Oxford Institute for Energy Studies

Entry-Exit Transmission Pricing with Notional Hubs: Can it Deliver a Pan-European Wholesale Market in Gas?

The European Commission has designated entry-exit tariff design as "best practice" methodology to be adopted in all gas markets throughout the Union. In this paper, Paul Hunt draws attention to the limitations of entry-exit methodology which has been devised to compensate for the failure to develop primary and secondary transmission capacity markets but, by definition, is incapable of doing so. He concludes that, without very substantial amendments, entry-exit cannot deliver a pan-European wholesale market in gas.

Renewable Energy - Quo Vadis

This presentation was given at OIES by Marianne Haug, Professor of Energy Policy and Sustainable Development, University of Hohenheim (Germany) and senior research advisor to the Institute.

Bali 2007: On the road again!

Benito Müller analyses the recent UN climate change conference, with a particular focus on what happened on the last day, and what implications that will have for the upcoming negotiations.

One Step Forward, Two Steps Back? The Governance of the World Bank Climate Investment Funds

Benito Müller and Harald Winkler are looking at the latest World Bank initiative to set up three 'Climate Investment Funds' -- a Clean Technology Fund (Target size US$5-10bn); a $1bn Forest Investment Fund, and a $1bn Adaptation Pilot Fund, and find that the proposed governance of these funds is completely out of step with recent thinking in development circles, indeed with recent events in the field of international funding on climate change.

Europe, Emissions and Echternach - assessing Brussels' January 2008 package

The European Commission has proposed a very ambitious overhaul of its climate change policies. But the renewable energy target could prove a distracting sideshow to the main task of reducing emissions, argues David Buchan.

The German Path to Natural Gas Liberalisation: Is it a special case?

Despite the importance of the German gas market as the second largest gas market in Europe, there is, amazingly, no comprehensive account in English of the steps towards liberalisation through which this market has passed. This book from the OIES Natural Gas Programme - now available as a free download - fills that gap in the literature. While many of us know some part of the German story, this is the first study to take us from the start of the Verbandevereinbarung through the E.ON–Ruhrgas merger to entry/exit tariff design and the legal challenge to long-term contracts. Not only does the study explain these events, it also provides a comprehensive picture of all the different market players, their relative positions and strategies.

The Dynamics of Crude Oil Price Differentials

Despite the wide variety of internationally traded crude oils with different qualities and characteristics, many observers consider the world oil market as 'one great pool' or 'globalized' in the sense that supply and demand shocks that affect prices in one region are transferred into other regional markets fairly quickly. This paper examines the dynamic behaviour of crude oil price differentials using a two-regime threshold autoregressive (TAR) model. We find that different oil markets are linked and thus, at the very general level, the oil market is 'globalized'. However, we also find that there are differences in the dynamics of adjustment which suggest that within this one great oil pool, oil markets are not integrated in every time period and, although the presence of an active futures market has helped make some distant markets more unified, arbitrage across the different markets is not costless or risk-free.

The Dolphin Project: The Development of a Gulf Gas Initiative

The Dolphin Gas Project is an important regional gas pipeline initiative between Qatar and its neighbours in UAE and Oman which commenced operation in 2007. It is the logical conclusion of many years of discussions between Gulf countries regarding gas supply cooperation. However, Dolphin has highlighted serious economic and political difficulties in developing such cooperation, and it is not clear whether the project represents the limit of what is possible, or the start of much larger scale regional gas trade.

Agreements from Another Era: Production Sharing Agreements in Putin's Russia, 2000-2007

Under President Vladimir Putin, the Russian government has reasserted state control over strategically important oil and gas projects. The Putin administration's actions toward the three projects governed by production sharing agreements-Kharyaga, Sakhalin-1 and Sakhalin-2-are often cited as examples of Russia's resurgent resource nationalism. This paper by Timothy Fenton Krysiek analyzes corporate-government relations over the PSA projects from 2000 through mid-2007 and argues the Kremlin's behavior toward Kharyaga, Sakhalin-1 and Sakhalin-2 can be explained through a combination of factors unique to each venture. Thus far, regional and domestic industrial factors have prevented the Putin administration from establishing a strategic direction for Kharyaga and Sakhalin-1 or intervening decisively against project operators Total and ExxonMobil. In the case of Sakhalin-2, a perfect storm of operational, legal, technological and geopolitical factors explain the government's bold and decisive action against Shell, the project's former operator.

OIES Geopolitics of Energy Seminar Series

This seminar series, run in association with St. Antony's College, Oxford, will focus on the important role played by geopolitics in shaping global energy trends. For a full seminar schedule please click here.

13th Session of the Conference of Parties (COP13)

At the 13th Session of the Conference of Parties (COP13) of the UN Framework Convention on Climate Change in Nusa Dua, Bali, the OIES is hosting a Side Event on Bunker Fuel Emissions and Adaptation Funding on Wednesday, 5 December 2007; 20:00 – 21:30h, Room ‘Wind’, GH. For more information please visit the main event site.

Why do Oil Shocks no Longer Shock?

This paper, by Paul Segal, surveys the literature on the relationship between oil prices and the macroeconomy in order to explain why high oil prices over the past three years do not appear to have led to a slow-down in the world economy. It makes three arguments. First, that oil prices have never been as important as is popularly thought. Second, that the most important route through which oil prices affect output is monetary policy. The third argument is that high oil prices have not reduced growth in the past three years because they no longer pass through to core inflation, so the monetary tightening previously seen in response to high oil prices is absent.

Energy: the long view

As we become increasingly concerned about the sustainability of our energy systems, we need to develop ways of thinking about energy from a long term perspective - for instance, climate change studies often involve forecasts hundreds of years into the future. A new study, by Malcolm Keay, draws inspiration from Churchill's dictum "The further backward you look, the further forward you can see". It traces past energy developments and trends, since before the industrial revolution, to see what lessons history may hold about possible long term energy futures.

Nuclear Power in the UK

The consultation process on nuclear power in the UK has ended and the Government is considering the way forward. This Comment, by Malcolm Keay, explores the difficult dilemma the Government is facing. On the one hand, nuclear power looks necessary for energy security and to meet climate change targets. On the other hand, nuclear does not look viable in current market conditions. The Government will have to decide whether to change the rules in order to make nuclear viable - something it has so far set its face against.

