In December Saudi Arabia's oil minister Ali al-Naimi posed an interesting question: "Is there a black swan out there that we don't know about which will come by 2050 and we will have no demand?"
Obviously, we do not know the answer. However, it is almost certain that prospects for a big innovation that validates his anxiety have been increased by very high oil prices. This suggests that Saudi Arabia did itself no favours in the past by cutting production to support such prices.
Mr Naimi implicitly recognised this point in a speech he gave to the German-Arab Friendship Association in Berlin earlier this month. In the talk, he pointedly referred to the effect of high prices on development of high-cost reserves:
"When prices are rising, or at a historic high, as they have been over the past few years, the global oil industry tends to increase investment. So we have seen higher production from oilfields that are more costly to develop or operate, such as in the arctic, deep offshore, heavy oils in Canada and Venezuela, and shale oil deposits in the US," he said.
Mr Naimi then added tellingly: "It is not the role of Saudi Arabia, or certain other Opec nations, to subsidise higher cost producers by ceding market share."
While leaving the door open for an agreement between Opec and non-Opec nations to stabilise prices, Mr Naimi made it clear that Saudi Arabia, as the world's low-cost producer, would not make sacrifices for other high-cost producers. He also implied that Saudi Arabia did not intend to make it easier for alternative energy sources or conservation efforts to replace oil.
Mr Naimi has raised an important and relevant point. Changes in the technology of production and consumption and the availability of alternative fuels threaten to alter energy markets permanently. Further changes could result in nations agreeing to limit greenhouse gas emissions, or worse, individual jurisdictions such as California embarking on radical programmes to end hydrocarbon use. The prospect of global economic growth falling short of the rates recorded before the Great Recession is an additional threat.
In this context it is a rational strategy for the kingdom to refuse to cut production. In effect, after raising the spectre of black swans, the Saudis are taking steps to increase the likelihood of oil continuing as an important source of world energy in 2050. By maintaining production and allowing prices to fall, Saudi Arabia and its allies in effect are starving the black cygnets to death.
The implications for those engaged in oil exploration and production, as well as those developing alternatives such as electric cars or renewable fuels, are obvious. Oil prices will be much lower than anticipated. The lower prices will force those who back alternatives to look for larger subsidies or make a greater effort to reduce their costs.
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LUKOIL - The plan is based on the conservative $50 per barrel oil price scenario. Sustainable hydrocarbon production growth is planned in the Upstream business segment along with the growth in the share of high-margin projects in the overall production. In the Downstream business segment, the focus is on the improvement of operating efficiency and selective investment projects targeted at the enhancement of product slate.
BP - BP will acquire on completion a 43% equity share in Lightsource for a total consideration of $200 million, paid over three years. The great majority of this investment will fund Lightsource’s worldwide growth pipeline. The company will be renamed Lightsource BP and BP will have two seats on the board of directors.
REUTERS - Brent crude was up 69 cents, or 1.1 percent, at $64.03 a barrel by 0743 GMT. It had settled down $1.35, or 2.1 percent, on Tuesday on a wave of profit-taking after news of a key North Sea pipeline shutdown helped send the global benchmark above $65 for the first time since mid-2015. U.S. West Texas Intermediate crude was up 45 cents, or 0.8 percent, at $57.59 a barrel.
ROSATOM - On December 10, 2017, the construction start ceremony took place at the Akkuyu NPP site under a limited construction licence issued by the Turkish Atomic Energy Agency (TAEK). Director General of the ROSATOM Alexey Likhachev, and First Deputy Minister of Energy and Mineral Resources of the Turkish Republic, Fatih Donmez, took part in the ceremony.