ALBERT

Description: The Middle East, home to nearly half of the world’s oil and natural gas reserves, has traditionally been amongst the world’s least diversified regions in terms of its domestic energy mix, which continues to rely for more than 98% on regionally produced fossil fuels. An increasing number of Middle Eastern and North African countries have set ambitious targets for the adoption of renewable energy to supply their future energy markets. Given the limited use of renewable energy technology in the region so far, governments and various private sector stakeholders interested in promoting renewable energy technology in the Middle East find themselves in a challenging position. This paper aims to examine the various stakeholders’ positions; to discuss barriers to the introduction of renewables to the region’s energy markets; and to propose realistic targets and policy solutions to effectively raise the share of renewables in the Middle East’s future energy mix. The post A Roadmap for Renewables in the Middle East appeared first on Oxford Institute for Energy Studies .

Description: This paper examines the implications of the rapid growth in US tight oil production for US and global energy markets. The behaviour of US crude markets is analysed, with a particular focus on changing arbitrage dynamics. The rapid growth in US tight oils production was not met with an equally fast response by the US midstream companies, resulting in severe regional crude price dislocations. These lower regional prices impacted on producer profits and, more significantly, benefitted refineries that secured cheap feedstock and sold end products at levels linked to global product markets. However, we argue that globally, US tight oil production has primarily impacted price spreads though changes in trade flows, rather than absolute oil price levels, given various offsetting factors such as extremely weak supplies from outside the US.‎ Put another way, we argue that perhaps the correct way of seeing the US supply shock is not as something that should result in the collapse of prices, but instead as a factor that has prevented prices from being significantly higher. The post US Tight Oils – prospects and implications appeared first on Oxford Institute for Energy Studies .

Description: Historically, the industry has had a very poor record in predicting oil prices and key fundamental shifts in the oil market, and this time is no different. Not only did most industry and oil market analysts fail to predict the scale of the tight oil revolution, but now that the pendulum has swung in the opposite direction, expectations regarding the impact of the tight oil revolution on global supply dynamics and international prices appear overhyped. However, contrary to the general view in the market that the abundance of tight oil would cause both a sharp drop in oil prices and create a supply glut in crude or refined products, neither has really materialized. This raises a key question: how can the oil market be undergoing a revolution without its effects being felt on global oil prices? One may argue that the impact of shale oil on prices and oil market dynamics is yet to be felt, as some of the underlying forces still need time to unfold. However, we find such an argument unconvincing. If, during the last three years, the large positive US supply shock failed to cause sharp price falls, why would a rise in US supply now bring about falling prices over the next few years? Instead, in this note, we argue that there are some fundamental weaknesses and flaws in the analysis underlying the ‘oil price-collapsing’ scenario and ‘hyped expectations’; current projections of the impact of shale on global oil market dynamics are hence likely to produce ‘off the mark’ predictions once again. We also argue that the current debate neglects some key areas in which the tight oil revolution is likely to have its biggest impact – namely on crude oil and product trade flows, on price differentials, and on the global markets for natural gas liquids. The post The US Tight Oil Revolution in a Global Perspective appeared first on Oxford Institute for Energy Studies .

Description: Spain is living with a high penetration of intermittent renewable power from wind and solar PV. Other EU electricity markets will soon have to do the same, if they are not already doing so. This Comment summarizes a number of the challenges facing Spain as a result of this form of de-carbonization, and also considers the implications for the EU.  For each of the challenges, the Comment suggests possible policy responses.  The Spanish case reveals the need for a fundamental revision of European wholesale electricity markets to reflect the cost structures of de-carbonised  power.  It also highlights the need to reconsider European policies on climate change to enable markets to support innovation in low carbon technologies. The post Living with Intermittent Renewable Power – Challenges for Spain and the EU appeared first on Oxford Institute for Energy Studies .

Description: The Italian gas market is the third largest in Europe with strong demand growth especially in the power generation sector up to the mid 2000s. But projections of demand growth from that era have not been realised. Clearly the impact of the financial crisis and subsequent recession has had a significant impact, exacerbated by the growth in wind and solar generation capacity. Market liberalisation in the 2000s failed to achieve levels of competition in the mid and downstream sectors to the extent seen in North West European markets. This resulted not only in some of the highest European end-user gas prices, but also delayed development of a liquid trading hub. Only in late 2012 did prices at the Italian gas hub PSV align with the prices at the Dutch gas hub TTF and other North West European hubs after capacity availability issues in linking infrastructure were resolved. Italy’s contracted supply commitments considerably exceed current and envisaged gas consumption levels. Scenarios on gas demand are not optimistic and will ultimately depend on future economic activity, tempered by the growth of renewable capacity. This paper takes these issues into consideration, and offers some insights regarding the challenges but also the opportunities that will arise in the Italian gas industry up to 2020. The post The Italian Gas Market – Challenges and Opportunities appeared first on Oxford Institute for Energy Studies .

Description: Natural gas commentary and industry focus on South Asia tends to target India, the largest gas market.   Pakistan and Bangladesh in aggregate however equal India in terms of gas consumption and as such are significant markets in their own right.  This paper by Ieda Gomes is an in-depth study of the genesis and present situation of these two significant gas consuming countries, including the drag on their potential economic output as a consequence of gas supply shortages and the attempts of each to secure gas import projects be they pipeline gas or LNG.  Their lack of success to date due to poor institutional capability, insufficient trust with potential suppliers or merely procedural shortcomings is recounted.  This said, there is clearly a need for both a re-invigorated upstream domestic exploration and development campaign and the implementation of a coherent import strategy.  Reform of domestic pricing is critical to the achievement of both these necessary developments. This paper is a detailed and comprehensive study of these gas markets at a crucial stage of their evolution. The post Natural Gas in Pakistan and Bangladesh – current issues and trends appeared first on Oxford Institute for Energy Studies .

Description: In this OIES Energy and Environment Brief, Benito Müller looks at lessons from fiscal transfer mechanisms, i.e. instruments used to allocate central tax revenue to sub-national governments, for the allocation of (adaptation) resources by the Green Climate Fund. The post The Allocation of (Adaptation) Resources appeared first on Oxford Institute for Energy Studies .

Description: The role of the Arctic region in global petroleum supply over the next decades is becoming a subject of increasing interest as the potential of the region’s geology is revealed and the shrinking of the ice cap makes drilling an increasingly feasible activity. Nevertheless, significant concerns remain, not least the potential impact of any hydrocarbon E&P activity in an environmentally sensitive region. In addition, the lack of existing infrastructure and the likely high cost of any development in geographically remote and climatically harsh conditions mean that the economics of any new project will depend to a large extent on the size of discoveries and the oil price, which, in turn, will be impacted by the development of other sources of oil supply (for example, US unconventional oil) and alternative energies. As a result, although increased activity in a number of Arctic countries suggests that the region could become a major source of future oil supply, there are a number of challenges – including the impact of sanctions resulting from the Ukraine crisis – to be met before this potential can be realized. The objective of this paper is to provide an updated overview of offshore oil and gas developments in the Arctic and to discuss the potential for large-scale development of the region as a petroleum province over the next 20-30 years, thereby providing a starting point for future production estimates and for analyzing how relevant such estimates may be for global oil (and gas) markets. The paper argues that the most likely Arctic offshore areas to be developed first are the Barents Sea and the Kara Sea but that various factors – political, commercial, technological and environmental – have the potential to hamper petroleum development, particularly if the conflict between Russia and the international community continues to escalate, as partnership will be critical if the Arctic resources of the country with the largest geography in the region are to be developed successfully. Executive Summary The post The Prospects and Challenges for Arctic Oil Development appeared first on Oxford Institute for Energy Studies .

Description: During President Putin’s visit to Beijing in November 2014 Gazprom and CNPC signed a memorandum of understanding concerning the export of gas to China via the so-called “western route” via the Russian republic of Altai. The announcement was hailed by Russia as another example of its shift towards Asia as a diversification of its traditional gas export business in the West. This has important implications not only for Russia and China, but also for all the other potential suppliers of gas, and especially LNG, into North-East Asia. Confirmation that China could import up to 68bcma of Russian gas starting from 2019 would create a significant dent in the country’s potential LNG import requirement from 2020, increasing the competition between the planned sources of supply that are being constructed and planned over the next 5-10 years. Despite remaining doubts as to whether both Russia – China pipeline deals proceed to completion, it would appear that LNG suppliers are right to be concerned, as there is real commercial as well as political logic for significant Russian gas to flow south into the world’s fastest growing gas market. From a Chinese perspective, growing gas demand, uncertainty over some of its existing sources of supply, a desire to create more competition with Central Asian gas and the one-off nature of the opportunity to negotiate with Russia from a position of exceptional bargaining strength mean that an Altai deal is also likely to make sense. There may be some concern over the need for more Russian gas, with the possibility that total supply of 68bcma (the combined capacity of the Power of Siberia and Altai pipelines) could account for as much as one third of total Chinese imports by 2030. However, any potential security of supply threat is offset by the fact that the Russian contribution to overall Chinese gas consumption would be much lower, at around 13%, while the share of gas in the China’s total energy balance is estimated to remain below 10% at that date. Overall, then, the potential for a deal on exports via the Altai pipeline appears to have significant commercial and political logic. If a deal is signed, substantial problems will still remain, not the least of which will be Gazprom’s ability to raise the money needed to build the pipeline given its current inability to access western capital markets. Nevertheless, the impact of the signing of an Altai deal alone could have a significant impact on the ambitions of companies planning LNG projects that are also targeting the Chinese market, and as such the continuing discussions will require attentive observation over the next 12 months. The post The Commercial and Political Logic for the Altai Pipeline appeared first on Oxford Institute for Energy Studies .

Description: The government has an ambitious renewables programme whose costs have been much discussed. Unfortunately, due to the polarised nature of the debate, it has not produced clarity and some basic points remain obscure – are renewables cheap or expensive? Are renewables costs rising or falling?  This Comment, by Malcolm Keay, looks at two important aspects of the issue – resource and system costs – which have often been neglected but which throw light on the debate and help explain some of the uncertainties about the likely cost of meeting the government’s targets.

