HOME / RESEARCH / RCEM WORKING PAPERS

RCEM Working Papers

Search for papers, journals, articles, books and reports
Editorial Committee
Editorial Committee
 
Dr Patrick GOUGEON
Director, RCEM
Emeritus Professor, ESCP Europe Business School, France
 

Editorial Committee
 
Dr Kostas ANDRIOSOPOULOS
Executive Director, RCEM
Associate Professor, ESCP Europe Business School, UK
 

Editorial Assistant
 
Dr Georgia MAKRIDOU
Postdoctoral Research Associate
ESCP Europe Business School, UK
 

E: gmakridou@escpeurope.eu
T: +44 (0)20 7443 8971

The Research Centre for Energy Management periodically publishes working papers involving research by the members of the Laboratory and joint projects with external researchers.

The Working Paper Series provides researchers with the opportunity to make the results of new and continuing work available in a timely fashion. Many of the working papers are draft stages of articles that will eventually be published in international scientific journals. 

2017
Is US President Donald Trump Trying to Provoke a Showdown with China?

The great rivalry between the United States and China will shape the 21st century. It is a truth universally acknowledged that a great power will never voluntarily surrender pride of place to a challenger. The United States is the pre-eminent great power. China is now its challenger. 

 
Dr Mamdouh G. Salameh,
International Oil Economist
2015
Is the United States Really the World’s Top Crude Oil Producer or is this a Figment of BP’s Imagination?

The BP Statistical Review of World Energy, the International Energy Agency (IEA) and the Financial Times are three of a kind. The three of them represent the major consumers of oil (particularly western consumers) and, therefore, have a tendency to exaggerate global oil reserves, production and 

 
Dr Mamdouh G. Salameh,
International Oil Economist
Has the Petrodollar Had Its Day?

The petrodollar came into existence in 1973 in the wake of the collapse of the international gold standard which was created in the aftermath of World War II under the Bretton Woods agreements. These agreements also established the US dollar as the reserve currency of the world. The Nixon Administration understood that the collapse of the gold standard system would cause a decline in the global demand for the US dollar.  Maintaining demand for the US dollar was vital for the United States’ economy. So the United States under Nixon struck a deal in 1973 with Saudi Arabia. Under the terms of the deal, the Saudis would agree to price all of their oil exports in US dollars exclusively and be open to investing their surplus oil proceeds in US debt securities. In return, the United States offered weapons and protection of Saudi oilfields from neighbouring countries including Israel. For the Americans, the petrodollar increases demand for the dollar and also for US debt securities and allows the US to buy oil with a currency it can print at will. In 1975, all of the OPEC nations agreed to follow suit. Maintaining the petrodollar is America’s primary goal. Everything else is secondary. This paper will deal with the actions, incentives, and related consequences that the United States has created through its attempts to maintain global hegemony through the petrodollar. It will examine the latest challenges facing the petrodollar and how the petrodollar system influences the United States’ foreign policy. The paper will conclude that the petrodollar has had its day and that it will be a matter of time before it becomes redundant with huge repercussions for the US economy and the global economy. 

 
Dr Mamdouh G. Salameh,
International Oil Economist
Could Solar-powered Water Desalination Plants Be the Answer to Drought WorldWide

For years, experts and pundits have predicted that conflicts will increase over an ever scarcer and more vulnerable commodity: water. The fear has been that as populations grow and development spreads, vicious battles will erupt between water-rich and water-poor nations, particularly in major river basins where upstream nations control the flow of water to those downstream. To the doomsayers, global warming will only make those battles worse by decreasing rainfall and increasing evaporation in critical areas.

The argument has certain logic and examples abound. Take the case of the Nile. Three days after the fall of Egypt's President Husni Mubarak, the then Ethiopian Prime Minister, Meles Zenawi, announced the start of the construction of a dam on the Nile's main tributary. The Grand Ethiopian Renaissance Dam will be the first Ethiopia has built on the river, despite more than three-quarters of the Nile's flow falling as rain within the highlands. The move is a direct challenge to downstream Egypt's 'hydro-hegemony', which had ensured that it and Sudan enjoy essentially exclusive use of the river, thanks to favourable colonial and post-colonial agreements.