The moral duty to eat African strawberries at Christmas

In his latest Energy and Environment Comment, Dr Benito Müller looks at the recent controversy about discouraging consumers particularly in the UK from buying produce of least developed countries because of their 'food miles', i.e. the transport carbon emissions (especially from air freight), and the effect that such an environmental consumer boycott has on the efforts to eradicate poverty in these countries.

Crusading against vertical integration.

The European Commission has stuck to its guns in proposing ownership unbundling for energy networks. But David Buchan warns that if the Commission's plans misfire on investment from inside and outside the EU, and create more of a two tier market structure, they would have been better kept in their holster.

How Secure Are Middle East Oil Supplies?

In light of the Middle East's record as a reliable supplier, a simple return to the old theme that consuming countries should reduce dependency on Middle East oil may prove unrealistic, costly and counter productive. In this paper, we argue that a more useful approach is to assess under which circumstances the region would cease to act (willing or unwillingly) as a reliable supplier, what are the chances of these events occurring, and in case of a disruption, how big the impact is likely to be on oil supplies and productive capacity. This approach would help refocus the debate regarding Middle East supplies by reconsidering certain concerns that seem to shape energy security policies. On the other hand, one can identify some factors that may have a long lasting impact on energy security but which do not receive the appropriate attention.

The Battle for the Next Energy Frontier: The Russian Polar Expedition and the Future of Arctic Hydrocarbons

The recent Russian expedition to the North Pole has highlighted the growing strategic importance of the Arctic. This comment, by Shamil Midkhatovich Yenikeyeff and Timothy Fenton Krysiek, examines the Arctic's potential as a,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, new hydrocarbon producing region, analyzes the Kremlin's regional development strategy, and explains the response of the other circumpolar countries the United States, Canada, Denmark, and Norway. This opinion piece also reviews the challenges to Arctic development, describes the implications of a traversable Northern Sea Route and Northwest Passage, and argues that the Norwegian energy companies and Anglo American supermajors are best positioned to take on upstream projects in the region.

The Myth of the Iranian Oil Weapon

Although Iran has many tools for deterrence or retaliation at its disposal, contrary to what many analysts believe, the oil weapon is not one of them. There are serious costs and risks associated with the use of the oil weapon. It is not always effective; it is indiscriminate; and it cannot be sustained for a long period of time. It is certainly not one of Iran’s strongest tools with which to confront the US.

Europe’s mid summer blues

The European Union faces a difficult autumn carrying forward its three pronged energy programme. The problem so far, argues David Buchan, is less the policies cutting across each other than the 27 member states, with their differing views on Russia, competition and green priorities.

A note on oil prices and the world economy in the IMF’s World Economic Outlook

In the April edition of the World Economic Outlook the IMF has taken up the argument that the provenance of oil price shocks—whether they are caused by supply restrictions, or by increased demand for oil—is important in determining their impact on the world economy. In this Comment Paul Segal disputes this analysis, arguing that the IMF misinterprets its own modeling strategy and fails to show that the source of an oil price shock has explanatory power for macroeconomic outcomes.

Bonn 2007: Russian Proposals, Policy CDM, and ‘CER Put Options’ (CERPOs)

This opinion piece by Dr Benito Müller argues that probably the only way of reprieving the Russian Convention track proposal is by way of a generalised version of the Clean Development Mechanism (CDM), allowing for sectoral, programmatic, or generally policy based emission reduction activities in developing countries (‘policy CDM’), together with ‘CER Put Options’ issued by Annex II Parties in order to limit the carbon investment risk of such policy CDM activities for the developing country host Parties (in accordance with UNFCCC Article 4.1)

Assessment of key negotiating issues at Nairobi climate COP/MOP and what it means for the future of the climate regime

This paper on the recent UN climate conference in Nairobi, co authored by Dr Benito Müller, is meant to be an aide memoire for scholars and policy makers, as an independent reference source to inform policy, as well as flagging some key issues of relevance for future research agendas.

Ukraine’s Gas Sector

Roughly 20% of Europe’s gas passes through Ukraine and the country has the fourth largest gas market in Europe. Developments in Ukraine’s gas sector will have a significant impact not only on Europe but also on Russian and CIS gas markets. Despite its importance, very little attention has been devoted to Ukraine as a gas producing country, transit country for Russian gas, and gas market.

Energy, Politics and Poverty

On Monday 4 June, the Oxford [University] High Level Taskforce on UK Energy Security, Climate Change and Development Assistance released a report titled 'Energy, Politics and Poverty'. ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, The report is the result of several meetings by an international Taskforce of scholars, high level officials from the UN and government, and business advisers on energy, the environment, and development assistance. Lord Patten of Barnes, Chancellor, University of Oxford, was the Chair of the Taskforce. Dr Ngaire Woods, Director of the Global Economic Governance, and Christopher Allsopp CBE, Director of Oxford Institute for Energy Studies, were co directors of the Taskforce.

The Fuel Choice and Technological Change Effects of the Tradable Sulphur Permit Scheme on the US Electricity Generating Industry

This paper, submitted by Lindsay Tuthill to the ‘Third International Conference on Business, Management and Economics’ organised by Yasar University, uses monthly firm level data to characterise fuel choice and technical change in the US electricity generating industry in response to the tradable sulphur allowance program. Data covering the years 1990 2004 in a flexible translog cost function are used to determine the Allen Uzawa and Morishima elasticities of substitution for the three main fossil fuel inputs (coal, oil and natural gas) and the rate and direction of technical change.

The Liberalization of Natural Gas Markets: Regulatory Reform and Competition Failures in Italy

In some ways the Italian gas market is one of the most liberalised in the EU. Yet significant problems and barriers to both competition and liberalisation remain. Alberto Cavaliere shows how a combination of lack of import capacity, TPA exemptions, competition by market limitation and partial privatisation have not succeeded in creating real competition in the Italian gas market

WTI Benchmark Temporarily Breaks Down: Is it Really a Big Deal?