Description: At the second meeting of the Green Climate Fund (GCF) Board in October 2012, India announced they would prepare a submission with regards to the Board deliberations on a business model for the GCF. A consultation meeting was held in New Delhi on 15-16 February 2013 for which Benito Müller (Director Energy and Environment, OIES) was asked to contribute one of three background papers, focussing on access modalities and disbursement instruments. This Oxford Energy and Environment Brief is based on this background paper.

Description: High oil prices and the environmental advantages of gas have led to increased interest in natural gas as a transportation fuel though barriers such as lack of refuelling infrastructure and inadequate policy actions have inhibited growth in many countries. Levels of global car ownership are forecast to continue to grow strongly as is the demand for road freight. Significant penetration of the transport sector by natural gas could therefore represent an attractive growth opportunity for the fuel – not least in Europe where the gas demand outlook is for low or negative growth rates. The paper will cover the following aspects: •     The technical, commercial and environmental case for natural gas transportation (NGT) versus other fuel options •     The extent and likelihood of the adoption of natural gas as a transportation fuel in the European market under existing and potential policy directions •     The long term impact on European gas demand of alternative policy scenarios encouraging NGT usage •     The key policy drivers and structural aspects that could encourage or inhibit the development of the NGT sector in Europe

Description: The UN Framework Convention on Climate Change implies that countries should shoulder costs and burdens of climate change in accordance with differentiated responsibilities and respective capabilities, but it does not indicate how these fairness parameters are to be quantified. In this OIES Paper, Benito Müller and Lavan Mahadeva provide a novel and distinctive methodology (‘Oxford Approach’) regarding quantifying the (economic) capability of countries as a contribution to assessments of fair cost/burden distributions, an issue of central importance in the upcoming international climate change debate.

Description: While oil, economy and politics are subjects that are often debated in discussions of contemporary Iran, the political and institutional framework that both enables and constrains Iran’s oil sector has rarely been made an explicit subject of analysis. The relative neglect of this area has left a gap in our scholarly understanding of Iran’s most important industry and its symbiotic relationship with the shifting configurations that constitute the Iranian political elite. The importance of filling this gap has become particularly salient in light of the current consolidation of oil sector decision making under the Iran Revolutionary Guards Corps (IRGC). William’s research will examine contemporary changes in the confluence of oil, politics and institutions to map the new trajectory along which Iranian oil sector strategy and governance is currently developing. Bringing to bear an intimate knowledge of the Iranian political landscape, the research will place sectoral developments in a broader analytical landscape that will encompasses Iran’s domestic and international position.

Description: This paper assesses the prospects and challenges facing the Republic of Cyprus in developing the discovery of a significant offshore gas field by Noble Energy in December 2011. This discovery came close on the heels of the major discoveries in adjacent offshore Israel, further astounding the international upstream exploration and production community who had largely overlooked the prospectivity of this area.   For the Republic of Cyprus, whose economy is dominated by tourism and the service sector and overshadowed by Eurozone economic malaise, this discovery offers lower domestic energy costs and substantial export revenues. However, as is often the case with unexpected fortune, decisions on how best to develop such a resource for the benefit of a nation with a history of inter-ethnic tensions are not straightforward and further complicated by Cyprus’ geographic and geopolitical setting. Anastasios Giamouridis describes the status of the Aphrodite field and juxtaposes the logical process of progressively defining options for the development of the field and the export strategy for gas produced in excess of Cyprus’ modest current and future consumption needs with the rising expectations, not just of the Cypriot government but also neighbouring countries with either aspirations to share in this source of hydrocarbon wealth or openly disputing Cyprus’ sovereign hydrocarbon ownership rights.  Anastasios introduces the pros and cons of future unitisation and joint development with Israel and examines the institutional capability of the Cypriot government to guide the monetisation of the resource at a time when it is also focused on Cyprus’s EU Presidency in the second half of 2012.

Description: To most analysts, the combination of geopolitical and economic factors constitutes a ‘perfect storm’ that will keep an upward pressure on oil the price for the rest of 2012. The purpose of this short article is to broaden the debate and consider some potential weaknesses in the dominant story. The article will highlight three main points. First, the premises upon which the story of tightened market fundamentals is built are subject to a wide degree of uncertainty. Second, the channels expected to put an upward pressure on the oil price are not exogenous: they tend to interact with each other and are shaped in part by oil price behaviour. Finally, the feedback from policy circles seems to be different this time from that seen in the previous oil price cycle, and thus should not be ignored. This is not to say that dominant expectations of very tight market fundamentals may not materialize. They may well do, but this is not a foregone conclusion.

Description: This energy comment is a response to a paper by Sergei Komlev, from the Contract Structuring and Pricing Directorate of Gazprom Export, which challenged the conclusions of previous OIES research on European gas pricing and suggested that we had “refused to engage constructively with those who offer opposing viewpoints.” In this comment, Jonathan Stern and Howard Rogers set out the differences between their research and that of Sergei Komlev and respond to his criticisms. They conclude that that contractual linkage of European natural gas prices to oil no longer has any market reality, and is only held in place by existing long-term contracts. By contrast they suggest that Komlev is refusing to recognize that the era of oil-linked gas pricing is drawing to a close in Europe (and is subject to increasingly serious challenge in Asia) and also refuses to accept that such changes represent a secular trend which will not be reversed. This is far from an academic argument: the extent to which Gazprom is willing to change its views on pricing will have a significant impact on Russian gas supplies to Europe, and hence on the future of the entire European gas market.

Description: This report was supported by the UK Foreign and Commonwealth Office (FCO) Prosperity Fund for Latin America. It examines the feasibility of private investment in wind power in Colombia within the current regulatory framework.  It focuses especially on the regulatory methodology for estimating the “firm energy” that wind power plants are capable of providing in Colombia to back up hydro generation during extended periods of drought (El Niño weather events).  Our conclusion is that the current methodology probably underestimates wind’s firm energy contribution, possibly by a substantial amount. This in turn means that wind power stations receive a lower firm energy payment than they should.  We consider this to be an important barrier to investment in wind power in Colombia. We recommend that the Colombian Government reconsider their methodology for estimating the firm energy capacity of wind power and of other (non hydro) sources of renewable power.

Description: The earthquake and tsunami which left its toll of destruction and the tragic loss of life on Japan’s eastern seaboard on 11th March 2011 was a natural disaster of the highest order.  This working paper addresses methodically and in detail the extent of the impact of the events of 11th March 2011 on Japan’s energy complex and describes how, through higher utilisation of fossil fuel plant and enforced and voluntary demand conservation measures, the country has coped with this unprecedented reduction in generation capacity. Looking forward, the key uncertainty is the policy-driven path of future nuclear generation. It is in this context that the paper provides a timely and robust evaluation of Japan’s future LNG import requirements based on a range of scenarios regarding the future utilisation of operable nuclear power facilities. Importantly the paper also analyses the strong growth in industrial consumption of LNG in the period prior to 2011 and identifies this as a continuing source of demand growth tempered perhaps by the prevailing linkage of imported LNG prices to crude oil. Compared to the 2010 LNG consumptions levels of 69.8 million tonnes, the paper shows a range for 2015 from 75.5 to 84.8 million tonnes, and for 2020 78.1 to 88.7 million tonnes, depending on decisions to re-start nuclear plant.

Description: This paper by Howard Rogers addresses the issue of the challenges in establishing Carbon Capture and Sequestration at a commercial scale in the power generation sector, especially as this has been repeatedly proposed as a key policy in furtherance of CO2 emission abatement in the last decade. For those who have become increasingly frustrated by claims about, rather than demonstrations of, the contribution which natural gas can make to a low carbon economy, it has become important to understand more of the detail behind the headlines of carbon capture and sequestration (CCS). This paper shows that all aspects of the implementation of CCS projects are complex, albeit that the underlying technologies have been used individually in the petrochemical, refining and upstream industries for decades. Costs, and technical and commercial complexity go a long way towards explaining why there is no gas-fired power plant with CO2 capture and storage in operation or under construction anywhere in the world. The few gas-related CCS projects which exist mainly serve to process natural gas to grid specification and either store CO2 close to gas production sites, or use it for enhanced oil recovery. With slower than expected progress of other forms of power generation, UK policy makers have come to the realisation that gas-fired capacity will remain important for a considerable period of time. This in turn will mean that the question of whether CCS should be fitted (and retrofitted) to gas-fired power generation is likely to move higher up the UK’s climate policy agenda. Howard Rogers’ study demonstrates that, on paper, gas-fired generation with CCS can be more competitive than the low carbon generation options such as Offshore Wind, generally assumed to grow most significantly in the UK over the next decade but the commercial complexities of CCS projects set out in this paper, do not give cause for optimism about its future development, absent a clear and sustained commitment from government. It is no part of the OIES Gas Research Programme’s remit to promote natural gas, either in the UK or more generally. However, our research increasingly suggests that the likely future role of gas in energy balances has been, and continues to be, under-estimated in a range of countries, including perhaps until very recently, the UK.

Description: This paper by Patrick Heather assesses the development of the European Continental Gas Trading Hubs. It is a natural successor to his 2010 paper ‘The Evolution and Functioning of the Traded Gas Market in Britain’.  Although the drivers and challenges for gas trading on the European Continent have been different from those of Britain, the desire for change at an EU policy level, the catalyst of the economic recession and the sea-change in the acceptance of trading have all contributed to an astonishing development in European gas hubs over the past few years. Based on extensive research and discussion with the key actors intimately involved, the paper provides deep insights into the characteristics of the individual hubs, the reasons behind their particular evolutionary path and their characterisation as ‘Trading Hubs’ (NBP and TTF), ‘Transit Hubs (ZEE and CEGH) and ‘Transition Hubs’ (GPL, NCG, PEGs and PSV); a framework which assists the reader in better understanding the current and future role of each.

