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Why ExxonMobil is sticking with oil as rivals look to a greener future



In late 2011, ExxonMobil announced plans to drill for oil in disputed land between Kurdistan and the rest of Iraq. Baghdad’s government, fearing the move could break up the country, threatened to eject the company from a big project near Basra, in the south of the country.

Exxon ignored them, knowing the encounter was a mismatch. Iraq’s revenue from oil sales that year amounted to about $80bn. Exxon’s revenue came in at more than $430bn. The move exemplified the geopolitical chutzpah of America’s best-known energy producer — the kind of clout that persuaded Donald Trump to make Rex Tillerson, Exxon’s then chief executive, his first secretary of state.

Almost a decade later, Exxon’s Kurdish investment has gone nowhere and its big project in southern Iraq is producing a fraction of its original target. Far from showing Exxon’s international mastery, these days Iraq is just another oil arena where things did not go as the company had planned.

“Exxon was a superpower in every sense of the word — a blue-chip stock that handed out money year after year, a firm with a calling card to foreign leaders that rivalled even top international diplomats, and with geopolitical savvy that bested most intelligence agencies,” says Amy Myers Jaffe, professor at The Fletcher School at Tufts University. “It was one of the safest bets on Wall Street.

“But no more does it have this status,” she adds.

Even before coronavirus shattered the global oil industry Exxon — once the world’s most valuable by market capitalisation — was struggling. But the pandemic has left the company exposed. In March, rating agencies downgraded it; in August it lost its place in the Dow Jones Industrial Average to a software company. And once famous for high margins and low leverage, Exxon is now mired in debt and expected to report its third consecutive quarterly loss on Friday.

ExxonMobil intends to increase its fossil fuel output by almost a third in the next four years © Bloomberg

Analysts say a quest for fast oil-production growth and an addiction to risky, high-cost projects has hobbled the company in recent years.

Yet Exxon’s response has been to double down on oil and gas, plotting another huge surge in output. As rivals fret about peaking oil demand and start trying to navigate a global energy transition away from fossil fuels to cleaner energy, Exxon is making a huge bet on oil’s future.

“Some believe the dramatic drop in demand resulting from coronavirus reflects an accelerating response to the risk of climate change, and suggest that our industry won’t recover,” Darren Woods, the company’s chief executive, told staff last week. “But as we look closely at the facts and the various expert assessments, we conclude that the needs of society will drive more energy use in the years ahead — and an ongoing need for the products we produce.” 

If Exxon is right, its gamble will rescue the company as projects from New Mexico to Guyana begin pumping crude oil into a rising market, while its refineries and petrochemicals plants feed an increasingly prosperous world for decades to come. Exxon, not its European rivals, would stand to gain. But an already sceptical market will punish the company severely if this bet fails too.

“Exxon is committed to the future of fossil fuels” says Paul Sankey, an oil analyst who runs Sankey Research. “If it is wrong, it has an existential crisis.”

Line chart of Sum over previous four quarters ($bn) showing ExxonMobil's cash revenues no longer cover capex and dividends, prompting a rise in debt

Era of missed opportunities

For decades Exxon has not questioned the idea that global population growth and a rising middle class would trigger demand for more oil and gas. The priority for an oil company, therefore, was to keep finding more hydrocarbons, replace those it produced and minimise costs.

Lee Raymond, Exxon’s chief executive from 1993 to 2005, added scale with the addition of Mobil in 1999. And then he honed a high-margin model that churned out bumper profits, even through lean patches, and paid one of Wall Street’s most cherished dividends. Mr Tillerson, his successor, took charge in an era of perceived supply shortages. And as oil prices soared towards their historic peak in 2008, Exxon scoured the world for new reserves and big developments.

In subsequent years it launched a huge bitumen mining project in northern Canada — Kearl, run by its local affiliate Imperial Oil — and signed up to develop Iraq’s West Qurna 1, in one of the world’s largest oilfields. With Vladimir Putin watching on, Exxon signed deals with Russia’s state-controlled producer Rosneft and planned a colossal offshore exploration and production programme in the Kara Sea north of Siberia.

