Peter R. Odell

Four decades of Groningen production and pricing policies and a view to the future

Abstract The 1959-discovered Groningen gasfields size and low-cost production are unique in Europe. As the monopolistic supplier to Europes gas markets from 1965, it earned supernormal profits for the Dutch state, Shell and Exxon. A decade later, when alternative suppliers broke the monopoly and Dutch energy policy — anticipating gas scarcity — stimulated the exploitation of smaller fields, Groningen production was constrained. Yet, it remained highly profitable and its large remaining reserves still offered long-term production potential. Now, impending European gasmarket liberalisation is threatening the traditional role of Groningen in the gas supply system. New marketing arrangements are required that secure and enhance the balancing role of the field and its profitable exploitation within the wider European context.

The West European gas market : The current position and alternative prospects

Abstract Western Europes natural gas industry is recent and has evolved under severe institutional and policy constraints. Growth has been limited and there is a massive under-utilization of available gas resources. These conditions persist so that gas prospects remain constrained. Any major expansion depends principally on external competition stimuli, notably from the USSR for which large additional gas exports are important to the efforts for political and economic changes at home. A competitive response to the challenge of Soviet gas could lead to natural gas becoming Western Europes most important source of energy by the early 21st century.

Global and regional energy supplies Recent fictions and fallacies revisited

Abstract Over the past 20 years a number of powerful perceptions concerning the prospects for the supply of various sources of energy, at both the global and the regional level, have strongly influenced governmental and inter-governmental energy sector analyses and policies. Unhappily, the perceptions that have so ruled supply-side questions have been based in part on a set of demonstrable fictions and fallacies. These have led to high costs and severe difficulties for the Western worlds economy, most notably in respect of the massive increase in the price of oil since 1970. Much of this increase can, indeed, only be defined as a self-inflicted wound on the fabric of Western society arising from policies which reflected the unsubstantiated belief in an inevitable scarcity of oil. More generally, there has been an unwillingness to accept the energy supply potentials which were indicated by economic rationality. There was, instead, a propensity to follow non-economic interpretations of the nature of energy resources and of the processes of their exploitation whereby the efforts made to achieve efficient ways of meeting the energy demand of our economies and societies were undermined. A review of what went wrong — and why — may avoid equally, or even more costly mistakes in the future.

Outlook for the international oil market and options for OPEC

Abstract A fundamental misinterpretation of post-1970 events in the international oil market has severely curbed oil demand and led to conditions in which much of the worlds lowest cost reserves of energy are in danger of remaining unexploited. There is, instead, an increasing use of inherently higher cost sources of energy, so undermining world economic growth prospects. A return to the preferential use of low cost oil (and gas), without further exacerbating already strained North-South relationships, can now only be achieved in the context of a difficult-to-negotiate OPEC-OECD agreement on a long-term development strategy.

Optimal Development of the North Sea's Oil Fields- the reply

Abstract We consider that Wall et als technical criticisms of our monograph are irrelevant or ill-confused. Their volumetric analytic method is inadequate and their approach to the platform/wells location question conflicts with oil industry views. On the economic aspects, Wall et al avoid the central issue we considered — on how to resolve company-government conflict — and instead take up an issue — on the overall speed of North Sea development — which we did not discuss. We show, moreover, how this criticism of our study is largely unsubstantiated personal opinion and, as such, unworthy of consideration, even if many of Wall et als arguments were not erroneous.

Global and regional energy supplies : recent fictions and fallacies revisited

Review of some fundamental previous misinterpretations of energy sector supply side economics

CONTINUING LONG-TERM HYDROCARBONS' DOMINANCE OF WORLD ENERGY MARKETS: AN ECONOMIC AND SOCIETAL NECESSITY

Near future hydrocarbons scarcity is an unjustified perception. Unfortunately scarcity-based energy policies impacted adversely on the global economy. A realistic approach to the energy component in global development requires reappraisal of both demand and supply. The 1945-1973 annual energy use growth rate was a temporary aberration. A reversal to the global 2.2% p.a. increase in energy demand from 1860-1945 has already occurred and is now the the most likely prospect for long term demand development. On the supply side hydrocarbons remain the preferred energy sources. Reserves additions each year far exceed use. This is important for both industrial and non-OPEC developing countries seeking to increase oil and gas production. This, though difficult to initiate is, once started, a self perpetuating process and is not generally susceptible to international oil price changes. Thus hydrocarbons will continue to supply over 60% of total energy use. Oil prices will remain under downward pressure and gas prices will decline as gas increasingly competes with coal so reducing regional and global pollution problems. Higher cost alternative energies will remain relatively unimportant in total energy supply for at least the next 20 years.

Prospects for non-OPEC oil supply

Abstract The political and economic importance which has been attached to the oil industry in recent decades relates to the rapid increase in the demand for oil over the period from 1950–1980 and to the dominant role played by the politically volatile Middle East in its supply. Although global demand for oil has grown little over the last decade, during which period the role of Middle East supplies has fallen both relatively and absolutely, contemporary conventional wisdom on the future of oil envisages the reestablishment of Middle East supply dominance. This paper will challenge the validity of this view in the context of a realistic evaluation of the longterm demand prospects for the commodity.

The Future of Oil: A Response to the Review Article by Dr. H. V. Dunnington

Dr. Dunnington used the opportunity to review our book, The Future of Oil (Odell and Rosing, 1980) in this journal (Dunnington, 1982) to launch a lengthy and vitriolic attack on work we have done over a number of years on the important questions of oil resources and their exploitation and use. His evident concern severely to criticize our work, and the conclusions emerging from it, appear to indicate that he did, at least, share our view of the importance of the subject. Had it not been for his unfortunate death, after he wrote the review but before its publication, we would have wished to point out the many errors of fact and of interpretation concerning our work, and the unsubstantiated attacks on our integrity that his comments included. Instead we wish to use the opportunity of a rejoinder to present a number of issues of general and continuing importance on the subject of the future of oil. This would seem to be appropriate since, if an eminent petroleum geologist such as Dunnington had so little understanding of our presentation of the issues involved, then it is likely that there are other readers of Energy Exploration and Exploitation who share his difficulties. As with questions of war which are too important to be left to the generals, so with the question of oil resources they are too important to be left exclusively to oil geologists.

The potential for natural gas from the North sea in relation to Western Europe's market for gas by the mid-1980s

The potential role of natural gas in the Western European energy market remains as perplexing now as it has been throughout the last decade. More than eight years ago I published a study, Natural Gas in Western Europe (ODELL, 1969) which drew attention to the availability of a potential for gas production which far exceeded both the plans of operators and the expectations of governments in a situation in which there was no possible element of demand constraint on the potential to supply. The essential element that could then be identified in the European gas market was the existence of a monopoly supplier seeking to achieve the highest possible monopoly rent out of the remarkable phenomenon of the largest non-associated gas field in the non-Communist world: a gasfield, moreover ~ the Groningen field of the Netherlands ~ which lay in a concession allocated in its entirety to a joint enterprise of Shell, Esso and the Dutch government. The parties concerned were not only anxious to earn monopoly profits out of the production and sale of the gas as such, but were also jointly concerned with so restraining the sale of gas that their own interests in the maintenance of the markets for fuel oil and middle distillates would not be adversely affected.