Bressand+scenarios+lecture+1+23 jan2012

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Bressand+scenarios+lecture+1+23 jan2012

  1. 1. Session 1Introduction : Riskand the 2012 global energy sceneProfessor Albert BressandJanuary 23, 2012 © Professor Albert Bressand 1
  2. 2. Part. 1 Energy risk in 2011: Reflecting on what risks materialized for various types of actors in 2011 Professor Albert Bressand© Professor Albert Bressand February 28, 2011
  3. 3. Common sense questions • How  do  we  define  ‘risk’  in  the  energy  system? • What sort of risks materialized in 2011? • What can we expect in 2012? • …  and  how  should  we  go  about  analyzing   energy risk in the future?© Professor Albert Bressand 3
  4. 4. Thinking about risk (and opportunities) • What sort of risk has the world energy system been exposed to most visibly in 2011? • To answer, ask first: who worries about what? 1. importing countries 2. energy users 3. net exporting countries 4. stakeholders and civic society 5. investing companies Each of these five groups can be further divided into subgroups sensitive to different types of risks and opportunities© Professor Albert Bressand 4
  5. 5. 1. Risk as experienced by importing countries: the security of supply perspective, 2011 • The  ‘peak oil’  perspective  has  been  receding,  yet  oil prices have risen • Continuing E&P successes in Africa, North America, Brazil • Libya’s revolution and a short lived supply challenge. IEA SPRs used. • Nigeria’s strike over oil subsidies and continuing unrest in Niger Delta • European boycott of Syrian oil • Saudi and global spare capacity down to pre-glut levels …  and  knocking  at  the  door: • Boycott of 400k Iranian oil to start in Spring 2012 • Iraq close to adding 400k b/d from Southern fields …  and  looking  forward: Heritage Foundation scenario work on oil supply: • - The Strait of Hormuz is closed (2006) • - Attacks on major Saudi oil infrastructures • - To be released 2012: Downfall of the Saudi monarchy© Professor Albert Bressand 5
  6. 6. 2. Risk as experienced by energy users in 2011:Short term volatility, long term transition• 2011 the first year at 100 $ Brent average price• Volatility• Unusually high Brent-WTI differential in mid 2011• Collapse in carbon prices• Transition towards a different energy mix: • - EU roadmap to 2050 • - US States RES AND the shale gas revolution • - China’s  13th Five year Plan © Professor Albert Bressand 6
  7. 7. The role of futures markets• Oil price formation, is OPEC really a cartel?• Nymex and ICE• Producers and consumers hedging• Non commercial and swap traders 7
  8. 8. November 2004: from short-term price increases toLT adjustments in expectations • November 2004: Crude Oil "Forward Curves" - prompt prices doubled 70 Note: 2/06 - forward prices also doubled this is a 10/06 3/07 60 year 11/05 - OPEC  “suspended”  the  $22- 10 10 after Iraq $28/b target price band II 3/05 50 • A conjunction of causes: 11/04 Higher - 2004 oil demand surge out year 40 prices $ / barrel - Iraq recovery delayed 3/04 3/03 - Spare capacity ran out 30 3/00 - Buoyant  “asset  demand”  for   oil futures 20 3/02 - Non-OPEC supply growth Old OPEC 10 price band limited 3/99 • The new $60-80 price band seems 0 to hold 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 8
  9. 9. 3.Risk as experienced by exporting countries in 2011:Geographic  shift  and  ‘security  of  demand’ • Has OECD demand for oil peaked in 2008? • Europe’s  efforts  to  move  out  of  oil.  Roadmap  2050  sees  energy   consumption only 6% higher than now • US quest for ‘energy independence’,  the  Bush  era  CAFE   standards  begin  to  bite,  and  the  US  hydrocarbon  revolution… But also: • Fukushima and the German angst • the end of US ethanol subsidies • Diminished support for solar and win. Solyndra. Vesta • Chinese and BRIC demand as the central driver for global oil demand • Cheap LNG chasing demand • Security of demand in natural gas © Professor Albert Bressand 9
  10. 10. Oil demand: OECD has peaked,China growth more than offsets Net imports of oil in the WEO 2011 New Policies Scenario 14 mb/d 2000 12 2010 10 2035 8 6 4 2 0 China India European United Japan Union StatesUS oil imports drop due to rising domestic output & improved transport efficiency: EU imports overtake those of the US around 2015; China becomes the largest importer around 2020