A 2013 deal between Exxon and Russia’s state-controlled producer Rosneft later fell foul of sanctions © Serge Karpukhin/AFP/Getty Images

Yet it is now seen as an era of missteps and missed opportunities for the company. As wildcat drillers in the US were busting open a century’s worth of new shale gas reserves — the start of a supply revolution that would turn the global energy market on its head — Exxon demurred, backing big capital projects overseas instead. When it eventually dipped its toe into this new unconventional resource, the company focused on German and Polish shale fields.

Sanctions on Russia after it annexed Crimea in 2014 killed the Kara Sea venture. The hunt for shale gas in Europe was a dead end. The Iraqi investments underwhelmed investors. And while Kearl survived, it became a high-cost, high-carbon project that sucked up capital just as an era of scarcity flipped to one of abundance.

“Exxon was always good at betting the farm big at the bottom of cycles, and allocating capital counter-cyclically,” says Nick Stansbury, head of commodity research at Legal & General Investment Management, an Exxon investor.

“What went wrong? It thought it was allocating capital counter-cyclically, [but] into a cycle that didn’t happen and into assets that weren’t as good as everybody thought they were,” he adds.

Line chart of Share price growth (%) showing Big Oil stocks have been eclipsed by a leader in renewable enegy

Belatedly, recognising the promise of the shale revolution happening under its nose, Exxon’s $41bn purchase of XTO including its debt in 2009 made it the US’ biggest natural gas producer. But the bumper price reeked of panic.

Return on capital employed dropped from more than 30 per cent in 2008 into single digits in 2014. The production growth promised by Mr Tillerson failed to materialise. In the 15 years up to 2019, capital expenditure hit $350bn, but output ended lower. The balance sheet bulged. From 2015, cash flow from operations struggled to cover the sum of the company’s market-leading capex plus its dividend.

Peter Speer, an analyst at Moody’s Investors Service, estimates that Exxon needs an oil price of at least $55 a barrel to cover these spending needs, far above current prices of around $40 or those visible in the futures curve.

Other analysts are more sanguine. Exxon thinks in decades, says Doug Leggate, head of US Oil and Gas at Bank of America, and is spending at the bottom of an oil price cycle. “By definition you’re not going to have a lot of cash flow.”

Mr Woods has promised $15bn of asset sales to shore up the balance sheet. But only one big deal in Norway, worth $4.5bn, went through before the pandemic hit asset values, leaving the company a reluctant seller in a buyer’s market.

The West Qurna-1 oilfield near Basra, operated by Exxon, is producing a fraction of its original target © Essam al-Sudani/Reuters

Investors have punished the stock, which has fallen almost 60 per cent in the past five years. By contrast, Chevron — Exxon’s closest rival — is down by about a fifth. Carbon Tracker, a think-tank, calculates that between 2007 and 2019, Exxon shareholders collectively would have earned $400bn more if they had invested in Chevron instead.

And investors see no easy solution. Deeper capex cuts on top of the 30 per cent drop already undertaken this year would jeopardise the medium-term production growth Exxon has promised. Slashing or suspending the dividend would destroy the rationale to hold the shares — a view reflected in a dividend yield that has soared above 10 per cent.

“Cut the dividend, cut capex — there’s no yield, there’s no growth,” says an executive at an institutional investor with a position in the company. “Why would we own the stock?”

For now, the company is holding back the dam. Unlike Shell and BP, which used the oil price crash to rebase their dividends, Exxon’s board is expected to announce on Wednesday another 87 cents-per-share payout. It would make 2020 — the oil industry’s worst year in decades — the 37th year in a row that Exxon has increased its dividend.

Fossil fuel focus

The bigger difference between Exxon and its European rivals is about the future of oil and its role in any energy transition. BP, Shell, Total and Equinor have all begun to confront the implications of climate change for the oil business. BP recently published a scenario in which global oil demand would fall by almost half in the coming three decades. It has pledged to reduce its own fossil fuel output by 40 per cent by 2030.

Exxon, which intends to increase its fossil fuel output by almost a third in the next four years, sees things differently. It accepts that there will be a global energy transition — and that it must help tackle emissions — but believes oil will remain a pillar of the world’s economy. It estimates that demand will reach 111m b/d in 2040, compared with about 100m in 2019. A production increase equivalent to adding another Saudi Arabia would be needed just to try and meet this projected extra thirst for oil.

