Statoil’s Folly

This is making me all misty-eyed with nostalgia for the late ’90s/early ’00s:

The board of directors of Statoil proposes to change the name of the company to Equinor. The name change supports the company’s strategy and development as a broad energy company.

Back in the days when New Labour were sneering at anything traditional and wrecking institutions that had worked well enough for centuries, the business world was going through it’s own version of similar self-harm. British Airways replaced the Union Flag on its tailplanes with tribal art, reversing the decision a few years later. Having spent £75m on branding experts, PricewaterhouseCoopers changed its name to Monday, which proved to be a mistake. Sun Alliance and Royal Insurance changed their name to More Than, which it keeps to this day. British Petroleum switched it’s name to BP, getting rid of the shield logo and replacing it with some sort of flower. They also adopted the tagline Beyond Petroleum, despite sales of oil, gas, and petroleum products making up pretty much all their revenues.

It’s this last example which I’m reminded of the most by Statoil’s rebranding, for obvious reasons. Have a read of the guff they’ve come out with to justify it:

The world is changing, and so is Statoil. The biggest transition our modern-day energy systems have ever seen is underway, and we aim to be at the forefront of this development. Our strategy remains firm. The name Equinor reflects ongoing changes and supports the always safe, high value and low carbon strategy we outlined last year,” says chair of the board in Statoil, Jon Erik Reinhardsen.

Basically, Statoil doesn’t want the word “oil” in its name any more despite oil (and gas) production being their core business by a mile and a half. Yes they do other things, including renewable energy – as all the major oil firms now claim – but these activities are negligible in terms of revenue when compared to the production of hydrocarbons and their derivatives, and always will be. If you want to invest in a solar energy company, invest in a solar energy company. Don’t invest in an oil company that has bought some solar energy capability for PR purposes. I noticed a few years back that Porsche now makes luggage and sunglasses, or at least licenses their brand to someone that does. What Statoil’s doing is the equivalent of Porsche rebranding in the hope nobody notices their core business is still making cars.

“Equinor is a powerful expression of who we are, where we come from and what we aspire to be. We are a values-based company, and equality describes how we want to approach people and the societies where we operate. The Norwegian continental shelf will remain the backbone of our company, and we will use our Norwegian heritage in our positioning as we continue growing internationally within both oil, gas and renewable energy,” says Sætre.

A values-based company. Uh-huh. Which company isn’t these days? I’m sure the good folk who dropped a bridge on innocent motorists in Florida claimed the same thing, but what does it actually mean? If values are something you need to consciously adopt and then advertise, perhaps you don’t have them. A friend of mine recently switched employers and one of his first assignments was to attend a three-day workshop with the senior management to decide what the company values would be. This is the same category error as when a CEO stands in front of his staff and says “we need to adopt X culture”. Values, like culture, is something you develop organically, intrinsically, personally. They cannot be imposed by decree, and a company’s culture or values is simply the aggregate of the people within it. If you were to send someone into a modern corporation with a copy of its “values” and tell them to report back when they found the first instance of a manager acting in a way which completely contradicts them, you’d barely have time for a cup of tea. As I’m fond of saying loudly in meetings, if you want to change the culture in a company you need to employ people who already subscribe to that culture, put them in charge, and fire those that don’t (this suggestion doesn’t always go down well.)

“Equinor is a name that is forward-looking, and creates a strong platform for engagement and dialogue with a broad set of stakeholders. We believe it will create internal alignment and pride, and help attract capital, partners and talents,” says Reidar Gjærum, Senior Vice President for Corporate Communication in Statoil.

Here’s another anecdote. I once worked for an outfit that wasn’t doing very well, and the reasons were obvious. The best thing the CEO could have done in terms of helping the company was gas himself in his garage, but instead he decided the company name and logo should change. He hired a consultant to tell him the name and logo was holding them back, but the consultant returned with the message that, on the contrary, the name and logo were probably the best things about the whole damned outfit. The consultant got fired on the spot, but the name and logo remained. The episode taught me that if a company is looking to change its name and logo (slightly updating the latter is fine), it’s got other, more serious problems that aren’t being addressed and the name change is merely a distraction. To their immense credit, RoyalDutch/Shell has retained the latter part of its name and the Pecten logo despite both being completely outdated and irrelevant in terms of what the company does. Coca-Cola never changed its name or logo, despite the company branching out far beyond cola production. And Chicago Bridge and Iron (CBI) famously isn’t in Chicago, doesn’t make bridges, and uses no iron.

Many people are as unimpressed as I am at Statoil’s name change:

The firm, the world’s 11th largest oil and gas company, released a video on Thursday announcing that after 45 years of operations, it is changing its name to Equinor.

The video is perhaps not what you’d expect from a company with assets worth more than €100 billion.

