ALBERT

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 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: 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: 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: 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 .

Description: Against a backdrop of rapidly growing oil and gas production and exports, the Indonesian government introduced fuel subsidies in the late 1950s to stimulate economic development. However, since the country ceased to be a net exporter of oil in 2004, increasing demand for oil products and political pressure to maintain subsidies has meant that government expenditure on subsidies has steadily escalated. Despite the various energy policy reforms implemented since 1998 to cut fuel subsidies and adapt to the evolution of the country’s energy landscape, it is now clear that oil subsidies are no longer the stabilizers that once helped a young nation find its balance. Indonesia’s dependence on subsidies is, instead, now weighing down a country pedalling hard towards the goal of economic success. This paper argues that increasing the production and consumption of natural gas will provide the much-needed momentum to cut Indonesia’s reliance on oil and empower the incoming Widodo administration to tackle the challenges of reconfiguring its energy mix and establishing sustainable energy policies. The post Can Indonesia’s policy of reconfiguring its energy mix by increasing natural gas usage support its initiatives to reform subsidies? appeared first on Oxford Institute for Energy Studies .

Description: Less than 10 years ago, at the height of the commodities boom, Brazil was all but assured a place as an oil world powerhouse following the discovery of oil in its subsalt basins. Much faith has been put in Brazil delivering the barrels needed to keep the medium-term oil market in reasonable balance. Whether it is the IEA, EIA, OPEC, major oil companies, or indeed the Brazilian government, all projected the country’s oil production to increase substantially in the coming years. This optimism was brought to the forefront of the global oil and gas industries by the 2007/2008 discovery of the vast pre-salt basins, specifically the Tupi field. This ranks alongside Kashagan as one of the largest and most significant oil discoveries of the past few decades and the biggest in the Americas since the Cantarell field in Mexico in 1976. However, as has often been the case in recent history for the oil markets, a number of project delays and cost overruns have since taken the shine off the initial optimism, and has also kept Brazil from playing a bigger role in the non-OPEC supply picture. So what has slowed the progress in the Brazilian oil sector? This paper argues that Brazil’s upstream sector faces a number of key challenges, including: regulatory barriers; a massive financial burden, consisting of the world’s largest corporate expenditure programme and increasingly funded by debt; high production costs and high decline rates; caps on domestic fuel prices, which have adversely affected Petrobras’ earnings; and waning interest from major international oil companies (IOCs) in co-financing projects. The country’s deep-sea bonanza has become less alluring, whilst oil companies have also been adapting to a changing energy landscape, altered by a focus on capital discipline, shale in the US, and the emergence of other frontier energy sources, such as in deepwater Africa or oil sands in Canada. The post Challenges across Brazil’s oil sector and prospects for future production appeared first on Oxford Institute for Energy Studies .

Description: Hub pricing is dominant in north west European gas markets and is spreading to the south and east of the Continent. A new study by Howard Rogers and Jonathan Stern finds that the most important determinants of European hub prices will be global gas market dynamics. Changes in these dynamics will create price competition between LNG from a variety of sources (including North America) and Russian pipeline gas in Europe. Changes in prices and contracts in the new competitive environment of European gas markets have had significant impacts on the roles and risks of the major groups of European gas market players. Mid-stream energy trading companies have encountered the biggest problems because hub pricing has rendered their traditional business model (at least partially) unworkable, and an urgency to move to a hub-minus/hub-plus commercial model. Should this prove impossible, companies are likely to exit the natural gas sector with significant impacts on security of supply, and the likelihood that many existing long term contracts will be unable to survive into the 2020s. The post The Dynamics of a Liberalised European Gas Market – Key determinants of hub prices, and roles and risks of major players appeared first on Oxford Institute for Energy Studies .

Description: The objective of this paper is to analyse the effectiveness and relevance of stabilisation mechanisms in oil and gas contracts, especially under evolving market conditions, mainly the increasing competition among oil and gas producers, the emergence of unconventional resources and the development of gas markets. The paper analyses how these clauses evolved over the last 15 years and the lessons that can be learnt and that can help shape policy in the future. More precisely, the paper evaluates whether changes in these clauses point to something different from past practice and the implications for revenue and wider tax issues. It reviews the conventional forms of stabilisation mechanisms that are often introduced into petroleum contracts between host governments and international oil companies (IOCs) and the arguments generally put forward in their favour. The paper also assesses the effectiveness of such mechanisms by looking at specific countries’ experience. It then analyses central issues in the design and implementation of stabilisation clauses and proposes some guidance for good practice. The findings of the paper are particularly relevant for emerging oil and gas producers who typically face the dilemma of whether to include stabilisation clause in their contracts. The post The Relevance of Stabilization Clauses in Oil and Gas Contracts appeared first on Oxford Institute for Energy Studies .

Description: Although tight oil and natural gas production have shared the spotlight of the US “shale gale”, some 2.5 million b/d of natural gas liquids (NGLs) and an additional ~0.75 million b/d of liquid lease condensates were recovered from shale gas plays in 2013 alone, accounting for well over 20% of total US liquids production.[1] [2] The “light” gas-liquid hydrocarbons recovered from US shale plays, predominately ethane, as well as the liquid petroleum gases (LPGs) propane and butane and the light-end commodities “split” from lease condensate streams, promise to have profound implications on the global petrochemicals industry.  Not only will the supply surge of North American natural gas liquids and condensates influence domestic plant economics and feedstock trends and investments, but also global commodity trade flows and olefins production. This paper seeks to analyze the implications off US NGLs and condensates production on global petrochemicals markets. The post US NGLs Production and Steam Cracker Substitution: What will be the Spillover Effects in Global Petrochemical Markets appeared first on Oxford Institute for Energy Studies .

Description: In late March 2012, Kenya entered the East African oil scene with a surprising splash. After decades of on-and-off-again, but unsuccessful exploration by international oil companies, Tullow Oil, a UK-based firm, discovered oil in Kenya’s northwest Turkana County. The discovery immediately provided an extra boost to Kenya’s already growing and diverse economy and position as East Africa’s strategic transport and communications hub. Kenya was turning a corner in the aftermath of large-scale violence following the 2007/08 national elections. The government launched Vision 2030, an ambitious development program to modernize its economy, passed a new constitution in 2010, and held contested, but largely peaceful national elections in 2013. But over the past two years political and security tensions have risen dramatically to threaten Kenya’s bright future. The constitutional stipulated devolution of powers from the central government to newly constituted counties must overcome enormous implementation hurdles. All the while, terrorist attacks orchestrated by the Somalia-based militant group al Shabaab, punctuated by the September 2013 killings in Nairobi’s upscale Westgate Shopping Mall, have grown in Kenya’s coastal regions. These attacks threaten to become intermingled with long-standing animosities between coastal communities and the central government in Nairobi. Al Shabaab’s long reach in Kenya sits ominously alongside the oil industry’s plans to move from the exploration to production phase and develop key export infrastructure on the coast. The post Kenya: An African oil upstart in transition appeared first on Oxford Institute for Energy Studies .

Description: This study will explore how the Gulf Cooperation Council (GCC) states’ political and economic external relations have evolved over the past years in relation to the green economy agenda. With its main emphasis on the energy-related aspects of the green economy, the study will aim to produce a clearer picture of these states’ different types of external engagements – with both developed and developing countries, as well as non-state actors – in this new development paradigm. Through an analysis of political relations with states and non-state actors, and flows of investments, trade and aid, in the areas of renewable energy and energy efficiency, the paper will seek to answer the following questions: (i) what external relations and engagements have the GCC developed over the past years that support a transition to a green economy; (ii) how are these relations and engagements contributing to a green economy transition, including by provision of means of implementation; (iii) are the enabling conditions in the GCC states favourable to a green economy; and (iv) where do the greatest opportunities and challenges lie in the ‘international relations of the green economy’ in the GCC? The post The International Relations of the Green Economy in the Gulf appeared first on Oxford Institute for Energy Studies .

Description: The region of South Asia accounts for 1.5 billion people, or 25% of the world’s population, but just under 5% of its electricity consumption, and one of the lowest per capita electricity consumption rates in the world. This region is home to some of the world’s fastest growing developing economies – such as India, Bangladesh and Pakistan – as well as the world’s largest population of people living in poverty, with very little or no access to any form of modern commercial energy. Beginning in the 1990s, most South Asian economies adopted electricity sector reform programmes aimed at restructuring their power utilities, strengthening transmission infrastructure, and enabling greater access to electricity. These reform programmes were predicated on the textbook or prescriptive model of electricity market liberalization pioneered by the UK, and were often adopted as a condition of multilateral agency financing. The post Reforming Electricity Reforms? – Empirical Evidence from Asian Economies appeared first on Oxford Institute for Energy Studies .