Description: The Controvery over Energy Subsidies

Description: The countries of the Middle East and Africa sit on large reserves of natural gas, but their share of international trade looks unlikely to increase significantly by 2020. Fast-growing domestic demand is, in many of these countries, putting considerable pressure on domestic gas supply, resulting in reduced exports and growing import needs. Artificially-low domestic gas prices are a key feature of this state of play. They need to be reformed if these regions – especially the Middle East and North Africa – are to contribute to international gas trade more as a source of exports than as a growing demand (and import) centre. However, reforms of gas (and energy) prices remain tentative because of the political economy logic in which they tend to be rooted and in which governments appear to be locked. This is not to say that solutions do not exist – remedies can be devised based on existing experiments and country-specific circumstances. This paper analyses the political economy of domestic pricing in gas-rich developing countries in the Middle East and Africa, and chronicles the pricing mechanisms in the main export and import contracts in these regions, helping assess the disconnect between domestic prices and international prices and its implications for gas use in these regions.

Description: In February 2012, during a period of extremely cold weather across Russia and large parts of Europe, Gazprom failed to supply all the gas that was requested from it by its non-CIS customers in countries ranging from Poland in the north to Italy and Greece in the south of Europe. This situation led to concerns over a gas shortage and caused gas prices to spike at all the major hubs on the continent and in the UK. This Comment argues that the supposed supply “crisis” was not caused by any production shortfall in Russia but by a combination of inadequate storage available to Gazprom, excess gas withdrawal by Ukraine and in particular by political considerations in Russia ahead of the Presidential election in early March. However, it does highlight the current constraints to the Russian gas supply machine under certain severe temperature conditions. The paper also argues that, in contradiction to the claims of Alexander Medvedev (the Head of GazpromExport) that “spot markets failed to compensate for the increased demand”, in fact the markets had a logical price reaction to daily supply/demand changes. Although this reaction resulted in sharply higher prices in the short term, this provided a potent commercial signal which in turn led to spot supplies and/or demand management and then, as the situation resolved itself, produced lower prices so that the monthly average was still below the oil-indexed average price. While it is certainly true that the mature hubs at NBP and TTF reacted in a more responsive manner than some of the Continent’s less liquid hubs, it was nevertheless the case that, overall, customers were supplied at a market price and traders were able to arbitrage a short-term supply and demand imbalance.

Description: The financialization of oil futures markets has been held responsible for a variety of phenomena including changes in price volatility, increased co-movement between oil futures prices and other financial asset and commodity prices, a breakdown of the statistical relationship between oil inventories and the price of oil, and an increased influence of the decisions of financial investors such as swap dealers, hedge funds and commodity index traders on the oil futures price. Most importantly, there is a perception that oil futures markets no longer adequately perform their functions of price discovery and risk transfer. In this presentation, Dr Fattouh reviews the evidence in the academic literature and evaluates to what extent it provides support for the proposed effects of financialization.

Description: This paper, by Fan Gao, assesses the extent to which China is likely to achieve levels of shale gas production by 2020 which would make a meaningful difference to its growing need for imports of pipeline gas and LNG. The study suggests that given the rather disappointing progress on Coal Bed Methane production since exploration and development work started some 25 years ago, a cautionary approach is needed in anticipating the outlook for shale gas for the remainder of this decade.  The specific challenges include water availability and population density demographics as well as the need to stimulate an innovative competitive dynamic in the Chinese upstream service sector and an appropriate upstream investment framework with foreign participants for the transfer and application of technology. The paper provides a rare appreciation of the dynamics of the onshore Chinese upstream industry and from that basis a better understanding of what will be required, on a number of policy levels, for Chinese shale gas development to succeed.

Description: This presentation by Malcolm Keay was delivered at a British Institute of Energy Economics seminar on 25 April 2012.  It looks at the links between energy efficiency and sustainability and concludes that they are much more complex than they might appear at first sight.

Description: As one of the world largest holders of oil as well as natural gas, Iran is a significant producer of both. Yet, international sanctions which have intensified in recent years have significantly dented the country’s oil and gas industries’ short- and medium-term prospects. National oil company NIOC’s own set target of producing 4.5 mbd by 2010 was not met and meeting the desired 5 mbd benchmark by 2015 looks by now very unlikely; indeed, Iran’s long term industry-intern challenges have most recently been added to by the intensifying conflict with Western nations in expectation of a new round of sanctions aimed at Iran’s oil sector. This paper aims to examine the status of Iran’s oil sector; to draw lessons from previous year’s of sanctions and its effect on Iran’s oil sector; and to conclude from our observations Iran’s potential role as a producer and exporter of oil.

Description: The aim of this study is to explain based on the case of the GCC economies the particular ways in which many oil- and energy-rich economies price energy domestically; to identify different cost concepts and observed and potential future caveats of these pricing systems, such as rapidly rising energy demand, lack of energy efficiency and a rapid depletion of exhaustible natural resources; and to draw policy lessons for energy-rich countries’ pricing strategies.

Description: This paper suggests a new approach to analysing the distribution of natural resource revenues and applies it to the case of Mexico. It defines a natural resource entitlement as a citizen’s per capita share of their country’s natural resource rents. The main finding is that, according to official estimates, Mexican fiscal policy transfers oil entitlements from the bottom 90 percent of the population to the top 10 percent of the population. This implies that, although fiscal policy is progressive relative to market income, it is regressive once oil entitlements are taken into account. I consider a fiscal reform that would ensure that every citizen received their oil entitlement, and in doing so would eliminate extreme poverty.

Description: Sharing costs and risks are the basic foundation of any the joint venture. However, the required financial commitments might be jeopardized either by a co-venturer who cannot afford the payment of the related costs or a co-venturer who simply chooses not to pay its share. The petroleum industry tends to rely on the forfeiture of interests as a threat to deter such behaviour but as a remedy this is often uncertain in times of its enforceability and could operate to the benefit of the defaulting party. The options to consider are collateral support provision, secured interests and cross-default options structured over wider asset interests. The recommendations which should arise out of this research intend to provide safer guidance for a long term relationship in a joint venture in the petroleum industry.

Description: The increasing maturity of Russia’s onshore fields, especially those in West Siberia, and the potential for the country’s production to go into sharp decline over the next decade has prompted the Russian government to promote offshore development as a potential solution. President Putin has encouraged his state oil company to seek international partnership to bring in the requisite technical and management expertise as well as much needed capital to fund what will be very expensive projects. The immediate consequence of this activity has been the formation of three joint venture partnerships between Rosneft and Exxon, ENI and Statoil respectively, with the IOCs finally seizing the chance to exploit their competitive advantages in a region with huge resource potential. However, despite the undoubted benefits which these new partnerships can bring for all parties in terms of technical knowledge exchange, reciprocal asset deals, diversification of risk and potential upside from exploration success, it would appear doubtful whether the results of their activity can be anything other than a long-term solution to Russia’s production issues. Therefore, the Russian government may need to increase the incentives for both domestic and international companies to exploit the country’s more accessible onshore resources if the country’s current levels of oil production are to be maintained in the short to medium term.

Description: Energy subsidies form an important part of many governments’ policies in the developing world, the Arab world being no exception. The primary goal behind energy subsidies is often to address underlying poverty issues and to enable all citizens to access at least basic forms of energy. However, the use of energy subsidies has been criticised by numerous national and international observers as ineffective in achieving its goal, and for creating large scale energy waste. Organisations such as the OECD and the IEA are now calling directly on their member states to eliminate energy subsidies. Iran, the Arab world’s most immediate neighbour and a major energy producer has recently set an example of how a large-scale reform of energy subsidies can be realised; in tandem with the removal of direct and indirect energy subsidies, particularly vulnerable parts of society are protected through the disbursement of compensatory, universal cash transfers. This research looks at the situation of energy subsidies prevalent in the Arab world their impact on the region’s economies, with a focus on non-GCC countries. It also proposes options for the reform of energy subsidies in the context of the Arab world.

Description: This paper, by James Henderson , concludes that Russian domestic gas prices are not likely to reach European netback levels any time soon, but that the momentum of the past five years towards significantly higher domestic prices will continue, leading to an eventual liberalization of the Russian gas market. Over the next decade, this could create fundamental changes in Russia’s relationship with European gas markets with potential competition for available supplies between domestic and European export markets.

Description: The European Commission has broken new ground in proposing to streamline national planning approval of vital energy infrastructure, use EU funds to leverage private finance for such networks and to negotiate foreign pipelines on the EU’s behalf. These initiatives coincide awkwardly with the eurozone crisis. But David Buchan broadly endorses Brussels’ attempt to kick-start implementation of Europe’s 2020 energy and climate goals. He suggests the Commission go a step further by taking advantage of the forthcoming treaty revision to propose a constitutional amendment on EU states’ energy mix.

Description: While much of the emphasis of the literature on energy poverty is on the prevalence of the phenomenon in sub-Saharan Africa and South Asia, little has been written about energy poverty in the Arab world. Traditionally having being seen as one of the world’s most energy rich regions, the Arab world has in recent years often been overlooked as a region which suffers severely from energy poverty itself. In 2002, about 65 million people in the Arab world had no access to electricity, and an additional 60 million were severely undersupplied in both urban and rural areas. In terms of cooking and heating, almost one-fifth of the Arab population rely on non-commercial fuels like wood, dung, and agricultural residues particularly in Comoros, Djibouti, Sudan, Yemen, and Somalia but also in Algeria, Egypt, Morocco, and Syria. This study fills a gap in the existing literature by looking at the case of prevailing energy poverty in Yemen, one of the poorest countries in the Arab world.

Description: In 2004 a large discovery of oil was made in Rajasthan, a relatively poor state in north-west India. Oil began to flow in 2009. The estimated total hydrocarbons resource base in Rajasthan is 6.5 billion barrels, and the fields are estimated to have the potential to reach output levels of over 200,000 barrels of oil per day. The quantities of oil that are expected to be produced, and their resulting revenues, are significant, but unlikely to be transformative to the state’s finances. However, given low levels of economic and human development, effectively-spent resource revenues could have a significant impact on the welfare of Rajasthan’s citizens.  This paper discusses options for the use and management of oil revenues in Rajasthan, picking up the challenge from the point at which revenues start to flow to the government. The receipt and expenditure of oil revenues are matters for fiscal policy, and we consider them in the context of India’s federal system, where fiscal responsibility is divided between the federal government and state governments. Drawing on international experience, we discuss how resource revenues are spent in practice, and how they might better be used to benefit the citizens who ultimately own them.

