International
Energy economists unearth noteworthy findings. In a seasonal rite that seems to be exceeded only by the return of the swallows to Capistrano, a significant collection of international energy economists made the annual pilgrimage to Boulder, Colorado. As usual, the late-April occasion was the annual conference staged by International Research Center for Energy and Economic Development (ICEED). ICEED Director, Dr. Dorothea El Mallakh, assembled a very diverse, yet distinguished, group of presenters and attendees. Thirteen countries outside the U.S. were represented among the economists, government officials, company execs and others. Countries represented included Russia, China, Saudi Arabia, Kuwait, Qatar, Algeria and Venezuela. Among the presenters was an ExxonMobil corporate planner, who had some interesting forecasts on future oil demand growth. For instance, he predicted that China, which registered 7.0% annual oil demand growth during the 1990 – 2000 period, would only grow 4.0% from 2000 to 2020. Similarly, India grew 5.4% in the 10 years ending in 2000, but the rate through 2020 is pegged at 4.8%. Most startling is the projection for "Other Asia-Pacific" countries. They are expected to annually increase demand by only 2.8% through 2020, versus 6.0% between 1990 and 2000. On the other hand, Latin America’s rate will jump to 3.2% from 2.8%, and Africa should increase to 2.9% from 2.6%. Most impressive is the Former Soviet Union, which is expected to have 1.7% annual growth to 2020, versus a – 7.4% rate in the 1990s. Equally revealing was a presentation made by a gentleman from Russian oil company YUKOS. He noted that Russian and other The YUKOS evaluation of Russian output is based on four factors: current booked reserves, production level of these reserves, oil and gas remaining to be found, and export capacity. Regarding reserves, the YUKOS executive noted that the Soviet Union’s State Reserves Committee used to calculate proven reserves (categories A, B and C1) on the basis of proposed, approved development plans, with no economic filters. In recent years, Russian oil firms have used internationally recognized auditing firms to estimate their reserves. Consequently, their audited amounts tend to average about 80% of the State Reserves Committee’s figures. Thus, the committee’s Russia-wide figure of 100 billion to 110 billion bbl would translate to 80 billion to 88 billion bbl, when the 80% factor is applied. These figures are considerably higher than the levels carried in our magazine’s August issue (54.3 billion bbl) or in other industry data sources in recent years. One has to wonder whether the 80% factor may be too high for other Russian operators. Similarly, the YUKOS presentation pegged the combined proved reserves for Azerbaijan, Kazakhstan and Turkmenistan at about 30 billion bbl, exclusive of another 10 billion to 20 billion bbl in the Kashagan discovery. This compares to roughly 10 billion bbl carried in this magazine and other industry sources. The ExxonMobil and YUKOS talks are just two examples of the thought-provoking sessions at ICEED’s conference, which included presentations by Saudi Aramco, Kuwait Petroleum, the Qatari government, European experts and numerous others. Readers desiring more details about these presentations, or who would like to attend the 2003 conference, should contact Dr. El Mallakh in Boulder by either e-mail (iceed@stripe.colorado.edu) or fax: +1 (303) 442-5042. Book explains energy market financial products. Although many of us E&P types are loath to admit it, the ongoing commoditization of oil and gas, and the proliferation of attendant financial instruments, are increasingly impacting our industry. So, it behooves us to understand how these markets and instruments work; yet, many of us probably do not. Riding to the rescue is a book entitled, Energy Derivatives: Trading Emerging Markets, authored by fellow ICEED attendee Peter Fusaro and his European partner, Jeremy Wilcox. As president of Global Change Associates Inc. (New York) and managing director of Global Change Associates Ltd. (Europe), respectively, Messrs. Fusaro and Wilcox are well-qualified to explain these complex instruments to a wider audience outside the financial trading community. Mr. Fusaro is a globally recognized expert on energy derivatives, who first authored studies on the subject 25 years ago. Mr. Wilcox has 10 years’ experience in energy derivatives, and his former employers include Total, Conoco and Eurobrokers. This book’s most outstanding feature is its ability to examine and explain new energy financial products in layman’s terms – in other words, plain English. The authors do an excellent job in Chapter 1 of explaining the overall climate in which this range of new instruments came into being. From there, individual chapters examine a number of key market topics, including emissions trading; telecommunications bandwidth trading; weather derivatives, electronic energy trading, and electricity and natural gas trading in Europe. A number of charts and tables are easily understandable. Energy derivatives now influence all facets of the energy chain, for both producers and end-users. The topics discussed in this book represent the latest frontiers in "financial engineering." As the second work in what will be a three-volume series, this book is a worthy successor to its predecessor, Energy Risk Management, authored by Messrs. Fusaro and Wilcox several years ago. Copies of both books may be purchased directly from the Global Change Associates website (www.global-change.com), or in association with Amazon.com. Readers may also fax Whitehurst & Clark at +1 (732) 225-1562 for information.
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FSU production had collapsed from a high of more than 12 million bopd in the 1986 – 1989 period, to 7 million bopd in 1999. However, these countries have now restored 1 million bpd of oil output over the last two years, to an 8-million-bopd level in 2001. Most of that recovery came in Russia. YUKOS now predicts that FSU oil production will climb to 14 million bopd by 2010, of which 75%, or 10.5 million bopd, will be in Russia.