The recent disconnection of WTI from the other benchmarks revived the debate on whether the WTI benchmark has been ‘broken’ and whether oil market participants should adopt an alternative benchmark that better reflects the supply demand balance in the oil market. In this article, the author discusses the reasons for the WTI disconnection and its implications on the behaviour of oil price differentials. The author concludes that despite its drawbacks, WTI will continue to serve as one of the main international benchmarks for pricing crude oil as long as market players have an interest in its survival.

Is There A Rationale for the Continuing Link to Oil Product Prices in Continental European Long Term Gas Contracts?

A paper published today by the Natural Gas Programme of OIES argues that the rationale for continued linkage of gas prices to those of oil products in long term Continental European contracts is weak and will continue to weaken further. Its original rationale that end users had a real choice between burning gas and oil products, and would switch to the latter if given a price incentive to do so was robust when oil product indexation was established in the late 1970s and early 1980s but has become increasingly dubious in the majority of countries, particularly in North West Europe.

The Drivers of Oil Prices: The Usefulness and Limitations of Non Structural model, the Demand–Supply Framework and Informal Approaches

Dr Bassam Fattouh discusses three main approaches for analysing oil prices: non-structural models, the supply–demand framework and the informal approach. Each of these approaches emphasizes a certain set of drivers of oil prices. While non-structural models rely on the theory of exhaustible resources as the basis for understanding the oil market, the supply–demand framework uses behavioural equations that link oil demand and supply to its various determinants such as GDP growth, prices and oil reserves. The informal approach, on the other hand, analyses oil price movements within specific contexts and episodes of oil market history. We use the latter approach to identify the main factors that have affected oil price movements in recent years, analysing whether these drivers reflect structural changes in the oil market. We emphasize that although all the above approaches provide useful insights on how the world oil market functions, they suffer from major limitations especially when used to make long-term projections. Thus, pushing hard for policies based on the projections of such models defeats their purpose and may result in misguided policies.

Mexico’s energy dilemma: resource nationalism vs market liberalisation

In this Comment, Rolando Fuentes looks at the challenges facing the new Mexican government in the energy sector. Successive governments have been committed to energy sector reform, but it raises fundamental political and social issues. Resource, particularly oil, nationalism is at the heart of Mexican identity and underlies the central role of Pemex in its energy system. Despite the problems this creates, it would be unrealistic to expect rapid progress.

The European Union’s new targets on emissions and renewables: pluses and minuses

David Buchan argues that Angela Merkel has got her fellow EU leaders to agree at their March 8-9 summit to goals giving her a strong hand in chairing this year’s G-8 climate change negotiations. But making the emission trading scheme work would be a better long- term route to promoting clean energy than setting renewables targets.

The New Green Agenda – Politics running ahead of Policies

Recent weeks have seen an outburst of target-setting on climate change, most recently in the UK Government’s new climate change strategy. But experience shows that governments’ track record of delivery in this area is very poor – nearly all climate change targets have been missed. In this Comment, Malcolm Keay suggests that to make targets binding and subject to independent monitoring when there is no effective means of delivery, as the UK is proposing, could prove very damaging.

The Potential Contribution of Natural Gas to Sustainable Development in South Eastern Europe

A study published today by the Oxford Institute for Energy Studies believes that although natural gas can make a significant contribution to development in South Eastern Europe, gas demand may decline over the next few years. The author, Aleksandar Kovacevic, proposes a “turnaround scenario” for the region based on a ten year transition period to efficient and competitive use of natural gas which would promote efficient use of indigenous resources (water, biomass, lignite, waste and geothermal heat) and minimise communal and housing costs. The South East European region does not receive much attention from the European gas community except in relation to transit pipelines. With the exception of Romania, there are no large gas markets in the region. But with Bulgaria and Romania now European Union member states, and many others which are parties to the European Energy Community Treaty, the region is becoming increasingly important in its own right.

OPEC Pricing Power The Need for a New Perspective

Although there is plenty of room for OPEC to influence the oil price in the current oil pricing system, this influence is not unconstrained. In this paper, Bassam Fattouh argues that the recent changes in the international oil pricing system have diminished OPEC’s pricing power, especially when compared to the previous administered oil pricing system. He also emphasises that OPEC’s pricing power is not constant and varies according to oil market conditions. Finally, he questions the proposition that OPEC in general and the Middle East in particular are bound to have greater influence in the oil market as they develop their reserves and gain greater share of the market.

Gas-Opec: A Distraction from Important Issues of Russian Gas Supply to Europe

President Putin's comment that Russia will study the possibility of creating a "gas-OPEC" created a wave of newspaper headlines. Jonathan Stern argues that gas-OPEC is a distraction from much more important issues which have recently emerged in gas trade between Russia and Europe.

United States Natural Gas Prices to 2015

A report published today by the natural gas programme of the Oxford Institute for Energy Studies finds that over the next decade US natural gas prices are much more likely to be determined by electric power demand and price dynamics than by crude oil or oil product prices. The author, Dr Michelle Michot Foss suggests that these dynamics may maintain US gas prices within a corridor of $3-6/mmbtu (in real 2006 dollars) over the next decade. The study concludes that the relationship between petroleum liquids and natural gas prices going forward will be less contingent, a function of both the dominance of natural gas production and drilling over oil, and a reflection of changing patterns of gas use.

Analysing Oil Prices

In this presentation, Dr Bassam Fattouh discusses three main approaches for analyzing oil prices: non-structural models, the supply-demand framework, and the informal approach. While non-structural models rely on the theory of exhaustible resources as the basis for understanding the oil market, the supply-demand framework uses behavioural equations that link oil demand and supply to its various determinants such as GDP growth, prices, and oil reserves. The informal approach on the other hand analyses oil price movements within specific contexts and episodes of oil market history. The latter approach is then used to identify some factors that have affected oil prices movements in recent years and analyses whether these drivers reflect structural changes in the oil market. This presentation is based on a paper titled: The Drivers of Oil Prices: The Usefulness and Limitations of Non-structural, Supply-Demand and Informal Approaches.

Nairobi 2006: Trust and the Future of Adaptation Funding

Dr Benito Müller argues that in order to secure political acceptability, the governance of the Kyoto Protocol Adaptation Fund will have to go beyond the 'one-country-one-vote' rule decided at the recent Nairobi climate change conference and include certain direct democratic safeguards and that it will have to involve a direct representation of climate change concerns in its decision-making procedures.

