'Energy & Utilities' Archive
The world’s cheapest car has been put on hold, as protests over Tata Group’s plans for a Nano plant in eastern India have been stymied by protesters and politics.
Although Tata plans to repurpose other plants to build what it has billed as the world’s least expensive car (around $2,500), it had to nix plans for a production volume of 40,000 per month, instead settling for 10,000. The move could affect the price as well, since one of the factors allowing the company to offer the car at this price point was cheap land.
Although normally I would take umbrage at the forced change in Tata’s plans, the critics have a point. From an environmental standpoint, does India need more vehicles? Should it be moving farmers off their land and building factories?
The giant nation is beset by pollution, as are most countries with growing middle classes, and the Nano could exacerbate the problem in India. Another question is that of energy. Won’t 40,000 extra cars a month on India’s roads put pressure on the country’s energy supplies? What about the world’s oil markets?
India has been stepping up its oil development and exploration efforts as domestic demand has risen. The country is a net importer of oil, although it looks to be sitting on some fecund oil and gas fields of its own. The US isn’t the only country seeking energy independence — that could be India’s slogan as well.
The question is, is the increase in oil production going to fuel the Nano, or is the Nano (and increasing wealth that is causing rising consumption) fueling oil production? And if India is truly seeking energy independence, is a Nano in every garage the way to go about it?
Even though I would like countries to scale back their energy consumption, it’s hardly fair to insist that nations forego the conveniences of cheap energy that Americans and Europeans have enjoyed for more than a century. In general, the benefits of a sturdy middle class outweigh the disadvantages of consumption. So I hope Tata’s plan for a Nano plant gets the green light again.
And then, maybe next, Tata can tackle global warming. After all, is there nothing this company can’t do?
Led by former CEO Lord Browne, BP launched a $200 million public relations campaign (conducted by Ogilvy & Mather) in 2000 to rebrand the oil and gas behemoth as an environmentally sensitive and responsive energy company. The Big Oil giant’s corporate brand became an earth-friendly green and yellow logo in the shape of a sunflower, and the message about the company became BP: Beyond Petroleum.
A 2008 Adweek article points out that BP’s advertising strategy has worked. It reported that in a Landor “ImagePower Green Brands” Survey conducted in early 2007 BP was seen as more green (21%) than its Big Oil peer brands Shell (15%), Chevron (13%), ExxonMobil (11%), and Texaco (part of Chevron, 9%). BP also led the survey of companies that had “become more green” in the last five years, with some 49% of consumers familiar with the brands concluding that BP had done so (compared to Shell’s 36% and Exxon Mobil’s 31%).
But is BP really walking the clean energy walk or just trying to assuage a growing unease among Western consumers about Big Oil’s traditional products and practices and their deleterious effects on global warming and pollution, with a thin veneer of clean energy initiatives, aka greenwashing?
Here are some pros:
- In 1997 the company was the first to acknowledge the potential link between carbon emission and global warming, and later that year resigned from the anti-global warming business lobby, the Global Climate Coalition.
- In 1999 it acquired solar power pioneer Solarex (now BP Solar International) for $45 million.
- In 2005 it formed BP Alternative Energy and committed to spend $1.8 billion over three years in developing alternative and renewable energies.
And some cons:
- In 2005 an explosion at BP’s refinery in Texas City killed 15 workers. The US Chemical Safety Board’s report in 2007 blamed BP for the “organizational and safety deficiencies at all levels” that led to the disaster.
- In 2006 corroded pipelines broke at its Prudhoe Bay Field in Alaska, leaving a record 201,000-gallon oil spill and forcing the company to partially shut down the field. (A similar, smaller problem occurred in 2008).
- In late 2007 the company moved into the development of Canadian Oil Sands (perhaps the dirtiest of all oil sources) with Husky Energy.
In its defense, BP does not claim to be Beyond Petroleum yet. One of its ads reads:
“We’ve invested $28 billion in the last five years in US energy supplies … and $500 million over the next 10 years to develop advanced biofuels. It’s a start.”