Description: In the last few years, it has become apparent that EU electricity utilities are in serious economic trouble. By utilities, I refer to the companies that have traditionally operated vertically integrated electricity (generation, network, retail) businesses in the EU. Over a hundred billion € has been wiped off their market value in recent years.  This research paper explores the reasons for this, distinguishing between temporary and structure problems. First, some of the financial problems facing the utilities are related to specific national government policies, notably the decision to close nuclear plants in Germany.  This reflects a structural problem in the EU, namely that national governments have the power to decide the mix of generation and that they intervene frequently and sometimes in a retroactive way. Second, low wholesale electricity prices and the reduction in gas-fired generation are the result of temporary and structural factors. Temporary factors include excess generation capacity, the economic recession, low CO2 emission prices and low coal prices. Structural factors include the consequences of subsidizing significant amounts of renewable energy through “out of market” payments. These displace conventional power stations in the merit order while driving down wholesale market prices. Third, while wholesale electricity market prices have been falling, final consumer prices for electricity have been rising, in large part to recover the costs of political decisions related to climate policy, energy security and other government priorities.  The costs of these political decisions correspond to revenue streams for a variety of companies, some of which are the utilities but many of which are not. So the utilities are being squeezed by a scissors effect, to a large extent by political interventions but also by temporary market effects. On the one hand, wholesale market prices are being driven down, reducing conventional generation and utility revenues in the wholesale market.  On the other hand, retail prices are being driven up, but the increased retail prices fund companies who provide services outside of the market.  Furthermore, the higher prices to final consumers reduce demand for electricity from the system (and from utilities), both by encouraging conservation and by encouraging self-generation, which involves bypassing the system altogether.  I conclude that the utilities face a structural problem that requires rethinking both of public policy and corporate strategy. The post The Scissors Effect in the EU electricity utility sector appeared first on Oxford Institute for Energy Studies .

Description: The objective of this paper is to analyse the effectiveness and relevance of stabilisation mechanisms in oil and gas contracts, especially under evolving market conditions, mainly the increasing competition among oil and gas producers, the emergence of unconventional resources and the development of gas markets. The paper analyses how these clauses evolved over the last 15 years and the lessons that can be learnt and that can help shape policy in the future. More precisely, the paper evaluates whether changes in these clauses point to something different from past practice and the implications for revenue and wider tax issues. It reviews the conventional forms of stabilisation mechanisms that are often introduced into petroleum contracts between host governments and international oil companies (IOCs) and the arguments generally put forward in their favour. The paper also assesses the effectiveness of such mechanisms by looking at specific countries’ experience. It then analyses central issues in the design and implementation of stabilisation clauses and proposes some guidance for good practice. The findings of the paper are particularly relevant for emerging oil and gas producers who typically face the dilemma of whether to include stabilisation clause in their contracts. The post The Relevance of Stabilization Clauses in Oil and Gas Contracts appeared first on Oxford Institute for Energy Studies .

Description: Over the last decade, India has evolved into a large exporter of refined petroleum products. In order to achieve national self-sufficiency in refining capacity, India’s government began encouraging energy companies to invest in refineries in the 1990s. This helped the country become a net exporter of petroleum products for the first time in 2001. Since 2003, India’s refining capacity has grown at an average rate of 5.4% annually and stood at 4.35 million bbl/d at the end of 2013 making it the second-largest refiner in Asia after China. India projects an increase of the country’s refining capacity to 6.3 million bbl/d by 2017 which would represent a much higher 9.6% growth annually over the next four years. On average, although India still imports some refined products, its product exports have been growing at an average rate of about 14% since the year 2004. In 2012 India was the fourth largest petroleum exporter in the world, and the largest in Asia with a market share of about 6.1%. A combination of public-sector and private-sector refinery investments in the recent past has led to this recent dramatic increase in India’s export ranking. This has been predicated on an investment model adopted by private refiners, who while unable to sell their products in the domestic market where they compete with NOCs due to strict price controls, seek instead to take advantage of higher refining margins through international sales. Interestingly, we see a new trend emerging – Indian public sector companies are now beginning to divert their surplus capacity towards exports, with small quantities of product exports started in early 2014. This  paper will examine in detail aspects of the Indian refined product market, policy implications and investment capabilities in the context of export capacity and competitiveness, by focusing on two issues (a) the current status of the trend of export growth in refined products from India and the factors that have contributed to a more than 200% increase of refined product exports over the last seven years, and (b) the ability of Indian refiners in aggregate to maintain their export market competitiveness, to sustain export growth over the next decade, and the challenges related to this. The post Silent Revolution: An analysis of India’s rise as Asia’s largest exporter of refined products appeared first on Oxford Institute for Energy Studies .

Description: This study explores the economic potential for, and possible caveats of, renewable energy in the GCC countries. Looking at the case of Kuwait, the authors highlight the growing potential for economic cost savings, primarily for solar photovoltaic power in the GCC states over oil-fired power generation, in the current global high-price environment for oil. The economics of solar power versus gas-fired power generation in the GCC are less obvious, though rising LNG imports by some GCC countries (chiefly Kuwait, the UAE and possibly Bahrain) are expected to improve these economics in the future. Renewable energy also entails some important caveats for the region. Highly distorted domestic energy markets that continue to price fuel at a fraction of its shadow economic cost provide few market-based incentives for utilities to switch towards renewables. The recent emphasis on the use of energy policies for renewables for the creation of ‘green’ jobs by GCC policymakers’ may increase, rather than reduce, unproductive economic sinks across the GCC states’ domestic energy industries and that would considerably dilute, if not call into question, any economic gains to be made from renewable energy in the GCC. Executive Summary The post Prospects for Renewable Energy in GCC States – Opportunities and the Need for Reform appeared first on Oxford Institute for Energy Studies .

Description: Since 2009, China has turned from a net coal exporter to a net importer, and by a large margin. In 2013, the country accounted for almost a quarter of global steam coal imports. This shift has had a tremendous impact on global trade and prices. China has become a price setter for steam coal after overtaking Japan in 2009 as the world’s biggest importer. Increasing imports have exacerbated oversupply on the domestic market and led to a dramatic fall in coal prices and revenues of coal miners. The government is determine to improve the health of the coal industry, while at the same time combatting air pollution from coal mining, transport and combustion. The new policy measures adopted since September 2013, such as the Airborne Pollution Prevention and Control Action Plan, the mandated reduction in coal production and imports, the ban on low-grade coal imports and sales, have a significant impact on the level of coal supply and demand. Short, medium- and long-term market and policy developments, however, have different impacts on international steam coal trade. This paper analyzes key policy and market developments in the Chinese coal market and their possible impact on global coal trade. It reviews recent policy changes that aim at curbing China’s coal demand and reducing the environmental footprint of coal. The report puts a special emphasis on Chinese coal imports and competition between domestic and imported coal. It assesses the impact of the measures adopted recently by the government on global trade at short, medium and long-term. Executive Summary The post China’s Coal Market – Can Beijing Tame ‘King Coal’? appeared first on Oxford Institute for Energy Studies .

Description: While the impact of the increase in US production on prices and on oil market dynamics is yet to be fully felt, as some of the underlying forces still need time to unfold and need to be fully understood, it is important to provide a general framework to help us analyse the US shale revolution and its potential impacts on oil markets and key Middle East producers. In this paper, we propose a broad framework based on three main aspects: the US tight oil revolution as a positive oil supply shock – with the potential to transform into a global supply shock if hydraulic fracturing technology successfully diffuses to other parts of the world;  the US tight oil revolution as a force disrupting the existing trade flow patterns of crude oil, petroleum products, condensates, and NGLs; the development of US shale as a powerful force behind the shift in market perceptions, not only from a position of oil scarcity to one of oil abundance, but also as a shift in terms of the USA’s aspiration to achieve energy independence and how this would impact US foreign policy and its relations with other players, including key Middle East oil exporters. Executive Summary The post The US Tight Oil Revolution and Its Impact on the Gulf Cooperation Countries – Beyond the Supply Shock appeared first on Oxford Institute for Energy Studies .

Description: Dubai crude oil has been the main Asian benchmark since the mid-1980s. The most notable and recent development in the Dubai benchmark has been the significant increase in the liquidity in the Platts ‘window’. What has caused this increase in liquidity? To answer this question, this comment will look at the two recent shifts in international oil market dynamics. Firstly, Asian demand growth and the increase in US tight oil production, and secondly, the associated shift in crude oil trade dynamics. Then it will examine the changes within the Asian crude oil market, leading to the increased assertiveness of the regional players in the price formation process. Finally, this comment will consider some remaining issues with the Dubai market, and a possible way forward for Asian benchmarks in general. The post Oil Markets in Transition and the Dubai Crude Oil Benchmark appeared first on Oxford Institute for Energy Studies .

Description: With the widespread excitement surrounding the acceleration in US shale gas production, Canadian gas has until recently been largely ignored.  Clearly as US gas import requirements have reduced, Canada has seen its trade balance decline.  British Columbia is emerging as a significant new production center with the potential for several LNG export projects targeting the sizeable LNG markets of Japan, South Korea and China.  Unlike the US LNG export projects which are in the main conversions of import terminals to export facilities through the addition of liquefaction plant, the Canadian projects are true greenfield undertakings, though proximity to Asian markets to a degree might offset these higher costs.  The paper will assess the status of the Canadian gas sector in the light of the ‘shale boom’ to the south and the outlook for its embryonic LNG ambitions. This paper will likely be published at the end of 2014. The post The Outlook for Canadian Gas appeared first on Oxford Institute for Energy Studies .

Description: The discovery of the giant Groningen onshore gas field in 1959 is generally acknowledged to represent the birth of the European natural gas industry.  In addition to meeting the majority of the Netherland’s domestic gas requirements it has also played a key role in providing base supply and winter ‘swing’ flexibility to neighboring North West European markets.  As natural gas consumption increased the Netherland’s geographic position enabled it to adopt the role of a ‘gas roundabout’; importing gas from Russia and Norway some of which transited through to adjacent markets.  Field maturity, inevitable production decline and the occurrence of earth tremors coinciding with high production periods are also placing restrictions on Netherlands gas production.  In addition to describing the development of this market, the paper will address the issue of whether the Dutch Disease was more fiction than fact, the outlook for Dutch gas consumption and the remarkable success the country has had in creating the Title Transfer Facility (TTF) which has rapidly emerged as continental Europe’s pre-eminent gas trading hub. The post The Netherlands Natural Gas Market appeared first on Oxford Institute for Energy Studies .