A Question of Rigs, of Rules, or OF Rigging the Rules: Upstream Profits and Taxes in US Gulf Offshore Oil and Gas

Two decades ago the combination of new deepwater technologies and the discovery of ample reserves in the Gulf of Mexico seemed to promise a new episode in the USA's struggle to reduce its dependence on imported energy. This book by Juan Carlos Boué analyses in rich detail the story of oil and gas production in the Gulf of Mexico – its triumphs and its ultimate failure to rescue the country from its ever tightening energy balance.

The 2007 Russia-Belarus Gas Agreement

After prolonged negotiations, the 2007 Russia-Belarus Agreement was signed two minutes before the previous contract expired, with Europe wondering whether there would be a repetition of last year’s Russia-Ukraine gas crisis. Fortunately, a crisis was avoided but not without renewed speculation and adverse commentary on the reliability of Russian gas (and oil) supplies. Our comment analyses the available details of the new agreement, looks at the advantages and disadvantages for both parties and assesses its durability.

Europe’s crab-like sidle towards a common energy policy

In this comment, David Buchan looks at the Commission’s recently published energy policy proposals. Amid growing concern about climate change and energy security, the time may be ripe for a European energy policy but the Commission is likely to find it difficult to achieve consensus on its proposals from the member states. Its main powers relate to the establishment of the internal energy market, where many member states are reluctant to see stronger intervention.

The Nairobi Climate Change Conference: A breakthrough for adaptation funding

Has the recent climate change conference in Nairobi really been the failure that some would have us believe? In this comment, Dr Benito Müller argues that, on the contrary, there has been some considerable success – at least in the context of adaptation to adverse impact in general, and adaptation funding in particular; issues which are at the heart of the climate change agenda for many developing countries, particularly the host continent.

The Dynamics of Power: Power Generation Investment in Liberalised Electricity Markets

Liberalisation has brought big changes to electricity markets in recent years. Yet there is little agreement on whether these changes are for the better, or on how best to organise a liberalised electricity market. Particular uncertainties arise over investment in electricity generation – is there enough investment of the right sort to meet society’s needs and, if not, how can more investment be encouraged? Malcolm Keay’s study looks at the evidence and at possible solutions. [BUY NOW - £30]

Russian Opportunities under the Kyoto Protocol

Although Joint Implementation (JI) under the Kyoto Protocol enhances investment returns on CO2 emission reduction projects, little research has been undertaken as to the potential CO2 emission savings and project viability taking into account different discount rates, prices for fuels and carbon emissions credits. Alexandra Kornilova has undertaken a case study on switching from coal to gas by Russian power plants in the Sakhalin region which shows that JI projects can make a significant contribution to Russian GDP growth, the environment and CO2 emission reduction, helping to reverse global climate change.

The Rich Must Face Their Personal Carbon Responsibility

Dr Benito Müller and Dr Saleemul Huq argue that the time has come for people who have the means to face the responsibility for their emissions, regardless of whether they live in the developed or the developing world.

Major Challenges to the Liberalization of the Turkish Natural Gas Market

This paper, by Yeşim Ackollu, explains the recent developments in the structure and ownership of the Turkish gas sector; including transit projects. It analyses recent data on and forecasts of supply and demand. It clarifies the liberalization process of the Turkish gas market. Although Turkish gas legislation – the 2001 Law – has been almost fully brought into line with the EU’s energy acquis, provisions for rapid liberalization and reducing the market share of the incumbent company, namely BOTAS, encountered serious practical difficulties. The Turkish gas release programme is unique in implementing a program of contract release with very high volumes in so short a time; something no other country has achieved to date.

Why is the Macroeconomic Impact of Oil Different this Time?

In this article from the August 2006 issue of the Oxford Energy Forum Christopher Allsopp asks why, with oil prices around $70 per barrel compared with a low of $10 a few years ago, the impact on the world economy seems (so far) to have been so small.

IATAL — an outline proposal for an International Air Travel Adaptation Levy

This paper by Benito Müller and Cameron Hepburn highlights political advantages and moral reasons to link the problem of adequate adaptation funding with that of airline emissions (and absence of reasons in economic theory not to). Solving both problems by an International Air Travel Adaptation Levy (IATAL) – or an emissions trading scheme with auction revenues hypothecated for adaptation – is ethically, economically and politically attractive.

The Peak Oil Theory

In this comment, Professor Robert Mabro provides a critical assessment of the peak oil theory and how by focusing on the wrong questions, peak oil can shift attention away from more pressing and vital issues.

The New Security Environment for European Gas: Worsening Geopolitics and Increasing Global Competition for LNG

Jonathan Stern’s new paper challenges the conventional wisdom that the major problem for European gas security is rising import dependence. Rather, it suggests that despite ample resource availability and commercial profitability, it is not clear where Europe’s next major tranche of gas supplies will be sourced after 2015, and particularly after 2020 when indigenous production is likely to be in sharp decline.

Contango Lessons

One striking feature in the current market has been the prolonged contango in the WTI forward curve. Dr Bassam Fattouh assesses the various explanations that have been put forward to explain the current contango in crude oil markets.

Oil Prices and Markets

In this presentation, Dr Bassam Fattouh assesses the recent behaviour of oil prices focusing on ten relationships between oil prices and the market.

Oil in Egypt, Oman, and Syria: Some Macroeconomic Implications

In this study Randa Alami considers the experiences of Egypt, Oman, and Syria in managing their oil and gas sectors.

The German Path to Natural Gas Liberalisation: Is it a special case?

Despite the importance of the German gas market as the second largest gas market in Europe, there is, amazingly, no comprehensive account in English of the steps towards liberalisation through which this market has passed. This new book from the OIES Natural Gas Programme fills that gap in the literature. While many of us know some part of the German story, this is the first study to take us from the start of the Verbandevereinbarung through the E.ON–Ruhrgas merger to entry/exit tariff design and the legal challenge to long-term contracts. Not only does the study explain these events, it also provides a comprehensive picture of all the different market players, their relative positions and strategies.

Middle East Crude Pricing and the Oman Crude Oil Futures Contract: A Critical Assessment

In this comment, Dr Bassam Fattouh considers whether the proposed Oman oil futures contract to be launched later this year satisfies the necessary conditions for it to play the role of a benchmark in pricing Middle Eastern crude oil exports to Asia.

