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31. Guyana: Oil, Internal Disputes, the USA and Venezuela

Author:
Raphael Padula, Matheus de Freitas Cecílio, Igor Candido de Oliveira, and Caio Jorge Prado
Publication Date:
01-2023
Content Type:
Journal Article
Journal:
Contexto Internacional
Institution:
Institute of International Relations, Pontifical Catholic University of Rio de Janeiro
Abstract:
Guyana has a strategic geographic position in the Amazon and the Greater Caribbean area, as revealed in the strategic thinking and military presence of the United States (USA). Its territory also possesses abundant natural resources, especially after the recent and significant oil discoveries, having the American company ExxonMobil as protagonist. Meanwhile, the country is characterised by a domestic political and ethnic cleavage. In addition, Venezuela and Guyana are in a historical dispute for the Essequibo area, which is potentially endowed and surrounded by areas with strategic resources. The main argument of the paper is that the oil discoveries in Guyana are leading to geopolitical and geoeconomic impacts regarding the intensification of domestic and foreign disputes, involving American and Venezuelan interests and recent state actions. More broadly, it points out that the north of South America has become one of the stages of the global power strife, in view of the Sino-Russian and American presences, in a context of Brazil’s absence. To survey and evaluate the actors’ actions resulting from the oil findings in Guyana, the paper is based on geopolitical and geoeconomic concepts, energy data, specialised academic and journalistic bibliography.
Topic:
Foreign Policy, Oil, Geopolitics, Strategic Competition, and Geoeconomics
Political Geography:
China, Latin America, Venezuela, Guyana, and United States of America

32. Betting on Black Gold: Oil Speculation and U.S. Inflation (2020-2022)

Author:
Carlotta Breman and Servaas Storm
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Sharp increases in systemically important crude oil prices have been a major cause of the recent surge in the inflation rate in the U.S. This paper investigates the extent to which the increase in oil prices can be attributed to excessive speculation in the oil futures market. Our analysis suggests that excessive speculation in the crude oil market has been responsible for 24%-48% of the increase in the WTI crude oil price during October 2020-June 2022. These estimates translate into an oil price increase of around $18-$36 per barrel and an increase in the U.S. PCE inflation rate by circa 0.75 to 1.5 percentage points during the same period. We complement the analysis with an empirical investigation of the crude oil market which shows that (speculative) long non-commercial open-interest positions in oil futures have increased considerably relative to short non-commercial positions. We further find that higher futures prices for crude oil ‘Granger-cause’ oil spot prices, the futures prices of corn and soybeans and the fertilizer price. These econometric results show that oil speculators have to be held accountable for not just raising oil prices, but also driving up food commodity prices. We finally discuss measures to clamp down on excessive speculation in oil in order to eliminate its systemically adverse consequences for the U.S. economy.
Topic:
Economics, Markets, Oil, Inflation, and Speculation
Political Geography:
North America and United States of America

33. Facing the Future: What National Oil Companies Say About the Energy Transition

Author:
Andrea Furnaro and David Manley
Publication Date:
11-2023
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
National oil companies (NOCs) should publicly acknowledge the risk of the energy transition, assess this risk, and act by implementing mitigation plans. Only 9 out of 21 NOCs analyzed acknowledge the risk of the energy transition, 4 have mentioned the use of transition risk assessments, and 5 have explicitly mentioned strategies to mitigate the risk. None of the NOCs have published “just transition plans” detailing how they will help workers and communities. NOCs do not plan to decrease investments in risky oil and gas assets. Petrobras (Brazil), Petronas (Malaysia) and Sonangol (Angola) are divesting from less valuable assets, but not necessarily to mitigate transition risk or downsize operations. Some NOCs, such as NNPC (Nigeria) and GNPC (Ghana), want to expedite drilling before oil and gas demand falls and acquire assets divested by other companies. At least six NOCs intend to increase oil and gas investment to secure energy supplies. Most NOCs intend to diversify, especially into gas, oil refineries, petrochemicals and renewable energy. However, it is unclear how much NOCs are spending on diversification or whether these are effective mitigation strategies. NOCs can learn from each other. Two NOCs—Ecopetrol (Colombia) and Petrobras—are clear leaders in terms of recognition of energy transition risk. However, NOCs disclosing more transition risk information are not necessarily also those reducing higher-risk investments.
Topic:
Oil, Business, Investment, and Energy Transition
Political Geography:
Africa and Global Focus

