Economic Analysis of Selected Offshore Petroleum Arrangements

As a result of the current decline of oil prices, exploration decisions are more carefully analysed than ever before. At the same time various governments have introduced incentives to reinvest in exploration and development in order to maintain or increase activity. As a result, most exploration decisions are now being analysed as "incremental investments". This has the effect of "trapping" investments in areas where profits are currently being made. This in turn creates serious problems for those developing countries which would like to attract exploration. The paper analyses issues related to sliding scale formulae based on the ROR, and the economic impact of the size of the area to which fiscal terms apply.     

Restructuring of Eastern Europe and its possible consequences for atmospheric environment

The environmental situation in the (former) communist countries of Eastern Europe is threatening. How will the political and economical restructuring affect the environmental conditions? This article investigates the consequences for air pollution resulting from energy uses over the next 5 yr. Since abatement investments seem unfeasible (with the exception of the former GDR) financially and to some extent also technically, the assessment of energy demand is crucial. Explicitly accounting for market prices shows that emissions will substantially decline due to conservation and the substitution of the cleaner fuel natural gas for “dirty” coal.     

Assessing the value of CO2 capture ready in new-build pulverised coal-fired power plants in China

Making new plants CO₂ capture ready (CCR) would enable them to retrofit to capture CO₂ at a later date at lower cost when the appropriate policy and/or economic drivers are in place. In order to understand the economic value and investment characteristics of making new plants CCR in China, a typical 600 MW pulverised coal-fired ultra-supercritical power plant, locating in Guangdong province, was examined. Combined with an engineering assessment, costs were estimated for different CCR scenarios. To analyze CCR investment opportunities, the paper applies a cash flow model for valuing capture options and CCR investment. Results were obtained by Monte-Carlo simulation, based on engineering surveys and an IEA GHG CCR study, as well as plant performance information and expert projections on carbon prices, coal prices and electricity prices.CCR investments are justified by factors such as higher retrofitting probabilities, lower early closure probabilities and fair economic return. However, the economic case for CCR largely depends on two factors: (a) whether the original plant is retrofittable without CCR; and (b) the type of investments made, for example, investments essential to CCR tend to be more economic than additional non-essential CCR features such as clutched low pressure turbines. The carbon price and discount rate were found to have significant impacts on the economics of CCR. Overall, it appears that the value of the ‘capture options’ that CCR generates for retrofitting CCS is significant, and so could justify a modest CCR investment, even assuming the original plant is retrofittable without CCR. It was also found the value of CCR might be significantly understated if the range of potential retrofitting dates is artificially constrained.     

Long-term iron ore price modeling: Marginal costs vs. incentive price

The paper studies and applies the approaches to forecast long-term (LT) real prices of iron ore. This price is crucial for valuation of investments in Greenfield iron ore projects on the horizon of more than 5 years. The forecast is obtained by three different approaches which are usually used by investment bank analysts: marginal costs approach and 2 approaches based on calculation of incentive price. The paper concludes that there has been a structural shift on the iron ore market and LT iron ore prices will be higher by 20–30% than the average of industry forecasters suggest. This is related to the 2 key factors which were taken into account in this study—depletion of existing iron ore deposits and targeted return on investments for new projects. In addition, escalated industry costs inflation is claimed to be the factor which will bolster nominal iron ore prices at high levels in the long-term. Using a Monte-Carlo simulation approach, confidence interval for future iron ore price was estimated.     

International oil market – new directions

This article focuses on changes in the international petroleum industry during the past 20 years and examines some major trends, especially since the oil price collapse of 1986. The resumption of rapid increases in oil demand since 1986 in the developed market economies and the developing world has already led to a pronounced production shift to OPEC member countries where output increased by 6.6 million barrels per day or, 37% since 1985. Cutbacks in petroleum investments in non-OPEC countries are likely to result in even more dependence on the vast proved oil reserves of OPEC. However, the gap between peak output and sustainable production capacities in OPEC has narrowed and there is an urgent need for sizeable investments to expand capacities. Such investment programmes are already being implemented by transnational oil corporations in countries such as Indonesia and Nigeria where the companies had retained equity participation. In other countries such as Iraq and Venezuela where oil operations had been nationalized, transnational oil corporations are being invited to participate in new arrangements for oil production. New arrangements are also being considered in Eastern Europe and the USSR. New understandings, dialogue and cooperation between oil-consuming and producing countries will be necessary for the security of investments, supplies and markets in this process. The unanswered question is whether such cooperation can be achieved in time in order to avoid yet another energy crisis.     