 
Dr Mamdouh G. Salameh,
International Oil Economist
2014
Where is the Crude Oil Price Headed?

Crude oil is one of the hardest markets to predict because there are so many conflicting crosscurrents that affect its price including supply and demand, the health of the global economy, geopolitics and the global monetary and regulatory environment. Whenever a conflict occurs in an oil-producing 

 
Dr Mamdouh G. Salameh,
International Oil Economist
The European Union, Ukraine and Russian gas

Could the crisis in Ukraine threaten the security of Europe’s energy supply?

The European Union imports significant quantities of oil and gas from Russia. The EU also imports oil and gas from the Central Asian republics, in particular Kazakhstan (oil) and Turkmenistan (gas), which also come via Russ

 
Dr Jean-Pierre Favennec,
Consultant, WD Cooperation et Fair Links Professor, French Institute of Petroleum (IFP)
Turning the Gaze towards Asia: Russia’s Grand Strategy to Neutralize Western Sanctions

Russia’s intrusion into the Ukraine in February 2014 and the ensuing annexation of the Crimea have been prompted by energy and geopolitical factors. The energy factor  is that 50% of Russia’s gas and oil supplies to the European Union (EU) are piped through the Ukraine. 

 
Dr Mamdouh G. Salameh,
International Oil Economist
Oil Wars

The 20th century was truly the century of oil whilst the 21st century would be the century of peak oil and the resulting oil wars. No other commodity has been so intimately intertwined with national strategies and global politics and power as oil. 

 
Dr Mamdouh G. Salameh,
International Oil Economist
An overview of next-generation of fuels for land transportation

When fuels as versatile as petroleum products are in transports, it is not surprising that several alternative fuels are needed to substitute for different vehicle types and usages. Petroleum products' qualities are their unsurpassed energy and volume density and their ease of handling. 

 
Grossmann M.
Natural Gas for Vehicles - drivers behind the success of natural gas in transports

At a time when, in the West, people drive fewer miles and the number of gasoline and diesel retail stations is on the decrease, Compressed Natural Gas (CNG) is bucking the trend. The original justification for using CNG in transports despite its greater bulk is its low cost, on an energy basis. Oil 

 
Grossmann M.
Major Geopolitical Developments that could Impact on Oil Supplies from the Arab Gulf Region

Four major geopolitical developments have the potential to impact on the flow of oil supplies from the Arab Gulf region: Iran's nuclear programme, the US shale oil revolution, the natural gas discoveries in the eastern Mediterranean and the steep-rising domestic oil consumption among the Arab Gulf States and a lack of a meaningful diversification of their economies. Whilst Iran's nuclear programme with the inherent risk of war in the Gulf could have direct and serious impact on the flow of oil from the region and the price of oil, its adverse impact would be short-lived. On the other hand, both the US shale oil revolution and the eastern Mediterranean gas discoveries would virtually have no impact. However, the real threat to oil supplies from the Gulf region in the long term actually comes from the steeply-rising domestic oil consumption among the Gulf States and a lack of meaningful diversification of their economies. This means they will have to cut their domestic oil consumption drastically or replace oil with nuclear power and solar energy for electricity-generation and water desalination. Failing to do either would result in their relegation to minor crude oil exporters by 2025 or ceasing to remain oil exporters by 2032 altogether.

 
Dr Mamdouh G. Salameh,
International Oil Economist
Smart Energy Technologies for Higher Energy Efficiency

Energy efficiency is high on the agenda of policy makers because it contributes to the achievements of the three main objectives of energy policy: security, affordability and sustainability. In this paper the focus is placed on efficiency gains arising from the adoption of smart energy technologies by domestic and small corporate users, including smart metering and "beyond the meter" management systems, home area networks and devices. Though the expected benefits are important a lot remains to be done. Condition for smart energy systems to be adopted and barriers to their adoption are discussed. Considering the dominant suspicious attitude toward utilities it appears that a trustworthy independent business entity, building a proper relation between users and technology providers, is needed to assure the deployment of smart energy technologies across the population concerned. 

