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Editorial comment

Over the last few months global governments have been looking in great depth at annual budgets due to the current economic crisis, and for many countries this year’s budget could be the key to recovery. Throughout April the British media focused heavily on the 2009 UK Budget, which will be announced on Wednesday 22nd April 2009.


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Over the last few months global governments have been looking in great depth at annual budgets due to the current economic crisis, and for many countries this year’s budget could be the key to recovery. Throughout April the British media focused heavily on the 2009 UK Budget, which will be announced on Wednesday 22nd April 2009. Prebudget reports have already announced medium term recovery measures including a new top rate income tax of 45% to be introduced from April 2011 along with other taxation measures that will affect the individual. The Prime Minister, Gordon Brown, has also stated that a green budget and greener economy will help the UK out of the current recession, with the UK becoming a global leader in producing, exporting and using electric and hybrid cars being an integral part of the plan. Alistair Darling, Chancellor of the Exchequer, is also expected to announce the introduction of 400 000 green industry jobs over the next five years, following on from Mr Brown’s low carbon industrial strategy revealed in March.

Several governments are looking towards creating a greener economy, the UK included, and a greener global economy will bring benefits; however, where is the oil and gas industry’s place in a green world? Cap and trade policies are being introduced globally and could aid a green recovery by reducing carbon emissions steadily and cost effectively. Also, the policies will of course help trade as permits are sold by companies who can reduce emissions relatively easily to companies who are not able to make reductions without some difficulties. Yet, there are reservations. Conclusions of a recent UK government survey state that the cost of a permit should be increased to at least US$ 124 if pollution reduction targets are to be met successfully, as under Europe’s Emissions Trading Scheme permits are trading at approximately US$ 16 per t. None the less, a steep increase to US$ 124 begs the question; will this green measure continue to be cost effective once prices rise? More money being spent on emissions reductions will possibly detract from other areas also needing expansion and funding.

Despite the call for more green investment, oil majors have been withdrawing from renewable energy projects. BP has announced that it is going to close a solar panel production plant in Spain and reduce the output from one of its US plants, resulting in a loss of over 600 jobs. This is, of course, a cost cutting strategy due to the economic downturn, and to compensate for the lost production BP will be increasing output at plants in India and China and expects to increase total production over the next 12 months. Shell has also contributed to the retraction by major oil and gas companies from renewable energy as it announced plans to drop all new investments in wind, solar and hydrogen energy. Shell said it would still be investing in its long standing projects, especially second generation biofuels and continue to spend on carbon capture and storage projects. The slowdown in investment in the renewable energy industry from leading oil and gas companies does not reflect well with those looking for a green recession solution; however, surely at this turbulent time, investing in established enterprises is a wise decision to make.

A further point of debate surrounding the oil and gas industry’s place in a green world was commented on in a recent interview with James Hackett, chairman and chief executive of Anadarko, published in the Financial Times. Many prominent industry figures are calling for attention to be drawn away from the possibility that renewable fuels will reduce the need for petroleum products and look at the affects on imports. Mr Hackett stated, with particular attention to the US domestic market, ‘focusing on solar and wind would work against Washington’s goal of reducing the US’s dependence on foreign oil as it would displace sources of energy produced domestically, such as uranium, natural gas and coal.’ It seems that at this unstable time, focusing on a relatively unknown enterprise will affect global trade, supply and demand, and not only fiscal matters surrounding the current recession.

It is clear that the oil and gas industry is making a conscious effort to find its place in a green world and is steadily contributing to a greener economy, even if some what tentatively in these uncertain times. In this issue the article ‘High CO2 processing’ (p. 27) from URS Washington Division looks at the task of selecting a processing configuration for treating CO2 rich gas in an industry that is under increasing global pressure to reduce emissions.

Hydrocarbon Engineering will be exhibiting at ACHEMA, 11 – 15th May. Please visit me and John Baughen, EMEA Advertisement Manager, at stand 9.2 J40.