Description: While the much heralded politically inspired Nabucco project has morphed into a more pragmatic and initially more modest project to export 10 bcma of Azeri Gas (Shah Deniz 2) beyond Europe, the 2020’s could see more significant volumes of gas targeting the Turkish and European markets from the Azeri Caspian Sector.  The land-locked nature of this gas producing province (with the Volga-Don canal limiting the size of plant entering the Caspian) has limited the availability of exploration drilling rigs, nevertheless a combination of a deeper gas reservoir underlying the Azeri-Chirag-Gunashli field, the partially appraised Absheron discovery and several sizeable prospective structures point to further supply potential.  The paper will address the challenges to be overcome, the timing and the potential scale of this supply tranche.  This paper would likely be published in 4Q 2014/1Q 2015. The post The Outlook for Azeri gas Supply for Europe in the 2020’s appeared first on Oxford Institute for Energy Studies .

Description: The EU faces a crisis over Ukraine, as the main protagonist in the unfolding drama, Russia, is also the EU’s largest source of oil, gas, coal and nuclear fuel imports. It is a serious crisis because it appears to mark the start of Europe and Russia turning away from each other, and not just in political terms. Russia is forging new energy links with China, while EU leaders repeated at their June 2014 summit their call for ‘increased efforts to reduce Europe’s high energy dependency’, meaning in particular its reliance on Russia. Energy security measures in the EU face a special constraint in the degree to which they conflict with the long-term goals of energy decarbonisation and affordability that the EU has set itself for 2020, and is now debating for 2030. If the decarbonisation goal is to be met, the EU cannot decide to rely more on its own resources of high-carbon coal, or to rely less on imports of relatively clean gas. This comment argues that the EU can, and should, address the issues of energy security raised by the Ukraine crisis without jeopardising its goals of decarbonisation and affordability. In short, it should not be panicked into letting energy security worries bend its existing policy framework out of shape. Executive Summary The post Europe’s energy security – caught between short-term needs and long-term goals appeared first on Oxford Institute for Energy Studies .

Description: Russia possesses the potential to produce significant gas from its Eastern Regions, with total proved reserves in East Siberia and the Far East of Russia standing at 5 trillion cubic metres (Tcm) while prospective resources could be as large as 65Tcm. This would appear to give Russia a huge opportunity for export sales into the Asia Pacific region, which contains the world’s largest LNG importing nations and two of the world’s fastest growing gas markets in China and India (also importers of LNG). It is surprising, therefore, that despite the obvious commercial logic of linking enormous gas resources to expanding consumption centres, to date Russia’s only significant exports in the region are from the Sakhalin 2 project, which currently sells 10.8mt (14.6 Bcm) of LNG per annum into the neighbouring Asian markets. However, it is possible this situation could change significantly over the next five to ten years as Russia attempts to re-focus its Asian efforts with plans for potential sales of piped gas and LNG. A number of key uncertainties remain, though: will Russia finally sign a gas export contract with China; will Gazprom as a result remain the dominant player, or will its domestic competitors Rosneft and Novatek take on a more prominent role? If the latter is the case, will Russia’s eastern strategy be driven by LNG alone, implying much lower volumes of exports into Asia; and finally, is it possible that Russia may miss this opportunity altogether, either as a result of political delay or failure to price gas competitively from these new projects? This Energy Comment from James Henderson and Jonathan Stern discuss these issues and assesses the potential consequences for the Asian gas market that new Russian gas supplies could have, as and when they ultimately are exported from the country’s Eastern Regions. The post The Potential Impact on Asia Gas Markets of Russia’s Eastern Gas Strategy appeared first on Oxford Institute for Energy Studies .

Description: The Oxford Institute for Energy Studies has recently published a paper which examines the rapid unit cost increases exhibited by the LNG industry since the turn of the century. Between 2004 and 2009 the economic growth of the BRICS and their commodity import and investment requirements increased the price of oil and other commodities but also the unit investment costs in capital intensive industries.  These costs almost doubled in real terms during this period. On the face of it the impact on liquefaction plant costs appeared to be significantly more pronounced. Since 2010 regional natural gas prices have diverged and the prevailing assumption in the oil and gas industry has been that at present levels of liquefaction costs, only Asia represents a viable market for new LNG projects.  With the prospect of US LNG exports, where existing re-gasification terminals are to be converted into export facilities through the incremental investment in liquefaction plant, it is plausible that LNG trading and arbitrage could yield sustainable hub prices (at today’s development cost levels) of US: $5-6/mmbtu; Europe $10 – 11/mmbtu and Asian LNG $12 – 13/mmbtu. In addition to the significant competitive advantage for the US deriving from these lower gas prices, the ability for gas to compete with coal in power generation in Europe and Asia is doubtful without robust policy support, with obvious implications for CO 2 emissions. Such regional gas price differentials in such a scenario are directly influenced by the assumption of the continuation of today’s liquefaction (and to a lesser extent shipping) costs. In this paper Brian Songhurst assesses the reasons for the liquefaction cost level increases in the last decade by placing the available data into a framework in which an objective comparative analysis is possible.  He also discusses trends in the LNG project construction and execution sector which should lead to cost reductions over time. The post LNG Plant Cost Escalation appeared first on Oxford Institute for Energy Studies .

Description: This paper will address the issue of construction and usage of incremental and new gas transportation capacity in Europe. It will analyse the existing (Guidelines of Good Practice for Open Seasons, the Energy Infrastructure Package, the 3rd Gas Directive) and draft (ACER Guidance for incremental capacity) regulation, as well as various proposals for development of additional regulation (e.g. Coordinated Open Seasons) with the aim of establishing whether the existing/draft/proposed regulatory framework is adequate for construction of new cross-border pipelines in Europe. This will be the second paper in the series of the Gas Programme publications on the EU regulatory issues. The post Building New Gas Transportation Infrastructure in the EU – what are the ‘rules of the game’? appeared first on Oxford Institute for Energy Studies .

Description: This paper will analyze the Russian regulatory regime for gas transportation, aiming to provide a clear understanding of the existing framework and its possible future changes. The paper will a) provide an overview of the Russian Unified Gas Supply System (UGSS), focusing on transportation and storage activities, b) analyze the existing third-party access (TPA) regime to the UGSS, focusing on capacity allocation rules and tariffs (including a detailed analysis and critique of the tariff methodology), c) analyze proposed changes to the existing regime and their potential impact on the industry, d) analyze the issue of new capacity development. This paper will be based on one of the chapters in Henderson & Pirani (eds) The Russian Gas Matrix (OUP, 2014 forthcoming). The post The Evolution of Gas Transportation Regulatory Regime in Russia – network ownership, third party access, and tariffs appeared first on Oxford Institute for Energy Studies .

Description: In just seven years, the US shale gas and tight oil revolution has created significant new challenges and opportunities and a new known-unknown that energy market players and analysts must learn to deal with in the years to come. Among all the data and evidence at hand, this comment focuses around the following pieces of industry data that capture a vast amount of relevant context (technical and commercial) and decision-making: (1) recent announcements by large and small industry players, such as write-downs, and (2) financial performance analysis of US shale gas and tight oil independents. The article argues the shale industry has been focused on drilling and this is likely to remain the focus for years to come as companies delineate acreage spacing, increasing the longevity of these plays and the span of drilling that may require decades not years. A key question is who can, or will want to, fund the drilling of millions of acres and hundreds of thousands of wells at an ongoing loss? The article concludes that a more realistic outcome is that sections of the industry will have to restructure and focus more rapidly on the most commercially sustainable areas of the plays possibly yielding a lower production growth in the US than is currently expected, but perhaps a more lasting one. It argues that not all companies are going to end up on top, but shifts in commodity prices and performance improvements will result in a stable ‘core’ group holding the prize. The post US shale gas and tight oil industry performance: challenges and opportunities appeared first on Oxford Institute for Energy Studies .

Description: Global fossil fuel consumption in 2000-2009 was running at more than four times the level of 1950-1959. Since fossil fuel consumption, and production, are key causes of global warming, it is generally accepted that reduction of both would be a good thing. And yet policies aimed at reducing consumption, at both national and international level, have failed – a striking fact of modern history. Since the 1980s, i.e. since the science on climate change began to become clear, these policies have neither reversed nor slowed down the aggregate fossil fuel consumption growth rate. Research on what drives the increase from the consumption side, and the context of and reasons for these policy failures, is obviously relevant to discussion of climate change issues. This project will cover the global history of fossil fuel consumption since 1950. I will conduct the research as a historian, taking an integrative approach that looks at social, political, technological and economic factors, and how they work internationally, over time. The project will aim to test widely-accepted explanations for fossil fuels consumption growth – e.g. those that refer to increasing world population; expansion of economic activity; the growth of both population and economic activity in middle-income countries, notably China and India; and excessive individual consumption (of energy, and goods and services made using energy) in rich countries – and interrogate underlying assumptions. Attention will be paid to the way that predominant paths of economic development, and infrastructure lock-in effects that go with them, influence consumption patterns. I welcome contact with historians doing related research. The post Global History of Fossil Fuel Consumption from 1950 appeared first on Oxford Institute for Energy Studies .