 
Dr Patrick Gougeon,
Director, RCEM Emeritus Professor, ESCP Europe Business School, France
2013
Acceptability of new Oil & Gas projects and Reputation Management. A major challenge for the International Oil Companies

This paper details a methodology to manage the long term Reputation of an International Oil Company with respect to key Stakeholders. Reputation is defined with three major components: responsibility (respect HSE rules, national laws, local content target, social responsibility), reliability (deliver project on time, schedule and quality) and trustability (be honest and transparent with stakeholders).

 
Charlez, Ph. A.
Where does energy come in the global economy?

Growth has been the driving force for most countries and organizations. Global economy has grown over the last thirty years. Although the growth rate varied, but overall the global economy has got a rate of over 2 % as measured by GNP. During the last ten years we are seeing a new phenomenon; the emerging markets have grown at a much faster rate. The balance of global economy has radically changed. But where does energy come in? The growth means demand for energy. Energy production has to grow to sustain the growth.

 
Dr Jyoti Gupta,
Emeritus Professor ESCP Europe Business School, UK
Impact of US Shale Oil Revolution on the Global Oil Market, the Price of Oil & Peak Oil

Reports about the US shale oil boom being a game changer have proliferated after the November 2012's prediction by the Paris-based International Energy Agency (IEA) that the United States will overtake Saudi Arabia and Russia to become the world's biggest oil producer by 2020 and energy self-sufficient by 2030. While such rosy predictions play well to the IEA's audience, which is largely American, they don't stand up to scrutiny. Still, it is clear that US shale resources might at some point play some role in non-OPEC supply prospects.

The paper will argue that US shale oil production would hardly make a dent in the global oil supplies as it would largely offset the decline in US conventional oil production. It will also argue that the US would never be able to overtake Saudi Arabia or Russia in oil production and would continue to be dependent on oil imports for the foreseeable future. The paper will conclude that the shale oil boom in the United States would not be easy to replicate in the rest of the world nor would it invalidate the peak oil concept.

 
Dr Mamdouh G. Salameh,
International Oil Economist
Estimation of Non-Parametric Regression Models: Production Profiles of Crude Oil

In many practical statistical situations, it is desirable to restrict the flexibility of nonparametric regression models to accommodate prior information. We propose an estimator for regression models with a smoothness penalty and constraints imposed by the nature of the problem. Our estimator is easy to implement and has an explicit algebraic structure. Alternative or additional constraints can be readily applied. We present production profiles of crude oil to demonstrate possible uses of the proposed estimator.

Keywords

non-parametric regression, smoothing penalties

 
Voudouris V.
 
Stasinopoulos M.
 
Eilers P.
 
Rigby R.
Risk Assessment for the Shale Gas industry in Europe

This article presents the main conclusions of a survey carried out as part of a research project on "risk management in the energy industry" sponsored by KPMG/ESCP Europe Chair Risk Strategy and Performance.

Abstract

The success of shale gas in the US has prompted companies to examine the possibilities of replicating the shale gas production and market in Europe. But in doing so they face various difficulties including issues such as the different geology, the density of European population, the legal, fiscal and land-use particularities and the service industry for onshore. To add to the difficulties, there is considerable environmental skepticism and opposition from lobby groups and media regarding shale gas drilling in Europe. Hence, a comprehensive assessment of risks of shale gas development in Europe is helpful to prevent harms as well as to take into consideration investment and growth opportunities. In this paper we outline six major clusters of risks associated with developing the shale gas industry in Europe: social, environmental, economic, regulatory, geopolitical, and technological. The outcome of this paper is extremely useful to companies' leaders willing to invest in shale gas in some European countries. This dimension of contemplating the risks associated with shale gas development, from the companies' point of view, has received less attention so far and provides opportunities for further research, particularly from management scholars.

Index Terms-- Shale gas, energy security, energy policy, energy market.

