Britain could experience widespread power cuts within eight years, the Government has admitted.

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The following graph shows that the spike in West Texas Intermediate Oil of 7 per barrel may have signaled that global oil production has already hit its peak.

There are two telling signs:

July 2004 – September 2007: Daily oil production remained flat while prices doubled and consumption was on an upward trajectory. Perhaps OPEC wanted to create a tightening bias in the world oil markets to force prices to rise. But more realistically, OPEC likely knew it had limited production slack and did not want to use up its last ‘bullet’ before price rises started destroying demand.
May 2007 – February 2008: Daily oil consumption rose by 3.6 million barrels and daily oil consumption peaked at nearly 88 million barrels per day during February 2008. The supply response during the same period was a meaningless 1.7 million barrels of extra production. During the same period, prices rose from per barrel to per barrel (eventually spiking to 7/barrel during July 2008). Given that as of May 2007 prices had already tripled from 2002 levels it is difficult to argue that OPEC wasn’t satisfied with market prices and wasn’t beginning to worry about demand destruction. The problem was that excess capacity simply didn’t exist and production couldn’t be increased meaningfully to offset destructive price increases.
Production was eventually increased to 86.71 million barrels per day by July 2008. This was still below peak demand.

Regardless, by that point demand destruction had already begun. The twin ravages of high prices and a developing economic recession pulled the plug on oil demand thereby temporarily alleviating the supply-demand imbalance.

Bottom Line
7 per barrel oil prices were caused by supply-demand characteristics that illustrated global oil production had peaked. A global near-depression only resulted in a 6% decline in oil demand.

Therefore, a return to tepid global growth could be enough to push consumption back to the 85-86 million barrels per day point. As of June 2009, world consumption is already back above the 84 million barrel mark.

Given the supply-side constraints (lack of capacity, depleting reserves, delayed projects) any form of a global economic recovery would risk pushing oil prices back up to the triple-digit range.

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Mr. Devine: To ask the Secretary of State for Energy and Climate Change what recent assessment he has made of the development of carbon capture and storage technology; and if he will make a statement.

Edward Miliband: Carbon capture and storage technology has huge potential to turn coal into a clean fuel of the future. While it has only been demonstrated at small scale, our plans will be among the largest demonstration projects in the world and we hope will drive us towards the successful deployment of CCS in developed and developing countries.

Mr. Ronnie Campbell: To ask the Secretary of State for Energy and Climate Change what his policy on carbon capture and storage is; and if he will make a statement.

Edward Miliband: Carbon capture and storage is essential in the battle against climate change, because of the global reliance on coal in the energy mix, now and in the future. Our policy is to show leadership on this issue as a way to improve our energy security, help provide jobs for the future and bring down carbon emissions.

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UK Coal today (16 July 2009) issues its pre-close trading statement, together with an outlook statement for the full year, ahead of publishing its Interim Results for the six months to end June 2009 on 27 August 2009.

Mining

Average realised sales price: Despite the significant reduction in the world coal price over the period, our average realised sales price for the first half was marginally above our expectations at around £1.80 / Gj (H1 '08: £1.79/Gj).

As usual, our first half sales mostly comprise sales under legacy fixed or capped price contracts, whereas the majority of our floating price and uncontracted sales will take place in the final quarter. The legacy contracts will largely have fallen away by the end of this year to be substantially replaced by new or amended long-term contracts with blue chip electricity generator customers, as announced at our 2008 Preliminary Results on 27 April 2009. These new contracts significantly increase our long-term contracted coal prices and our short-term cash flows.

Production: Total first half production was some 3.7m tonnes, the same as the first half last year (H1 '08: 3.7m tonnes). Deep mine production was 3.0m tonnes, broadly in line with expectations and slightly above last year (H1 '08: 2.8m tonnes). Surface mine production was 0.7m tonnes, slightly lower than last year (H1 '08: 0.9m tonnes), due to a greater proportionate amount of "muckshift" (the lift of non-coal material in order to expose coal) than in the same period last year.

Daw Mill continued to perform strongly, producing 1.7m tonnes (H1 '08: 1.6m tonnes), reflecting its continued improved reliability and the benefits of the belt replacement programme undertaken in the last quarter of last year and the beginning of this year.

As expected, Kellingley and Thoresby continue to face the same geological conditions as reported on before, but together produced the same tonnage as last year - Kellingley: 0.4m tonnes (H1 '08: 0.5m tonnes); Thoresby: 0.4m tonnes (H1 '08: 0.3m tonnes). Our investment programmes in these mines mean we expect Kellingley to start mining its new reserve areas in January 2010 and Thoresby in February/March 2010. It is expected this will enable both mines to increase production volumes with lower production costs per tonne.

Welbeck produced 0.5m tonnes (H1 '08: 0.4m tonnes) and will start work on its final panel this summer in the run-up to its scheduled close in Q1 2010.
Development work: We have deliberately increased the amount of deep mine development work we undertake alongside coal production. This increases costs in the short term but will enable a smoother flow of future coal production and minimise face gaps, consequentially benefiting future production volumes.
At Daw Mill, for example, first half development work was 2,700 metres, more than the 2,000 metres developed in the whole of last year, and we are now operating four development headings simultaneously at the mine.

Production costs: Reflecting the geological factors and increased development work, deep mine costs were slightly higher than originally planned. Before depreciation, non-trading exceptional items and the impact of stock movements, they were some £155m (H1 '08: £136.3m). The second half will, however, see the start of the reduction in costs at Welbeck where the last development work will shortly be complete.