Description: German Energy policy – in its current form the Energiewende – is the product of a complex evolution of overt aspirations of many of the parties in and out of governing coalitions since the turn of the century, and a covert fear of import dependency on Russian gas combined with ‘coal-mindedness’ – an affinity for the use of coal and lignite, despite the country’s net coal import position. In this extensive and comprehensive paper, Ralf Dickel explains the political path by which Germany’s current energy policy was derived and in particular the way in which the Fukushima disaster on March 2011 finally catalysed an embedded desire to exit nuclear energy in many political factions to fulfilment through consensual legislation. Phased nuclear closure and a desire to achieve decarbonisation targets drove the many scenarios underpinning energy policy, but the role of gas was never explicitly addressed within the governing political mainstream.  The choice between gas and coal/lignite was comprehensively ‘ducked’ but as the abject failure of the ETS system unfolded it was convenient to ascribe such a choice as being ‘for the market to decide’.  At present a CO 2 price of €50/tonne CO 2 would be required to burn gas in favour of coal in German power plant. Looking ahead however, the paper anticipates potential developments for which the maintenance of the German gas sector and its transmission grid would be much more positive (preserving options) than allowing gas to wither and coal and lignite to maintain dominance.  These include the continuation of biogas generation, gas with CCS (having superior investment economics than coal and lignite) and power to gas, via the Sabatier process, by which surplus renewable power generation could be stored as (zero carbon) gas and utilised by the existing transmission and storage system. The post The New German Energy Policy – What Role for Gas in a De-carbonization Policy? appeared first on Oxford Institute for Energy Studies .

Description: The future level of U.S. coal exports is strongly linked to the level of international prices and the building of new export capacities on the Pacific coast enabling the country to remain competitive on the Asian coal market. The proposed paper will look at the current and future evolution of U.S. coal exports. It will review the recent surge in coal exports to Europe and Asia and analyses the future of coal exports to Asia.  Projects to build new coal terminals on the U.S. west coast will be reviewed. Environmental and market challenges will also be discussed to assess the likelihood of increased exports from the Pacific coast. The post U.S. – the long road to coal exports to Asia appeared first on Oxford Institute for Energy Studies .

Description: The aim of the proposed paper is to analyze key policy and market developments in the Chinese coal market and their possible impact on global coal trade. It will review recent policy changes that aim at curbing China’s coal demand and reducing the environmental footprint of coal.  Coal demand and supply trends will be reviewed, as well as future outlook. The report will put a special emphasis on China’s coal imports and competition between domestic and imported coal. It will conclude on the impact of a possible leveling off of coal demand on global coal trade and prices. The post China’s coal market – can Beijing tame King Coal? appeared first on Oxford Institute for Energy Studies .

Description: The discovery of large natural gas fields in the Rovuma basin offshore East Africa represents one of the most exciting upstream exploration successes of recent years.  The period of stability after the cessation of the civil war in 1992 allowed the international upstream companies to successfully apply advanced seismic and deep water drilling technology to identify a string of significant discoveries.  In a very short time Mozambique found itself the owner of a world-class natural gas resource base. Mozambique is a ‘real time study’ of how a country of modest financial means succeeds (or fails) in its quest to successfully assimilate unexpected resource wealth.  In this paper Anne Frühauf provides an extremely well structured analysis of these complexities as well as a masterful in-depth description and assessment of the political dynamics of Mozambique, which the Rovuma discoveries have re-invigorated, and which ultimately may be the most important factor determining the country’s fortunes. The post Mozambique’s LNG revolution – A political risk outlook for the Rovuma LNG ventures appeared first on Oxford Institute for Energy Studies .

Description: In recent years Brazil has received much attention in macro-economic circles as one of the high growth BRICS countries.  Its performance has waned of late, apparently due to lack of internal reforms and infrastructure bottlenecks, and as this paper, published today by the Natural Gas Programme of the Oxford Institute for Energy Studies demonstrates, these factors certainly ‘read across’ to Brazil’s natural gas sector. Initial excitement in the wake of Brazil’s offshore pre-salt hydrocarbon discoveries in 2007 and 2008 raised the prospect of Brazil becoming an LNG exporter.  Following further appraisal and market developments this prospect has receded and managing the country’s gas balance has been further complicated by low rainfall (and hence hydro availability) in recent years.  For these reasons Brazil has had to import LNG at Asian-equivalent spot prices to meet requirements which are difficult to forecast. In short Brazil is a market which any observer of the natural gas world is required to develop a working understanding of: in view of its scale, its potential for growth and its impact on the global LNG market.  However, its circumstances and specificities make such an understanding extremely difficult. This paper by Ieda Gomes offers a comprehensive, lucid and perceptive assessment of the evolution, status and future challenges of Brazil’s gas sector. The post Brazil – Country of the future or has its time come for natural gas? appeared first on Oxford Institute for Energy Studies .

Description: The political turmoil that has swept across many parts of the Middle East and North Africa (MENA) since the beginning of the Arab Spring in December 2010 and the tightening of international sanctions against Iran in 2012 have reignited the recurring debate about energy security and the reliability of MENA as an energy supplier. In this paper, we examine the impact of the past three years of political turmoil in MENA on oil and gas markets. We argue that although many disruptions did occur and oil prices did rise, especially following the Libyan revolution in 2011 and when fears of a potential military confrontation between Iran and the USA intensified in early 2012, the short-term effects on oil and gas markets of recent events in the region have been less dramatic than originally feared. The Arab Spring did not destabilize the large Gulf oil and gas producers; the rise in oil price induced by political and geopolitical factors proved to be transient; and oil and gas markets have shown relative resilience in filling the supply gap and in redirecting oil and gas trade flows. Beyond the immediate impact of the past three years of political turmoil in the MENA, however, we argue that it is the more subtle, long-term effects of regional political instability and international sanctions that are likely to leave the most lasting mark on regional oil and gas markets. Potential repercussions are likely to be felt through several years of an unstable regulatory and investment environment, policy uncertainty, deteriorating security, and a lack of much needed energy pricing reform that will impact the long-term production and export capacity of various MENA oil and gas producers, including some of those unaffected directly by the Arab Spring and sanctions. The post The Arab Uprisings and MENA Political Instability – Implications for Oil & Gas Markets appeared first on Oxford Institute for Energy Studies .

Description: Inside its 28-country energy market the European Union is permitting serious distortions. These arise out of the current patchy way whereby energy-intensive industries are relieved of the costs of ambitious, clean EU energy policies of capping carbon and promoting renewables.  This comment argues that the EU should adopt a common approach to such carbon cost relief, rather than leaving it to member states, of which only a few are able and willing to help their energy-intensive sectors. Europe now has substantially higher energy prices than its main competitors. This gap is due partly to the shale revolution in the US; the EU can do little about that, although the European Commission has given a green light to environmentally-responsible exploitation of shale resources in Europe. The gap is also due to clean energy costs which stem from the EU pursuing a climate policy more ambitious than its competitors. There is no evidence yet that carbon costs (purchase of emission allowances + renewable energy subsidies) have led to ‘carbon leakage’ – energy-intensive industrial output leaking out of Europe to locations without carbon costs or constraints. But there is already some evidence that EU carbon costs are discouraging new investment in energy-intensive sectors in Europe. If Europe’s energy costs remain higher than those of its competitors for many years – which they are forecast to do – it is very likely that carbon leakage or investment leakage will occur. This comment therefore accepts the need for some relief from clean energy costs. But only one form of this cost relief (that for the direct cost of Emission Trading System allowances) is provided in a harmonised manner across Europe. Compensation for the bulk of clean energy costs (indirect ETS costs + renewables costs) is left to member states, and only a few of them provide it. This is distorting competition in the EU energy market. The comment proposes two ways of removing this distortion. The post Costs, competitiveness and climate policy – distortions across Europe appeared first on Oxford Institute for Energy Studies .

Description: This issue of the Forum is dedicated to developments in Chinese energy The post Oxford Energy Forum – Issue, 95 appeared first on Oxford Institute for Energy Studies .

Description: Executive Summary The Oxford Institute for Energy Studies Natural Gas Research Programme has recently published a paper entitled ‘The Future of Australian LNG Exports: Will domestic challenges limit the development of future LNG export capacity?’ With seven the new LNG projects under construction and due for completion in the 2014 – 2018 timeframe amounting in addition to existing facilities, Australia is expected to overtake Qatar as the world’s largest supplier of LNG by the end of the 2010s.  With its plentiful gas reserves, prior track record of LNG project execution and operation and relative proximity to the fast growing Asian LNG markets the degree of comparative advantage would seem to guarantee a benign investment environment. However, several factors, among them competition for skilled labour within Australia, the strength of the Australian dollar and the specific logistical and environmental sensitivities of the project locations have resulted in significant cost escalations and in some cases delays to the original project schedules.  This paper also serves to convey an understanding of the much overlooked Australian gas market and, significantly the impact that the new LNG projects are already having on internal supply/demand – price dynamics and the political challenges raised. Much energy media attention has focused on the problems faced by the current group of new Australian LNG projects. This paper comprehensively addresses the root causes but more importantly conveys the scale of the new wave of Australian LNG supply and integrates this with its impact on the domestic market which until now has been largely isolated from global energy dynamics.  The OIES Natural Gas Research Programme is committed to producing timely and insightful research on both supply and demand side developments and this paper achieves both these objectives. The post The Future of Australian LNG Exports – Will domestic challenges limit the development of future LNG export capacity? appeared first on Oxford Institute for Energy Studies .