 
Lucie Roux,
Senior European Gas Specialist Platts
 
James B. Seaton Iii,
Executive, Oil & Gas/ Energy Houston Technology Center
 
Dr Kostas Andriosopoulos,
Executive Director, RCEM Associate Professor, ESCP Europe Business School, UK
 
Dr Patrick Gougeon,
Director, RCEM Emeritus Professor, ESCP Europe Business School, France
China: The Ultimate Decider on Crude Oil Prices

The single most important driver of shifting dynamics in world oil markets is China. It alone will continue to account for most of the world demand growth throughout this decade and probably the next. In September 2013, China's net oil imports are projected to exceed those of the United States on a monthly basis and by 2014 on an annual basis, making it the largest importer of oil in the world. In order to satisfy its thirst for oil, China has aggressively used its financial reserves to offer billions in development credit, underwritten with oil, especially in Africa, Latin America, and even Russia. From energy security point of view, one of the biggest threats to maintaining a stable oil price in the long run will be satisfying growth in Chinese demand. That is what is putting pressure on prices. An optimistic oil price could range from $100 to $130 a barrel. However, this paper will argue that in a supply-constrained world and with OPEC's spare capacity continuing to shrink, oil is unlikely to spend much time hovering around that price range. It will suggest that prices will continue to spike over the next five years occasionally reaching $200/barrel in order to keep oil demand in check. The paper will also argue that the global economy can at most sustain oil prices that represent just about 6% of GDP translating into $137 a barrel of Brent crude by 2015, $156 by 2020, and $241 by 2035. It will conclude that China's steep-rising oil demand, its search for new sources of oil and also its acquiring of oil assets around the world will ultimately give it the final say on the oil price globally.

Key Words: China, price, growth, energy security, superpower. 

 
Dr Mamdouh G. Salameh,
International Oil Economist
2012
An Integrated Approach for Energy Efficiency Analysis in European Union Countries

This paper evaluates the energy efficiency of EU countries over the period 2000-2010. At the first stage, Data Envelopment Analysis (DEA) is employed, combining multiple energy consumption data, economic outputs, structural indicators, and environmental factors. The efficiency estimates obtained from the analysis are evaluated in a second stage through a multiple criteria decision aiding methodology (MCDA). The proposed non-parametric approach combining DEA with MCDA enables the modeling of the problem in an integrated manner, providing not only energy efficiency estimates, but also supporting the analysis of the main contributing factors, as well as the development of a benchmarking model for energy efficiency evaluation in country level.

 
Dr Kostas Andriosopoulos,
Executive Director, RCEM Associate Professor, ESCP Europe Business School, UK
 
Dr Georgia Makridou,
Postdoctoral Research Associate ESCP Europe Business School, UK
 
Dr Michael Doumpos,
Co-Director of Research, Financial Engineering Laboratory Associate Professor, Technical University of Crete, Greece
 
Dr Constantin Zopounidis,
Director, Financial Engineering Laboratory Professor, Technical University of Crete, Greece
Improving Carbon Efficiency: is Economic Growth so Favourable?

In this paper we present an empirical study to verify the assertion of a negative impact of economic growth on carbon efficiency using a cross country analysis. More precisely we are concerned with the relation between past growth and CO2 emissions, assuming that rapid growth in the past may explain lower carbon efficiency today. The central idea tested is that hasty growth is likely to slow down the improvement of energy and carbon efficiency. In other words, using an ordinary least square multifactor model to explain carbon intensity, we verify that the coefficient for an exogenous variable measuring the average past growth rate (apgr) for each country in our sample, is significantly positive.

 
Dr Patrick Gougeon,
Director, RCEM Emeritus Professor, ESCP Europe Business School, France
 
Dr Kostas Andriosopoulos,
Executive Director, RCEM Associate Professor, ESCP Europe Business School, UK
 
Dr Othman Cole,
Assistant Professor ESCP Europe Business School, UK
If Current Trends Continue, Saudi Arabia Could Become an Oil Importer by 2025

The flame of oil is not eternal. The horizon carries all signs of peak oil.Saudi Arabia, the world's biggest crude oil producer and exporter risks becoming an oil importer probably by 2025 if current economic, demographic and security trends continue into the future. Saudi oil production peaked in 2005 and has been in steady decline since then with domestic oil demand rising at an alarming rate and accounting for 37% of crude production in 2012. As a result, Saudi crude exports have already declined by 32% between 2005 and 2012 and are projected to decline further by 9% by 2015. Population growth and robust economic development and also fuel subsidies drive that demand.