Description: In parallel with a flourishing economy, the natural gas industry in Spain was characterised by rapid consumption growth in the late 1990s and 2000s. Infrastructure and supplies were designed to meet the needs of a gas market growing at double digit rates each year. This high growth rate – for a European gas market – was expected to continue until at least the mid-2010s. By 2011, this outlook was replaced by a more pessimistic one. Firstly, the country’s economy was hit hard by the global recession and GDP growth recovered later than average for Europe. Secondly, the utilisation of Spain’s CCGTs dropped from 52% in 2008 to only 33% in 2010 as a result of an increasing use of renewable energy – especially wind and hydropower – to produce electricity. This raises the question of whether the expectation of gas demand in the Spanish power sector is ever going to materialise. The objective of this paper is to investigate the state of the Spanish gas market and its potential for growth. Will the negative impacts on the gas market be short lived or is there a need to review the scenarios to incorporate new dynamics relative to economic growth and renewable energy use? What will the consequence be of these changes on the gas industry?

Description: The Oxford Institute for Energy Studies has recently published a paper which concludes that agreement between Russia and China for pipeline gas exports may not be reached this year or even in 2012. The paper by James Henderson suggests that the Chinese have developed other gas import options from Central Asia, Myanmar and a range of LNG suppliers which mean they are not in a hurry to conclude a contract with Russia. On the other side of the border Gazprom does not want to compromise on the principle of oil-linked pricing on which it is insisting in its European export contracts. Both sides believe themselves to be in a powerful position without the need for compromise, but the paper suggests that if the first pipeline project could be located in Eastern Siberia – instead of the Altai line from Western Siberia which is Gazprom’s priority – then it would be easier to agree a price acceptable to both parties.

Description: Carbon dioxide (CO2) emissions are essentially cumulative in character; but much of the economic analysis and policy making in relation to the mitigation of CO2 emissions fails to reflect fully this fundamental feature of any analysis of the impact of emissions on climate. The cumulative and irreversible nature of CO2 emissions implies that a significantly heavier weight should attach to current as opposed to future emissions. Unfortunately current application of market-based approaches to limiting carbon emissions delivers a contradictory message, with the price of current emissions being very low but with a prospect of rapid rises in the future. This inconsistency has the potential to create major distortions in policy and is likely to be seriously sub-optimal. Similar criticisms can be levelled at policies or climate negotiations based on individual year targets rather than cumulative emissions. Policy making needs to redress this imbalance. Focus on the cumulative nature of CO2 also strengthens the case for urgency and leads to more recognition of the positive option value of early action on emissions.

Description: The events that took place in the Arab world in the opening months of 2011 mark a watershed in the history of the Middle East and North Africa (MENA) region. Given the importance of MENA energy supplies in global economic terms, the political unrest witnessed by the region has caused widespread fears about the prospect of energy supply disruptions. With international oil and gas prices beginning to rise from 2010, there was serious concern among market and political actors that any further increase in prices would put at risk the fragile recovery of the global economy from the deepest recession in decades. This paper examines the significance of the recent Arab uprisings and their implications for regional and global oil and gas markets. It argues that, although markets were able to cope resiliently in the short term, there remains much uncertainty about the likely longer-term implications of the recent events.

Description: This Oxford Energy and Environment Brief by Dr Benito Müller (Director Energy and Climate change at OIES) discusses a way in which the Kyoto Protocol could be used to provide the framework for a legally binding outcome in the current UN climate change Negotiations.

Description: While the former Soviet Union is usually thought of as a gas producing region, it is also the second-largest regional market behind north America – and that even modest changes in consumption could have big implications for future production in the region, the investment required for it and the availability of gas for export markets. The paper considers the substantial demand reduction that could be achieved with efficiency measures, and the reasons why progress towards these has been painfully slow and the potential largely unrealised. The paper concludes that some efficiency gains have already been made, and more could be achieved quite soon, largely as a result of the long-term trend towards higher gas prices, whereas larger-scale gains, dependent e.g. on power and heat sector reforms, will take much longer. The analysis is underpinned by a detailed study of the statistical information available, with particular reference to consumption by various economic sectors.

Description: This paper by Howard Rogers challenges the assumption of UK government policy papers and projections that, as a result of substantial increases in renewable and other low carbon generation capacity, the role of gas in the will decline rapidly over the next decade and beyond. The study suggests that gas will retain a central and undiminished role in the UK power generation sector. Although its role in the power generation sector may change, gas is likely to be particularly important in respect of ensuring security of supply in the context of increasing intermittent wind generation. As a result, additional gas storage will be needed and, given current market conditions, immediate attention needs to be devoted to creating incentives to ensure this will be provided.

Description: Nuclear Energy post Fuklushima Malcolm Grimston Gordon Mackerron Malcolm Keay Interconnecting the GCC States Laura El-Katiri Oil and Gas Resources Bassam Fattouh James Henderson Juan Carlos Boue

Description: In this Comment, Dr Shamil Yenikeyeff analyses the reasons for the collapse of BP’s Arctic partnership with the Russian state company Rosneft. He argues that the BP–Rosneft deal was inauspicious even before it was signed due to the history of the Kremlin’s reluctance to back BP plc in its often uneasy relations with the AAR consortium – BP’s Russian partners in the TNK–BP joint venture. Dr Yenikeyeff analyses the motives of the key players involved and looks at the possible future of BP’s involvement in Russia.

Description: Oil prices are largely formed at the junction of the financial sphere and the physical sphere. This is particularly true for the main markers, such as Brent prices. The term “Brent prices” may refer to several type of contracts (see, for example, Bossley 1999) traded by physical and financial participants. The main contracts interacting in the Brent sphere are ICE Brent futures contracts, Dtd. Brent, Forward Brent and Brent CFDs. In this article we look at the interaction between these contracts, resulting in part from the price assessment methodology of Price Reporting Agencies (PRAs). Our conclusion is that changes in PRAs methodology in the past ten years, first aimed at avoiding price manipulation, today can guarantee an anchor to the physical market for oil prices.

Description: This Oxford Energy and Environment Brief is the first of two papers by Benito Müller on the theme of ‘Equity and the Durban Platform’ as recently presented at the Centre for Policy Research in New Delhi. The Brief focuses on the question of how to operationalize the principle of common but differentiated responsibilities and respective capabilities as enshrined in Article 3.1 of the UNFCCC. It does so by looking at the controversy about the introduction of international aviation in the EU Emission Trading Scheme as a case study and uses the proposed operationalization to suggest options for compromise in that dispute.

Description: Despite the existence of other regional crudes with a much larger physical base, more than 25 years have now passed, and most cargoes from the Gulf destined for Asia are still priced against Dubai. Nevertheless, the nature of the Dubai benchmark has evolved and many of the institutional and pricing details have witnessed major transformations, driven in large part by the decline in Dubai’s oil production and innovations in the pricing mechanisms introduced in the 2000s. In theory (and in practice to some extent), the price of Dubai may be identified from the financial layers that have emerged around Dubai and Brent. The Brent complex sets the price level for Dubai while the EFS and the inter-month Dubai spread market set the price differentials against Brent. Since physical benchmarks constitute the pricing basis of the large majority of physical transactions, some observers claim that derivatives instruments such as futures and swaps derive their value from the price of these physical benchmarks. However, this is a gross over-simplification and does not accurately reflect the process of crude oil price formation in the case of Dubai.

Description: The expansion of the ESPO pipeline to China and the Pacific has re-focussed attention on Russia’s oil export priorities and the question of whether it will have sufficient supplies to meet its export goals to both western and eastern markets. This research will explore Russia’s oil export priorities and the available supply to meet them, reflecting the current trend for expansion in Asia that has already caused some crude to be withdrawn from exports to Europe. We will examine Russia’s future production profile, likely domestic demand and overall export plans and attempt to identify any key issues that individual companies and the Russian government itself may have to face as demand from Asian markets for Russian crude oil increases. The post Crude oil trade flows from Russia appeared first on Oxford Institute for Energy Studies .

Description: Oil Benchmarks The post Oxford Energy Forum – Issue, 94 appeared first on Oxford Institute for Energy Studies .

Description: LNG has been a priority for Gazprom for the past decade as it has attempted to establish itself as a global player in the gas market, but it is now becoming an area of increasing competition with its domestic rivals. This report will examine how Russia’s overall LNG strategy is developing, who the key players will be and whether the country’s LNG projects can be competitive in the global gas market. It will also question whether the development of an LNG business will mark a change in overall gas strategy for Russia, and if it might also mark a gradual change in the position of Gazprom as the dominant player within the sector. The post Russia and the Global LNG market appeared first on Oxford Institute for Energy Studies .

Description: China’s growing energy import dependence makes the economy more vulnerable to global energy market instability.  This is how the US felt after the Arab oil embargo.  Today, the US and China have reversed places.  China is now the world’s largest energy consumer and the country most dependent on energy imports, especially from the Middle East, while the US is on the way to becoming energy self-reliant.  How China deals with this will have a significant influence on global energy markets and climate change, and on international relations.  This set of slides examines China’s energy demand, its growing reliance on energy imports and some possible implications for international energy markets and China’s international relations.  The slides were presented to the Oil and Gas Network (NOG) in Stockholm in October 2013. The post China’s growing energy demand – some internationsl implications appeared first on Oxford Institute for Energy Studies .

Description: Natural resource wealth is frequently said to inhibit economic growth and to abet and prolong political conflict both across and inside national borders. High resource concentrations of oil in particular have been associated with political conflict, owing primarily to the enormous resource rent potential control over these resources offers. The fundamental role played by oil export rents as a powerful source of income raises incentives for different sides to a national or cross-border conflict to fight for control over these resources, while the ensuing rental income stream to whoever is eventually in control provides a formidable source of income during times of conflict. Oil  also has a critical role to play in the political economy of resource-endowed post-conflict states, a relationship that has so far received little academic attention. This study aims to fill a gap in the literature, looking at both roles of an oil industry played during conflict and in its aftermath at the stage of state reconstruction. It aims to do so by focusing on one to two case studies, with the aim of deriving a general set of channels of interaction between oil and national post-conflict state-building. The post The Political Economy of Oil in Post-Conflict States appeared first on Oxford Institute for Energy Studies .