Description: The surge in natural gas liquids (NGLs) supply accompanying US shale production has notably underpinned the domestic petrochemicals industry with cheap plant feedstock, particularly in the form of ethane. This has allowed US plants to forge a competitive global position in ethylene production and ushered in a new era of investments in the US petrochemicals sector. However, the impact of US NGLs production is not confined to the domestic petrochemicals sector. The emergence of the USA as a key global exporter of light-end commodities and purity products split from NGL streams is not just redrawing traditional trade patterns, it is also influencing wider market dynamics and global petrochemical feedstock trends and investment decisions. In this paper, we argue that while North American producers will lead the charge on cost-advantaged ethane-based ethylene production, petrochemicals markets will also adjust to support naphtha-based steam crackers based on growth in condensate exports and splitting capacity, particularly in markets east of Suez. Given these dynamics, the major spillover effect of US NGLs production on global petrochemical markets will be the provision of more optionality and feedstock alternatives between LPG and naphtha to global producers; this will ultimately act as a ‘balancing mechanism’ in global petrochemical markets outside the USA. The post US NGLs Production and Steam Cracker Substitution: What will the Spillover Effects be in a Global Petrochemicals Market? appeared first on Oxford Institute for Energy Studies .

Description: The FLNG concept has brought new players into the liquefaction market with an entrepreneurial approach in providing an own and operate service (as they do for floating regas) on a leased basis. This is ideal for the small independents who would struggle to raise the capital as thus provides an enabling technology for marginal fields. It could also provide a lower production cost base for the major energy companies and possible reuse, especially given a) Concern over the rising cost of liquefaction projects in general and in certain locations specifically, and b) the potentially more highly competitive market that new projects may face over the next ten years, and the need therefore to ensure projects which are robust at lower expected market prices potentially. The prospect of repeat ‘standardised’ units built competitively in a ship yard, rather than bespoke customised land-based liquefaction solutions is the fundamental attraction. The paper will assess the capabilities and track record of the likely FLNG solution providers, the limitations to this approach in terms of condensate yield, gas impurities and water depth, an indicative cost comparison with ‘status quo’, an assessment of the scope for deployment on otherwise stranded marginal fields and other issues such as host government requirements for local project content. The post The Outlook for Floating LNG Liquefaction Solutions appeared first on Oxford Institute for Energy Studies .

Description: As addressed in several Gas Programme papers, European gas hubs have become the dominant price reference points for North and Central Europe.  On the basis of liquidity measures and correlation metrics, the UK’s NBP and the Netherland’s TTF are the leading gas hubs in the European market whilst those in Germany, France, Italy and Austria are closely linked through arbitrage. Traders on a trading floor make use of information of several adjacent gas hubs before making their decision about a gas deal or about bid and offer prices. From this one may expect that gas prices are well correlated with a possible time lag in the variation of the price signals of each of the gas hubs. This time lag contains information about the relative position of each of the gas hubs. The question of which hub is the ‘prime mover’ and which hubs follow is the challenge this paper seeks to address. The post Vector auto regressive analysis on gas hubs as multi agent system appeared first on Oxford Institute for Energy Studies .

Description: With survey data from the IGU and others continuing to demonstrate the continuing widespread adoption of hub pricing for European gas, and trading volumes growing strongly overall, this paper revisits the issue of hub price correlation.  Following from her ground-breaking paper of October 2013 where for the first time in the public domain the analysis of OTC trading data revealed strong trends towards price convergence at the European gas trading hubs, Beatrice Petrovich in this paper extends the analysis with data to October 2013. Focussing on price and volatility correlations between Europe’s gas trading hubs, Beatrice identifies those whose trends, either temporarily or on a more sustained basis, are out of line with the ‘core group’ of North West continental hubs.  Applying a forensic focus, the underlying causes of such anomalies are, where possible, identified.  This involved extensive discussions with system operators, market participants and analysis of infrastructure flow data. The emerging picture is a positive one in terms of supporting the thesis that European gas hub prices respond to supply and demand forces.  However as flow patterns across the European geography change, for example due to LNG being diverted away from Europe towards Asia and with the opening of North Stream, new ‘pinch points’ or bottlenecks emerge which can cause hub prices to de-link.  Whether, in a European context, the appropriate incentives are in place to resolve such bottlenecks in a cost effective manner is beyond the scope of this paper.  It may be worth reflecting however that despite being a liberalised gas market since the 1980s, the US still has need to reconfigure and debottleneck its gas transmission system as its geographic loci of demand and supply continue to change and evolve. Executive Summary The post European gas hubs price correlation – barriers to convergence appeared first on Oxford Institute for Energy Studies .

Description: The European Court of Justice recently announced its judgement in the case of Alands Vindcraft, concerning Sweden’s right to deny support for renewable electricity to Finnish producers.  Against the Advocate General’s recommendations, the Court decided that the Swedish policy does not infringe European law.  This Comment, by Étienne Durand and Malcolm Keay, looks at the implications of the decision, which could justify the continuing existence of 28 different renewables support mechanisms in the 28 European Member States and thereby undermine the goal of a single European electricity market. Executive Summary The post National support for renewable electricity and the single market in Europe: the Ålands Vindkraft case appeared first on Oxford Institute for Energy Studies .

Description: Over the past 8 years, research by the Gas Programme has anticipated, rationalized and analysed the transition of European gas markets away from oil-indexed pricing towards hub-based pricing (liberalization).  Although initially content with the status quo, European mid-stream utilities began to experience unsustainable financial exposure as a combination of falling demand, competing spot-priced gas and a more competitive downstream landscape emerged – while still contractually obligated to buy oil-indexed gas from upstream suppliers.  The quest for change through renegotiation and arbitration by the midstream players has been a key transformative factor in Europe’s gas market evolution. However while financial exposure may have eased for these players, other existential questions remain.  For an organization whose prior mission was to secure supplies from often distant producers under long term contract to serve a downstream customer base – what should its role now be in a liberalized market where hub prices and transport tariffs are transparent and large industrial customers can secure their own supplies directly.  Anticipated publication date: end 2014. The post The Role of the Midstream Utility in a Liberalising Market appeared first on Oxford Institute for Energy Studies .

Description: Natural gas has often appeared to be a “balancing factor” in UK government energy policy. Given a long term vision of carbon free energy the main focus of government has been on developing an electricity sector that will provide power through nuclear/renewable sources with gas expected to fill in the gaps as required. On the other hand unlike the electricity sector, the GB gas market has remained relatively free of direct government intervention and whilst demand for gas has not grown in line with some expectations it is still a vital part of the nation’s energy mix. However there are signs that the policy environment may be starting to change. Concerns from both politicians and (to a greater or lesser degree) the public have emerged in a number of areas: -       The growing risk of power shortages combined with a continuing reluctance from investors to extend the role of gas as a future power source -       Public perceptions over the level of gas and electricity prices and profitability of energy companies. -       The role, if any, of unconventional gas In boosting UK supplies -       The danger of physical disruptions to UK/European gas supply as a result of increased import dependency coinciding with upheavals such as recent events in Ukraine. The background described raises not only issues related to policy actions in the gas sector, but also more fundamental questions regarding the prevailing consensus on energy market structures and conduct. The study will therefore to seek to answer the following questions. How far has the consensus regarding the legitimacy of a privatised, market led energy market eroded in the face of public concerns over costs and supply security? How might policy evolve given these concerns and government intervention to reduce carbon emissions? What role is gas likely to play in this future environment and what might be the impact of other factors such as indigenous shale gas or abundant international supplies? Is there a case for specific policy initiatives directed at the gas market? The post The Role of Gas in UK Energy Policy appeared first on Oxford Institute for Energy Studies .

Description: In light of the 2014 Russia-Ukrainian crisis and statements made in EU policy circles of an aspiration to reduce European dependency on Russian gas, the following paper will assess the practicality of such a course of action.  Taking a series of near and longer term timeframes, and aknowledgeing Europe’s current portfolio of contract with Russia, the paper will examine the alternative sources of gas, both domestic and import sources and the prospects for them providing an increased contribution to Europe’s gas supply mix.  The paper will also examine the potential contribution of demand reduction and alternative power sector fuels and technologies to CCGTs.  The paper will also examine the viepoint and potential response from Russia and widen the discussion in the context of wider geopolitical considerations.  In essence the paper addresses the key questions of whether Europe has any realistic alternatives to Russian gas, and if so at what cost and over what time scale? Might there be different answers for different countries/regions? How likely is a unified response and does this need to be “geopolitical” rather than energy-related? Is a unified response necessary if the overall goal is to be achieved? The post Reducing Dependence on Russian gas: distinguishng natural gas security from geopolitics appeared first on Oxford Institute for Energy Studies .

Description: The current gas dispute between Russia and Ukraine is potentially the most serious yet. It takes place against the background of the two countries’ deteriorating relations following the collapse of the Yanukovich government, the annexation of Crimea by Russia and the military conflict in eastern Ukraine. In June, negotiations between Russia and Ukraine on the pricing of gas imported to Ukraine broke down, gas deliveries were halted, and Gazprom (the exporter) and Naftogaz Ukrainy (the importer) began arbitration proceedings against each other. The main obstacle to agreement on gas issues is political. Throughout the post-Soviet period, commercial agreements between Gazprom and importing companies in Ukraine were underpinned by inter-governmental agreements (IGAs). From 2006, contracts were signed without specific reference to IGAs, but the Russian and Ukrainian governments continued to participate in discussions of gas import and transit, and corporate negotiations were conducted alongside political negotiations. This year, political relationships have come close to breaking down, and the European Commission, concerned at the possible impact of a Russia-Ukraine dispute on the transit of Russian gas to Europe, has joined three-sided negotiations on the unresolved gas issues. By mid-June these had come to a standstill. This comment assesses the commercial and political context of recent times leading up to the current impasse and places the price levels at the core of the commercial dispute in the context of developments in European traded markets, concessions on Russian contract price levels in North West Europe and prevailing prices in other FSU states.  This comment is the latest in a series of publications by the OIES Natural Gas Research Programme focusing on the continuing tension in natural gas matters – commercial and political between Russia and Ukraine. The post Ukraine’s imports of Russian gas – how a deal might be reached appeared first on Oxford Institute for Energy Studies .

