GLOBAL energY AND ENVironment SUMMIT| MAY 2012 Decision makers and experts at Reuters Summit examine geopolitical and market upheaval rattling energy industry POWERFUL SHOCKS ONFRONTATION across the Middle oil producers? Will new shale oil and gas Environment Summit 2012 this week, dozens East, carnage in Syria, an oil-led reserves meet the world’s fuel needs -- or of decision makers in the energy and climate Cindustrial revolution in North America, cook the Earth’s atmosphere forever? Will businesses addressed these key questions in stagnating nuclear output, and a crisis economic depression mean a permanent closed sessions with Reuters journalists. of confidence in renewables have left the decline for Western energy demand and the Government officials, top executives and world’s energy industry in turmoil. death of the European refining industry? other experts gave their views of the issues Will war stop exports from the biggest At the Reuters Global Energy and the opportunities and challenges ahead. Oil prices still pose risk to global recovery, IEA says BY MURIEL BOSELLI Birol repeated that the Paris-based agency, Iraq is potentially one of the world’s last PARIS, MAY 16 which advises 28 industrialized nations on great unexplored territories after decades of energy issues, remained ready to release neglect due to wars and sanctions. IL PRICES REMAIN a threat to the strategic oil stocks if needed. “If there is no good news from Iraq, it’s a fragile global economic recovery Oil markets have been on alert for a bad news for the global oil outlook in the Odespite a recent fall, the International possible release from strategic reserves after short, medium and long term,” he said. Energy Agency’s chief economist said, adding news in March the United States had held Birol said he was concerned over the risk the IEA remained ready to release emergency talks with the British and French on the issue. of a lack of investment in the Middle East oil stocks if needed. In an election year, the U.S. administration and Northern Africa after the Arab Spring, a North Sea Brent crude oil reached a peak is anxious to bring down gasoline prices as wave of protests which forced dictators out of of more than $128 in March before declining the summer driving season looms and further power. around $15 gradually over the last two debate is expected at G8 talks at the end of “When I look at investment schemes and months as tensions in the Middle East have this week in Camp David, United states. investment appetite in some key Middle eased and oil supplies have increased. “We are monitoring the oil market all the Eastern and Northern African countries, I “Even current prices are far too high for time, we look at economic and stock data, see that several investments are diverted to the current economic context... and pose a and remain ready to act if market conditions social spending, to infrastructure spending,” serious risk,” the IEA’s chief economist Fatih warrant,” Birol said. Birol said. Birol told the 2012 Reuters Global Energy & The European Commission said it saw no Beneficiaries from high oil prices included Environment Summit. “Economic recovery immediate need for any release of oil stocks the Organisation of the Petroleum Exporting was especially at stake in Europe, the U.S., although it was in close contact with the Countries (OPEC) and Russia. Japan and China,” he added. United States and the IEA. OPEC’s revenue in 2012 was likely to reach “I’m concerned for Europe and I’m also Iraq was the only country in the world which or exceed $1.2 trillion, up $140 billion on very concerned that these high prices would could significantly increase oil production 2011 if oil prices remained at current levels. hit the still hesitant and slow U.S. economic given the decline of existing fields and rising Russian earnings from oil and gas exports recovery,” Birol said. demand in emerging countries, Birol said. would reach $400 billion, some 25 percent of the country’s gross domestic product. “In the oil market, there are always winners,” he said. (Additional reporting by Dmitry Zhdannikov and Oleg Vukmanovic; Editing by William Hardy) contents EU energy chief on carbon ............3 Oil price outlook ............................4 IBM .................................................5 Mercuria’s outlook .........................6 Japan Oil, Gas and Metals ............7 Trafigura ........................................8 Standard Chartered Bank ........... 10 European natgas market ............ 12 Shale and conventional gas .........13 HARMA S Korea Nationa Oil Corp ............... 15 U.N. on climate pact ................... 16 Britain on CO2 ..............................17 EU airlines’ carbon cash ............. 18 /PARIVARTAN /PARIVARTAN TOO HIGH? Demonstrators carry a motor bike to protest a price hike in Summit speakers ......................... 