By 2025 Saudi oil consumption is projected to exceed production by 610,000 barrels a day (b/d) and Saudi Arabia would have ceased, to all intents and purposes, to remain a net oil exporter. This paper will argue forcefully that even a drastic cut, if not elimination, of subsidies altogether and a determined shift from oil use in power generation and desalination to nuclear and renewable energy sources starting immediately will not delay the inevitable day when Saudi Arabia will become a net oil importer. The paper will also assess the implications of this eventuality for the global economy, energy security and the price of oil

 
Dr Mamdouh G. Salameh,
International Oil Economist
China Eyes Arctic Access & Resources

Within the next two decades, we could witness a strategic shift in the centre of gravity on oil and geopolitics from the Middle East to the Arctic prompted by global competition for new crude oil reserves and shortened sea lanes across the Arctic. As a result, the Arctic could become another flashpoint in global power politics. Arctic states should expect future geopolitical challenges from non-Arctic states particularly China. Moreover, changes in the Arctic will further increase territorial claims and border disputes betweenArcticand non-Arctic states.These issues are primarily related to free passage and resource extraction rights. Though China is not an Arctic littoral state, itargues that the Arctic belongs to all people around the world as no nation has sovereignty over it and that the region is part of the common heritage of mankind. And with one fifth of the world's population,China must have access to Arctic natural resources and its shortened sea routes. China's position clearly contrasts with that of the five Arctic littoral countries, namely, the United States, Norway, Denmark,Canada and Russia. This paper will argue that China and other nations of the world have entitlement to the riches of the Arctic given the fast-depleting global oil reserves and the fact that, under international law, no country currently owns the North Pole or the region of the Arctic Ocean surrounding it. This paper will also argue that Arctic issues are becoming inter-regional and that a balanced approach towards common interests should be adopted so as to pre-empt future conflict.

 
Dr Mamdouh G. Salameh,
International Oil Economist
Brazil’s Pre-salt Oil Potential: The Hype & the Reality

There is a great hype about Brazil's pre-salt oil potential and the impact it will eventually have on the global oil market. Some sources say that it could vault Brazil to seventh place in the world rankings in terms of proven oil reserves behind Saudi Arabia, Venezuela, Iran, Iraq, Kuwait and United Arab Emirates. Others claim that Brazil could emerge as a major oil producer and exporter and that will certainly change the balance of oil distribution in the world with very important geopolitical implications for the United States' dependence on Middle East oil. Others, in contrast, see Brazil as an overstated high-risk oil province whose pre-salt oil is extremely challenging and very costly to produce. The reality, as always, is somewhere in between. Even with Brazil's growing oil reserves and accelerating production, the country could never become a major oil exporter as all the incremental oil production will be needed to fuel the country's economic growth. Brazil could only aspire to remain self-sufficient if its current economic growth continues its surge into the future. While Brazil's oil wealth will certainly accelerate the country's ascent into the top ranks of the world's economic powers, it will hardly make a dent in the global oil market and the price of oil.

 
Dr Mamdouh G. Salameh,
International Oil Economist
2011
Risk management in the energy markets and value at risk modelling: a hybrid approach

This paper proposes a set of VaR models appropriate to capture the dynamics of energy prices and subsequently quantify energy price risk by calculating VaR and ES measures. Amongst the competing VaR methodologies evaluated in this paper, besides the commonly used benchmark models, a MC simulation approach and a Hybrid MC with Historical Simulation approach, both assuming various processes for the underlying spot prices, are also being employed. All VaR models are empirically tested on eight spot energy commodities that trade futures contracts on NYMEX and the Spot Energy Index. A two-stage evaluation and selection process is applied, combining statistical and economicmeasures, to choose amongst the competing VaR models. Finally, both long and short trading positions are considered as it is extremely important for energy traders and risk managers to be able to capture efficiently the characteristics of both tails of the distributions.