Even if the world successfully follows policies in line with the Paris climate agreement goals — implying a significant drop in global oil demand — huge new investment will be needed in oil and gas projects, Exxon says. It points to the International Energy Agency’s Paris-aligned sustainable development scenario and the agency’s view that cumulative investment in oil and gas will need to be around $13tn by 2040.

Officials were also quick to seize on Joe Biden’s remarks after the most recent presidential debate, as the Democratic party nominee clarified his comments about a “transition away from oil” by saying this would not happen before 2050.

Yet while Exxon plots more fossil fuel production it is also ploughing money into research on biofuels and carbon capture techniques, believing it can bridge a “technology gap” to solve the conundrum of delivering more energy to more people at lower cost and less emissions.

“That’s where we focus our research,” says Vijay Swarup, head of research and development at Exxon. “How do you provide the energy that the developing nations want to grow their prosperity, and continue to meet the demands of the developed nations, but to do that, with lower emissions?”

Kearl, a huge bitumen mining project in northern Canada run by Exxon affiliate Imperial Oil © Imperial Oil

It marks a break from the past, when Exxon executives such as Mr Raymond would regularly question climate science, or when Mr Tillerson dismissed biofuels as “moonshine” in 2007.

But scepticism among some Exxon investors and analysts persists. “ExxonMobil has failed to produce any advanced technologies at commercial scale,” says Ms Jaffe.

Despite a company pledge to reduce its own greenhouse gas emissions, they remained about 124m tonnes a year between 2009 and 2018, a volume greater than Belgium’s.

Its large retail investor base means it does not face as much institutional pressure as some of its rivals, says one company adviser. But the lingering perception of some in the market is that the company’s devotion to oil is a source of Exxon’s current failings.

Line chart of Dividend yield (%) showing ExxonMobil's cost of capital has soared

“They have a general macro view [of oil demand] that served them well for several decades,” says Tom Sanzillo, analyst at the Institute for Energy Economics and Financial Analysis. “The broader vision doesn’t work any more, and the business model that flows from it doesn’t work any more.”

It has exasperated some institutional shareholders. An executive at one Exxon-investing fund was blunt: “I know they don’t believe in transition. But the market does.”

Meeting higher demand

But what if Exxon turns out to be right about oil demand? The bullish thesis for the company’s stock is that this year’s vast cuts to global upstream capex will lead to a drop in supply by mid-decade — by which time oil demand will have recovered.

Exxon is pledging to increase oil and gas production by more than 1m b/d by 2025. Rivals such as Chevron also plot growth but not of the same scale — and some expect to reduce production or hold it flat. Exxon’s bet is that its output surge will hit its peak just as the market tightens. “Exxon has growth projects, BP and Shell don’t,” says Mr Leggate. “Is their pivot to green energy partly because they underinvested [in oil] in the past five years?”

In his message to staff, Mr Woods said: “Irrespective of short-term volatility, we must stay safe, maintain the integrity of our operations, drive efficiencies and continue investing.”

Darren Woods, ExxonMobil CEO, The company estimates that oil demand will reach 111m b/d in 2040, compared with about 100m in 2019 © Lexey Swall/FT

The upstream centrepieces are US shale — where Exxon holds a commanding position — and deepwater oilfields off Guyana, where the company estimates its production will reach 750,000 b/d by 2025. Brazilian oil will flow later, according to the plan, while a Mozambique liquefied natural gas project will offer a “highway to India” and its fast-rising economy, says a company adviser.

In the Permian, the prolific shale oilfield of west Texas and southeastern New Mexico, Exxon says oil and gas production will rise from around 300,000 b/d in the second quarter to around 1m b/d by 2024.

Shale is now a crucial part of the company’s portfolio because it offers the ability to rapidly dial up or down output, according to oil price changes. Thus, as Exxon slashed its planned capex this year to around $20bn, it was able to slow its Permian development, allowing it to speed up later.