影响中国碳价的能源价格因素灰关联研究

本文选取中国碳排放价格数据和8种能源价格指数为研究变量,运用灰色关联方法研究了中国能源价格对中国碳价的影响。研究结果发现,化石能源价格对中国碳排放价格的影响较大,特别是煤炭、成品油和基础油价格对碳价的影响最大;低污染能源中,与天然气相比,液化气价格对中国碳排放价格影响明显。研究结果指出了保持碳市场价格稳定、防范价格异常波动的重要性,并从能源价格体系和能源消费结构角度提出了政策建议。     

From exogenous to endogenous development in Scottish forestry: the feasibility of small-scale wood energy enterprise

This paper presents a change in the Scottish forestry policy from the exogenous to the endogenous development approach, and feasibility of heat entrepreneurship based on locally produced woodfuels in the Highlands of Scotland. The cost structure and heat pricing in the case of an 800 kW solid fuel boiler is presented, and the profitability of local heat entrepreneurship is analysed with scenarios of different investment costs and fuel prices. The results indicate that a district heating (DH) system, using locally produced woodchips, could produce heat at a lower price than single-house heating systems using light fuel oil. The profitability of replacing existing heating units by investing in a new district heating (DH) scheme is very dependent on the available investment support, price level of woodchips and substituted light fuel oil, and the amount of sold energy. In the case of an 800 kW DH scheme, and woodchip prices of 14 and 22 €/MWh, investments should remain under break-even points of 280 and 420 €/kW of heating power (230,000–335,000€).     

Producer homogeneity,heightened uncertainty and mineral market rigidity

Minerals/metals markets are characterized by lumpy investments which impart a bias towards rigidity. That rigidity increased in the 1970s owing to heightened global economic uncertainty. The unexpected slowdown in global metals demand was a fundamental cause of the heightened uncertainty, but adjustment to it was hampered by a simultaneous reduction in the homogeneity of producers. The two main causes of reduced producer homogeneity were: the emergence of unstable and sizable differences in producer competitiveness and the proliferation of producers. A reduction in minerals market rigidity requires two sets of conditions. First, restoration of greater stability in global economic growth, inflation, energy prices and exchange rates; and second, an increase in producer homogeneity through the encouragement of joint ventures. Increased producer homogeneity facilitates expansion where investment is lumpy and since this improves the efficiency of capital it may be socially justified provided it is not accompanied by excess profits.     

PROJECTED EFFECTS OF ENERGY POLICIES ON AGRICULTURAL WATER USE AND IRRIGATION1

ABSTRACT: A national and interregional programming model was used in projecting the impacts of alternative energy policies and prices on agricultural production, land use, and irrigation. The alternatives analyzed include (a) natural gas deregulation, (b) natural gas curtailment, (c) doubled energy prices, and (d) tripled energy prices. These alternatives are compared with a base alternative where prices and conditions are at normal levels. Restraints in the model control availability of water, land, nitrogen fertilizers, and energy. Water production functions were used to adjust water use to conform with projected energy prices and policies. Natural gas curtailment would have the largest effect on nitrogen use on irrigated land. Values or shadow prices for lands that remains in irrigation would increase under all of the alternatives because of reduced supply. Increased energy prices generally would increase use of surface water for irrigation and reduce use of ground water due to higher pumping costs. Reductions of 50 percent or more in ground water use would occur in the South Central and Western regions of the United States. Water supply prices increase under all of the alternatives; with the amount varying by regions and the policy or price situation.     

Making a stronger case for industrial energy efficiency by quantifying non-energy benefits

This paper describes a more compelling case for industry to promote the non-energy benefits of energy efficiency investments. We do this in two ways to actively appeal to chief executive officers (CEOs) and chief financial officers (CFOs) primary responsibility: to enhance shareholder value. First, we describe the use of a project-by-project corporate financial analysis approach to quantify a broader range of productivity benefits that stem from investments in energy-efficient technologies, including waste reduction and pollution prevention. Second, and perhaps just as important, we present such information in corporate financial terms. These standard, widely-accepted analysis procedures are more credible to industry than the economic modeling done in the past because they are structured in the same way corporate financial analysts perform discounted cashflow investment analyses on individual projects. Case studies including such financial analyses, which quantify both energy and non-energy benefits from investments in energy-efficient technologies, are presented. Experience shows that energy efficiency projects’ non-energy benefits often exceed the value of energy savings, so energy savings should be viewed more correctly as part of the total benefits, rather than the focus of the results. Quantifying the total benefits of energy efficiency projects helps companies understand the financial opportunities of investments in energy-efficient technologies. Making a case for investing in energy-efficient technologies based on energy savings alone has not always proven successful. Evidence suggests, however, that industrial decision makers will understand energy efficiency investments as part of a broader set of parameters that affect company productivity and profitability.     