Description: Brazil is at a crossroad with regard to its sustainable energy future. Despite currently boasting one of the world’s cleanest energy supplies, a number of current trends are pointing towards a deterioration of the country’s sustainable energy performance, measured in terms of renewable energy use, energy efficiency, and greenhouse gas (GHG) emissions. Firstly, declining emissions from land use and increasing demand for fossil fuels are turning energy into a key driver of Brazil’s domestic GHG emissions. Secondly, the electricity sector, dominated by large-scale hydropower, is facing challenges in meeting the growing demand. Worrying trends include the shrinking relative storage capacity in the system and the growing use of natural gas in lieu of cleaner sources. Thirdly, demand for transport fuels is growing fast, prompted by rising living standards and a long-term policy of favouring road transport. Expanding volumes and shares of oil are of particular concern and are intimately interlinked with the present troubles of the bioethanol sector. Furthermore, despite low levels of carbon and energy intensity, the country’s energy efficiency performance remains stagnant. In this paper, Mari Luomi provides an evaluation of the prospects and potential for sustainable energy in Brazil in the medium and long term, based on an analysis of current energy-related dynamics, existing government policies and plans, and domestic and international projections of energy supply and demand through 2035. She argues that there is still plenty of room for increased ambition and warns that, unless current trends are reversed with determined policy and implementation, Brazil will place at risk the decarbonization of its energy supply at a time in which global attention is turning to resource-efficient low-carbon transitions. Policy recommendations for achieving a diversion from current plans and projected trajectories include: a diversification into non-large scale hydro renewables in the electricity sector, a sustainable expansion of bioethanol production, increased attention to energy efficiency across the economy, and an ambitious post-2020 climate change mitigation policy. The post Sustainable Energy in Brazil – Reversing Past Achievements or Realizing Future Potential appeared first on Oxford Institute for Energy Studies .

Description: This comment analyses the potential impact of the proposed Mexican energy reforms in light of the current state of Mexican oil production. It identifies the main themes behind the reforms and evaluates the prospects for shallow, deepwater and shale resources, along with the midstream and downstream sectors. The comment notes that while Mexico offers significant opportunities, financial and political challenges will limit foreign investment until after 2016, thereby preventing any material impact on Mexican production or on global oil supplies until after 2020. The steep decline rates at existing fields and a beleaguered midstream and downstream sector, which are not tackled by the reforms, will also likely limit foreign investment. The post Awaiting the Mexican Wave – Challenges to energy reforms and raising oil output appeared first on Oxford Institute for Energy Studies .

Description: Oil has defined the modern-day development of the Gulf region in a 
way seen in no other place in the world; together, the six members of the Gulf Cooperation Council (GCC), Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, are home to around a third of known global reserves of oil, and nearly a quarter of its natural gas. Saudi Arabia remains the world’s most important producer
 of conventional oil, and continues to hold the majority of the world’s spare capacity, while Qatar has become the world’s largest producer of liquefied natural gas. This reflects the GCC states’ continuing pivotal role on global energy markets as a key centre of world energy supply. The fast-track economic growth and development experienced by the GCC economies since the mid-20th century in particular, however, has also left its toll on the region’s energy profile. No longer just global suppliers of energy, the GCC states have become a key centre of energy demand growth in their own right, accounting to a large extent for projections such as those by the IEA that see the Middle East alongside Asia as the world’s future energy demand growth centres well into the 2030s. This issue of OEF reflects on the variety of options and challenges faced by the GCC states more than a decade into the new millennium, and offers perspectives on future policy choices inside one of the world’s most important group of energy producers. The post Oxford Energy Forum – Issue, 96 appeared first on Oxford Institute for Energy Studies .

Description: This comment analyses the political economy aspects of the electricity market reform that has been proposed by recent changes to the Constitution in Mexico. It identifies the main political and economic barriers that could potentially prevent the reform from progressing. Although privatization is not being considered, Mexico is following closely the same deregulation-commercialization path to electricity market reform as has been implemented since the early 1990 in many developed countries. The danger is that the potential gains for the Mexican economy from electricity market deregulation will be delayed for many years if the reforms become trapped in a political impasse over electricity subsidies and commercializing Comision Federal de Electricidad (CFE). We propose an alternative route that takes into account the economic, political and social realities of Mexico, recognizing that our proposal is a ‘second best’ alternative, but one that increases the chances of success as compared to trying and ultimately failing to implement the ‘first best’ standard solution. The post In Search of the Mexican Way – How to kick start competition in the electricity sector and achieve lower tariffs appeared first on Oxford Institute for Energy Studies .

Description: Recent experiences in electricity market reform have reignited an enduring debate in economics and public policy, namely, the benefits of liberalized markets versus central planning in the provision of goods and services. This debate as it relates to energy is not new – there has been previous criticism of whether liberalized markets in the energy sector have delivered optimal outcomes on objectives related to pricing, investment, storage, and overall ‘security of supply’ (Wright, 2006; Rutledge and Wright, 2010). However, the debate has arguably taken on new and greater relevance for two reasons. The first relates to the role of the electricity sector in decarbonization, and the argument that the sector provides the most direct and substantial way of reducing greenhouse gas emissions given the growing urgency of the environmental impacts of non-action (Keay, 2009; 2010). The second has wider ranging, global implications, given that many developing countries – which stand to lose the most from the environmental impacts of climate change – have been progressively moving towards electricity market liberalization, since the 1990s, after having adopted variations of this model following its relatively successful reception in the developed world at the time. What then are the implications of the fact that developed and developing countries could end up moving in opposite policy directions – the former towards central planning and the latter towards markets – in the pursuit of a shared eventual goal, that is, climate change mitigation through the proliferation of renewable energy in the electricity sector? This paper summarizes this debate and sketches out areas of policy relevance as they pertain to developing countries. The post Divergent Paths to a Common Goal? An Overview of Challenges to Electricity Sector Reform in Developing versus Developed Countries appeared first on Oxford Institute for Energy Studies .

Description: A report published by the Natural Gas Programme of the Oxford Institute for Energy Studies, concludes that European gas demand will not recover its 2010 level until about 2025. Dr Anouk Honoré has produced the most comprehensive independent study of European gas demand by country and by sector available in the public domain. The scenarios show that natural gas demand in the 35 countries of the European region falls from 594 Bcm in 2010 to 564 Bcm in 2020 and then rises to 618 Bcm in 2030. Only 24 Bcm in two decades may seem very pessimistic, but one must not forget the sharp decline that already happened in 2010-2013. Focusing on the 2013-2030 period, then 88 Bcm of additional gas consumed is expected. Even before the financial crisis of 2008 and subsequent financial recession, European demand growth had slowed, however a product of both a maturing market, low population growth, higher gas prices (in large part due to the oil price linkage in much of its contracted imports) and the migration of manufacturing industry to other world regions. Assessing the long term prospects for European gas demand against this backdrop would be challenge enough. The additional dimensions of EU renewables and decarbonisation policy, the Large Combustion Plant Directive, the Industrial Emissions Directive, the German Energiewende and other country-specific policies and diverse national power generation mix ‘starting points’ take the challenge into ‘formidable’ territory, especially in the current uncertain post-economic crisis landscape. This paper addresses all the major ‘known unknowns’ as far as this is possible and proposes an overview of the gas demand fundamentals in Europe to 2020 and 2030 horizons. Readers will find in the appendix all the key assumptions set out in detail at a national level which, when aggregated, form the basis for the demand outlook scenario. The post The Outlook for Natural Gas Demand in Europe appeared first on Oxford Institute for Energy Studies .

Description: Published paper can be found here One of the major developments associated with the US shale revolution and that has attracted little attention from market analysts is the sharp expansion in US liquefied petroleum gas (LPG) exports. Substantial increase in domestic supply has not only meant that US imports of LPG have dwindled, but the US has now become one of the world’s biggest exporters of LPG. The sharp rise in US LPG exports is already having wide repercussions on global LPG market dynamics and trade flows. It is widely believed that the impact of higher US LPG exports will undermine the position of traditional exporters, mainly those in the Gulf Cooperation Council (GCC). First, as Asian consumers increase their purchase of US LPG in an attempt to diversify their sources of supply and gain access to cheaper LPG, GCC’s share of LPG exports to Asia is expected to fall. Second, LPG prices and the existing pricing mechanism may come under pressure from intense competition from US supplies. This paper argues that while US exports are a powerful force shaping LPG markets, it is also important to examine some of the internal dynamics within the key GCC producers, especially the rapid growth in domestic demand for LPG driven by the petrochemical sector. The drive towards diversification implies that a large percentage of the increment in production from the GCC will be used domestically. Liquid cracking could also offer opportunities for GCC producers to capture a larger share of the higher value petrochemical specialty products, which fits within GCC governments’ policies. These internal dynamics would lower the volumes of LPG available for exports from the region, and along with the expected growth in Asian demand for LPG, will moderate the impact of higher US LPG exports on prices. Furthermore, the cost of arbitrage between the US and Asia is likely to limit the impact on regional LPG prices, as prices in the US will have to fall substantially before the impact is felt in Asia. The biggest uncertainty however remains as to whether access to cheaper US LPG will induce Asian petrochemicals to start seeking alternative feedstock away from Middle East naphtha, which will have dramatic effect on LPG and naphtha markets and consequently on petrochemicals trade The post The US Shale Revolution and the changes in LPG Trade Dynamics – A Threat to the GCC? appeared first on Oxford Institute for Energy Studies .

