It was counterintuitive for Timothy Dexter, the 18th-century entrepreneur, to carry coals to Newcastle. But his cargo arrived during a miners’ strike and he made a fortune. It is equally counterintuitive in the 21st century to ship gas across the Atlantic Ocean to the edge of the North Sea and expect to profit.
But Ineos, the UK’s largest private industrial business founded by Mancunian tycoon, Jim Ratcliffe, sometimes known as JR, is preparing to do just that. Within a year or so Ineos will be transporting natural gas in freezer-ships built in Asia from the Gulf of Mexico to ethane tanks being built at its petrochemical plants in Grangemouth. This is the shale gas that is used both to fire up plants and supply the feedstock that ends up in everything from plastic bags to face paint.
Ineos is convinced the economics will work. Supplies of the North Sea natural gases that it needs are dwindling. And the boom in fracking means that US gas is now a fraction of the price of European equivalents and will remain so.
Mr Ratcliffe, the veteran of a bitter battle with unions over Grangemouth’s future last year, has long warned politicians that high energy costs, green taxes and high feedstock prices will drive the chemicals industry out of Europe.
But it will be hard for rivals to replicate his solution for Grangemouth. As Dexter found 350 years ago, timing is everything. Ineos has secured a government guarantee on a loan that will materially reduce its cost of funding the project weeks before Scotland’s independence vote. Second, Ineos has invested billions in building two of the four plants in Europe that can process shale gas.
Ineos may have safeguarded Grangemouth’s future in petrochemicals, but it hasn’t saved the chemicals industry in Europe.
Keep your friends close but your enemies closer. Yesterday, Todd Kozel relinquished his directorship of Gulf Keystone Petroleum shortly before the company would have announced the results of a vote on his re-election at the annual meeting. Last month, Mr Kozel quit as chief executive but was down to remain as a board director.
His departure ends a long battle with the group’s most powerful shareholders, M&G and Capital, over Mr Kozel’s leadership and lavish payouts. Their jubilation on news that he had quit the board – the sixth director to leave in as many weeks – was tempered by frustration at being deprived of any satisfaction at seeing Mr Kozel cashiered.
And he will still be employed by Gulf Keystone as an “officer”. Simon Murray, former foreign legionnaire and chairman, who is also under investor fire, said Mr Kozel was “essential” to negotiations with the Kurdistan government over leases.
The problem now for shareholders will be gaining an insight into how Mr Kozel is rewarded for being essential. Companies do not have to publish the pay of employees below board level.
Shareholders may wish they had kept Mr Kozel where they could see him. Now they need to remind the board that out of sight is not out of mind.
When banks’ sorrows come, they come not in single spies but battalions, writes Sam Fleming. The Financial Conduct Authority’s chief Martin Wheatley on Thursday darkly warned that regulators were teeing up yet more big fines as he lambasted the industry for failing to clean up its act.
For some members of the public attending the FCA’s annual conference in Westminster the £425m that the watchdog levied in fines last year was nowhere near enough. The latest scandals to hit the industry – including sending customers letters from fictional law firms – has rightly renewed the chorus of discontent. Finance has undoubtedly become semi-detached from its core purpose of providing services to customers.
But all too often it is banks’ shareholders, rather than management teams, that feel the pain of the penalties most acutely. The fines imposed on banks such as JPMorgan, BNP Paribas and Credit Suisse may be eye-watering in size, but they have not led to boardroom bloodlettings. And as the cost of litigation and redress escalates, it is impairing banks’ ability to strengthen capital and fund economic activity.
The FCA should avoid the colossal penalties of the type imposed in the US where rival regulators joust for supremacy. Justice unquestionably needs to be done, but it also needs to be well-targeted.
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