19 petrol in New Delhi, Nov. 4, 2011. REUTERS GLOBAL ENERGY AND ENVIRONMENT SUMMIT 2 MANN G RND WIE BYPRODUCTS: Smoke billows from a plant A / of U.S. chemical producer Dow near the eastern German village of Lippendorf, south of Leipzig, March 25, 2004. REUTERS EU energy chief presses for much higher carbon prices BY JEFF COELHO AND NINA CHESTNEY euros a tonne was his personal choice for the Commissioner Connie Hedegaard told LONDON, MAY 16 moment. reporters on Tuesday. The European Commission has been Speaking at the Reuters’ Global Energy and UROPEAN CARBON PRICES should be reluctant to name a level for carbon prices, Environment Summit, she would not specify at least twice their current value of just although the EU executive is reviewing how to a preferred price level for the carbon market. Eover 6 euros ($7.66) a tonne in order tackle a massive supply of pollution permits Oettinger added that the ETS needed to spur investment in cleaner technology, EU that have built up since the 2007/2008 be made more flexible, so it could respond to Energy Commissioner Guenther Oettinger recession. unexpected changes in economic growth. said. The glut in pollution permits has grown “Our ETS scheme was born before the Europe’s recession and fiscal crisis has to 900 million, the Commission said on financial crisis, before Lehman Brothers and crippled prices in the European Union’s Tuesday. before our public budget problems,” he said. Emissions Trading System, meaning carbon Coupled with weak demand, the oversupply To try to improve the economics of low- prices are providing little incentive for utilities has spurred about a 60 percent fall in carbon energy, he said predictable subsidies and other heavy polluters to move to greener European carbon prices over the past year. were useful. production of electricity, steel or cement. To try to reduce the surplus, the Asked whether Britain, for instance, could “A (carbon) price of 6 to 8 euros is not a Commission said last month it was bringing be seeking aid for its nuclear plants, he said price signal for anything, not for investors and forward a review of the carbon market and such power sources should in principle rely not for consumers,” Oettinger told Reuters’ reassessing its auctioning rules to control on market forces, but was willing to listen to Global Energy and Environment Summit on when new allowances become available. the debate. a conference call from Brussels. Before the Commission breaks for summer “I’m open. If member states want to debate, “At the moment, looking at the investment in August, it plans to publish its review. we have to be ready,” he said. crisis, 20 (euros) and more is not really a cost Any legal proposals would then have to be (Additional reporting by level for our industry to be more competitive,” debated, with a view to deciding a course of _Barbara Lewis and Karolin Schapps; he said. He added that a price range of 12-18 action before the end of the year, EU Climate Editing by Jason Neely) GLOBAL ENERGY AND ENVIRONMENT SUMMIT 3 Saudis and soaring costs may keep oil above $100 BY DMITRY ZHDANNIKOV AND CLAIRE MILHENCH SAUDI POWERS: Saudi Arabia Oil Minister LONDON, MAY 16 Ali al-Naimi (R) and Finance Minister Ibrahim al-Assaf (L) arrive at the International Energy Agency conference in Riyadh, Nov. 20, 2011. IL INDUSTRY executives and bankers are assuming oil prices will stay Oabove $100 a barrel in the year ahead, despite mounting economic worries, as any fall below that level would trigger a cut in Saudi Arabia’s output and force closures at high-cost projects around the world. A straw poll by Reuters of oil executives, traders, bankers and fund managers showed seven respondents predicting Brent crude trading at $100 to $120 a barrel in the next 12 months. Four respondents saw prices at $120 to $140 and only four at $80 to $100. At a previous summit last June, most respondents also saw prices above $100. HADEED Then worries centred around supplies S following a full outage of Libyan output AHAD F and OPEC’s failure to boost production to / compensate for the loss. By contrast, the current mood is dominated by demand concerns as euro zone collapse REUTERS worries, poor U.S. economic data and signs of slower demand in China overshadow “Ultimately the Saudis are the ones that have the single jitters about a potential loss of Iranian oil biggest positive influence in the oil price, other than supplies. But although Brent prices are almost $20 anyone starting a war - which would have a negative down from their 2012 peaks at $110 a barrel, but upward impression on oil price.” few expect a repeat of the 2008 crash which saw them collapsing to $34 per barrel from $100 a barrel as higher levels damage the at $100 or more... I think the Saudis can do an all time high of $147 in a space of six global economic recovery.