 
Dr Kostas Andriosopoulos,
Executive Director, RCEM Associate Professor, ESCP Europe Business School, UK
 
Dr Nikos Nomikos,
Director, MSc in Shipping, Trade and Finance Professor, Cass Business School, City University London, UK
Oil Scenarios for Long-Term Planning: Royal Dutch Shell and Generative Explanation, 1960-2010

Most executives know that overarching paints of plausible futures will profoundly affect the competitiveness and survival of their organisation. Initially from the perspective of Shell, this article discuses oil scenarios and their relevance for upstream investments. Scenarios are then incorporated into generative explanation and its principal instrument, namely agent-based computational laboratories, as the new standard of explanation of the past and the present and the new way to structure the uncertainties of the future. The key concept is that the future should not be regarded as 'complicated' but as 'complex', in that there are uncertainties about the driving forces that generate unanticipated futures, which cannot be explored analytically. 

 
Voudouris V.
 
Prof. Michael Jefferson,
Member, International Advisory Board, Energy Policy journal Affiliate Professor, ESCP Europe Business School, UK
2010
A comparative analysis of the major European oil and gas companies

The major premises of the resource-based view of the firm (RBV) are that firms are bundles of idiosyncratic resources and capabilities and that firms with valuable, rare, inimitable and nonsubstitutable resources and capabilities outperform in their industries (Barney, 2001; Dierickx and Cool, 1989; Wernerfelt, 1984, 1995). Drawing on Barney (1991), Miller and Shamsie (1996) define property-based resources as appropriable resources controlled by the corporation through property rights, and in contrast, knowledge-based resources are those "protected from imitation not by property rights but by knowledge barriers", and often include technical, creative or collaborative skills (1996: 522).

This paper uses the resource-based view framework to conduct a comparative analysis of the major European oil and gas companies. This study will look at six companies namely BP, Eni, Repsol, Shell, Statoil, and Total, and identify which resources are drivers and determinants of their competitive advantage and financial performance. Drawing on the framework of property-based and knowledge-based resources, the paper will analyse six resource categories of oil and gas companies namely annual capital expenditure, annual changes in liquids and gas reserves, annual replacement ratios, refinery distillation capacity and number of service stations, number of employees and net income per employee, and annual levels of drilling activity in exploration and development with a disaggregation of successful and unsuccessful wells drilled.

 
Dr Othman Cole,
Assistant Professor ESCP Europe Business School, UK
The ACEGES 1.0 Documentation: Simulated Scenarios of Conventional Oil Production

The ACEGES (Agent-based Computational Economics of the Global Energy System) 1.0 model is an agent-based model of conventional oil production for 93 countries. The model accounts for four key uncertainties, namely Estimated Ultimate Recovery (EUR), estimated growth in oil demand, estimated growth in oil production and assumed peak/decline point. This documentation provides an overview of the ACEGES model capabilities and an example of how it can be used for long-term (discrete and continuous) scenarios of conventional oil production.

Keywords:

Oil production, ACEGES, agent-based model, energy scenarios, oil forecasting

 
Voudouris V.
 
Di Maio C.
2009
Petroleum resource management and economic development in sub-Saharan Africa - the lessons drawn from Nigeria

A central goal that has eluded most countries in sub-Saharan Africa is to effectively manage their natural resources, develop diversified and prosperous economies, and as a result improve the standard of living of their citizens. This paper draws from the framework of diversification and economic growth, resource-based industrialization, resource curse hypothesis, ownership and control, and political structure and economic choices to examine how Nigeria and Angola managed their oil and gas resources from th 1970s and the outcome of their choices. The findings show that both countries were poorly equipped to diversify their economies and failed to achieve economic prosperity for their citizens. The contribution that this paper makes is to clearly outline and discuss key lessons that emerging oil producers in sub-Saharan Africa can learn from Nigeria and Angola for them to successfully manage their hydrocarbon resources.

 
Dr Othman Cole,
Assistant Professor ESCP Europe Business School, UK

Research Categories

Subscribe to the RCEM Newsletter
Subscribe