34. Riskier Bets, Smaller Pockets: How National Oil Companies Are Spending Public Money Amid the Energy Transition

Author:
David Manley, Andrea Furnaro, and Patrick Heller
Publication Date:
11-2023
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Expecting a slow energy transition away from fossil fuels, national oil companies (NOCs) will likely invest USD 1.8 trillion in upstream oil and gas developments and expansions over the next 10 years. But $425 billion—a quarter of the NOCs’ planned investment—will be unprofitable if oil demand falls to 55 million barrels a day, in line with the International Energy Agency’s Announced Pledges Scenario. This is the highest risk portion of the portfolio and has doubled since the Russian invasion of Ukraine. NOCs will only profit from around $1.2 trillion of investment (71 percent of the total NOC investment) if humanity fails to contain global temperature rise to below 1.5°C, pushing the world toward climate catastrophe. While NOCs are making riskier bets, their debt is rising in some regions. Between 2011 and 2022, the average debt to total asset value of NOCs in sub-Saharan Africa, the Middle East and North Africa, and Latin America rose by a third. Governments’ financial pockets are shrinking. Between 2011 and 2021, the average government debt as a proportion of gross domestic product doubled. Yet many NOCs have not publicly acknowledged the growing risks of the energy transition. They and their governments must examine how they can generate sufficient revenue and energy for citizens without making even riskier bets with public money.
Topic:
Oil, Business, Public Spending, and Energy Transition
Political Geography:
Global Focus

35. Energy Transition in the Middle East and North Africa: The Road to COP28

Author:
Hanen Keskes and Laury Haytayan
Publication Date:
11-2023
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Oil and gas producers in the Middle East and North Africa (MENA) must plan for the long-term impacts that the global energy transition will have on their fiscal systems and adapt public investment plans in the pursuit of long-term economic transformation. MENA countries seeking international climate finance to support energy transition must establish a track record of developing and implementing viable green energy projects. MENA governments must center energy transitions around justice, fairness and equity for all. A just energy transition process must include two types of justice: procedural justice, which relates to the extent to which people are involved in the process; and distributive justice, which represents the extent to which the positive and negative effects of energy transition are fairly distributed. Governments in the Global South must ensure that South-North cooperation for renewable energy production addresses domestic energy needs, before directing excess production to export.
Topic:
Climate Change, Oil, Gas, Conference of the Parties (COP), and Energy Transition
Political Geography:
Middle East and North Africa

36. Reasons Behind Words: OPEC Narratives and the Oil Market

Author:
Celso Brunetti, Marc Joëts, and Valérie Mignon
Publication Date:
09-2023
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
We analyze the content of the Organization of the Petroleum Exporting Countries (OPEC) communications and whether it provides valuable information to the crude oil market. To this end, we derive an empirical strategy which allows us to measure OPEC’s public signal and test its credibility. Using Structural Topic Models, we identify in OPEC narratives several topics related to fundamental factors such as demand, supply, and speculative activity in the crude oil market, highlighting that OPEC announcements are highly linked to oil market volatility and traders’ positions. Most importantly, we find that OPEC communication is credible, reduces oil price volatility, and prompts market participants to rebalance their positions.
Topic:
Markets, Oil, OPEC, Trade, and Volatility
Political Geography:
Global Focus

37. Druzhba via Hungary – The impact of the construction of a new oil pipeline on Serbia’s energy security

Author:
Belgrade Centre for Security Policy (BCSP)
Publication Date:
05-2023
Content Type:
Commentary and Analysis
Institution:
Belgrade Centre for Security Policy (BCSP)
Abstract:
The relationship between Serbia and Hungary is very specific and is characterised by intensive cooperation, which is primarily the result of very good relations between Serbian President Vučić and Hungarian Prime Minister Orbán. The two countries already cooperate in the field of energy. Namely, Serbia uses Hungarian gas storage capacities, while Hungary receives its gas via Serbia Serbia receives all its oil, including that which is Russian, through the Adriatic pipeline (JANAF). As the oil is delivered to that pipeline through the port of Omišalj in Croatia, Serbia can no longer receive Russian oil via this route. At the beginning of October 2022, the EU adopted the 8th package of sanctions which, among other things, prohibits the maritime transport of crude oil and oil derivatives originating from Russia to third countries. Due to Serbia’s non-alignment with the EU, i.e. the fact that it did not introduce sanctions on Russia, the 8th package of sanctions does not envisage any derogation from the measures when it comes to the Western Balkans, although it was originally intended to enable the transit of Russian oil through JANAF (provided that the quality remains within the limits of earlier years). To analyse the potential consequences of the construction of a new oil pipeline to Hungary for the energy security of Serbia, it is necessary to look at the geopolitical circumstances in which this decision was made and to consider which alternative options are available to Serbia and how adequate and feasible they truly are.
Topic:
Oil, Bilateral Relations, Pipeline, and Energy Security
Political Geography:
Europe, Serbia, and Hungary

