Blow me down

Wanted: a chief executive to promote the building of a European Super Grid

In a recent story (see North Sea monster – subscription required), we assessed the prospects of a North Sea super grid. The idea is to link nine countries in northern Europe through a renewable energy grid harnessing offshore wind. A second grid linking southern Europe is also being considered. It is, to say the least, an ambitious project.

So good luck to the man or woman appointed chief executive of the projects holding company “Friends of the Super-grid” (FOSG). If you are interested see here. What awaits the chief executive? Put simply, an enormous task. The new head of the FOSC will be based in Brussels, and will get to work on the various financial, regulatory, and technical hurdles the project faces.

The announcement follows through on the pledge made by FOSG in early March and adds to the feeling that, despite the hurdles, the project is building momentum. It will be down to the CEO to grease regulatory cogs in Brussels so expect the appointment of an adept political operator.

Just to recap the progress so far: FOSG estimates that the initial linkage of northern Germany, Norway and the UK will cost €20-34bn. The establishment of the FOSG, which includes German construction firm Hochtief, German conglomerate Siemens and French energy infrastructure specialist Areva, suggest serious corporate interest. The March announcement of the creation of the holding company followed a December announcement from ministers in nine countries—the UK, Germany, France, Belgium, the Netherlands, Luxembourg, Denmark, Sweden and Ireland—on the signing of an agreement to develop an offshore grid in the North and Irish Seas.


Brazil’s dilemma

Brazil is having to deal with the downside of success, both on the oil and biofuel front.

As our recently-updated Brazil Energy report points out, the country is still formulating its policy to tighten its grip on the oil sector to ensure the vast bulk of the wealth expected from the “pre-salt” offshore oil riches accrue to the public sector.

Don't be jealous

Even before production has begun to ramp up significantly, however, The Economist notes that proposals to distribute the oil wealth more evenly throughout Brazil’s states – rather than just Rio and Espírito Santo, which have received the bulk of it so far – has caused consternation among politicians who will lose out.

The country faces the downside of success on another front too. Helping Brazil to maximise the revenue from its oil windfall has been its achievement — originally, in response to the 1970s oil crises — in becoming the biggest domestic user of biofuels in transport and the world’s largest exporter of sugar cane-based ethanol. As our country report forecasts, government figures show that “flex-fuel” car production is approaching 90% of the total, so that Brazil is on track to have three-quarters of its car fleet having flex-fuel capability (running on either gasoline, biofuels or a combination of both) by 2020.

However, a story on Foreign Policy magazine’s website points out that this is a double-edged achievement:

As a result of its turn toward ethanol, Brazil avoided emitting 600 million tons of carbon between 1974 and 2004. So what’s with environmentalists who complain about ethanol — won’t they ever be satisfied?

While sugar cane ethanol is certainly less ecologically destructive than some other biofuels, the industry’s boosters have overlooked one key fact: You’ve got to plant sugar cane somewhere. One couldn’t pick a worse place to harvest cane than Brazil’s Atlantic rainforest. There, sugar cane crops have led to deforestation and, paradoxically, more carbon emissions.

In typically forthright fashion, President Luiz Inácio Lula da Silva has dismissed the criticisms – mainly, but by no means exclusively, coming from western environmentalists and like-minded governments – as motivated by jealousy. And it’s unlikely his successor will hold back the country’s march toward a biofuelled future.

In deep

President Barack Obama’s plan to open offshore acreage in the Gulf of Mexico, east coast and Alaska to oil and gas exploration had all the hallmarks of his governing style – a subtle compromise with a wider purpose – and received predictably mixed reviews.

The move is meant partly as a gesture to the oil industry, which next year faces the repeal of more than US$36bn in tax breaks. Oil and gas industry trade association, the American Petroleum Institute (API), which is often critical of the president, responded positively; so too did oil company Chevron.

There was disappointment, though little surprise, that the entire west coast of the contiguous US – from the Mexican to Canadian borders – was declared off limits. But companies already operating in Alaska were cheered by the news. Royal Dutch Shell, which holds a number of the previously-awarded North Slope leases, welcomed the plan and ConocoPhillips said it will proceed with exploration drilling in the Chukchi and Beaufort Sea.

The US Minerals Management Service (MMS) estimates the new acreage could hold as much as 60bn barrels of oil—approximately double US proven oil reserves— and interest from international oil companies will be strong, particularly as they’ve increasingly favoured investment in politically less risky regions (see Rising tide – subscription required). Any impact is some way off, however, as first leases off the coast of Virginia will not be offered before 2012 and local regulatory hurdles must be overcome.

The move is also aimed at garnering support for the Democrats’ energy and climate legislation. As Senators Kerry, Lieberman and Graham work on a new bipartisan energy bill, the expansion of offshore drilling – on top of moves on nuclear and coal — was meant at securing votes from both parties. But the risk, as the New York Times points out, is that in seeking political compromise to appeal to some Mr Obama may have succeeded in only disappointing many others.