The G8 and Russia: Security of Supply vs. Security of Demand?

In this comment, Dr. Shamil Midkhatovich Yenikeyeff looks at recent developments surrounding Russia’s G8 presidency which reveal that this international club is not capable of bringing energy producing and consuming nations closer together.

UK Energy Review – still in search of an energy policy?

In this comment, Malcolm Keay looks at the recently published UK Energy Review and asks whether it amounts to a coherent energy policy. He suggests that it is unlikely to be the final word on the matter – it leaves a trail of unfinished business and fails to address the fundamental question of how energy policy objectives can be implemented in a liberalised market.

Three new presentations

Spare Capacity, Oil Prices and the Macroeconomy by Dr. Bassam Fattouh for Oxford Economic Forecasting’s conference ‘Global Macro and Industrial Outlook’ held in London on 6-7 June 2006.

Strategies for Greater Energy Security and Resource Security by Dr. Robert Skinner to Finance Deputies of the G20 countries’ Energy and Resources Seminar in Banff, Alberta, 16–18 June 2006 and

Power and Order: the Energy Dimension, also by Dr Robert Skinner, for his introduction of ‘Power and Order: the Energy Dimension’ for the Global Policy Council conference “Global Power and International Order in the 21st Century” held in Berlin, 2-3 June 2006.

Managing Petroleum Resources: The ‘Norwegian Model’ in a Broad Perspective

Farouk Al-Kasim's book, launched this week at the Oxford Institute for Energy Studies, provides a welcome discussion of petroleum resource management with the Norwegian Model as a rich illustration. [more information]

OPEC’s Discounts on Heavy Crude Oil: Is a New Policy Instrument Taking Shape?

Earlier this year in Caracas, OPEC announced that it would leave its production quota unchanged. However, not everyone is convinced by OPEC’s recent announcement. Some observers believe that OPEC members have already reduced their supplies to keep inventories in check and they are doing this by not discounting their heavy crude oils. This comment explores the argument that OPEC may resort to reducing discounts on its heavy oil to reduce oil supplies in what is believed to be an oversupplied market.

The UK Energy Review and Decentralised Generation

The Government’s Energy Review is due out later this summer and already critics are attacking its expected recommendation – to build new nuclear plant. Instead, many are proposing a programme of decentralised generation. In this comment, Malcolm Keay asks whether this is a sensible way of framing the debate and what the evidence is on the impact of decentralised energy.

Oxford Energy Forum, June 2006

In issue 65 we start with a look at the International Oil Companies (IOCs). In the old days it was taken for granted that the objective was to get as much upstream as you could and have an integrated system through which the crude would pass. These days upstream resources are hard to come by. Project management has become a vital ingredient of their activity, but suitable personnel seem as elusive as upstream oil. Into all this come the financial analysts and investors demanding more cash more frequently and the environmentalists demanding all manner of energy provided it’s not oil. So, where will the IOCs end up?

Climate of Distrust

Mutual distrust can seriously endanger international relations. In the first of the re-launched OIES website comments, Dr Benito Müller exposes the unfortunate deep divisions between Europe and many lesser developed countries in some key negotiations of the UN climate change convention's Subsidiary Bodies which were held in Bonn, Germany 17-26 May.

Adaptation Funding and the World Bank Investment Framework Initiative

A recent World Bank Report estimates that 'climate-proofing' investments in developing countries - excluding additional investment needed to reduce the exposure to current climate risks and climate related damage that will have already occurred - will cost between $9 and $41 billion annually. In this background paper prepared for the Gleneagles Dialogue, Dr Benito Müller looks at how these rather large funding needs could be dealt with.

The Gas Exporting Countries Forum: Is it really a Gas OPEC in the Making?

There is currently no ‘Gas OPEC’ in the making. A new report by the natural gas programme of the Oxford Institute for Energy Studies finds that mounting speculation about the formation of a gas cartel, similar to OPEC, at a time of heightened concern about security of gas supply, is unjustified.

World Energy Trends: Recent Developments and their Implications for Arab Countries

To set the scene for the 8th Arab Energy Conference in Amman, Jordan, Dr Robert Skinner was invited by the organisers to examine recent energy trends and international developments, principally in oil and gas markets, and assess their implications for Arab countries. Besides reviewing drivers of oil demand and the range of factors behind the recent rise in oil prices, the paper examines whether this is "1973 all over again", compares recent energy projections, projects Non-OPEC oil supply and the call on Arab oil out to 2020 and examines the elusive goal of oil market stability and predictability.

Egypt’s Domestic Natural Gas Industry

This report charts the dramatic development of Egypt’s domestic gas market over the past 15 years. It illustrates how an exporting country can develop a substantial domestic market extremely rapidly in all end-user categories: power generation, industry, residential and compressed natural gas for vehicles. However, significant problems of regulation, legislation and price subsidy remain, and Egyptian gas market development have largely been financed from government sources leaving debts yet to be paid off. This is the first in-depth study to be published in English on the Egyptian gas market.

The Interconnector Pipeline: A Key Link in Europe’s Gas Network

Mark Futyan’s study is the first publicly available document to provide a detailed and independent account of the role of the Interconnector gas pipeline between the UK and Belgium. The Interconnector pipeline has transformed short term gas trading and pricing in North West Europe since the late 1990s. It has rarely been out of the news since it began operations in 1998.

Gas Prices in the UK: Markets and Insecurity of Supply

In a new book, Philip Wright (Management School, University of Sheffield) offers a long-overdue introduction to the UK gas industry from well-head to burner-tip, while also investigating the reasons for the dramatic increases in UK gas prices which have been in the news since 2003. It uses a wealth of data to examine the behaviour of the gas, transportation and supply costs which all contribute to the price of gas paid by both business and domestic consumers. [order your copy]

The book will be launched on Wednesday March 1st, 2006 at 5.30pm (presentation by the author, Q&A session, followed by drinks) at The Arts Club, 40 Dover Street, London. This event has been kindly sponsored by Heren Energy, Europe's leading Energy markets index. If you would like to attend, please write to Anouk Honoré.

