Not-So-Gentle Reminder

The past few months have given us reason to pause and think about how governments work as well as how we prepare for and deal with natural disasters.

We’ve watched as the citizens of nations across North Africa and the Middle East have taken to the streets to demand a change in the way their countries are run, calling for an end to corrupt, tyrannical leadership – so far, with mixed results.

We’ve also witnessed – almost in real-time – a devastating earthquake off the shores of Japan followed by an overwhelmingly destructive tsunami.

These upheavals have had us glued to the news reports, feeling a wide range of emotions from admiration for the protestors to compassion for the victims of disaster. Moreover, if you’re someone who’s concerned with energy security, these events are troubling.

Some five years ago, at a time when a barrel oil was in the $60 to $80 range, we reported how oil prices could rise above $260 if a number of conditions were to occur, including an upheaval that would stop the flow of oil from one or more of the largest oil-producing countries of the Middle East.

Once oil peaked at over $140 in 2008, the $260 scenario didn’t seem so dramatic. If demand and market forces could take oil to $140, perhaps the $260 of scenario was only a conservative estimate. The market has been skittish over the recent Middle East’s unrest, and we’ve seen significant increases in the price of oil price, especially for North Sea Brent, of about $30 in a very short time.

It’s far too early to tell exactly how events in the Middle East will play out in the coming weeks, months or even years. But considering the results thus far in Tunisia and Egypt, as well as the probable outcome in Libya, we know that significant change is underway for the region.

Another aspect of the world energy mix has been threatened by the on-going disaster at Japan’s Fukushima Daiichi Nuclear Power Plant. Following the one-two punch of the earthquake and tsunami, the plant’s failure has put nuclear power under a powerful spotlight.

Many government regulators are taking a hard look at their nuclear programmes. Nuclear power accounts for nearly 15 percent of the globe’s electricity production. And as the world has looked for low-carbon solutions to power generation, nuclear energy has been seen as one alternative to burning coal. But now a future expansion of nuclear power generation may be in doubt.

All of this brings us back to acknowledging that it oil and gas are, and will be for some time to come, what power the world. And we can expect that both human interaction and the forces of nature will both affect distribution and the markets.

Demand for oil has not been an issue for the oil and gas industry on the Norwegian Continental Shelf. And although gas production has grown, the declining production rate for oil on the NCS has had many worried.

But, there has been good news, such as Lundin Norway’s news last September of a significant find in the Avaldsnes prospect on the Norwegian side of the North Sea. Estimated to contain recoverable resources of between 100 to 400 million barrels of oil equivalent, this find shows that even the most mature parts of the NCS can surprise us.

And Statoil’s recent news from the Barents Sea has helped lift spirits here in Norway. The newly found and newly renamed Sverdrup field (the field formerly known as Skrugard) has been declared the most important finds of the last decade. Lying some 100 kilometres north of the Snøhvit gas field, the find estimated to be 150 to 200 million barrels – with a potential for double that amount – raises hopes for new bounty from the far North.