Starting off with the scream of a woman echoing through a forest, the video then cuts to her giving birth, before shots of a little girl doing gymnastics, a classroom of children learning that “to learn is to change”, and a spotty teenager looking in the mirror cross the screen.

Does this sound like an oil company with its eye on the ball? This doesn’t help, either:

Oil majors aren’t famed for their pranks, but Statoil ASA had analysts checking it wasn’t April Fool’s Day when it announced a new name that turned out to have been acquired from an Oslo veterinary practice specializing in horses.

When people think your company’s proposed name change is an April Fool’s joke, you might want to reconsider. Note the disparity between the earnestness of the Statoil CEO and the degree of seriousness on display from the journalist in this passage:

“I don’t expect Equinor to be love at first sight for everyone,” the CEO told reporters in Oslo on Thursday. “Give it a little time, let it mature. I feel very confident that this is right and important for the company to do.”
Statoil declined to disclose how much it paid the veterinarian, who will soon be offering services from equine dentistry to castration under the name of Equina.

And this is illuminating:

The name change is bound to “stir up some emotions,” said Frode Alfheim, the head of Industry Energy, Norway’s biggest oil union. But what counts is that the company remains 67 percent state-owned, stays in Stavanger and focuses on the Norwegian continental shelf, he said.

Basically, a state-owned oil company doesn’t want to be branded as a state-owned oil company; they’re embarrassed by who they are and what they do. How very modern.

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The False Start of Electric Cars

I have noticed that there is considerable optimism in some quarters about the future of electric cars, and many people are pointing to Norway as a sign that the internal combustion engine may be on the way out:

Norway may seem like an odd place for electric cars to thrive, but the 1,493 Tesla Model S new registrations last month set a new single-model sales record. That’s more than sales of the two next-best selling models, the Volkswagen Golf and Nissan Leaf, combined. In fact, so far this year, the Tesla Model S is the best-selling car in a cold country that has quickly warmed to electric vehicles.

Only when you look a bit closer you find the underlying reason as to why Norwegians have taken to the Tesla in such numbers:

Unlike many European countries, where electric cars carry a huge price premium, there is no import tax or 25% VAT tax on [electric vehicles] in Norway. 

And that reason is the government has, through taxation (particularly import taxes, which are a function of horsepower), made the price of ordinary cars artificially high. From Wikipedia:

As an example, by early 2013 the price of the top selling Nissan Leaf is 240,690 krone (around US$42,500) while the purchase price of the 1.3-lt Volkswagen Golf is 238,000 Krone (about US$42,000).[9] Electric vehicles are also exempt from the annual road tax, all public parking fees, and toll payments, as well as being able to use bus lanes.

Plus what gets left out of the purchasing figures in Norway is how many of these cars are bought by government departments for whom image is more important than value for money.

Personally, I am of the belief that the uptake of electric vehicles in Norway doesn’t tell us anything about the future viability of electric cars.  When you look at the development of the motorcar in the US between the wars, the boom was driven by an overwhelming desire of individuals to move around freely and independently, and the car companies rushed to meet that demand whilst the oil companies competed with one another to build the infrastructure to support it.  I can’t think of anything further from this situation than a government taxing the hell out of something and shoving a population in the direction of their chosen product.  Would Norwegians be buying Teslas if ordinary cars were reasonably priced?  According to this Reuter’s article, Norway’s electric cars require an annual public subsidy of up to $8,200.  This is the future?

What we have here is a government picking a winner, and this rarely ends well.  The underlying assumption is that everyone driving electric cars is a desirable end, and I’m not convinced this has been proven.  Norway registered about 11,000 electrical vehicles in 2013, which might make Oslo’s air a bit cleaner and the streets quieter, but is in no way indicative of what might arise should even half of Norway’s 5m inhabitants eventually switch to electric cars.  11,000 electric cars quietly charging themselves off the grid at night won’t make much difference, but 2.5m of them?  You’re going to need a lot more power stations to cope with that sort of demand, and although Norway currently produces around 96% of its electricity using hydroelectric power it is far from certain that they would not need conventional power stations to meet the increased requirements.  In any case, it is somewhat unlikely that other countries, should they choose to emulate Norway in this regard, would be able to meet the increased demands using renewable energy sources.

In fact, the whole drive to use electric cars seems at odds with campaigns by Green organisations and politicians who are constantly nagging us to save negligible amounts of energy by unplugging phone chargers and not using TVs on standby mode.  I think when most people talk of electric cars, they think charging them is simply a matter of plugging them into a grid which is already in place, and I suppose this is true while their numbers remain small.  But an increase in just one order of magnitude – let alone two or three – is going to require a complete overhaul of the electricity generation infrastructure in a manner which is going to render unplugging phone chargers even more negligible than it is now.

