2013 Think Corner

North, South, Texas, and the Rest

CEE 2013 Annual Meeting: Houston Branch - Federal Reserve Bank of Dallas Conference Center
December 4-5, 2013

CEE's annual meeting for 2013 focused on North American energy issues as a platform for linking past CEE research in this arena with new questions and debates. The conference brought together leading and provocative viewpoints on the Canadian, Mexican, and U.S. energy situations, as well as perspectives from abroad as U.S. energy output and trade impact global flows and trigger rethinking about possible outcomes. CEE activities and publications during 2014 will reflect many of the themes introduced during the December conference, ranging from economic impacts of U.S. and North American energy production and utilization to perspectives on infrastructure advancement and continental and global trade flows.

BEG/CEE Personnel for Meeting:
Michelle Michot Foss, Chief Energy Economist/Program Manager, CEE 
Gürcan Gülen, Senior Energy Economist, Research Associate/Research Scientist 
Xinya Zhang, Post-doctoral Researcher 
Deniese Palmer- Huggins, Senior Energy Advisor 
Miranda Ferrell Wainberg, Senior Energy Advisor 
Kristin Batres, Administrative Assistant/Coordinator 
Isis Gaber, UT Post-baccalaureate Researcher 
Eric Potter, BEG Associate Director – Energy 
Ian Duncan, BEG, Scientist-Earth Systems and Environment

CEE Advisory Councils: 
Vicky Bailey, BHMM 
Hal Chappelle, Alta Mesa 
Les Deman, Consultant 
Juan Eibenschutz, CNSNS-Mexico 
Herman Franssen, Energy Intelligence Group 
Bill Gilmer, University of Houston 
Luis Giusti, Center for Strategic and International Studies 
Ed Kelly, IHS Energy 
Dave Knapp, EIG 
Don Knop, Consultant 
Ernesto Marcos, Marcos y Asociados 
Rae McQuade, North American Energy Standards Board 
Ed Morse, Citibank 
Bob Skinner, Canadian School for Energy & Environment 
Bruce Stram, Element Markets 
Terence Thorn, Consultant

We thank our donors:

A Special Think Day: Mid-Year Review 
Building Out the New Oil, Gas, and Power Value Chains

Getting to Specifics from the Big Picture: A Research Forum for Energy Futures and Strategies
June 7, 2013

Michelle Michot Foss, Ph.D.
Chief Energy Economist and Head

Forum Agenda

Monitoring U.S./Global Oil and Gas: National Oil Company Upstream Cost Structure and Implications of Lower Oil Prices
Michelle M. Foss, Miranda Wainberg - January 2013

Do the shifting views on U.S. oil and gas supply and "energy independence" make sense given the prevailing cost structure embedded in the global oil industry? What are the constraints and reality checks? On the optimistic side, what are some "paradigm busters" that could accelerate a re-shaping of the global cost curve? And how would such an eventuality – abundant, lower cost, cheaper oil – sit with the very strong, almost cultural, push away from fossil fuels that has been unfolding over the past decades? A dramatic scale up in liquid hydrocarbon supply supported by an historic reduction in cost and with distinct benefits in lower price and energy affordability would challenge core assumptions ranging from climate to the notions of "peak oil". These are provocative ideas, certainly, and may have some real probability (as yet undefined) of being realized. Such a major shift in reality and strong departure from established norms would pose direct consequences to a prominent segment of the global oil and gas industry – national oil companies (NOCs). NOCs, either wholly- or partially-owned by their sovereign governments, command the larger share of global oil proved reserves (about two-thirds). They are the gatekeepers to reserves and resources that are converted to production to meet daily global needs. In this research note, we present early results from our updated benchmarking of NOC costs for a limited sample of the best reporting NOCs. Our bottom line – an average, weighted breakeven cost of $83-100 per barrel for NOCs in this sample – suggests either substantial adjustments ahead for these organizations and their governments or a reality check on what can be achieved and expected for global oil supply and prices going forward.

A Primer on The Resource Adequacy Debate in Texas
Gürcan Gülen - January 2013

What is the concern? Texas population and economy has been growing fast, fueling significant growth in demand for electricity. Some are concerned about the ability of the competitive electricity market to provide sufficient incentives for investors to build enough generation capacity and/or consumers to reduce consumption when needed (during hot summer afternoons) so that the Texas economy have enough electricity to continue to grow at a healthy pace. The extremely hot summer of 2011 enhanced these concerns; on August 3, 2011 when a new record for electricity consumption in Texas was set, the grid operator, ERCOT, had to cut power to large industrial users, most of whom volunteered to provide such demand response services in exchange for some compensation, and procured emergency power from neighboring grids. Otherwise, operations were mostly normal and in summer of 2012, there were no similar extreme conditions.

In this primer, we provide easy-to-understand answers to most commonly asked questions and potential points of confusion. As the debates are ongoing, we look forward to feedback and updates to incorporate into this primer.