The company may even join a wave of consolidation under way in the US oil sector. Hess, a partner in Guyana that also holds US shale assets, could be a good fit, believe some analysts. Pioneer Natural Resources, another Permian producer, is considered a plausible target as well.

Previous failures to deliver growth leave investors sceptical. But Mr Leggate says the market is “missing the woods for the trees” by discounting the only supermajor that will have capacity to increase production when oil prices recover.

Yet, as investors focus on the climate impact of their companies, it is not obvious that Exxon’s huge new bet on oil will be rewarded.

“The Exxon brand is so broken in the mind of the market,” says Mr Sankey. “The next generation don’t want to own environmental public enemy number one.”

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China’s leaders focus on post-Covid economy at annual meeting




China’s National People’s Congress, the country’s annual rubber-stamp parliament session, will convene on Friday for a meeting set to focus on a problem many other countries wished they had: how to rein in an economy that has rebounded from the coronavirus pandemic.

“There have been intense discussions about monetary and fiscal policy,” said Wang Jun at the China Center for International Economic Exchange, a government think-tank in Beijing. “The primary goal is to stabilise leverage, but if policy [tightening] goes too far too quickly it may have a negative impact on financial markets as well as the real economy.”

The NPC will run for about a week and is typically a forum where previously agreed measures and policy objectives are formally approved. Last year’s session, however, was dominated by Chinese president Xi Jinping’s surprise announcement of a stringent national security law for Hong Kong after the city was rocked by anti-government protests in 2019.

The gathering also provides the biggest stage of the year for Xi to project his unchallenged grip on both the government and the Chinese Communist party as he prepares for an unprecedented third term in power in late 2022.

China’s post-Covid recovery contrasts starkly with the situation in the US, where the pandemic has claimed the lives of more than 500,000 Americans and President Joe Biden is pushing Congress to pass a $1.9tn economic stimulus package.

China annual GDP growth rate 2018-2020

Guo Shuqing, one of China’s most powerful financial regulators, warned this week about the dangers of “extremely loose monetary policies” in the US and other pandemic-wracked economies, saying the measures could cause “too much fluctuation” in Chinese financial markets.

He added that China’s property market was still afflicted by “relatively large bubbles” and suggested lending rates would “rebound” this year. Guo, who heads the banking regulator and is also the most senior party official at China’s central bank, pronounced late last year that the real estate sector was the country’s “greatest grey rhino in terms of financial risk”.

Guo’s comments sparked a sell-off on regional markets, illustrating the difficult balance he and other financial officials must attempt to strike. Stimulus measures rolled out by Chinese president Xi Jinping’s administration early last year helped spur investment but also propelled debt levels in the world’s second-largest economy to about 270 per cent of GDP.

“While the leadership feels confident about the economy’s trajectory, there is still a lot of uncertainty,” said Andrew Polk at Trivium, a Beijing-based consultancy. “Authorities need to find a way to unleash consumption and pick up slack from industrial production and real estate investment.”

Shuang Ding, chief China economist at Standard Chartered in Hong Kong, said Beijing was likely to reduce its budget deficit to 3 per cent of GDP, down from 3.6 per cent last year. But he also forecast the Chinese economy would grow at least 6 per cent year on year, with “substantial room for outperformance”, and create 11m jobs.

“The most pressing economic issues are how to withdraw from last year’s expansionary fiscal policy and how to increase consumption,” said Jia Jinjing, an economics professor at Renmin University in Beijing. “The central deficit budget will be lower than last year but still above 3 per cent. We cannot rely too much on increased debt to spur consumption.”

China retail sales growth

NPC delegates will also formally pass the party’s 14th five-year economic plan, which is focused on achieving “self-reliance” in a number of critical technology sectors as well as ambitious environmental goals, including reaching peak carbon dioxide emissions by 2030 and net-zero emissions by 2060.

The NPC session in 2020 was delayed for almost three months by the pandemic and fixated on the imposition of the national security law on Hong Kong.

This year, it is likely to approve measures that will further reduce the pro-democracy camp’s representation in the city’s legislature. It is also expected to unveil rules consolidating Beijing’s hold on an already pro-establishment “election committee” that chooses Hong Kong’s chief executive.