Montreal 2005: What Happened and What it Means

The UNFCCC Climate Change conference of December 2005 in Montreal was not only the largest ever such meeting, it was an historic event. In this latest OIES Environment Working Paper, Dr Benito Müller explains what happened and analyses what it means.

OPEC & Climate Change: Challenges & Opportunities

Dr. Benito Müller recently co-authored a report for The Royal Institute of International Affairs Energy, Environment and Development Programme. The report makes an examination of OPEC countries in climate negotiations; to identify the key challenges and drivers in relation to wider domestic and political concerns; and to examine the scope for more constructive discourse on climate change.

Future Natural Gas Demand in Europe: The importance of the power sector

A report published by the natural gas programme of the Oxford Institute for Energy Studies finds that the use of natural gas for power generation in Europe will increase substantially over the next decade, but not as much and not as fast as is generally believed. Moreover, without significant numbers of new combined cycle gas-fired power stations (CCGTs), it is hard to see where the major gas markets of Europe will use the substantial additional gas supplies due to arrive by pipeline and LNG over the next decade.

The Russian-Ukrainian gas crisis of January 2006

Jonathan Stern examines the recent Russian-Ukrainian gas crisis.

Pricing and Demand for LNG in China

A report published today by the Gas Programme of the Oxford Institute for Energy Studies, explains why the latter part of 2005 witnessed a significant shift in Chinese LNG import policy, forced upon the country by price and market trends.

Russia - Ukraine Gas Dispute

In his book "The Future of Russian Gas and Gazprom" Jonathan Stern explores the background to the Russia - Ukraine gas dispute. Order a copy
You can also download a radio interview with Professor Stern broadcast on The World at One on BBC Radio 4 on 2 January 2006. (2.5MB MP3 file. Running time 2:44 mins)

Oxford Energy Forum, November 2005

Upstream taxation has become, yet again, a subject of particular interest since the oil price has tripled within the past couple of years. Should, or will, oil-producing countries change their taxation regime in order to take their share of the available fiscal surplus, or should contractual arrangements remain inviolate? Issue 63. [Fiscal Tightening: Read Robert Arnott’s views]

Energy Security and Producer–Consumer Dialogue: Avoiding a Maginot Mentality

This background note was presented by Dr. Robert Skinner at the Government of Canada Energy Symposium on 28th October 2005, Ottawa, Canada.

Difficult Oil

This presentation was given by Dr Robert Skinner at the Centre for Global Energy Studies 26th Executive Retreat, 29th-30th September.

UK Energy: An Overview

This presentation, by Malcolm Keay, looks at the UK energy scene, with a focus on international energy issues and in particular on the UK's energy relations with Russia. It was prepared as part of a project to develop ideas for international energy cooperation in the run-up to Russia's Presidency of the G8 during 2006, for which energy has been identified as a key agenda item.

Crude Oil: Scenarios and Perspectives of the Market

This presentation was given by Dr Robert Skinner in August of this year at the Comisión de Investigación de los Precios del Petróleo in Querétaro, Mexico.

The Future of Russian Gas and Gazprom by Jonathan P. Stern

The Russian gas industry provides 50% of Russian domestic energy supplies, a substantial proportion of CIS gas requirements, and around 25% of European gas demand. Over the next two decades, Russian gas will move to East Asian countries by pipeline and tanker, and to North America as LNG. Gazprom faces problems in developing higher cost fields on the Yamal Peninsula for the domestic market, despite price reforms which made supplying industrial customers profitable in 2005. Liberalisation and restructuring of the industry have been more significant than has generally been recognised but Gazprom’s monopoly of exports to Europe will remain. [order your copy]

Oxford Energy Forum, August 2005

For our summer issue we are looking at what appears to be the same subject from two different angles. The subject is the price of oil and we are looking, on the one hand, at the 'fundamentals' and, on the other, the state of the refining industry. Issue 62. [Read Paul Horsnell's view on a sustainable long-term price level]

Nuclear Power and Renewables: Strange Bedfellows?

High oil prices and climate change have put nuclear power and renewables at the top of the energy policy agenda. This note suggests that advocates for both technology groups would be wise to cooperate to achieve their common goals - supplying carbon-free and reliable electricity.

Gas Demand in Europe: The role of the power sector

This presentation was given by Anouk Honoré at the Energy Risk Management seminar on June 28, 2005 at the Cass Business School in London. It highlights the first results of our on-going research on gas demand in Europe.

Climate Change post-2012: Transatlantic Consensus and Disagreements

As part of the 'Guided Tour of the Journals' of the Journal for Energy Literature, Benito Müller considers and draws conclusions from the views of three eminent trans-Atlantic commentators (Ian Purvis, Michael Grubb, and Michael Zammit Cutajar) about the state and the future of trans-Atlantic climate change relations.

Wind Power in the UK: Has the Sustainable Development Commission Got it Right?

This comment looks at a recent report on wind power by the Sustainable Development Commission. It shows that the report presents a distorted picture, exaggerating the benefits of wind power and underestimating the costs. The Commission's recommended policy, which also involves abandoning nuclear, would lead to an increase, not a decrease, in CO₂ emissions. Ironically, the Commission is making the same mistakes as the early advocates of nuclear - overselling its favoured energy source, to itsultimate detriment.

Russian Oil Supply: Performance and Prospects

The Oxford Institute for Energy Studies is pleased to announce the publication of a new book by John D. Grace. Click here for more details and to order your copy.

The Oil Supply and Demand Context for Security of Oil Supply to the EU from the GCC Countries

This report and presentation were prepared as part of the EUROGULF project carried out under the European Commission’s Synergy Program by a consortium under the coordination of the Robert Schuman Centre for Advanced Studies, European University Institute, Florence.

Changing Financial Structures in the Arab World: Some Implications for Oil and Gas

Financial deepening amongst Arab producers has enabled oil and gas sectors to diversify their financing strategies and mobilise new financial instruments. Domestic savings have increased their share in overall financing. Regulatory and institutional frameworks throughout these economies, not just in oil and gas, must continue to be strengthened in order to attract investment.

The Development of A Global LNG Market: Is it Likely? If so When?