38. Assessing ESG Risks in National Oil Companies: Transcending ESG Ratings with a Better Understanding of Governance

Author:
Luisa Palacios and Catarina Vidotto Caricati
Publication Date:
05-2023
Content Type:
Special Report
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
National oil companies (NOCs) produce about half of the world’s oil, hold more than half of its refining capacity, and own the bulk of oil and gas reserves. Most of these companies come from emerging markets and depend heavily on international capital to finance their operations. As financial institutions consider more carefully environmental, social, and governance (ESG) risks in their investment decisions, an accurate assessment of the ESG performance of NOCs will be vital. Assessment of ESG risks in NOCs is currently hobbled by both the considerable divergence in ESG ratings for any given company and the complex nature of NOCs’ state ownership structure, which isn’t always readily encapsulated in ESG scores. A clearer picture of these companies’ ESG performance could be useful to investors. This paper, part of the Financing the Energy Transition initiative at the Center on Global Energy Policy at Columbia University SIPA, aims to provide a better understanding of what impacts the ESG performance of NOCs in emerging markets. The authors survey ESG ratings of the largest national oil and gas companies in emerging markets for which such ratings are available, alongside the scores of some of the largest integrated oil and gas companies from advanced countries. The authors find a significant divergence in ESG scores for each single company, which raises questions about their individual stand-alone value in assessing the relative ESG performance of companies in the integrated oil and gas space. An analysis of average NOC ESG ratings—imperfect as they are—against those of international oil companies (IOCs), however, indicates much lower performance of NOCs on governance specifically (i.e., the G in ESG). Ownership by a state creates unique governance challenges—which, in turn, affect environmental and even social efforts—and deserves further exploration to determine which factors within state-owned companies can improve or impair ESG performance, to facilitate a more reliable understanding of NOCs’ ESG risks.
Topic:
Oil, Governance, Fossil Fuels, Energy Transition, and National Oil Companies
Political Geography:
Global Focus

39. Optimizing the Role of the Extractive Industries in Domestic Revenue Mobilization: Analysis of Uganda's Mining, Oil, and Gas Revenue Generation and Management Laws

Author:
Dan Ngabirano and Onesmus Mugyenyi
Publication Date:
12-2023
Content Type:
Research Paper
Institution:
Advocates Coalition for Development and Environment (ACODE)
Abstract:
Dwindling aid and more recently the devastating effects of the COVID-19 global pandemic have rendered many African countries socially, politically, and economically vulnerable. Many are unable to effectively provide basic goods and services for their people, and their ability to pursue long-term development goals has been severely undermined. Given this situation, several African governments continue to fall behind in honouring their global commitments such as those made under the UN Sustainable Development Goals (SDGs) and the various regional and international human rights treaties that they are party to. To bridge the current funding gap, several African countries have turned to extensive borrowing with even more damaging consequences. In the face of this crisis, African countries have been urged to embrace and, in some instances, enhance their domestic revenue mobilization efforts as a more reliable and sustainable option. Uganda has heeded this call and in 2019, the country adopted a five-year Domestic Revenue Mobilization Strategy (DRMS). The key objective of this strategy is to improve revenue collection and lift the country’s tax-to-GDP ratio to between 16%-18%. More critically, DRMS recognizes the strategic role and potential contribution of oil, gas, and mineral revenues to national development. The DRMS underlines the need for the development of a strong extractive industries taxation fiscal regime. Given this reality, this study was conceived and set out to review and analyze the various laws, policies, and practices relevant to Uganda’s extractive industries fiscal regime, and to establish the extent to which these may enhance revenue generation, management, and equitable sharing of resource wealth. While focused on petroleum revenue generation, management and sharing in the Albertine region districts of Hoima, Buliisa and Kikuube, the study refers to experiences from gold mining in Mubende district. In this regard, the study established that gold mining in the district has for the most part been informal and unregulated. For this reason, both the central government and Mubende district local government have not been very successful in generating critical revenues from the largely artisanal and small-scale miners-dominated sector. Secondly, where revenue has been realized from gold mining in a few instances, it has been paid to the central government with less benefit to the district local government.
Topic:
Oil, Gas, Mining, Revenue Management, and Extractive Industries
Political Geography:
Uganda and Africa

40. Against the flow: Europe’s role in kickstarting Algeria’s green transition

Author:
Andrew Farrand
Publication Date:
10-2022
Content Type:
Policy Brief
Institution:
European Council on Foreign Relations (ECFR)
Abstract:
Russia’s war on Ukraine has reshaped European energy markets and lent new urgency to the EU’s decarbonisation plans, altering the incentives of the bloc’s energy partners. Surging demand for Algeria’s oil and gas exports has temporarily undercut pressure for domestic reform, including in the energy sector. But growing local energy consumption and European plans to reduce fossil fuel imports in favour of renewables threaten Algeria’s rentier system. The country’s leaders have taken only minimal steps to build renewable energy capacity and remain fixated on raising hydrocarbon investment. While Algeria has little spare capacity to increase its hydrocarbon exports in the short term, it holds far more promise for Europe as a long-term partner in renewable energy. Europe’s ambitious climate goals, deep pockets, and technical expertise make it well placed to help Algeria kick-start a robust energy transition – if the country chooses to go along. At a high-level energy dialogue this month, EU and Algerian officials will convene for the first of many discussions to reshape the future of their energy partnership.
Topic:
Climate Change, Oil, European Union, Gas, Exports, and Green Transition
Political Geography:
Europe and Algeria