Dozens of Hong Kong democracy activists, including publisher Jimmy Lai and jailed student leader Joshua Wong, have been charged with alleged offences of the security law. In a speech last month, Xia Baolong, head of the Chinese government office responsible for Hong Kong, singled out Lai and Wong as “extremely vile anti-China elements”.

“There doesn’t seem to be any end to the crackdown,” said Willy Lam, a China politics expert at the Chinese University of Hong Kong. “Xi has made up his mind to snuff out Hong Kong’s opposition movement altogether. For ordinary people, Beijing will insist on ‘patriotic education’ in the schools and media.”

A Chinese academic who advises Beijing on Hong Kong issues said the territory had been “too unbridled” prior to last year’s passage of the national security law. “The central government had no other option,” said the academic, who asked not to be identified. “The Hong Kong opposition overestimated its power.”

Additional reporting by Xinning Liu in Beijing

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Sunak goes big and bold to try to repair the public finances




Chancellor Rishi Sunak’s Budget was big, bold and broke many longstanding records for the public finances.

At an estimated £355bn, the level of UK government borrowing forecast for 2020-21 is due to be the highest since the second world war, reflecting the severity of the coronavirus crisis. It highlights the sheer scale of emergency state support for companies and households during the Covid-19 pandemic.

The tax rises announced on Wednesday by the Conservative chancellor for the middle of the decade — affecting businesses and individuals — will be the largest since 1993. The increases will raise the UK tax burden to its highest level since Roy Jenkins was the Labour party chancellor in the late 1960s.

Justifying his approach, Sunak told the House of Commons: “Just as it would be irresponsible to withdraw support too soon, it would also be irresponsible to allow our future borrowing and debt to rise unchecked.”

As far as the public finances are concerned, the March 3 Budget will become known as a “give then take” affair that will reshape the relationship between the state and the private sector for many years ahead.

And the figures in the Budget documents confirm the coronavirus crisis has utterly transformed the public finances for the worse.

At the March 2020 Budget, when the UK had little clue about the enormity of the pandemic, the Office for Budget Responsibility thought the government would borrow £55bn in 2020-21.

Sunak, who unveiled a £12bn support plan for the economy in what was his first Budget, has since had to add huge amounts of public spending in 16 major announcements.

On Wednesday, he outlined another £40bn of support, bringing total spending to £344bn, according to the OBR: roughly 16 per cent of gross domestic product, and well above the average of 13.3 per cent among advanced economies.

Chart showing the 16 major announcements since the last Budget have increased coronavirus support

It is this spending, alongside a loss of £90bn of expected tax revenues, that is set to raise the level of government borrowing to the highest level in peacetime.

In 2021-22, the government is still planning to spend £93bn on virus related support, mostly going to the NHS, but with large sums also for continued support for companies and households.

Karen Ward, strategist at JPMorgan Asset Management and a former adviser to Philip Hammond when he was chancellor, said Sunak was wise to keep splashing the cash in the next financial year. “The chancellor has rightly erred on the side of an extension that is potentially too long, rather than one that is too short,” she added.

With the colossal borrowing, underlying UK public debt, excluding temporary Bank of England schemes, is set to jump from a pre-pandemic forecast of 73 per cent of GDP by the middle of this decade to 97 per cent in the latest OBR prediction.

The 24 percentage point rise in the core debt burden is the second large jump in a little over a decade following the fiscal shock associated with the 2007-08 financial crisis. At about 100 per cent of GDP, UK public debt is now at its highest level since the early 1960s, when it was gradually coming down following the second world war.

Chart showing that public debt is set to rise to levels not seen since the early 1960s

This Budget was not just about fiscal support in 2021-22, but also stimulus to power the recovery, according to Richard Hughes, OBR chair. He said Sunak’s £25bn “super-deduction” in corporation tax would “stoke the recovery” and “encourage businesses to bring forward future investment into the next two years”.

But after 2021-22, the giveaways stop, and Sunak becomes the revenue raising chancellor, with very large increases planned in corporation and income taxes.

