey-Jones for the series Troubleshooter.
“I like working in a turnround situation,” he says. “And I do think there is some value in going from one company to another, and one industry to another, in that you get a fresh pair of eyes on the business. The fundamental elements are the same: you make something for less than you sell it [for].”
Since he arrived at William Sinclair, the garden products group, he has focused on cutting costs and culling less profitable brands, with the result that profits have risen steadily. Arbuthnot Securities, the group’s broker, is predicting adjusted profits of £1.6m for the 15 months to September 2008, rising to £2.1m in the following 12 months.
But his time at Aim-listed Sinclair, where he has been chief executive since February 2005, has not been without its challenges.
A few months before he joined, the shares were hit after it announced accounting irregularities. More recently, soaring fuel costs have taken their toll and continue to be a thorn in the side of the business, which relies on transporting heavy and bulky produce around the country.
Meanwhile, the sector has incurred the wrath of environmentalists and green gardeners. They take issue with companies harvesting peat from the bogs that are home to rare and specialised organisms. They are also concerned about carbon emissions resulting from the extraction of peat for horticultural use.
“I agree with them to an extent,” he says. “But I believe we can do a cracking job for shareholders and also do what the environmentalists want us to do. There is a real commercial benefit in a product which has a lower peat content.”
He believes the large multiples and environmentally-aware garden chains such as Wyevale (which has adopted targets for phasing out peat-based growing media), will want to be seen to adopt best practice environmentally.
Mr Burns believes it is possible to move to a 90 per cent peat-free ratio for its products in five years, up from the current 60 per cent.
“The rest of the market will have to follow. The reason I want to be a leader in this market is to disadvantage competitors.”
Currently Sinclair manufactures a peat-free compost called New Horizon, and is focusing attention on alternatives such as bark, coir (a coarse fibre from coconuts) and green waste as peat substitutes.
Last year it increased its stake in Freeland, a green waste recycling business, to 87.5 per cent and this now accounts for about 10 per cent of Sinclair’s turnover.
Countering the hefty transport costs is one of his biggest challenges, although he argues these costs are higher for rivals that transport peat from Ireland and the Baltic region.
“We have a strong advantage in that production is all located on mainland UK. This point of difference will become increasingly significant as fuel costs continue to rise.”
Prospects for the market look robust, given the trend towards growing your own produce. This has helped fan growth in the compost or, in the marketing vernacular, “growing media” market.
The Horticultural Trades Association, which monitors the sector, reported growth of 11 per cent in the total market for the year to March 2008, including 4 per cent at DIY superstores and 12 per cent at garden centres.
There is also scope for expansion through acquisition, although Mr Burns emphasises that these are likely to be smaller bolt-on purchases, which he finds less disruptive than bigger transformational deals.
Listing on Aim in 2006 made the cost of making acquisitions less prohibitive. This year it bought Joseph Metcalfe, which manufactures Gem composts and fertiliser, for £2.95m and it aims to bolt on further small acquisitions.
However, the success of Sinclair will always depend to some extent on the vagaries of the weather. The peat industry needs sunny and dry conditions for a successful harvest as well as for bringing gardeners into stores.
“I have never been so weather obsessed since I had this job. I look at the five-day forecasts for different locations around the country. The weather is bad at the moment, but it’s still better than last year.”
Copyright The Financial Times Limited 2008