Description: The shifting political landscape in MENA and the relatively high oil prices have recently reignited many of 70s’s and 80’s debates about energy security and the reliability of MENA as an energy supplier. However, the context of the debate has been transformed:  The global economy is still recovering from one of deepest financial crisis since post World War II; Global energy demand dynamics and trade flows have shifted towards non-OECD; the US oil and gas ‘revolution’ has reduced reliance on the Middle East oil imports and created expectations of US energy independence; and the Arab Spring has resulted in sweeping changes in MENA’s political and social landscape increasing the risk of regional spillovers and increasing political fragility and polarization in many MENA countries. The objective of this paper is to discuss implications of the current output disruptions and to identify some structural features in the region that could shape the long-term prospects of the region’s oil and gas sectors and their role in the global oil and gas markets. The post The Arab Spring and its Implications for Global Oil and Gas Markets appeared first on Oxford Institute for Energy Studies .

Description: LNG has been a priority for Gazprom for the past decade as it has attempted to establish itself as a global player in the gas market, but it is now becoming an area of increasing competition with its domestic rivals. This report will examine how Russia’s overall LNG strategy is developing, who the key players will be and whether the country’s LNG projects can be competitive in the global gas market. It will also question whether the development of an LNG business will mark a change in overall gas strategy for Russia, and if it might also mark a gradual change in the position of Gazprom as the dominant player within the sector. The post Russia and the Global LNG market appeared first on Oxford Institute for Energy Studies .

Description: This paper focuses on the extent to which fuel price movements in international markets are passed on to consumers in the BRIC, aiming to identify the pricing processes and their consequences on the downstream sector. Firstly, it will give a brief  history of petroleum product pricing in Brazil, Russia, India and China (BRIC), arguing that in both India and China, the effect of the latest reforms has been to move local prices towards international levels, while in Brazil and Russia, despite officially deregulated prices, the trend is not clear. It will describe the pricing mechanisms applied in these countries and the key policies used by governments to influence local prices. The paper will identify the main entities bearing the losses from pricing gasoline and diesel below market prices and how the pricing issue is affecting downstream investment. Finally the paper draws together some of the main lessons learned from the BRIC experience. The post Gasoline and diesel pricing in BRIC countries: Key Issues and Prospects for Reform appeared first on Oxford Institute for Energy Studies .

Description: The experience of the independent oil sector, particularly that of the United States and Colombia, suggests that independent players should be taken seriously in terms of their ability to boost oil output and develop new technologies. Although Russia’s independent oil companies face bigger challenges, when it comes to business operations, infrastructure access, ownership of resources, fiscal incentives and administrative barriers, than their counterparts in the United States or Colombia, the Russian oil sector, nevertheless, offers many opportunities. First, Russia’s vertically integrated companies (VIOCs) traditionally develop large hydrocarbon fields with reserves exceeding 10 million tonnes of oil-equivalent. However, large fields only make up about 25% of the Russian hydrocarbon base. The remainder is made up of smaller fields, the development of which is not commercially attractive to the domestic oil majors or international oil companies. Second, non-integrated small and medium oil enterprises (SMEs) could tap into non-producing mature oil fields and idle oil wells which remain on the balance sheet of Russian vertically-integrated oil companies. This research explores the potential of Russia’s SMEs to increase their role in domestic oil production by examining political, administrative, legal, economic, and corporate barriers that currently hinder their growth. The post Russia’s independent oil sector – the fruit at the bottom of the bowl? appeared first on Oxford Institute for Energy Studies .

Description: This paper aims to critically examine the potential economic benefits and challenges associated with renewable energy in the GCC. Kuwait is selected as a case study in order to identify key economic and policy issues that may help materialise economic benefits or hinder their materialisation in the case of Gulf oil and gas producers, with potential application to neighbouring countries such as the UAE, Qatar and Bahrain. In particular, the paper will discuss the benefit of renewable energy sources where these replace crude oil and oil products in electricity generation, with potential applications in desalination. The paper further aims to provide policy lessons and recommendations aimed at promoting renewable energy as an economical value-added energy source, rather than – as it is frequently promoted – as an end in itself. The post Renewable Energy Barrier and Opportunities in the GCC Economies: A Case Study of Kuwait appeared first on Oxford Institute for Energy Studies .

Description: The Green Climate Fund is at a crossroads where it must choose between the traditional centralized or a novel devolved decision making model. The next meeting of the GCF in February will be key as it will for the first time be explicitly discussing enhanced direct access through (national) funding entities which has devolution of decision making as its corner stone. This Discussion Note by Benito Müller takes stock of the deliberations on direct access and the correlated issue of country ownership, and considers how these issues should be taken forward at the February meeting. The post Enhancing Direct Access and Country Ownership – Status Quo and the Way Forward appeared first on Oxford Institute for Energy Studies .

Description: This OIES Energy and Environment Working Paper is the third and final study on resource allocation which Dr Benito Müller has been engaged in over the past year – the previous papers being on the Allocation of (Adaptation) Resources : (September 2013) and on Quantity Performance Payment by Results: (July 2013). This Working Paper looks at the lessons to be learned, in particular for the Green Climate Fund, from the Performance-Based Allocation (PBA) system of the World Bank’s International Development Association (IDA), and the Resource Allocation Framework (RAF) as well as the System for Transparent Allocation of Resources (STAR) of the Global environment Facility (GEF). The post Performance-based formulaic resource allocation – a cautionary tale appeared first on Oxford Institute for Energy Studies .

Description: Russia’s refining system is being upgraded to meet European specifications and also to satisfy the increasing needs of Russian consumers for higher quality oil products, especially gasoline and diesel. This research will attempt to map the changing trends in Russian oil demand and to match them with the changing profile of the oil product mx being produced by Russia’s refining sector in order to establish what surpluses, if any, will be available for export (primarily to Europe) and where any deficits may require imports. The research will also review the changing tax system for downstream businesses in Russia and what impact this may have on the supply and demand balance for oil products in the country. The post The Future of Russian Oil Demand appeared first on Oxford Institute for Energy Studies .

Description: Oil production from Russia’s core regions is in decline and the government is keen to encourage the development of fields in new areas in order to keep the country’s output above 10mmbpd. A series of joint ventures between state oil company Rosneft and various IOCs offshore in the Arctic has caused much excitement in this regard, but the potential of Russia’s unconventional oil resources might provide a shorter term reason to be optimistic. Russia has the largest estimated shale oil resources in the world, with a particular focus on the Bazhenov layer, and this report analyses the oil company work that has been done to date to assess the real potential of this resource and also assesses the potential impact of tax changes that have been introduced to encourage investment activity. It concludes that although the resource base would appear to be enormous, a number of below and above ground issues remain which mean that government targets of 1mmbpd of production win a decade are unlikely to be met. Not the least of the challenges to be faced include the need to increase the horizontal drilling capacity of the service industry in Russia as well as the likely need for further tax incentives once a clearer picture of the real economics of unconventional development in Russia has been formed. Nevertheless Russia’s unconventional oil plays can make a significant contribution to the country’s longer term production outlook in tandem with other developments in the Arctic and East Siberia. The post Tight Oil Developments in Russia appeared first on Oxford Institute for Energy Studies .

Description: East Mediterranean Gas – opportunities and challenges The post Issue 93, August 2013 appeared first on Oxford Institute for Energy Studies .

Description: While the succession of pro-competition measures (or ‘packages’)  for gas at the EU level since the early 2000s certainly favoured the development of the continental trading hubs, their progress has faced headwinds from dominance on the supply-side by long-term contracts which, until recently, were almost exclusively priced in relation to oil products. However, in the 2008 to 2011 period, a surge of LNG supply to Europe, growing accessible pipeline connectivity, supplier choice for end-consumers and a protracted period in which hub prices were considerably below those of oil-indexed contract prices, together catalysed the development of liquidity at these hubs.  Some upstream suppliers came to embrace this transition, others continue to resist; but in the downstream markets hub development has been generally assisted by co-operation between system operators and regulators. Despite favourable outward signs of progress, in order to assess the degree to which the European traded hubs have matured to the point where they can be said to represent a reliable and representative ‘market price’ requires extensive data and quantitative analysis.  In this context Beatrice Petrovich’s paper is a truly landmark work.  What sets it aside from previous research is that it incorporates OTC (Over the Counter) market data.  Through access to data from brokers (The Tankard Parties: ICAP Energy Limited, Marex Spectron Group and Tullett Prebon Group Limited) who in aggregate represent some 80% to 90% of the European gas OTC market, Beatrice’s analysis was able to incorporate anonymised price and volume data on every trade on every European hub considered since January 2007. The degree of price correlation between hubs demonstrated by this analysis provides compelling support for the hypothesis that the European hubs do provide a reliable price reference.  Where anomalies occur they can be related either to hub immaturity in early periods or to physical connectivity constraints. The post European gas hubs – how strong is price correlation? appeared first on Oxford Institute for Energy Studies .