Current CEO Tony Hayward took over from Browne in 2007. Early this year he hinted that he might spin off the renewables unit (valued at up to $7 billion). In July, however, he committed to keeping and growing the clean technologies businesses as part of BP.
Authentic champion of green energy or a traditional Big Oil company with a green wash?
You decide.
What’s your carbon footprint?
Exxon Mobil’s top executive gave a rare TV interview on ABC News in prime time. Was he looking for a little peace, love, and understanding?
Exxon Mobil is the 800-pound gorilla in the muscular band of Big Oil (BP, Royal Dutch Shell, ConocoPhillips, Chevron, and their ilk). It is the biggest company in the world in terms of market capitalization ($501 billion as of last April) and has recently capped years of record-breaking financial reports by posting a quarterly profit of $11.7 billion. But like King Kong, Exxon Mobil is arguably more feared and reviled than it is loved. Take this Barack Obama quote for instance:
Perhaps the only thing more outrageous than Exxon Mobil making record profits while Americans are paying record prices at the pump is the fact that Senator McCain has proposed giving them an additional $1.2 billion tax break.
Not much love there. (Even though Exxon Mobil’s profit margins, like those of its peers, are about 8%, slightly below average for S&P 500 companies).
But it is not just the Democrats needling a pain point — Exxon Mobil reaping eye-popping profits, in dollar terms, while consumers suffer record high gas prices — that has given the company a black eye, the company has a history of bad public relations dating back decades.
It is responsible for the Exxon Valdez disaster. Oil tanker Exxon Valdez spilled some 11 million gallons of oil into Alaska’s Prince William Sound in 1989. Exxon Mobil spent billions on the cleanup, and in 1994 a federal jury in Alaska ordered the company to pay $5.3 billion in punitive damages to fishermen and others affected by the spill. (Exxon Mobil appealed, and in 2001 the jury award was reduced.)
Former chairman and CEO Lee Raymond was an outspoken critic of the theory of global warming and the Kyoto Agreement. In the 1990s and the early 2000s (until his retirement in 2005) he kept Exxon Mobil focused squarely on oil and gas exploration and production (and some coal production), even while some of its peers, most notably BP (Beyond Petroleum) and Royal Dutch Shell, began to invest heavily in solar power and other renewables.
Raymond’s successor, Rex Tillerson, gave a rare interview to ABC’s Charlie Gibson earlier this month. Was this a public relations surge, aimed at winning the hearts and minds of the American consumers with company initiatives to lower gas prices and of environmentalists with new initiatives to develop green energy? Hardly. Although Exxon Mobil is now experimenting with renewable energy, Tillerson’s comments seemed to reflect Raymond’s blunt, stick-to-our-knitting tone. When asked why only a small percentage of funds were invested in developing alternative energy sources compared to the vast amount invested in stock buybacks for company shareholders, his reply was, “We haven’t found an alternative to invest in that makes a lot of sense for us.”
His position on securing energy independence for the US?
“I’m not sure that it’s even desirable for the United States to pursue that as a goal. … Our country’s economy is so interdependent with the rest of the world in so many areas of, not just commodities, but capital markets. … So I’m not sure why we would view energy any differently than the way we view the rest of our economy.”
Hey, he is being consistent. Maybe, when you are the 800-pound gorilla, you just don’t need the love.
The burgeoning growth of photovoltaic solar power and other sources of alternative, “green” energy are having positive consequences for an unexpected line of business: semiconductor production equipment.
Photovoltaic (PV) solar cells are semiconductor devices, as you may or may not know. Most of them are made with silicon substrates. Silicon is the most common of semiconductor materials used by the microchip industry. It’s not a stretch, then, that the equipment used to make semiconductors is strongly akin to the equipment used to make PV solar cells.
It’s also not a surprise that the world’s biggest purveyor of semiconductor fabrication equipment, Applied Materials, is getting huge in the market for solar cell production gear. Applied got into the market two years ago with its acquisition of Applied Films Corporation. Since then, the company has extended its SunFab line of equipment with more acquisitions and internal development.