Costs have been reduced all along the LNG chain and now major reserves of gas, too distant from markets to be served by pipeline, and therefore considered economically “stranded”, are being commercialised as LNG. Indeed such is the enthusiasm for the potential of LNG it is commonplace to read about the prospects for “a global LNG market” in the same terms as a global oil market. A major aim of this study is to test the proposition that LNG markets will become increasingly “global”. [More info in English and Japaneseor download the whole study.]

Fraternal Friction or Fraternal Fiction? The Gas Factor in Russian-Belarusian Relations

This paper examines the way in which natural gas has shaped political relations between Belarus and Russia. It charts the nature of the gas relationship from 1993 to end 2004 and asks how far Russia has used natural gas supplies as an instrument of foreign policy.

Exploration and Production Strategy: Keys to Success and Common Reasons for Failure

Rob Arnott reviews the EP strategies of the major integrated companies as well as the independent oil and gas companies and identifies the keys to success and the common reasons for failure. Arnott identifies the key phases of exploration and production as well as the features of the best in class and contrasts company strategy statements against actual performance, key shareholder demands and industry views on the business.

Quo Vadis, Kyoto? Pitfalls and Opportunities

This short opinion piece by Benito Müller, presented as a Key Note at the Civil Society Outreach of the G8 meeting of Environment and Development Ministers (17-18 March 2005, Derby, UK), considers the opportunities and pitfalls of the upcoming post-2012 multilateral climate change negotiations.

Oil Company Crisis

In this book, Nick Antill and Rob Arnott show that companies must revisit the key issues of structure, profitability and growth if they are to differentiate themselves from their competition and maximise shareholder value. Published two years ago the issues covered in this book remain relevant today as companies seek new growth opportunities in a more competitive market. Now available as a free download.

CO₂ Emissions Reduction: Time for a Reality Check

This Comment, by Malcolm Keay, looks at two recent reviews, for the EU and UK, of progress towards Kyoto emissions targets. It shows that despite some achievements, progress in reducing CO₂ emissions has been patchy, and the policy measures favoured have not proved capable of delivering significant emissions reductions. It concludes that it is time for Governments to take a realistic look at their policies for CO₂ reduction and consider a wider range of options, even if some of the options are unpalatable.

Oxford Energy Forum 60th Edition

This issue differs from our others. In place of two ‘debates’ we have seven articles each covering different aspects of the energy scene. We think that each, in its own way, will give some idea of the changes that have occurred during the lifetime of the Forum.

The Development of A Global LNG Market: Is it Likely? If so When?

The Oxford Institute for Energy Studies is pleased to announce the launch of a new publication from its Natural Gas Programme. Click here for more details and to order your copy.

Financial Aspects of Arab Power Development

This study examines the trends in, and the outlook for, financing power sectors in Arab countries. With changes in sectoral regulations and financial deepening, these sectors have been able to engage a wider range of financing methods. However given the embryonic state of regional reforms, difficulties with financing are unlikely to be solved quickly.

Fueling our Future – to define a national strategy for energy in Canada: The International Setting

This presentation was given by Robert Skinner at the Public Policy Forum on 29th November 2004 in Ottawa, Canada.

Exploring the Carbon Kuznets Hypothesis

This paper, a collaborative effort with modelers and econometricians from the Department of Economics at the University of Berne/Switzerland, investigates the possibility of an inverted u-shape (Kuznets-type) relation between (per capita) national income and (per capita) CO2 emissions.

Argentina: 2004 Gas Crisis

Why is it that a country such as Argentina, which is a net exporter of gas with huge proven gas reserves, substantial exploration potential and a privatised gas industry, faced huge gas shortages in 2004? In this paper Anouk Honoré analyses the origins of the crisis and governmental response.

Investments and Uncertainty in Liberalised Gas Markets: do projects need Article 22 exemptions?

This presentation was given by Professor Jonathan Stern at the Symposium on the European Natural Gas Market, AER/CPB/ECN, The Hague.

Oil Depletion or Depleted Policies

In a recent debate on oil depletion at the Energy Institute, Rob Arnott argued that robust demand was driving current strong oil prices not peak oil. His presentation focused on the ways in which oil is brought to the market and he showed that recent policies and strategies had led to a period of underinvestment in the oil sector which is only now being corrected.

Investment in LNG and Investment in Power Generation

Energy investment in LNG and Power Generation is necessary, but both face structural problems - LNG mainly in the USA and Power Generation mainly in the EU. Our articles address the factors that tend to restrain the investment that, it could be argued, ought to be taking place with greater urgency than it is. Oxford Energy Forum - Issue 59.

Asian LNG Trade and Gas Market Reform: Implications for Gas and Power Consumers

In this paper Jeffrey Skeer examines the interaction of gas market reforms in Asian gas-importing and gas-exporting economies. Gas market reforms cannot suceed without reform of regional power markets.

Oil & Gas Reserves

The debate surrounding oil and gas reserves estimates has been addressed by two new briefing papers jointly issued by the Oxford Institute for Energy Studies and the Sustainable Development Programme at Chatham House. The papers, Petroleum Reserves in Question by John Mitchell and Oil and Gas Reserves: Communication with the Financial Sector by Rob Arnott, argue that a consistent framework for generating oil and gas oil reserves should be implemented to allow for better estimation, increased accuracy and therefore improved production and income potential.

GOM Leasing and Taxation

This presentation discusses the evolution and performance of the institutional framework underlying oil activities in the GOM region. It characterises the two systems that have defined the rules for offering and assigning GOM acreage: Tract Nomination (TN) from 1953 to 1982 inclusive,and Area Wide Leasing (AWL) from 1983 to the present. Finally, it discussesthe effects that AWL has had on the structure of the offshore oil industry.

OPEC Honours Robert Mabro

OPEC's first award for life time achievment in the field of energy economics was awarded to Robert Mabro on 16th September 2004. [more...]

The Relationship Between Carbon Dioxide Emissions and Economic Growth

Benito Mueller, Michael Grubb and Lucy Butler examine the past relationships between national carbon dioxide emissions and GDP in order to help inform the current debate regarding emission projections.

