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1. New markets and partners for Saudi oil exports

Author:
Giacomo Luciani
Publication Date:
09-2013
Content Type:
Policy Brief
Institution:
Norwegian Centre for Conflict Resolution
Abstract:
Flows of crude oil sales are determined by refining demand. In recent years Saudi Arabia has invested massively in captive refining capacity at home and abroad and will be able to refine two-thirds or more of its oil in controlled refineries by the end of the current decade. Because refineries in Europe are likely to be put on sale as distressed assets, Saudi Aramco would have no difficulty in further expanding its controlled capacity. A continuation of this trend may even lead to the Kingdom not exporting crude oil to third parties at all. This is in line with the country's ambition to diversify its economy and its limited interest in further expanding oil production for the sake of selling oil as crude.
Topic:
Diplomacy, International Trade and Finance, Markets, and Oil
Political Geography:
Europe, Middle East, and Saudi Arabia

2. Restrictions of Passage, Accidents and Oil Transportation Norms: Impact on Supply Security

Author:
Giacomo Luciani
Publication Date:
06-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper looks at restrictions of passage, accidents and oil transportation norms as causes of interruption in oil supplies. The key 'chokepoints' are discussed in detail: the Straits of Hormuz, Malacca, Bab el-Mandeb, the Canals of Suez and Panama, the Turkish Straits and the entrance to the Baltic Sea. It is concluded that in most cases the danger of closure can only be temporary; nevertheless, investment in bypasses and alternatives is highly desirable, and in the case of the Turkish Straits, has not been forthcoming. The discussion then turns to threats to navigation outside the chokepoints, such as piracy and oil spills in enclosed seas, particularly the Mediterranean. The final section looks at changing international norms, especially the entry into force of the requirement of double hulls for oil tankers. The paper's main conclusion is that there is no scenario of interruption of maritime oil and gas transportation that may cause a severe physical shortage of oil, in general or specifically for Europe. In almost all cases potential tensions could be easily allayed if responsible governments took the necessary steps to create alternatives (notably pipeline bypasses) or to curb illegal activities. The main factor preventing the required investment in transportation alternatives is the lack of a well-functioning market mechanism for burden sharing. Where passage must be paid for, the resulting income stream supports investment to increase capacity and accommodate growing demand.
Topic:
International Trade and Finance, Oil, Maritime Commerce, and Piracy
Political Geography:
Turkey

3. Strategic Oil Stocks and Security of Supply

Author:
Giacomo Luciani and François-Loïc Henry
Publication Date:
06-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
Holding strategic oil stocks is at first sight an obvious tool to address potential disturbances in supplies. Rationally defining the desirable size of stocks and designing rules for their predictable use is an elusive task, however. A key conceptual difficulty arises in the distinction between commercial and strategic stocks, because a physical shortfall in the oil supply will inevitably lead to an increase in prices. But if strategic stocks are utilised when prices increase they become indistinguishable from commercial stocks. This paper reviews the legislation in force in the US and the EU on the use of strategic oil stocks as well as the emergency response systems of the International Energy Agency. It finds that such measures have been activated rarely and in dubious circumstances. Alternative approaches are proposed consisting of encouraging companies and major consumers to hold larger stocks and seeking a cooperative agreement with oil-producing countries for mutually beneficial stock management.
Topic:
Security, Energy Policy, Markets, and Oil
Political Geography:
United States and Europe

4. Armed Conflicts and Security of Oil and Gas Supplies

Author:
Giacomo Luciani
Publication Date:
06-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The paper offers a systematic analysis of the impact of international or civil wars and violent non-state groups on global oil and gas supplies. Statistical evidence points to the fact that international wars are becoming increasingly rare, while civil wars remain frequent. The paper discusses the cases of the Iraq-Iran war and the Iraqi invasion of Kuwait, showing the limits to the damage that belligerents were able to inflict on oil installations and illustrating how the world was able to compensate for this damage. The Iraqi insurgency following international intervention to replace the Saddam Hussein regime is discussed together with other cases of civil wars in Nigeria, Angola and Sudan. The analysis supports the conclusion that oil and gas installations appear to be much more resilient to armed conflict than is normally acknowledged. History shows that civil wars have caused limited damage to existing installations, but they have hindered the desired investment in new development and attainment of target production levels. However, it is very obvious that government's inability to overcome or reabsorb violent opposition discourages international oil company investment even if the violence does not affect the areas around oil and gas installations.
Topic:
Security, Civil War, Oil, Insurgency, Natural Resources, and Infrastructure
Political Geography:
Kuwait and Nigeria

5. The Functioning of the International Oil Markets and its Security Implications

Author:
Giacomo Luciani
Publication Date:
05-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
The paper discusses the link between security of oil supplies and the functioning of international oil markets. It is argued that wide and frequent variations in price are in themselves a source of insecurity for individual consumers and national economies alike. Furthermore, the impossibility of predicting future prices discourages investment and increases the fragility of the system. The paper puts forward several policy proposals to reduce excessive price fluctuations and improve security of supply at reliable prices.
Topic:
Security, Economics, Markets, and Oil
Political Geography:
North America

6. Global Oil Supplies: The Impact of Resource Nationalism and Political Instability

Author:
Giacomo Luciani
Publication Date:
05-2011
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper looks at resource nationalism and political instability as potential causes of disruption to global oil supplies. It points to depletion preferences and strategies as one form of resource nationalism. In most cases, resource nationalism appears to be motivated by rent maximisation. Hence, we see the adoption of more restrictive policies when prices rise. Conversely, when oil prices are low, increasing export volumes becomes more important. Restrictions on exports are common, especially for natural gas, which is sometimes reserved for national consumption. Export taxes are a tool used by some countries to extract revenue from oil producers. Domestic prices of gas and petroleum products are frequently much lower than international prices, also in some sense reducing availability for export. Political instability has a much more elusive impact on oil and gas exports, and historical experience points to contradictory potential outcomes. This paper concludes that political instability and resource nationalism are rarely associated with acute supply crises or shortfalls. Their effect is rather gradual and normally compensated by action in other parts of the system.
Topic:
Energy Policy, Nationalism, Oil, Politics, and Natural Resources
Political Geography:
United States