On accounting for sustainable development and accounting for the environment

Economic sustainability or intergenerational equity entails maintaining social well-being by decisions about investments in different types of assets. Under certain conditions, consumption can be sustained by depleting resources, or various kinds of natural capital, while building up other kinds of capital. Theoretically, the choices involve the use of a set of accounting prices. The question becomes one of finding and implementing accounting prices that express the roles of the various capital goods in achieving the objective of the economy.Hartwick's rule holds that an economy can be sustained if the value of the total, net investment in the economy, evaluated at those accounting prices, is zero. The rule applies to a special, abstract economic model which expresses a social objective different from the discounted-utilitarian objective on which national accounting is based. Different objectives give rise to different accounting prices. Because the prices may not be right, the zero net-investment rule using available national-accounting prices cannot generate a condition for sustaining an economy.Still, environmental accounting is a tool which, used prudently, can make an important contribution to social decision-making. This paper expands upon these ideas by discussing the incorporation of natural resource and intangible environmental costs and benefits into green accounting at the firm as well as the economy level. Common techniques of mine valuation and standard corporate accounting are the bases for this extension to the valuation of and accounting for decisions concerning the environment.     

Oil-Induced environmental Kuznets curve in organization of petroleum exporting countries (OPEC)

This study investigates the environmental Kuznets curve (EKC) hypothesis in 10 of the Organization of Petroleum Exporting Countries (OPEC). To realize the study’s aims a time series model is built based on the period 1977–2008, utilizing the ecological footprint as an environmental indicator and income, labour, capital, oil consumption and oil price as economic indicators. Employing the Autoregressive Distributed Lag (ARDL) approach, by comparing the short and long-run income elasticities, the EKC hypothesis is present in six OPEC countries namely Algeria, Iraq, Venezuela, Nigeria, Qatar and Kuwait. Moreover, the Toda–Yamamoto–Dolado–Lütkepohl (TYDL) causality tests outcome show that, after oil consumption, the most significant factors in increasing ecological footprint are labor and capital. This implies the relocation of pollution intensive industries to almost all of the OPEC countries. However, oil prices reduce environmental damage by its negative effect on the ecological footprint. From the outcome of this study it is important for the investigated countries to reduce their consumption of fossil fuel energy since it represents an important source of pollution. This can be achieved by allocating more labor and capital in projects and investments on renewable energy, energy efficiency and energy saving.     

Renewable energy programmes in India

There is increasing optimism regarding the possible role that renewable energy technologies can play in the coming decade in the energy sector in India. Some recent developments and trends within the renewable energy sector that are responsible for this optimism, and the likely investments of the order of US$1210 million in the next four to five years, are discussed. The paper includes discussion of the recent changes in the implementing institutions, innovation in financing renewable technology investments, and a shift from financial to fiscal incentives. In addition, wind power generation, small hydro, photovoltaic and gasifier programmes are analysed in some detail.     

Constraints to improved energy efficiency in agricultural pumpsets: the case of India

Supply to electrical pumpsets for irrigation purposes accounts for about 25% of the total electricity sold in India. The number of electrical pumpsets is expected to increase from 8.5 million in 1989–90 to 10.5 million in 1994–95. Low load factors (10–12%) and low densities (1–4 pumpsets/km²) mean large investments for the electric utility in order to supply electricity for irrigation. It is reported that there exists a potential to save at least 10% of the electricity supplied to this sector by means of simple retrofit measures. However, conditions in the field pose constraints to such retrofits. Some of those constraints are highlighted in this paper. It is also suggested that immediate attempts be made to ensure that all new connections are energy efficient. This paper suggests that the additional cost incurred to ensure new energy efficient connections and to maintain retrofit energy efficient pumpsets must be looked on as a necessary cost for energy efficiency.     