Just where is this additional power going to come from?  Wind is a non-starter, suffering from the same physical limitations the Dutch faced on their windmills a couple of hundred years ago.  Tidal sounds great, except it is mind-bogglingly expensive to construct and maintain, and wrecks the local environment. Wave power suffers from the difficulty of converting uneven, irregular reciprocal motion into rotary motion and the fact that any wave powerful enough to be of any use is likely to have a big brother in the vicinity which will destroy any device used to harness its power.  Solar has potential, but the technology is likely a few decades away yet.  In 40+ years time I can envisage an efficient system whereby solar power is used to generate energy which is stored in cells, and converted to electricity in cars which is then used to power a motor.  But even with huge leaps in solar technology I don’t think we’ll ever be in a situation where:

Solar > electricity > battery > motor

is an improvement over:

Petrol > engine

either in terms of efficiency or overall effect on the global environment.  Not even close.  As I say, perhaps this might work:

Solar > energy cell > electricity> motor

with the energy cells being instantly replaceable, but until then I think this whole electric car concept is dead in the water.

Aside from the economics, the enormous appeal of the motor car is its flexibility, a large part of which it is its near-permanent availability.  The electric car, as currently envisaged, does away with this as it is unavailable for several hours while it charges.  Unless one can predict exactly when the car will be used and for how long then it won’t be much use, and although in theory this sounds ideal for regular commuting the shortcomings of such a system quickly become clear.

Even those who use their cars mainly for commuting also use them for unplanned or irregular trips, e.g. at weekends or in emergencies.  The non-availability of an expensive asset will become an issue to even the most organised of citizens, and some might even keep an ordinary car as a spare.  And supposing you hit traffic on the way to work?  You can switch off the car and conserve your battery, but let’s hope you don’t live anywhere too hot or too cold (like Norway!) otherwise it’s not going to be very comfortable.  One of the beauties of the internal combustion engine is the waste heat means even the crappest of crap cars is warm; people don’t realise how damned cold a car would be without the engine pumping out heat, and to generate the equivalent amount of heat from a battery will eat into the range considerably.  According to this calculator driving with an outside temperature of 21°C with no heater gives you a range of 283 miles; drop the temperature to zero and put the heater on and you’re at 234 miles, a reduction of 17% (and 27% with the smaller 60kWh battery).  And that’s for a new car, that reduction will increase only as the battery and heating elements start to wear.  You could find yourself thinking you’ve got enough juice to get to where you want to, and then hit traffic and find your destination is outside your range.  The advantage of the internal combustion engine is that they burn little fuel when the vehicle is stationary yet keep you warm with no additional fuel cost.

The limited range isn’t actually the issue, as petrol cars also have a limited range.  The problem is the charging time, which renders the vehicle unavailable for several hours.  If you run low on petrol, you spend 5 minutes filling up and you’re on your way again.  Anyone who relies on an electric car to complete a journey within 20-30% of the maximum range is going to have to be very well organised – which most people aren’t, particularly when it comes to travelling by car – and have luck on their side as well.  The whole concept on which the current breed of electric cars is based will collapse as soon as there are more than a handful of stories of people being caught out miles from home – children in the back, howling – and having to wait at a charging station for hours before being able to continue the journey start to appear on the internet.  Until electric cars can overcome this issue, perhaps by using instantly replaceable energy cells instead of recharging, I don’t think they’re going to make even a dent in the supremacy of the internal combustion engine.

Whatever the Norwegians think they’re doing, game-changing it ain’t.  I give it a year or two before we start seeing news reports of electric cars found abandoned by their owners between Bergen and Stavanger due to a flat battery and a desire to sleep somewhere warm that night.

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Only in Norway

From Upstream Online:

Norway’s departed oil minister Ola Borten Moe may have been deprived of his portfolio after recent elections but apparently is still looking to milk the state cow even as the part-time farmer seeks fresh pastures.

After being given the boot, Borten Moe now finds the boot is on the other foot and is reported to have requested a Nkr300,000 ($50,700) payout – equivalent to three months’ gross salary – from the government to keep the wolves from the door while he looks for another job.

The so-called after-salary is only available to members of the administrative apparatus who are without work and he is said to be among seven former government members now seeking the extra benefit.

Now it is arguable whether he needs this allowance – he owns a heavily subsidised farm and I’m sure he could pick up a lucrative job in the private sector pretty quickly – but that’s not my point.

What I find fascinating is that only in Norway would a departing oil minister be concerned about his financial position in the absence of pending criminal embezzlement charges.  I’m sure the outgoing oil ministers from most producing nations would be more concerned with which multi-million dollar overseas property to spend the next few months in.  Even in the UK, ministers ensure they cultivate enough arse-lickers to ensure a cushy tenure in an NGO or consultancy somewhere immediately afterwards.

On the face of it, a politician’s job in Norway seems to be closer to a real job than you’d find anywhere else in the world.

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