Production management, security of demand and market stability

This paper was presented at the OPEC International Seminar, Vienna on 17th September 2004, by Adrian Lajous, Chairman of the Oxford Institute for Energy Studies. [pdf file]

Kyoto's Future Lies in Putin's Hands

The ratification of the Kyoto Protocol in Russia ultimately lies in the hands of President Putin. Will he go down in history as the man who saved the Kyoto Protocol? Benito Muller and Alexander Golub comment on why he should. (Published in The Moscow Times.com)

Vacancies

The Oxford Institute for Energy Studies periodically has openings for Senior and for Junior Research Fellows and Research Traineeships and Internships. For more details see our vacancies page

The Kyoto Protocol: Russian Opportunities [English version]

[Russian version]Much debate regarding the Russian ratification of the Kyoto Protocol has centred around whether the Kyoto emission limit would hinder Russian economic growth. The aim of this paper is to return the focus of the debate to the opportunities which the Kyoto Protocol could afford the Russian economy and which would be lost if Russia fails to grasp them by bringing the treaty into force in the very near future.

Redefining the Convenience Yield in the North Sea Crude Oil Market

The objective of this paper is to adapt the classical spot/futures relationship stemming from the theory of storage to the case of the North Sea crude oil market. Brent (and other North Sea crude oil grades) is waterborne and these logistical issues mean that a true spot market for Brent does not exist. As a result, the dated Brent (BFO) price, one of the most widely quoted 'spot' crude oil marker prices in the world, is in reality a short-term forward contract price. A new arbitrage relationship is constructed to take account of this and a new formulation for the convenience yield is calculated.

Carbon and Congestion: Can HM Treasury Save the White Paper?

The UK transport sector pays 94% of all environmental taxes but is only responsible for 26% of national CO2 emissions. A uniform fossil carbon input tax across the entire UK economy at a rate equivalent to £30 tCO2 emitted and combined with a £0.20 per kilometre motorway congestion charge would be a far a better way of delivering on the 2003 Energy and 2004 Transport White Papers' objectives.

The UK Energy Policy Accident: Driving into a Wall?

Current UK energy policy is adversely affecting investment decisions in the power generation sector. In this article John Bower examines current policy and seeks a pragmatic solution. (published in Platts European Electricity Review 2004)

Exploration of Future Risks on the Global Market for Oil, Coal and Uranium

This OIES paper examines the future risks to supply for the global markets for oil, coal and uranium. It forms part of an integrated project by CBP Netherlands Bureau for Economic Policy Analysis

Large Scale Investments in Liberalised Gas Markets: The UK Case

Using examples of ongoing multi-billion euro investments in projects which will deliver gas to the UK market, Jonathan Stern and Anouk Honoré show that the risks to such projects posed by market liberalisation are being assumed by market players, and are not preventing large scale, long-term supply reaching the UK. [540kB pdf download]

Argentina 2004: A Gas Crisis?

Anouk Honore examines the origins of the current Argentine gas crisis, governmental responses to it and its effect on Southern Cone energy integration.

Inquiry into European Union Energy Policy: Gas Supply and Access

Professor Jonathan Stern, Director of Gas Research at OIES, gives evidence to the House of Lords Select Committee.

The Internationalisation Programme of PDVSA

This article examines PDVSA’s internationalisation programme, which has been put forward as one of this company’s major entrepreneurial achievements. The justification for the programme (notably the need to secure market outlets for Venezuelan crudes) does not fit with the microeconomic evidence available regarding the marketing of these crudes. Rather, the programme revolves around a fiscal objective: reducing the tax burden on PDVSA by means of mechanisms that transfer profits abroad and import costs into Venezuela. [334kB pdf download]

An alternative 20:20 vision of the UK energy sector: Energy Trading Solutions in a Carbon Free World

The UK renewable energy industry should stop lobbying government for subsidies and extensions of the RO scheme but instead push for a sharper CO2 allowance price signal from the EU Emissions Trading Scheme (EU ETS). A target price of Euro 45 per tonne CO2 would be sufficient to support a secure and sustainable mix of new gas-fired and renewable electricity generation capacity investment in the UK.

Royal Dutch Shell: Putting at Risk Reputation as a Resource

The Shell Group has had to learn some salutary lessons in recent months. Robert Arnott reviews the recently published Audit Report and highlights the clash between corporate culture and governance.

Towards a Global Gas Market?

In his latest presentation Dr Robert Skinner examines the outlook for LNG, its influence on the evolution of regional gas markets, the likelihood of a global gas market and potential issues and factors affecting investments.

UK schemes for reducing carbon emissions from electricity

The UK government must acknowledge that the electricity industry alone cannot bear the entire burden of CO2 emission reduction. The current best option for the UK economy is if power generators and energy intensive industry take advantage of low prices in the EU Emissions Trading Scheme and buy surplus CO2 emission permits—not build expensive renewable generation capacity.

NOC to IOC?

NOCs are certainly capable of mutating from passive government agencies into proper corporations, but can they become IOCs? Forum Issue 57

Problems with Mr Illarionov's Methodology

Andrei Illarionov, President Putin's economic advisor, has been vocally advocating the view that ratification of the Kyoto Protocol by Russia would be inconsistent with the President's plan to double GDP over the next ten years. This presentation shows that Mr Illarionov's claims are based on a fundamentally flawed methodology.

EU Emissions Trading Scheme (EUETS)

This presentation summarises the current status of the EU Emissions Trading Scheme (EUETS) implementation, it highlights salient features of draft National Allocation Plans (NAPS) issued so far and puts the case for the EU and Russia reaching a bilateral agreement on a number of linked issues that will result in the Kyoto Protocol coming into force in the near future.

What lies ahead for refiners?

After the pain and losses experienced by the refining industry in the 1990s we have heard little from them in the past year or two. Does this mean that refiners, are for the moment, content? Oxford Energy Forum Issue 56

Blackouts: Invest, Intervene or Inveigh?

U.S. and EU federal authorities have wrongly concluded that lack of investment is causing transmission congestion and threatening system security in liberalised electricity markets. This perception has unfortunately been reinforced by the blackouts of summer 2003.

New India Electricity Act

New India Electricity Act paves the way for ‘bottom-up’ reform, but the Indian government should do more to encourage and facilitate local private investment in small-scale distributed electricity generation capacity. This is the argument as laid out by Christopher Joshi Hansen and John Bower in two new papers published by the Oxford Institute for Energy Studies (OIES).