Description: The change of government in Kyiv, the Russian military action in Crimea, the diplomatic reaction by the western powers, and the perceived danger of war, clearly have implications for all economic relations between Russia, Ukraine and Europe, especially in the energy sphere. Russia supplies about 30% of Europe’s natural gas, and more than half of these volumes are still transported via Ukraine. In Ukraine, gas supply issues are combined with the economic upheavals aggravated by political crisis. As of March 10 th 2014, the most likely source of supply disruptions is the serious indebtedness of Naftogaz Ukrainy, which, despite clearing some of its $3.3 billion debt to Gazprom in late February, as of 7 March was in arrears to Gazprom by a sum of just under $2 billion.  In previous Russo-Ukrainian gas disputes, such a build-up of debt has led to Gazprom cutting off deliveries to Ukrainian customers and the subsequent diversion of transit gas bound for Europe to consumption in Ukraine. This led in January 2009 to all westward deliveries of Russian gas, both to EU and Ukrainian destinations, being suspended for two weeks. If gas deliveries through Ukraine are halted the impact would be less serious than in 2009, because (i) the Nord Stream pipeline, which transports Russian gas to Germany without crossing Ukraine or Belarus, has been completed, and other interconnections have improved the situation in eastern Europe; and (ii) the economic situation, and the arrival of milder weather means that demand is relatively low. From Europe’s standpoint, commercial logic would suggest that support would be given to diversifying gas transit away from Ukraine, including regulatory support for the South Stream pipeline, which, if completed with four strings, should enable the transit of Russian gas through Ukraine to be suspended completely by 2020. However, it is possible that a political move to minimise cooperation with Russia on energy issues in line with European governments’ views of the Russian action in Crimea – may prevail. In this case, the EU-Russian disputes over gas imports and regulation will worsen, with potentially negative consequences for South Stream. Moreover, European efforts to diversify away from Russian gas, the success of which has been limited in the past because of the economic costs, will be revived. The post What the Ukrainian crisis means for gas markets appeared first on Oxford Institute for Energy Studies .

Description: Wind power outpaced all other renewable energy sources in terms of generation capacity in China, except for hydropower. Total installed capacity of wind power experienced a steady increase from 381.2 MW in 2001 to 1249.5 MW in 2005. Between 2006 and 2010, wind power generation almost doubled every year. With 53,764 wind turbines installed, total wind power generation capacity had reached 75,324 MW by the end of 2012. The National Development and Reform Commissions together with the International Energy Agency (IEA) proposed a wind energy roadmap in China until 2050. According to the projection, wind power generation capacity could reach 200 GW and 1,000 GW by 2020 and 2050, respectively. Nevertheless, the capacity growth is exciting but not convincing. A significant proportion of wind-powered output is curtailed due to insufficient power grid infrastructure and infeasible back-up systems. In addition, the institutional settings of China’s power system have impeded the development of wind energy in China. The aim of this research is to provide a critical review on wind power development in China based on the existing literature. It starts with an overview of China’s power generation system in terms of generation capacity growth, power mix and future projections. Then a portrait of the development of China’s wind power at both national and regional level is presented, starting from the early 1990s up to the present. It is followed by an introduction of the potential of China’s wind power and the development of domestic wind turbine manufacturing. This paper ends by discussing the barriers of wind power development in China. The post A critical review of China’s wind power development appeared first on Oxford Institute for Energy Studies .

Description: This working paper will assess the potential for oil (and possibly gas) production from Arctic waters over the next twenty to thirty years, addressing the key above ground risks that could hinder the achievement of substantial production from the region. The USGS has identified a huge resource base within the Arctic Circle, but there are many environmental, geo-political, social, governance and commercial risks that will need to be faced before companies and governments are able to proceed with safe and profitable projects to produce hydrocarbons. Nowhere is this more obvious than in Russia, which contains the majority of the Arctic geography and where initial exploration of the South Kara and Barents Seas is due to begin in the next few years in partnerships between Rosneft, the state oil company, and a number of IOCs. The working paper will investigate the drivers of this activity as well as the potential hurdles that both exploration and development work will face, in an attempt to present a realistic forecast of the extent and timing of any future production, and will also compare the Russian experience with other Arctic regions, in particular focusing on Russia’s neighbour Norway but also considering the on-going activities in the US, Canada and Greenland. The research will aim to highlight the similarities and differences between the various Arctic regions and to conclude on the likelihood of meaningful hydrocarbon production being realised over the next two to three decades. The post The potential impact of Arctic resources on global oil markets appeared first on Oxford Institute for Energy Studies .

Description: To view the published paper please click here . In the wake of the recession resulting from the financial crisis of 2008, European demand for natural gas is essentially stagnant and has recently lost market share to coal and renewables in the power generation sector in various European national markets.  This factor, as well as the significant price differential between natural gas and oil products since 2008, has created renewed interest in the market for natural gas in transport. Gas in transport is neither new nor revolutionary. An assessment of gas’ prospects in this sector relates to its ability to displace other fuels (existing and new alternatives).  An additional complication is the need to consider transportation sub-sectors, namely: light duty road transport, public passenger road transport, freight and goods vehicles and marine and inland waterway shipping. In this comprehensive paper Chris Le Fevre draws on extensive research and discussion with interested bodies to address the case for natural gas in transport, the extent and likelihood of its adoption, the long term implications for additional European gas demand and the key policy drivers and structural challenges which would encourage or inhibit these developments.   The post The Prospects for Natural Gas as a Transportation Fuel in Europe appeared first on Oxford Institute for Energy Studies .

Description: Spain is one of the leaders in the development of renewable electricity.  I will explain the drivers of this process and explore some of the important implications, among others the diminished and changing role of coal and natural gas in the system, and the need to change the design of the wholesale market.  Spain’s experience is an extreme version of the challenges that lie ahead for countries that have designed their electricity markets around natural gas and that subsequently introduced renewable energy on a massive scale. In other words, this research will be relevant for an understanding of many EU countries. The post Spanish renewable energy policy and its implications appeared first on Oxford Institute for Energy Studies .

Description: This research analyses the competition between various fuels (primarily coal, natural gas and petroleum) used for electricity generation in India by estimating the elasticity of substitution among them. This research can be viewed in two parts. The first looks at the numbers on the relative elasticities of fuel substitution in generation for India’s electricity sector and compares them with developed nations such as the USA, using existing literature. It draws on a method developed by the US Energy Information Administration which applies a linear logit model to US data. The second part considers the policy implications of these results for India by relating them to recent reforms on the pricing of natural gas and petroleum products, to electricity sector reforms, and to initiatives on decarbonisation. The post Fuel Competition in Generation in India’s Electricity Sector appeared first on Oxford Institute for Energy Studies .

Description: This paper by Mari Luomi examines current trends in domestic climate policy in the Gulf Cooperation Council (GCC) states. Given the politicisation of the topic at the international level, the paper takes a bottom-up approach that departs from the countries’ national circumstances, capabilities and vulnerabilities. It emphasises the opportunities inherent in integrating the goals of low-carbon, resource-efficient and climate-resilient development into these countries’ sustainable development goals. Following a review of the relevant international frameworks for action and support, and available domestic policies and measures, the study builds a comprehensive climate action profile for the GCC states, with analyses of national circumstances, capabilities and vulnerabilities, and greenhouse gas emissions. For the three most active GCC states in this area, the United Arab Emirates, Saudi Arabia and Qatar, the study presents a comprehensive, sector-based assessment of existing measures aimed at or with benefits for emission reductions and climate resilience. The study demonstrates that there is large potential for enhanced mitigation and adaptation action in the GCC states. It also argues that climate policy mainstreaming and low-emission development strategies (LEDS) would help these states in aligning their climate change-related policy aims with existing economic development visions and development strategies in a way that creates positive synergies. The post Mainstreaming Climate Policy in the Gulf Cooperation Council States appeared first on Oxford Institute for Energy Studies .

Description: The autonomous Kurdish region of Iraq (KRI) has emerged as one of the world’s most important new oil & gas exploration plays. Its petroleum resources, although smaller than those of the rest of Iraq, have key strategic importance for the KRI’s relations to the rest of Iraq and the “disputed territories”; its future and possible moves towards independence; and energy supplies to neighbouring Turkey and on to the EU. International oil companies from a variety of countries play important operational, financial and – to an extent – political roles in the KRI. However, full development of the KRI’s oil and gas has been held up by a continuing dispute with the central government in Baghdad, relating to the scope of regional versus federal powers over oil contracts, exports and revenues, but also encompassing wider disagreements over the future shape of Iraq. Though the KRI situation is in some ways sui generis, it has implications for other oil-endowed parts of Iraq, as well as for other countries with uneven distributions of petroleum resources. The post Oil and gas policy in the Kurdistan region of Iraq appeared first on Oxford Institute for Energy Studies .

Description: Kuwait’s domestic electricity and water sector has been in disarray for several years, struggling with fast-rising demand for several decades as a result of rapid industrialization, population growth, rising living standards as well as due to the artificially low utility prices set by the government. We use a model-based methodology to compare the current pricing scheme against an alternative where consumer prices are raised to market levels and consumers are on average compensated by cash transfers that do not distort their economic decisions. Our main finding is that a realignment of prices at or closer to the market price level confers a benefit on current and future generations of Kuwaitis, in terms of fiscal savings, that outweighs the impact of raising electricity and water consumer prices to market price levels. Specifically, in the market price scenario with consumer prices at about ten times current levels, there is a total fiscal cost of about one-third of the value of fuel input used in the power sector (or about 1.5 per cent of GDP), entirely due to the cash transfer. This, however, is just less than one-fifth of the fiscal cost of the current low-price regime, and in principle represents a massive saving. The net benefit of moving to market prices is 6.3 per cent of GDP. By implication, if it is judged that a cash transfer scheme, undifferentiated by usage, can help gain acceptance for the price reform, it is shown to be affordable. We also show that the shift to market pricing will be a more efficient route to achieving spare capacity in the electricity and water system. The post Price Reform in Kuwait’s Electricity and Water – Assessing the Net Benefits in the Presence of Congestion appeared first on Oxford Institute for Energy Studies .

Description: Oil Price Benchmarks in International Trade by Jorge Montepeque, Liz Bossley, Christophe Barret, Peter Stewart, Mike Davis, Bassam Fattouh, Amrita Sen, Peter Caddy, Giacomo Luciani, Salvatore Carollo

Description: A popular view is that the surge in the price of oil during 2003-08 cannot be explained by economic fundamentals, but was caused by the increased financialization of oil futures markets, which in turn allowed speculation to become a major determinant of the spot price of oil. This interpretation has been driving policy efforts to regulate oil futures markets. This survey reviews the evidence supporting this view. We identify six strands in the literature corresponding to different empirical methodologies and discuss to what extent each approach sheds light on the role of speculation. We find that the existing evidence is not supportive of an important role of speculation in driving the spot price of oil after 2003. However there is evidence that both oil futures price and spot prices were driven by the same economic fundamentals.