Overall, therefore, we expect a deep mines first half operating loss, pre non-trading exceptional items, of just over £35m (H1 '08: loss of £24.2m).

For surface mines, the increased muckshift relative to coal production means first half production costs are expected to be around £1.93 /Gj before depreciation (H1 '08: £1.52 /Gj), delivering a first half operating loss of some £3m (H1 '08: operating profit £5.0m.) (The comparative 2008 figure is stated before the £5.6m of charges related to the impact of fuel prices on the provisions for restoration - charges which were reversed at the last year end).

In the second half, we expect a much improved surface mine operational performance with a lower ratio of muckshift to coal production and a significantly improved extraction cost per gigajoule, in particular resulting from thicker, higher quality seam sizes now being exposed at our Steadsburn and Cutacre mines.
In the light of the current coal market and the more variable cost nature of surface mines, we have decided to reduce slightly second half surface mine production and to defer the start-up to our Park Wall North, Durham, surface mine to the second quarter of 2010.

Harworth Estates

In the first quarter of 2009, the trends in the property market continued in a similar vein to the final quarter of 2008, although there have been signs in the past month or two that the general market has stabilised. Whilst agricultural land prices have continued to improve, the market for redevelopment land has been particularly subdued and, not surprisingly, the valuations of this land have fallen, despite planning progress. Business Park valuations have also reduced, reflecting increased yields on shorter term commercial tenancies. Overall, we are therefore expecting the valuation on Harworth Estates to have fallen by around 9% in the first half, resulting in a first half non-cash valuation loss in the income statement of some £37m.

Overall results

Overall the first half operating loss will be around £38m before revaluation movements and non-trading exceptional items (H1 '08: loss of £25.0m). Non-cash property valuation losses are expected to be around £37m (H1 '08: valuation gains of £19.8m). Interest and other financing costs will be circa £11m (H1 '08: £5.4m), and net non-trading exceptional profits will be circa £4m (H1 '08: loss of £0.9m). The total first half pre tax loss is therefore expected to be around £82m (H1 '08: loss of £9.9m).

Net debt will be of the order of £145m (December 2008: £137.1m), excluding restricted funds. Prepayments and loans from generators are expected to be some £47m (December 2008: £ nil).

Principally as a result of the change in inflation outlook assumptions and corporate bond yields, the latest indications are that the deficits for IAS19 accounting purposes on the defined benefit pension funds liabilities will have increased to circa £165m at end June 2009 (end December '08 £75m). This has no immediate impact on the business as the triennial scheme revaluation will be undertaken in 2010.

Outlook

Our expectations for deep mines production for the full year remain broadly unchanged at up to 6.75m tonnes (FY '08: 6.2m tonnes). For the reasons given, we expect full year surface mine sales of around 1.5m tonnes, with production of around 1.4m tonnes (FY '08: 1.7m tonnes).

In Harworth Estates, we anticipate planning progress at a number of sites in the second half. This should reinforce the underlying momentum for value creation in our property interests. We remain unchanged in our view as to the long term value in our property portfolio, notwithstanding shorter term fluctuations in the market.

This information is provided by RNS
The company news service from the London Stock Exchange

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After Working people have been made to pay hundreds of billions of pounds to the banks and are still left with massive mortgages and other debts Lord Mandelson has admitted that Britain faces a decade of public spending cuts even if Labour wins the next election which will further reduce the living standards of ordinary people.

The Business Secretary said 10 years of tighter public spending would be needed to deal with the record levels of debt built up by the Government's fiscal stimulus package. It put him at odds with the Prime Minister, who has been reluctant to concede that his party would have to make cuts.

"We will re-balance public finances in the medium term," Lord Mandelson said. "There will be spending choices and a growing need for greater efficiency across the board, and less spending in some programmes."

He refused to say where the axe would fall, but maintained that frontline services would not be hit, promising there would be "sustained investment in schools, police, hospitals and frontline services, including our country's defences". He said that how the two parties chose to deal with the period of tighter finances would be the basis on which the public would make their choice at the next election.

"We will be operating under greater public spending constraints in the coming decade than we have in the last 10 years and that's why we need to respond to it in the way I have described, rather than the way in which the Conservatives have suggested they will set about it," Lord Mandelson added.

His comments have raised suspicions that the Cabinet is split over whether to be more frank about cuts. Both Lord Mandelson and the Chancellor, Alistair Darling, are said to be keen to persuade the Prime Minister to give a more honest assessment of future spending. Mr Darling has already admitted the country will have to be given some idea of the party's spending plans ahead of the election.

George Osborne, the shadow Chancellor, claimed the Cabinet was now "completely divided" on the issue. "Peter Mandelson and Alistair Darling are admitting the Conservatives were right all along and cuts will follow the election. Gordon Brown and Ed Balls, the man he wanted to be chancellor, are refusing to be honest and think they can still take the public for fools," he said. "This cabinet division on such a central economic issue is undermining confidence in the recovery and trust in the Government."

Downing Street denied there was any split between Mr Brown and his First Secretary of State, with a source saying that Lord Mandelson's words had been seen and cleared by the Prime Minister in advance.

Lord Mandelson added that despite his support for the euro, it would be "some years" before Britain was in a position to join the single currency. "The prospects and chances of us joining the single currency early on are not strong," he said.

He also admitted that the party's internal polling reflected the fact that Labour was "without doubt being thoroughly tested", but maintained that there was no enthusiasm among the public for David Cameron and the Tories.

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