The market for regular old semiconductor equipment is in the doldrums these days, mostly due to orders drying up from the hyperactive memory chip business, but some equipment vendors have a countercyclical antidote to those blues. Applied last week reported that quarterly sales in its Energy and Environmental Solutions segment grew sixfold from a year ago, to $174M from $29M. On the flip side, sales in the plain old Silicon segment were down 57% from the year before, to $756M from $1.77B. Solar power isn’t making up the difference, but it’s helping to patch a painful period for Applied.
A smaller vendor, Amtech Systems, also had some impressive growth in solar-related equipment sales to report last week. The company’s quarterly sales of solar cell production equipment quadrupled from the year-ago period, and represented about two-thirds of all sales. While orders for solar cell gear slowed down from the prior quarter, Amtech’s backlog of such equipment is nearly four times what it was in 2007.
GT Solar International, a sizable supplier of solar-related production equipment, is among the small number of companies to complete an IPO this year, going public last month. The company posted fiscal 2008 sales of $244M and was significantly profitable for the year.
With the solar energy market dependent on politicians around the world deciding whether to keep government subsidies and tax incentives in place for PV products, it’s uncertain whether solar power will present an ever-growing business opportunity for years to come. Among semiconductor equipment vendors, though, it’s looking like a godsend in a troubled market.
“Drill here and drill now” is the mantra of Republican John McCain’s presidential campaign when its comes to addressing the high oil prices that have had US motorists paying more than $4 a gallon at the gas pump this summer. And the polls seem to bear out the attractiveness of McCain’s position (reflecting a 2008 conversion from being against offshore drilling to being for it), with a July Gallup poll reporting that 57% of those polled favored new offshore drilling while 41% were against it. These results were enough for the Democratic presidential candidate Barack Obama to change his tune on offshore drilling. Formerly also in favor of a moratorium on drilling, he recently announced a willingness to entertain new drilling as part of an overall energy package that supported the development of alternative energy as well.
But is new offshore drilling the answer to high gas prices? The answer is, no, at least not in terms of making a short term impact on oil prices. Simply put, it takes too long and does too little. Permits, initial surveys, exploratory drilling, and the usual trial and error of oil exploration places new production of relatively small quantities of oil at least a decade away.
A little context. According to the Mineral Management Service, the Outer Continental Shelf of the Pacific Coast, the Gulf of Mexico, and the Atlantic Seaboard contains about 574 million acres (or 85% of the total acreage) that are off-limits to drilling. The US Congress imposed this moratorium on offshore drilling in 1981, more than a decade after an offshore drilling rig accident caused 3 million gallons of oil to spill, covering 35 miles of pristine coastline near Santa Barbara, California with a thick layer of crude.
Environmentalists, tourism advocates, and other critics of offshore drilling argue that the risks of oil spills and the subsequent contamination of coastlines would not only harm the environment severely but would decimate the multibillion dollar tourism industries in California and Florida. Even without the potential for spills and even though the bulk of new rigs would be well offshore, the idea that there might be oil rigs within sight of their Pacific or Atlantic shores is a political non-starter in those two populous and tourist-reliant states.
So what is shaping up? A compromise. The US Senate’s bipartisan Gang of Ten is floating an energy plan that would open up new offshore drilling areas (as close as 50 miles offshore) in the Southeast Atlantic and Eastern Gulf of Mexico. The other side of the deal — raising taxes on the big oil companies such as Exxon Mobil, BP, and Royal Dutch Shell.
Florida’s Gulf coast and the Atlantic coastlines of Virginia, the Carolinas, and Georgia are all targeted for the new drilling — if the Senate and the states involved agree to the proposed compromise. So far the proposal has infuriated the partisan zealots on both sides (who want to demonize the other side’s position) and has actually prompted some deep reflection about the energy crisis.
Could an energy compromise actually break out in the white hot heat of a US presidential campaign? Maybe so. The fear of losing office (or not gaining office) is a powerful political mediator.
“Yes, we can” may end up in the same sentence as “drill here and drill now.”