Description: The EU emissions trading system is failing to produce a carbon price that is efficacious in promoting low-carbon investment or a low-carbon economy. Carbon price projections from this scheme are nevertheless incorporated in the formal guidance issued by the UK Treasury to guide government departments in appraising policy initiatives and projects. The Treasury’s guidance deals with this issue of the carbon price by trying to maintain a distinction between emissions in what it calls the ‘traded sector’, i.e. sectors such as power and aviation covered by the EU ETS, and the ‘non-traded sector’, which includes domestic gas and road transport. This distinction is untenable and has the potential to create serious distortions in policy. This Comment explains how these are likely to arise.

Description: The Green Climate Fund was established at Cancun in December 2010 as part of the effort to reform the financial mechanism of the UN Framework Convention on Climate Change. Its Instrument was adopted in Durban in December 2011. Its involves observers from academia, NGOs and the private sector and takes in to account submissions by observes. To view the OIES Submissions please go to: OIES Submission – GCF Observers

Description: Recent forecasts for gas supply in Russia produced by Novatek and Gazprom highlight the large amount of gas available to meet demand in the next 10 years and also point to contrasting views about which companies’ production may be preferred in a potentially oversupplied market place. In light of this potential oversupply situation, it is becoming clear that a number of Non-Gazprom producers (NGPs), including Novatek and some Russian oil companies, are taking the view that the Russian gas market will soon become much more competitive and that access to end consumers will become essential for any company wishing to maximise its gas sales. Rosneft’s announcement in February 2012 that it is to form a joint venture with Itera provides a prime example of this trend. However, this suggests the possibility that Gazprom, which is becoming more reliant on production from remote and relatively high cost fields, may soon find itself at a competitive disadvantage and facing the possibility that it may fail to meet its own production targets by some distance. As a state-owned company, it may hope to rely on political support to achieve its objectives and maintain its dominant position in the Russian gas market, but the Russian Administration then faces a potentially awkward consequence of a higher domestic gas price than might otherwise be necessary, as the lower cost gas owned by Non-Gazprom Producers is crowded out to leave room for Gazprom’s gas. This comment examines this impending dilemma for the Russian government and suggests that one conclusion is that what is good for Gazprom may no longer be good for Russia.

Description: The Government has published what is called a “technical update” to its electricity market reform White Paper.  This Comment by Malcolm Keay analyses the new proposals and their implications. Many important questions about the new system remain unanswered, but the overall direction is clear – towards a planned electricity system whose function is to deliver the Government’s policy objectives.   Having been a pioneer of liberalisation in electricity, the UK will now be a pioneer of post-liberalisation, with radical consequences for consumers and investors and for the governance of the industry.

Description: In this Paper, Malcolm Keay looks at governments’ uncritical reliance on energy efficiency to achieve multiple energy policy objectives.  He concludes that most existing programmes are ill-directed, badly monitored and probably ineffective in reducing energy demand and emissions – indeed they may be diverting attention from more effective measures.  A more targeted approach is needed under which efficiency programmes are properly designed and monitored and integrated more effectively into low carbon strategies.

Description: In this paper Michelle Foss concludes that Henry Hub gas prices could credibly be as low as $3/MMbtu, or as high as $10/MMbtu in 2020 but that the balance of likelihoods is for a price late this decade which is significantly higher than the current $3-4/MMbtu levels of 2011. Michelle Foss’ study looks at the past five years of supply, demand and pricing which have been strongly impacted by the unconventional gas –  and particularly shale gas – revolution and how different views of its evolution will impact future pricing. The study is a forensic analysis of the huge uncertainties surrounding US natural gas supply and demand which illustrates why both commentators and stakeholders have continuously failed to foresee even the approximate direction of prices, leading to the building of numerous LNG import terminals many of which now seem likely to be converted into export terminals.

Description: The term ‘road map’ is proliferating in energy and climate policy to denote any policy or aspiration projected into the future. Connie Hedegaard, Europe’s environment commissioner, hailed the Durban conference agreement as a ‘road map’ to an eventual global climate deal. This contrasts with the far more detailed road maps that she and her European Commission colleagues have been publishing on how Europe can reach its 2050 emission targets. This OIES comment looks at the uses and abuses of road maps. It shows they can be a substitute for action, but also argues they can also be a precursor to action, or at least useful in giving policy-makers and investors a sense of direction for the low carbon economy. And the Durban road map might just reinforce the sense – already evident in some parts of the fossil industry – that global carbon pricing is inevitable one day.

Description: In contrast to the majority of European gas analysis which has tended to concentrate on security issues narrowly defined as dependence on Russian gas supplies, this study shows how changes in North American gas supply and Asian gas demand over the next 15 years can create fundamentally different outcomes for European supply, demand and pricing. Using scenario analysis and a global gas model, Howard Rogers demonstrates that Europeans need to pay as much attention to what is happening in gas markets elsewhere in the world, as they do their own supply/demand dynamics. The study also examines the impact of different scenario outcomes in North America and Asia on Russian gas supply and pricing to Europe, showing that Gazprom also may need to make uncomfortable choices between European export volumes and prices over the next decade.

Description: Since the election of Vladimir Putin as president of Russia in 2000 Rosneft has become one of the cornerstones of the strategy for the Russian state to retake control over the ‘commanding heights’ of the economy, and in particular the energy sector.  However, having now established itself as a global-scale oil company, Rosneft faces a number of significant challenges. In common with many NOCs, its global significance is based entirely on its domestic asset base, and despite the size of Russia’s resources Rosneft does face the problem that its existing assets in the core areas of West Siberia and European Russia are going into gradual decline. This decline can be offset by the development of new areas such as East Siberia, the Arctic, and offshore fields, but these regions are remote and their exploitation will require advanced and expensive new technology. In parallel with this issue Rosneft is also facing pressure from its majority owner, the Russian government, to act as a catalyst for establishing a greater role for Russia in the global economy, using its energy resources as an important tool. The company is therefore looking to increase the diversity of its asset base by investing overseas at a time when the competition for global oil reserves is high and when Rosneft itself has limited experience of dealing in the international asset market. This paper explores how Rosneft may be attempting to meet these twin challenges, using the example of two peer NOCs that have experienced similar problems. Petrobras and Statoil are partially privatized, upstream focused NOCs who have established international businesses both as a way of supplementing and diversifying their domestic resource bases and also as a means of acquiring and exploiting technological and operating experience that could be applied across their asset portfolios. Both companies also have a much longer history as corporate entities than Rosneft, and gained listings on an international stock exchange (in New York) in 2000-2001, five to six years before Rosneft’s own privatization. As a result, they can provide a clear analogy for the strategy and tactics that Rosneft may use in the development of its own business model, and indeed it appears that in 2011 Russia’s NOC is already taking a similar path to its ‘Partial NOC’ peers.

Description: Hilary term, 2012 1 February 2012 Arctic Oil and Gas: Challenges and Opportunities Tim Reilly , Chairman and Co-Founder, Arctic Advisory Group Timothy Krysiek , Manager, Arctic Strategy Working Group, Statoil Shamil Yenikeyeff, Oxford Institute for Energy Studies and St Antony’s College Nissan Lecture Theatre , St Antony’s College 15 February 2012 China’s Energy Challenges and Their Implications Michael Chen , Principal Analyst, Statoil Dahrendorf Room , St Antony’s College 7 March Oil and Politics in Iraq ( NOTE: this event will start at 5.30 pm ) Gregg Muttitt , author of Fuel on Fire: Oil and Politics in Occupied Iraq Bill Farren-Price , CEO, Petroleum Policy Intelligence Dahrendorf Room , St Antony’s College   5 pm Wednesdays, St Antony’s College, 62 Woodstock Road, Oxford OX2 6JF Conveners: Dr Hakim Darbouche and Dr Shamil Yenikeyeff

Description: Energy subsidies in Iran have caused enormous economic, fiscal and energy sector issues for decades.  Faced with a fast growing energy deficit and tougher international sanctions, the current government has undertaken the bold initiative of a five-year reform plan, with the aim of eventually eliminating subsidies. The plan is, on evidence so far, succeeding in reversing large-scale energy waste and significantly reducing energy demand. This paper will assess the impact Iran’s energy subsidy reform is having, particularly on demand, and examine the important lessons – if any – that can be drawn from the Iranian experience for other energy-rich MENA countries.

Description: The exchange of threats between Iran and the West vis-à-vis Iranian oil exports to European and other consumer countries has received wide attention among policy makers and analysts; IMF officials predict that crude oil prices could increase by as much as 30 percent in case of a halt of Iran’s exports to OECD countries, and if other sources don’t offset the loss of Iranian crude oil. Others claim that all the elements are set for ‘the $200 a barrel scenario’. However, this commentary offers a less pessimistic view, and argues that the potential impacts of such threats on oil market dynamics are often exaggerated. Oil embargos against individual producing countries are in reality difficult to implement, for they require a concerted effort by a large number of buyers to prevent oil producers from diverting crude oil from one market to another. Where they result in a tightening of oil markets and rising prices for consumer nations, they can be relaxed or amended. As for the use of an Iranian oil weapon, the fact remains that despite continuous threats, Iran has never used the oil weapon; the oil weapon remains an indiscriminate policy measure that all producers, including Iran, are reluctant to use; and if ever employed, it is likely to be ineffective and counterproductive from a producer’s point of view. Nevertheless, fears that governments may pursue policies to restrict the flow of energy supplies rattle markets and place a premium on the oil price and contribute to increased price volatility.

