Oxford Institute for Energy Studies

Joint Ventures in the Russian Offshore – Positive News but only for the Long Term

James Henderson — Fri, 18 May 2012 11:27:51 +0000

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

How to Spend It: Resource Wealth and the Distribution of Resource Rents

Paul Segal — Thu, 17 May 2012 10:35:08 +0000

Natural resource revenues differ from other government revenues both in their time profile, and in their political and legal status: they are volatile and exhaustible, and belong to all citizens of the country in which they are located. This paper discusses the theory of natural resource revenues and examines expenditure practices in a range of resource-rich countries. It considers both the distributional impact and the efficiency of expenditure policies, focusing on the extent to which they succeed in providing all citizens with their share of the benefits due to natural resources.

Protection against Default in Long Term Petroleum Joint Ventures

Eduardo Pereira — Tue, 15 May 2012 13:07:07 +0000

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

Fiscal Policy and Natural Resource Entitlements: Who Benefits from Mexican Oil?

Paul Segal — Mon, 14 May 2012 10:57:10 +0000

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

Is Energy Efficiency Sustainable?

Malcolm Keay — Tue, 01 May 2012 11:09:36 +0000

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

The Financialization of Oil Markets: Potential Impacts and Evidence

Kate Teasdale — Wed, 18 Apr 2012 13:49:30 +0000

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

Will There be a Shale Gas Revolution in China by 2020?

Fan Gao — Wed, 18 Apr 2012 13:26:58 +0000

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

The paper provides a rare appreciation of the dynamics of the onshore Chinese upstream industry and from that basis a better understanding of what will be required, on a number of policy levels, for Chinese shale gas development to succeed.

The Iranian Oil Industry

Laura El-Katiri — Tue, 17 Apr 2012 09:59:39 +0000

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

Private Investment in the MENA’s Oil and Gas Sectors

Laura El-Katiri — Tue, 17 Apr 2012 09:58:03 +0000

This research aims to look at the role private companies, including IOCs and local private companies, have played in the development of the oil and gas sectors of the Middle East. Private capital and know-how play an important role in the development of hydrocarbon resources throughout the region, despite a history of very much changing relations between IOCs and national oil and gas companies in particular. The study aims to outline what private companies do contribute to the security of future output from these countries; and to identify the policy constraints and success factors that characterise private companies’ involvement in the MENA countries’ oil and gas sectors.

Energy Pricing in Resource-Rich Economies

Laura El-Katiri — Tue, 17 Apr 2012 09:55:01 +0000

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