The moves risk damaging the UK’s international standing. In 2018, the OECD said the UK taxed corporate profits below the rich country average. Britain collected 2.6 per cent of national income through the levy, compared with the OECD average of 3.1 per cent.

By 2025-26, the OBR projections suggest UK corporate taxes will generate revenues above the OECD average, although Hughes said this level was “one [the UK] seldom sustained for very long in the postwar period”.

Paul Johnson, director of the Institute for Fiscal Studies, a think-tank, said Sunak’s corporation tax rise was a significant risk. “For all the rhetoric about it leaving the headline rate here below that in other G7 countries, our effective tax rate will be relatively high,” he added.

The tax rises will tackle the high level of borrowing, however, according to the OBR.

It projects the increases will lower the current budget deficit in 2025-26 from £37bn, had Sunak done nothing, to £1bn, almost balancing the government’s books excluding public investment. This is a core ambition of ministers.

Chart showing Rishi Sunak’s spend then tax Budget to balance the books

Some economists thought Sunak should have been more explicit in setting new targets for the public finances.

Hande Kucuk, deputy director of the National Institute of Economic and Social Research, a research organisation, said the Budget needed “a comprehensive fiscal framework to build confidence in a sustained recovery given the significant uncertainty regarding the long-term effects of Covid-19 and Brexit”.

Other economists were more forgiving since there are huge uncertainties hanging over the public finances. The path of the pandemic is perhaps the largest, but Sunak also has to worry about the possibility of increased debt servicing bills if interest rates rise, and whether he can cut spending as he plans when the virus subsides.

Torsten Bell, director of the Resolution Foundation, another think-tank, was sceptical the chancellor would be able to reduce departmental spending.

The Budget documents showed a stealthy £4bn a year cut in spending alongside the tax rises. “He’ll end up spending more than that,” said Bell, adding this would add to pressure to proceed with additional tax rises.

But Sunak is an optimist, and hopes the uncertainty will go in his favour. If the economic recovery is sufficiently rapid, the chancellor will be looking to the OBR to cut its estimate of a 3 per cent long term hit to the economy from coronavirus.

And if that happens in a future Budget, Sunak can look forward to the possibility of tax cuts before the next general election.

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A pivotal moment for Scotland’s independence champion




Nicola Sturgeon, Scotland’s first minister, has credited her former mentor and predecessor Alex Salmond with making her career.

Sturgeon’s appearance on Wednesday morning before a parliamentary inquiry into her Scottish National party government’s handling of harassment complaints against Salmond will be a potentially pivotal moment for her, and her dream of leading Scotland to independence from the UK.

At an extraordinary appearance before the parliament committee on Friday lasting almost six hours, Salmond accused Sturgeon’s closest associates of maliciously colluding to drive him from public life and his former protégée of breaching the ministerial code by intentionally misleading parliament — potentially a resignation matter.

Sturgeon denies the allegations. But the televised session must have made difficult viewing for the formerly shy working-class girl from Ayrshire in south-west Scotland who has, in recent years, helped bring her nation closer to independence than at any time since the 1707 union with England that created Great Britain.

When Sturgeon succeeded Salmond as first minister in 2014 — in the aftermath of a referendum in which Scottish voters backed staying in the union by 55-45 per cent — she was fulsome in praise of her predecessor. “Without the guidance and support that Alex has given me over more than 20 years, it is unlikely that I would be standing here,” she told the Scottish parliament.

But Salmond was hardly the first figure in the SNP to spot Sturgeon’s talent. Aged just 16, Sturgeon in 1987 timidly rang the bell of then SNP general election candidate Kay Ullrich to offer her support. Four years later Sturgeon was a veteran student campaigner and, according to biographer David Torrance, Ullrich was presciently describing her to party comrades as the future “first female leader of the SNP”.

Sturgeon, who describes her nationalism as more “utilitarian” than “existentialist”, has said her early interest in politics was driven by anger at the social cost and deindustrialising impact of the policies of late UK prime minister Margaret Thatcher and the powerlessness of Scottish voters to resist them.

After studying law at Glasgow university, she became a community lawyer and a rising SNP star. In 1999, she was elected to the new devolved Scottish parliament and by 2004 she was a contender for the party leadership. But she accepted the junior place on a joint ticket after Salmond, who had already led the SNP from 1990 to 2000, entered the race.