Description: Several members of OIES contributed articles to, Oxford Review of Economic Policy , Volume 27, Issue 1, Spring 2011, edited by Christopher Allsopp and Bassam Fattouh . Each issue concentrates on a current theme in economic policy, with a balance between macro- and microeconomics, giving a valuable appraisal of economic policies worldwide. Volume 27, Issue 1, focuses on Oil and International Energy Markets. To access the articles please click on the links below: Oil and international energy, Christopher Allsopp and Bassam Fattouh Oil price shocks and the macroeconomy , Paul Segal Uncertainty, expectations, and fundamentals: whatever happened to long-term oil prices? Bassam Fattouh and Pasquale Scaramozzino Shale gas-the unfolding story, Howard Rogers

Description: Lacking a commonly held definition, volatility is an often over-generalised term with different meanings to different constituencies.  This does not detract from the importance of the subject.  To traders volatility is a source of revenue, to energy intensive industrial end-users it is often perceived as a threat.  Midstream utilities actively work to risk-manage volatility in order to deliver a ‘dampened’ price offer to end-user customers. In this working paper Sofya Alterman summarises the findings from an analysis of natural gas, crude oil and oil products price time series to answer the questions ‘are natural gas prices inherently more volatile than those of oil ?’ and the more interesting question ‘can episodes of markedly different gas price volatility be explained by underlying market fundamentals ?’ Sofya’s research involved a painstaking analysis of 14 years-worth of daily price data along with the investigation of the likely drivers of the volatility patterns uncovered.  Her results both confirm the relevance of obvious drivers but also show how these can be blunted or offset by other compensating effects, some of which are less widely acknowledged. This paper provides important insights into this key aspect of natural gas traded markets, and is especially relevant in today’s environment as trading hub development continues apace in Continental Europe.

Description: Technological Challenges and Developments by Ivan Sandrea, David Bamford, Petrobras and Boston Consulting Group, Michelle Michot Foss, Trisha Curtis, Samer Ashgar, Robert G. Skinner, Franz B. Ehrhardt, Tara Shirvani and Oliver R. Inderwildi.

Description: This paper, authored by Bassam Fattouh and Laura El-Katiri and published by the United Nations Development Programme, explores the issue of energy subsidies in the Arab World. The authors argue that while energy subsidies may be seen as achieving social objectives (such as expanding energy access and protecting poor households’ incomes); economic objectives (such as fostering industrial growth and smoothing domestic consumption); and political objectives (such as distributing the oil and natural gas rents to the population), they are a costly and inefficient way of doing so. Energy subsidies distort price signals, with serious implications on efficiency and the optimal allocation of resources. Energy subsidies also tend to be regressive, with high-income households and industries benefiting proportionately most from low energy prices. However, despite such adverse effects, energy subsidies constitute an important social safety net for the poor in many parts of the Arab world, and any attempts to reduce or eliminate them in the absence of compensatory programmes would lead to a decline in households’ welfare and erode the competitiveness of certain industries. Therefore, a critical factor for successful reforms will be the ability of governments to compensate their populations for the reduction or removal of subsidies through carefully designed mitigation measures. It is argued that  reform of energy pricing mechanisms in the Arab world may be seen as beneficial from more than one perspective. Nevertheless, this paper recognises that the current political climate in the region will render the reform of domestic energy prices difficult in practice, such that reform may indeed be a medium- to long-term endeavour. Please follow the link to access the paper.

Description: In 2012, Kenya became the latest East African country to enter the oil and gas scene. The discovery of oil resources in the Turkana County provided an extra boost to Kenya’s already growing and diverse economy. But significant political, social, and security challenges remain. This paper analyses the opportunities and risks facing Kenya’s oil industry and its role as a regional oil transport hub. Based on current discoveries, Kenya may very well become only a small African oil producer. Kenya’s role as a regional hub for East African crude oil and petroleum products may be more significant. But as Kenya’s oil industry moves from exploration to development and potential production, risk incentives among the involved oil companies will decline profoundly in what remains a shifting political and security landscape. Despite lofty regional infrastructure plans, a piecemeal approach – beginning with a basic export pipeline from Uganda and port terminal on Kenya’s coast – may need to be adopted. Executive Summary The post Kenya – An African oil upstart in transition appeared first on Oxford Institute for Energy Studies .

Description: The sharp fall in oil prices in the last few weeks has turned the world’s attention to OPEC and particularly to Saudi Arabia’s response to the current slide in the oil price. Following unofficial communications to the market that Saudi Arabia is comfortable with markedly lower oil prices, even for an extended period,  hopes that the Kingdom would come to the rescue and ‘balance’ the market, arresting the decline in the oil price, were replaced by stories of ‘price wars’, ‘conspiracy theories’ and ‘grand design strategies and games’.  But why Saudi Arabia has not reacted to the fall in the oil price ‘in the expected manner’ is a question to which there is no clear single answer, especially given that all the explanations put forward suffer from some form of internal inconsistency. This presentation explores some of the potential explanations and the implications on oil price dynamics. The post Saudi Arabia’s Oil Policy in Uncertain Times – A Shift in Paradigm? appeared first on Oxford Institute for Energy Studies .

Description: There is limited scope for significantly reducing overall European dependence on Russian gas before the mid-2020s. Countries in the Baltic region and south eastern Europe which are highly dependent on Russian gas, and hence extremely vulnerable to interruptions, could substantially reduce and even eliminate imports of Russian gas by the early 2020s, by a combination of LNG and pipeline gas from Azerbaijan. Similar measures could reduce (but not eliminate) the dependence of central Europe and Turkey on Russian gas. However, Russian gas will be highly competitive with all other pipeline gas and LNG (including US LNG) supplies to Europe, and Gazprom’s market power to impact European hub prices may be considerable. Countries with strong geopolitical fears related to Russian gas dependence will need to either terminate, or not renew on expiry, their long term contracts with Gazprom. The post Reducing European Dependence on Russian Gas – distinguishing natural gas security from geopolitics appeared first on Oxford Institute for Energy Studies .

Description: The European Union has decided its energy and climate goals for 2030, becoming the first major player in the international climate negotiations to make a commitment in advance of next year’s United Nations climate conference in Paris. Europe has thus maintained its leadership role in terms of being the first mover, but no longer clearly in terms of ambition. The compromises needed to get agreement within the 28-country organisation have produced a 2030 emissions reduction target that is only barely consistent with the bottom end of the 80-95 per cent range of emission cuts that industrialised countries are aiming to achieve by mid-century. EU leaders have also decided on a future loosening of the policy framework that has been driving their national renewable energy and energy efficiency programmes. If the EU has decided to rely in the next decade primarily on the single target of emissions reduction to achieve progress, it must reform its chosen instrument – the Emissions Trading System – to deliver this target. The post Energy and climate targets for 2030 – Europe takes its foot off the pedal appeared first on Oxford Institute for Energy Studies .

Description: While most recent analysis has focused on the potential impact of the US ‘tight oil’ revolution on global oil supplies and oil price levels, the impact on the shifts in trade flows and on the dynamics of price differentials has received much less attention. This is quite surprising, as the recent transformations in the US energy scene have manifested themselves most visibly through changes in crude oil and product flows with consequences on the behaviour of time spreads, inter-crude spreads, and the pricing of various crudes in relation to global benchmarks. This Comment explores some of the structural issues affecting WAF crude trade flows, providing a case study of how the US tight oil revolution is shaping oil market dynamics. The growth of US tight oil led to the first wave of structural change as the USA gradually backed out imports from West Africa, but because of a variety of factors (such as higher appetite from Asia, the loss of Libyan production making Europe switch to WAF barrels, and a spate of disruptions to WAF output) the loss of the US market was not fully felt on WAF crude prices. However, beyond these temporary factors, a couple of ongoing trends are forming the second wave of structural changes impacting West African differentials. The first of these is the changing structure of global refining. Much higher US, Russian, and Middle Eastern runs have meant that Europe is now the balancing point for global refining, a trend which is expected to continue. The second is the further backing out of WAF crudes from North America. While the USA largely backed out WAF grades by the second half of 2013, as domestic output and infrastructure continued to improve, this year has seen a significant increase in US crude exports to eastern Canada. As a result, Canadian imports of WAF crudes have fallen, implying that there is more crude oil available for clearing in the Atlantic Basin. In a way, WAF has become the swing barrel heading to North America, depending broadly on WTI–Brent differentials. But the implications have not been limited to markets in the USA and Canada. Since the marginal barrel sets the benchmark price, backed WAF barrels from North America are playing a more important role in the Brent price formation process. The post New swings for West African crudes appeared first on Oxford Institute for Energy Studies .

Description: Energy in Russia, the subject of this issue of the Oxford Energy Forum , has this year returned to the forefront of debates among academics, policy makers, and those in the industry. Politics, never far from these debates, is a factor: as a result of events in Ukraine, the tension between Russia and the western powers has risen to its highest level since the Cold War. The editors have endeavoured to provide commentary on the political and economic context of energy developments, while also inviting recognized specialists to comment on the host of issues – from long-term upstream oil issues to Russia’s domestic electricity market – that are sometimes neglected by the big-picture analysts. The post Oxford Energy Forum – Issue, 97 appeared first on Oxford Institute for Energy Studies .

Description: Demand for gas in Mexico currently exceeds supply by a factor of two to one, leading to significant imports of expensive LNG. The recent announcement of liberalisation in the upstream sector, and the opportunity for increased foreign investment in the Mexican oil and gas sector, suggests that domestic gas supply could increase as new onshore and offshore areas are opened for investment. In particular the shale areas in the north-east of the country, bordering the US state of Texas, appear prospective as they lie on trend with the gas-producing Eagle Ford area across the border. However, it remains unclear whether the costs of developing gas resources in the country actually justify the end of reducing imports, as LNG can increasingly be replaced with rising imports of shale gas via pipeline from the US, the price of which is based on the Henry Hub benchmark. At present the low price of US gas would appear to make the construction of more pipeline import capacity a more viable option than the development of Mexican resources. This study will examine the potential of the upstream gas sector in Mexico, and will discuss the short, medium and long term outlook relative to the country’s import options while also considering the mid and downstream issues that will need to be resolved if the country’s growing demand is to be met. The ultimate goal of the paper will be to assess the optimal balance of imports and domestic supply that can provide the best economic outcome for the country. The post The Mexican Gas Sector – Is Import Substitution a Rational Economic Aim? appeared first on Oxford Institute for Energy Studies .