Description: Published paper can be found here The spectacular growth of the Chinese economy since the early 2000s is a phenomenon familiar to all with an interest in the global economy. Clearly its impact on commodity markets in general has been both significant and observable. While China’s consumption of natural gas grew dramatically in the 2000s it was only in the second half of that decade that demand began to significantly outstrip domestic production, requiring pipeline and LNG import infrastructure and supply lines to be put in place. With pipeline imports secured from Myanmar, Turkmenistan and Central Asia and more recently East Siberia, as well as a range of LNG suppliers, China is rapidly becoming ‘connected’ to a portfolio of international supplies. As its demand growth increases, the scale of its import requirements will influence both regional and global trade flow dynamics. The vast geographic extent of China, the dispersion of its several gas producing regions and the location of import pipeline and LNG facilities, relative to centres of consumption, raise the related challenges of providing sufficient connecting pipeline infrastructure and a rational framework for city gate gas prices which reflect border prices and transportation costs. This paper by Michael Chen describes, within the context of China’s continued rapid gas sector development, the evolution and current status of Chinese gas price reform, which establishes city gate benchmark prices, most notably at Shanghai. These provide the basis on which sectoral prices are determined for consumption and well head prices at the various producing regions. The paper also discusses the likely future path of pricing evolution and identifies the likely response of different demand sectors in various regions within China, both to price levels and supply availability. On the OIES Natural Gas Research Programme we frequently acknowledge the increasing importance of understanding the key high growth Asian importing gas markets, and especially their impact on other world regions through competition for supply and price arbitrage. I am therefore delighted to add this paper, which significantly progresses our understanding of this highly important market in its continuing period of growth and transition to our published portfolio. The post The Development of Chinese Gas Pricing – Drivers, Challenges and Implications for Demand appeared first on Oxford Institute for Energy Studies .

Description: On 2 June 2014 the US Environmental Protection Agency (EPA) published its proposed performance standards to reduce CO2 emissions from existing power stations. In 2012, these stations accounted for about 38.5% of US energy-related CO2 emissions, chiefly from coal.  To date, the EPA proposal is the most substantial federal policy initiative aimed at reducing CO2 emissions in the US.  However, other developments will also influence CO2 emissions from the power sector. In this paper, David Robinson places the proposed EPA regulations into their wider political and sectorial context. He analyses four determinants of the demand for coal and gas in the power sector, as well as the resulting CO2 emissions: the relative price of coal and natural gas; electricity demand; renewable power; and EPA regulations. There are four messages.  First, reductions in CO2 emissions from the US power sector are likely to be modest, at least from a European perspective. Coal and natural gas will together continue to provide over 60 per cent of US electricity until at least 2030.   Second, achieving EPA objectives for CO2 emissions reduction will be difficult, which partly explains why the targets are modest. There are barriers to reducing coal-based generation in the US, including the relatively low cost of coal and strong political support for coal in many states. Third, while the market share for natural gas will grow, its market in the power sector will be limited by rising natural gas prices, growth of renewables and flat or declining electricity demand.  Finally, absence of bipartisan support for federal action to tackle climate change raises doubts about the successful implementation of EPA regulations and weakens US credibility in global climate negotiations. The post US climate change policy and the power sector appeared first on Oxford Institute for Energy Studies .

Description: Indonesia’s transition from crude oil exporter in the 1960s to net importer by 2004 has left the resource rich developing nation saddled with a ballooning fuel subsidy bill that successive governments have struggled with. The Southeast Asian nation’s decision in recent years to turn to natural gas to meet its growing energy needs will mean sustaining subsidised domestic gas demand by forgoing lucrative international exports. This paper will explore the parallels between the administration of Indonesia’s existing fuel subsidy system for oil products and future pricing policy for natural gas. The analysis will cover the history of fuel subsidies for oil products, the expansion of natural gas in Indonesia’s energy mix and how the government can draw on past experiences to build a sustainable pricing policy to drive domestic natural gas usage. The post Research – Siew Hua appeared first on Oxford Institute for Energy Studies .

Description: The impact of Europe’s high energy prices – relative to international competitors like the US – on European industry has risen to the top of the EU’s political agenda, and is causing growing tension between EU energy and climate policies. This working paper, to be completed by late spring 2014, aims to define the issue of competitiveness, to assess the effect of higher energy prices (and eventually carbon prices) on Europe’s energy-intensive industries, and to examine the feasibility of specific solutions such as free carbon allowances and state aid for sectors at risk of ‘carbon leakage’ (i.e. of losing market share and jobs to countries with lower energy prices and no carbon constraints). In addition to the economics of competitiveness, the paper will also look at the politics of the issue and the relative weight of industrial lobbies in Brussels – asking for instance, why the European Commission has (so far) paid more attention to the steel industry’s competitiveness concerns than to those of other sectors. The post Competitiveness – the wedge issue that is driving EU energy and climate policies apart appeared first on Oxford Institute for Energy Studies .

Description: Lebanon is the Levant’s most recent candidate to launch an offshore bidding round, the first in the country’s bid to become yet another gas province in the East Mediterranean. Lebanon’s waters are believed to hold significant hydrocarbon potential, for both natural gas and oil, making offshore Lebanon a potentially attractive location for new green field investors. A long-term importer of primary energy for all of its energy needs, Lebanon’s faltering economy could benefit tremendously  from its expected hydrocarbon wealth. Current plans are to import short-term LNG to replace oil in power generation, but the successful development of Lebanon’s offshore resources could reverse this trend within less than a decade, turning Lebanon into a self-sufficient producer and a potential exporter of natural gas. This chapter aims to discuss and reflect on different export options for Lebanese gas, monetising what is yet to become Lebanon’s own small gas revolution. The post Natural Gas in Lebanon and its Export Options appeared first on Oxford Institute for Energy Studies .

Description: With gas reserves in the Rovuma basin estimated at 150 tcf, Mozambique seems destined to emerge as a major LNG producer by the 2020s. Combined with a simultaneous coal boom, the country’s vast gas deposits have the potential to radically transform Mozambique’s economy and political landscape over the next two decades. This research paper assesses Mozambique’s outlook as a future LNG producer from a political risk perspective. It explores the government’s evolving agenda and priorities for the oil & gas sector; the interests of key stakeholders – domestic and external – that influence decision-making around LNG projects; the regulatory and policy regime for the sector; and operational and governance hurdles confronting project developers – all of which will have a crucial bearing on producers’ ability to bring LNG exports online from 2018 onwards. The post Mozambique’s natural gas revolution: what will it look like and who will it serve? appeared first on Oxford Institute for Energy Studies .

Description: This research project aims to evaluate the energy impact of economic rebalancing strategies in China by using an input-output analysis. It includes a brief introduction of China’s economic development and energy situation during the past 30 years. Then, it reviews the input-output models used in previous energy studies (with a specific focus on China) and sets out a new model to evaluate a range of policy packages, which represents alternative pathways of economic rebalancing in China (e.g. from relying on manufacturing industry to service industry, and from the more advanced coastal areas to the inland areas). This research also highlights the significance of changes in technological coefficients and changes in energy efficiency, which could help explain if China’s rising CO 2  emissions are caused by less-advanced technology or high levels of energy use. The post Economic rebalancing in China and its implications on China’s energy consumption appeared first on Oxford Institute for Energy Studies .

Description: This book on Iran’s natural gas industry will describe the historical, political, and economic developments which have led to Iran’s failure to engage in international gas trade at a material level, despite its world class reserves. It includes a description of the development and organisation of Iran’s gas industry, the challenging environment for IOC’s due to legal and political barriers, not least the rigid current investment framework, and the US and international sanctions.  It also outlines the domestic politics and the resulting dilemmas faced by qualified Iranian authorities striving to achieve successful negotiating positions with external parties while being typically undermined by internal political factions. The book also examines the challenges facing the Iranian government in allocating its vast natural gas resources to competing uses, including the domestic market, oilfield reinjection, and exports.  Unless material changes in domestic political attitudes and international relations happen, all these factors combined with the lack of a long-term, transparent policy serve to lower the probability of Iran becoming a major gas exporter in the short to medium run. The book will be published by Oxford University Press in 2014. The post Iran’s Natural Gas Industry in the Post-Revolutionary Period – Optimism, Scepticism and Potential appeared first on Oxford Institute for Energy Studies .

Description: China’s energy industry, with over US$ 1.3 trillion of assets, has expanded very rapidly over the last two decades but there is no single agency or entity that can, or does, co-ordinate and supervise this mammoth industry. During Hu Jintao and Wen Jiabao’s leadership period, the necessity of establishing an energy ministry was raised repeatedly but the continuous discussions produced no tangible results. The same importance on establishing an energy ministry has been stressed during the first year of Xi Jinping and Li Keqiang’s leadership. This paper will review the current structure of China’s oil and gas sector governance and explain how the delicate relationship between the major players and the government is sustained, it will also discuss the necessity of establishing a  new energy ministry. The post The Structure of China’s Oil and Gas Sector Governance – The Links between the Players and the Government appeared first on Oxford Institute for Energy Studies .