  11. 11. 4. Risk as experienced by stakeholders in 2011: environmental risk at the forefront • Deep Sea Horizon oil spill • Climate change: muddling through at Durban • Keystone XL controversy • Fracking controversy • The French law on shale gas© Professor Albert Bressand 14
  12. 12. The changing energy mix(IEA view, nov. 2011) World primary energy demand by fuel in the WEO 2011 New Policies Scenario 5 000 Mtoe Additional to 2035 4 000 2009 3 000 2 000 1 000 0 Oil Coal Gas Renewables Nuclear Renewables & natural gas collectively meet almost two-thirds of incremental energy demand in 2010-2035
  13. 13. The age of fossil fuels is farfrom over, but theirdominance declines (WEO 2011) Shares of energy sources in world primary energy demand in the New Policies Scenario 50% Oil Coal 40% Gas 30% Biomass Nuclear 20% Other renewables Hydro 10% 0% 1980 1990 2000 2010 2020 2030 2035Oil remains the leading fuel though natural gas demand rises the most in absolute terms
  14. 14. Part. 2 Risk in 2011: The investing company’s  perspective Professor Albert Bressand© Professor Albert Bressand February 28, 2011
  15. 15. 5. Risk as experienced by investing companies, 2011 • Technical risk: the Macondo well debacle • Environmental risk, local: Chevron in Brazil • Environmental risk, global: Durban COP on climate • Market risk, energy: the crash in US natural gas prices • Market risk: soft growth and the euro crisis risk • Country risk: the Arab spring, • Geopolitical risk: Iran nuclear program • Resource curse: AND • A new oil & gas frontier in US, Africa and Brazil 18
  16. 16. Risk: the diversity of Shell experience • 1995: Ken Saro-Wiwa execution in the Niger delta • 1995: Brent Spar platform and the Greepeace-led customer boycott • 2004:  ‘Reserves’  booking  scandal • 2000’s:  Canadian  tar  sands  emissions  to  be  offset  by  reduced  Nigerian   flaring • Ongoing:  ‘bunkering’  of  West  African  oil • 2005: Sakhalin II • 2000’s:  Iran  off  limit • 2010s: Beaufort Sea permitting uncertainties AND • Iraq, PEARL, Floating LNG platform © Albert Bressand 19
  17. 17. Saro-Wiwa • - President of the Movement for the Survival of the Ogoni People (MOSOP), led a nonviolent campaign against environmental degradation by the operations of the multinational petroleum industry, especially Shell. • - outspoken critic of the Nigerian government, which he viewed as reluctant to enforce environmental regulations on the foreign petroleum companies operating in the area. - hastily tried by a special military tribunal and hanged in 1995 by the military government of General Sani Abacha, all on charges widely viewed as entirely politically motivated - His execution provoked international outrage and resulted in Nigerias suspension from the Commonwealth of Nations for over three years.© Professor Albert Bressand 20
  18. 18. Brent Spar© Professor Albert Bressand 21
  19. 19. Offshore Terminals - Energy  Bridge™  System  Overview Reinforced LNG High Pressure Pumps Storage Tanks And Vaporizers Oversized Boiler The Energy Bridge™  system  is   Traction based on proven Winchtechnology used forover a decade in the Buoy harsh North Sea Compartmentmarine environment Energy  Bridge™ Regasification VesselWhen not in use, thebuoy will remain 80to 90 feet below the surface
  20. 20. How Shell –and followers– will expand LNG production to strandedfields and overcome siting challenges with 600,000 ton behemoths
  21. 21. The  investing  company’s  perspective:   a typology of risks • Market risk • Energy prices and macroeconomic context • Refining margins • Financial intermediation crisis • Technical risk, often with environmental implications: • - ENI in Kashagan : H2S • - BP in Macondo • - Chevron in Brazil deep water • .. And countless opportunities at the technology frontier • Country risk: nationalization, forced renegotiation • - Exxon and other  investors  in  Venezuela’s  Orinoco Belt • - Petrobras in Bolivia • - BP in Kovykta, Russia • Reputation risk - Shell and the Brent Spar boycott - Total in Myanmar • Compliance risk • - Shell in breach of SEC reserve-booking rules • - Chinas state-run Zhuhai Zhenrong Corp sanctioned by US for its trade with Iran© Professor Albert Bressand 24

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