VALUING IRRIGATION WATER IN PUNJAB PROVINCE,PAKISTAN: A LINEAR PROGRAMMING APPROACH1

ABSTRACT: Linear programming models of a representative farm in a district of Pakistan's Punjab Province are formulated for the purpose of estimating the value of irrigation water. The models provide for choices among several irrigation levels for each potential crop. Solutions of the model for several water supply situations provide the basis for approximating the total, average, and marginal values of irrigation water. Prices for important crops in Pakistan are controlled at levels below their levels elsewhere in the world, so models are specified for both financial (domestic price) and economic (world price) scenarios. The value of water to society (its economic value) is high relative to the costs of some generally available water-augmenting investments, while financial values, which measure water management and allocation incentives faced by farmers, are less than the corresponding economic values. At current water supply levels, incremental returns to added water estimated from the economic model would justify investments in water-saving or water-augmenting technologies, while such a decision would be barely attractive assuming financial prices. While present government commodity price policies may serve to protect low-income and non-farm members of the population, they also inhibit farmer investments to increase the productivity of scarce irrigation water.     

The impact of the electricity tariff reform on renewable energies and energy efficiency investments: The case of the Italian residential market

This article investigates the impact that the electricity tariff reform is likely to have on investments in renewable energies (i.e., photovoltaics) and the adoption of energy efficiency measures (i.e., installation of heat pumps and efficient home appliances) in the residential market in Italy. The study develops detailed cost comparisons and simulations considering two different investment scenarios (before and after the reform) to conclude that the reform will: (i) have a negative impact on investments in photovoltaic systems; (ii) favor the adoption of energy efficiency measures, such as efficient home appliances.     

The supply and demand outlook for energy in the Asia—Pacific region

Years of strong economic growth in the Asia—Pacific region have resulted in unprecedented increases in energy demand in the region, particularly for oil and gas. The supply of oil and gas to the region will become more problematic as the decade progresses. Already 50% dependent on imported oil, this figure will rise to nearly 65% by 2000. Because high rates of domestic oil demand growth among traditional petroleum exporters - Indonesia. China and Malaysia - will absorb exportable surpluses, the region will find itself dependent on the Middle East for at least 90% of its imported oil needs by 2000. Currently linked to oil, LNG prices cannot justify the investments needed to bring new greenfield projects on line. With demand expected to exceed 67 million tonnes (Mt) in 2000 and 100 Mt in 2010. over 50 Mt of new capacity will be needed; satisfying this demand will necessitate a new pricing structure for LNG, raising the price substantially above the relative price of crude oil.     

FINANCING PRIVATE WATER RESOURCE DEVELOPMENT: ANALYSIS OF A STATE LOAN PROGRAM1

ABSTRACT. A State loan program was analyzed for its effects on groundwater development in Wyoming. The analysis focused on the effects of low-interest State financing on the economic feasibility of investments in center-pivot sprinkler irrigation systems. The feasibility analysis indicated that investments in sprinkler systems for production of cash crops are highly profitable, and would frequently be carried out whether or not the State loan program were available. Investments in sprinklers for production of forage crops are perhaps frequently made attractive by the loan program. Thus, while the program appears to have accelerated the pace of private water resource development in Wyoming, it has also subsidized some investments that would have been carried out regardless of the program's existence. Further analysis indicated that sprinkler investments carried out with State financing contribute substantially to firm growth when cast crops are grown, but have less marked, and sometimes negative, effects on growth when forage crops are produced. Some positive effects of the loan program on southeast Wyoming's regional economy were noted, though a complete empirical analysis of regional impacts was beyond the scope of the study.     

Explaining the resource curse, with special reference to mineral-exporting countries

Recent studies have found an inverse correlation between economic growth and natural resource abundance among developing countries. There appears to be no obvious explanation for this finding, such as an important growth variable that is common in resource-poor countries and deficient in resource-abundant countries. The resource curse hypothesis is closely related to the problem of sustainability for resource-exporting countries since periods of high growth are frequently followed by long periods of stagnation. Models are examined showing how increases in export income can affect relative prices in the trade and nontrade sectors and how the changes in relative prices affect investment and growth. It is the thesis of this article that there is nothing inherent in resource-abundance that condemns countries to either low growth or nonsustainability.     

Energy consumption trends in high growth Asian economies before and after 1986

In 1986, world oil prices declined sharply. Lower oil prices have been favourable to economic growth and price stability in Asia. However, oil consumption has also been growing rapidly in developing Asian countries including those dependent on imported oil. The increasing dependence on oil as a source of energy since 1986 is a striking reversal of the previous trend. In their pursuit of rapid industrialization, Asian countries have neglected energy conservation and diversification strategies. Unless energy policy is redirected, countries like Korea, Thailand and the Philippines could be seriously hurt by a sharp rise in oil prices. An increase in oil prices is almost inevitable in the next few years.