Description: During the last decade, commodity prices have experienced roller-coaster type movement and caught extensive attention among consumers, investors and regulators. A thorough investigation of energy commodity market dynamics is timely, given the vital role commodity prices play in economy and consumers’ welfare. Futures prices carry a substantial amount of information about commodity markets, as trading of most commodities takes place mainly in the futures market. The classic theory of storage, which is based on the “no arbitrage” principle, defines a commodity futures price as the sum of the spot price and costs of carry. The latter comprises of interest forgone, marginal convenience yield and marginal warehouse cost. The convenience yield – a stylized feature unique to each underlying commodity – represents the flow of services for the physical holder of the storable commodity. The convenience yield connects current and expected market conditions in the future through the storage decision and thus affects the commodity market dynamics. In this investigation, the otherwise unobservable convenience yield series will be extracted by modelling the instantaneous convenience yield and other factors, and then proceed by further testing energy sector related factors, e.g., inventory levels, OPEC activities. Moreover, the paper will examine the function of inventory as a buffer against the uncertainty of both the commodity-specific and macroeconomic conditions. The paper will also discuss the extra benefit of publicly announced inventory data on oil and gas. The post Convenience Yields of Energy Commodities: Determinants and Implications appeared first on Oxford Institute for Energy Studies .

Description: This research project will examine the potential impact of the US shale gas production on the industrial diversification strategies of the member states of the Gulf Cooperation Council (GCC), with special focus on the petrochemical sector. A key question for the research project is how the US shale gas production will affect the Gulf economies both in petrochemical revenue generation and downstream industrial diversification. The research will be composed of two major strands. First, it will assess the impact of American shale gas production on the international and Gulf petrochemical markets. Second, it will develop a workable and robust model for how the Gulf countries are able to best manage their economies to remain economically competitive in the petrochemical sector. The post The Impact of North American Shale Gas Production on the Gulf Petrochemical Sector appeared first on Oxford Institute for Energy Studies .

Description: Over the last century, oil firms have been immersed onto a lock in oil-only path dependency without major disruptions. However, in the production of fuels, oil firms are facing increasingly stringent environmental quality specifications for their products. These include in several markets, an increase of biofuel mandates, following regulations for CO2 reductions and other pollutants. These ‘new conditions’ affecting oil firms’ fuel production, including notably the integration of biofuels into the firms’ operations, have created modifications at various levels of the firms. This paper seeks to contribute empirically to the topic by examining, in particular, the implementation and innovation of biofuel in oil firms, understanding the emergence, diffusion and impact of biofuels in oil firms. The research will look into the evidence relating to the innovation strategies of oil companies with respect to biofuels, its relevance to their business and technological development. The post Ethanol and oil firms: the beginning of a new role for alternative fuels? appeared first on Oxford Institute for Energy Studies .

Description: Very large amounts of low carbon generation investment – nuclear and renewable sources –will be needed to meet UK and EU carbon targets   It is not clear whether this investment will be forthcoming without substantial wholesale market reform; such reforms are under way in the UK and a number of European markets.  In this research, the proposals as they have developed are analysed and their strengths and weaknesses considered, along with the implications of national electricity market reforms for the single electricity market in Europe, and the question of whether the European Target Model market is fit for purpose. The post UK and EU wholesale electricity markets appeared first on Oxford Institute for Energy Studies .

Description: Energy stands out among issues of major international concern in having no single global organisation with comprehensive responsibility.  Existing international organisations are restricted in their functions, either by membership (like the International Energy Agency, whose membership is confined to members of the OECD), or in coverage, like the International Renewable Energy Agency.  This structure, which has been described as the “Energy Regime Complex”, is mainly the product of history.  The IEA was set up in response to the oil crises of the 1970s, when the energy world was a very different place.  It has evolved over time in response to changing circumstances, but its membership, and to a significant extent its organisation and activities, still reflect these origins.  This situation raises a number of questions – If the IEA did not exist would it be invented today?  If there were a blank canvas to work with, what sort of international energy governance structure might be considered appropriate to the circumstances of today and the challenges of the future?  And, given that there is considerable inertia about international institutional structures, what sort of options for change might be realistic? The post Global energy governance appeared first on Oxford Institute for Energy Studies .

Description: This paper will analyze the current situation and the prospects for coal-based generation in the US, and indirectly for natural gas and other sources of power. The paper will draw on published EIA and commercial information sources to consider the balance of factors favoring coal-based generation and those that damage coal’s prospects. The research questions are whether coal-based generation is rapidly on the way out, as many people argue, and what might slow the process or reverse it.  The research will also help to understand the relationship between coal and gas markets, both domestic and international. The post US climate change policy and coal-based generation appeared first on Oxford Institute for Energy Studies .

Description: The Impact of North American Shale Gas Production on the Gulf Petrochemical Sector This research project will examine the potential impact of the US shale gas production on the industrial diversification strategies of the member states of the Gulf Cooperation Council (GCC), with special focus on the petrochemical sector. A key question for the research project is how the US shale gas production will affect the Gulf economies, both in petrochemical revenue generation and downstream industrial diversification. The research will be composed of two major strands. Firstly, it will assess the impact of American shale gas production on the international and Gulf petrochemical markets. Secondly, it will develop a workable and robust model for how the Gulf countries are able to best manage their economies to remain economically competitive in the petrochemical sector. The post Research – Justin Dargin appeared first on Oxford Institute for Energy Studies .

Description: Over the past twenty years, Central Asian republic of Kazakhstan has often been hailed as an important player in global energy markets. The geographic proximity of Kazakhstan to Russia, China, the Caucasus and the Caspian region, as well as to the Middle East, also attracted media and expert attention to a new great energy game over this country’s hydrocarbon resources. However, today Kazakhstan’s energy sector faces many challenges due to recent developments in global and regional oil and gas markets following the unconventional oil and gas revolution in North America; uncertain political environment after the imminent departure of its current president Nursultan Nazarbayev who presided over Kazakhstan since 1989; potential external and internal threats following the withdrawal of the US-led coalition from Afghanistan; and China’s diverse strategies towards its ‘near abroad’. This project will explore Kazakhstan’s current and future role in energy markets by assessing industry-specific, economic, political and geopolitical issues involving this second largest oil and gas producer in the former USSR. The post Kazakhstan’s Oil & Gas in the New Era: The big picture approach appeared first on Oxford Institute for Energy Studies .

Description: The year 2013 witnessed a major upgrade of Sino-Russian oil cooperation. The achievements in the oil sector between Russia and China during Xi Jinping’s first year as the new president of China were much bigger than those during the decade of president Hu Jintao’s  leadership period (2003-2012). However the massive crude supply deal between Rosneft and CNPC & Rosneft and SINOPEC during 2013 raised a big question as to how Russia would balance the volume of crude supply to China (through Skovorodino) and other Asian consumers (through Kozmino) with the limited production capacity from East Siberia. To answer this question, this paper will make an in-depth analysis on the supply capacity of the production centres in East Siberia for the ESPO (East-Siberia Pacific Ocean) oil pipeline. The supply gap has to be covered by the diversion of western Siberia’s crude for Europe to Asia, and the driving force for this diversion of crude supply flow is China’s massive financing of this very large-scale crude supply to China. This paper will explain the importance of the upfront payment that had facilitated the second oil supply deal.  In the case of Sino-Russian gas cooperation, by the end of 2013 the gas deal had not materialised. Despite this failure, both Gazprom and CNPC are strongly indicating their intension to fix the final export price during the spring of 2014, and ultimately President Putin’s Beijing visit in May 2014 could seal the long awaited price deal. The result – success or failure – of the Sino-Russian gas price deal will be the most important news in 2014 and will have a massive impact on regional and global gas trading in the coming years and decades. It will fundamentally affect the volume of US LNG to Asia and East Africa’s LNG to Asia towards the end of this decade, not to speak of LNG from Australia and Canada. To explain the very complicated gas price negotiation process between the two countries since the failure of the gas price deal during the June 2011 summit in St. Petersburg, this paper will make a chronological analysis of the process, and will then assess the implications on regional and global gas trading. The post Sino-Russian Oil and Gas Cooperation – Dawning of a New Era appeared first on Oxford Institute for Energy Studies .

Description: Indonesia’s transition from crude oil exporter in the 1960s to net importer by 2004 has left the resource rich developing nation saddled with a ballooning fuel subsidy bill that successive governments have struggled with. The Southeast Asian nation’s decision in recent years to turn to natural gas to meet its growing energy needs will mean sustaining subsidised domestic gas demand by forgoing lucrative international exports. This paper will explore the parallels between the administration of Indonesia’s existing fuel subsidy system for oil products and future pricing policy for natural gas. The analysis will cover the history of fuel subsidies for oil products, the expansion of natural gas in Indonesia’s energy mix and how the government can draw on past experiences to build a sustainable pricing policy to drive domestic natural gas usage. The post Can Indonesia’s history in petroleum product subsidies offer lessons in ensuring the sustainable and profitable expansion of natural gas usage? appeared first on Oxford Institute for Energy Studies .

Description: Beatrice’s 2013 paper, using quantitative correlation analysis, demonstrated the strong linkage between all key European gas hubs from 2007 to mid 2012.  In periods where price correlation was weak this could be related to physical transportation constraints.  This research benefits from a proprietary data set from the three brokers who in aggregate represent 90% of European OTC gas trading through a data licence collaboration with ICAP, Tullet Prebon and Marex Spectron. This paper will extend the analysis up to October 2013 and address apparent de-linkage episodes in the southern French and Italian hubs.  Gas price volatility analysis will also be undertaken and related, where possible to physical supply or demand side events. The paper is intended to be published in mid 2014. The post European Hub Prices – Price volatility Correlation appeared first on Oxford Institute for Energy Studies .