Sturgeon, right, with Kay Ullrich in May 1999 © Mirrorpix/Alamy

Robert Johns, politics professor at Essex university and author of a book on the SNP’s rise, said Sturgeon was a big factor in the party’s fortunes as deputy leader from 2004 and as deputy first minister of Scotland after it won power in Edinburgh in 2007.

“She’s got better and better at being seen as a normal human being and becoming likeable, while at the same time not losing that reputation for competence,” Johns said.

After playing a central role in the 2014 referendum, which the pro-independence Yes campaign lost by a much smaller margin than expected, Sturgeon took over an SNP energised rather than dispirited by defeat.

Today, the first minister enjoys approval ratings unmatched by any other UK party leader despite 14 years in government and a patchy record on key policies.

Voting with her husband Peter Murrell in Glasgow in 2019 © Jeff J Mitchell/Getty Images

An international education survey in 2019 found Scotland’s progress in narrowing the attainment gap between advantaged and disadvantaged pupils had actually slowed since Sturgeon made the issue her top priority four years earlier. And the SNP’s reputation for governing competence has been dented by serious problems with construction and equipment at flagship hospitals in Edinburgh and Glasgow. 

Sturgeon’s instinctive caution and mastery of detail — on display at near-daily televised briefings — appears to have served her well during the coronavirus pandemic. Most voters think she has handled the crisis better than UK prime minister Boris Johnson. While Covid-19 deaths in Scotland are high by international standards, they have been somewhat lower than in England.

But Sturgeon’s determination to keep a tight rein on the SNP and her reliance on a small inner circle of confidants, which includes her husband and SNP chief executive Peter Murrell, has fuelled discontent among some party colleagues. Formidable self-discipline was an ingredient in the once anarchic SNP’s rise, Johns said, but now the party felt “over-professionalised”. “It’s more top-down than it ever used to be,” he added.

‘The Alex Salmond Show’ on RT © Russia Today

Some in the SNP also believe that Sturgeon has been too cautious to take full advantage of a rise in support for independence since the UK in 2016 voted for Brexit despite 62 per cent of Scottish voters backing staying in the EU. Tensions in the party have also grown over her plans to make it easier for trans people to receive official recognition for the gender they identify as.

But it is the rift with Salmond that now threatens Sturgeon’s hopes for a renewed push for a second independence poll.

Relations between the two had already been tested by Salmond’s decision to host a chat show on Kremlin-backed Russian broadcaster RT when in 2018 two civil servants made formal complaints against the former first minister dating to his time of office.

In 2019, the Scottish government accepted that its investigation into the complaints had been “tainted by apparent bias”. At a criminal trial last year, Salmond was acquitted of all of the 13 sexual offences charges against him.

Salmond has accused Murrell and Sturgeon’s chief of staff Liz Lloyd of involvement in a “concerted” effort to damage his reputation “to the extent of having me imprisoned”. They deny the allegations.

Salmond and Sturgeon present the white paper for Scottish independence in 2013 © Jeff J Mitchell/Getty Images

Salmond has also accused Sturgeon of breaching the ministerial code by misleading parliament about when she learned of the complaints against him and by failing to report meetings between the two. And he says she has presided over a broad failure of “national leadership”.

They are charges that, if proven, could prove politically fatal, but Sturgeon — a formidable debater — says she is “relishing” the opportunity to set the record straight on Wednesday.

With crucial elections for the Scottish parliament just nine weeks away, her committee appearance could have a major impact on the UK’s constitutional debate, said Mark Diffley, a consultant on Scottish public opinion.

Polls suggest the SNP has been on course to go from minority to majority government, removing its need to rely on the pro-independence Scottish Greens for support on constitutional matters and providing a strong mandate to demand UK approval for a second referendum.

But securing a majority in the proportionally representative Scottish parliament is a difficult feat that would be made harder if Sturgeon was not seen to effectively rebut Salmond’s allegations, Diffley said. “She can, with a good performance, recover some of the damage,” he added. “It’s a huge deal for her — and she knows it.”

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