Shell UK chairman Ed Daniels was away on business when investigators from the European Commission came calling at his London office this month over sensational allegations of price-rigging in the oil market. ‘But I heard about it pretty quickly,’ he says wryly. Unsurprisingly, it is not a subject he is eager to discuss:
Targeted: Ed Daniels said Shell is co-operating with an EC investigation
By Helen Loveless: PUBLISHED: 22:02, 25 May 2013 | UPDATED: 22:02, 25 May 2013
Shell UK chairman Ed Daniels was away on business when investigators from the European Commission came calling at his London office this month over sensational allegations of price-rigging in the oil market.
‘But I heard about it pretty quickly,’ he says wryly.
Unsurprisingly, it is not a subject he is eager to discuss: ‘We are fully co-operating with the investigation with the EC. We will continue to co-operate. More than that I can’t say.’
But he does admit that the bizarre and arcane process for setting some key oil prices – involving a few people meeting in an office for half an hour – may need an overhaul.
‘With any commodity, having a transparent and open pricing mechanism is really important,’ he says.
‘If you want the ability to have traded instruments on the back of it, hedging and so forth, you need an open, free-traded market.’
Daniels pauses: ‘I am not going to go any further. It’s the subject of an ongoing investigation and I’ve probably gone too far already.’
Shell, of course, was not alone in getting an unwelcome knock at the door. BP, Norwegian oil group Statoil and the price-setting agency Platts were also all raided.
The regulators are investigating claims that several oil companies colluded to distort the price of oil and petrol, going back as far as 2002, and which the EC said could have had a ‘huge impact’ on the cost of petrol at the pumps.
Reports have suggested that the Serious Fraud Office may also be taking a look. Daniels brushes that aside. ‘We have not heard from them,’ he says. Nor has the company been contacted by the Government or the Office of Fair Trading following the raid.
Daniels has been with Shell for his whole career since 1988. In January, as he turned 47, he was elevated to the role of chairman of the Anglo-Dutch group’s UK business.
You cannot spend 25 years in the oil industry without being able to cope with controversy, and Daniels is equally calm and considered discussing Britain’s energy crisis.
‘By 2050 we will need to double the amount of energy we are using today on the planet and yet bring down CO2 levels by at least half. The energy system of 2050 will not be just a natural extrapolation of what we have today, it’s going to be quite different,’ he says.
But he warns that the ‘simplistic’ answer of wind farms and solar panels will not be enough. ‘If you think about the renewables economy, there is a huge intermittency issue that we have to get our heads around. If the wind doesn’t blow and the sun doesn’t shine, you need something that is a credible back-up.
‘The challenge for the energy industry is how we get enough of the different sources of energy that we need, from traditional hydrocarbons, gas and nuclear, to renewables and biofuels.’
But Daniels believes ‘the biggest and best thing that the Government can do is to be consistent’.
He points to the impact of the last Labour Government’s decision to increase the tax on North Sea oil production from 20 per cent to 32 per cent in the 2011 Budget.
‘The tax hike led to a real dip in investment and it’s taken quite a number of changes and conversations between industry and the Department of Energy & Climate Change to get back on a path of sustainable long-term investment,’ he says.
The price of carbon emission permits has swung wildly since the system of trading rights to emit the gas has been in place, and he argues this has not helped the supposed aim of encouraging investment in low-carbon technology.
‘We don’t have a good consistent price for carbon, which we need to stimulate the kind of low-carbon innovation necessary,’ Daniels says. He is keen to talk about the report Shell has just produced with the Carbon Trust that highlights the huge opportunities for small and medium-sized businesses in the low-carbon economy.
According to the report, small businesses are set to double their share of the £3 trillion global low-carbon market, which in the UK is worth about £120 billion to the economy, about 90 per cent of which is down to smaller firms.
‘There is growing global recognition that we are going to have to make a shift into a sustainable, low-carbon energy system,’ he says. ‘With no single answer to this, there are plenty of entrepreneurial opportunities for people to look at how we make the transition from today to where we need to be in 2050.’
One solution widely being touted in Britain is fracking, the controversial technique of pumping water, sand and chemicals into dense rock to open up fractures through which trapped oil and shale gas can be extracted.
‘We are a significant player in shale gas in the US, Ukraine and China, and we aspire to be a player in South Africa, but it is not without its controversy,’ he admits.
‘In the UK I don’t think that Shell will be playing any time soon. The geology here is different from that in the US, and not as attractive. Also in America you have the right to the minerals in the land underneath your property and that’s a massive incentive for people to bring in developers.
‘In the UK the land belongs to the Crown. Then there is also the issue of population density.’
Despite this, Shell is ‘a significant proponent of gas’ and Daniels says: ‘It emits just 50 per cent of the CO2 of coal, and building a gas power station is much quicker and easier than both coal and nuclear.’
He adds: ‘Looking long term, we are going to need coal, gas, renewables, oil, nuclear, biofuels – everything. We are going to have to go back into nuclear in the UK and Europe to make the energy equation work in 2050.’
But in the meantime Shell and Daniels are preparing to leave the group’s towering offices beside the Thames near the London Eye for more modern accommodation down river at Canary Wharf.
However, neither he nor the company wants to be precise about the location. Oil company executives are regarded as potential targets for crime or protesters.
And certainly Daniels could do without any more surprise visitors to the office.