SECURE Project - Security of Energy Considering its Uncertainty, Risk and Economic implications

WP 5.1 Development and application of specific tools for energy security in the Oil Sector (Upstream, transport, refining, distribution)


Objectives

  1. Define the concepts of “normal” level of global oil production and of “physical oil supply shock” as deviation from the former.

  2. Categorize events that may give rise to physical oil supply shocks, including accidents, acts of God, government policies, domestic or international armed conflict, and non-governmental use of violence; affecting production and/or key logistic links.

  3. Build scenarios with probability estimates and analyse the quantitative impact of each on physical oil supplies; define, on this basis, a credible maximum physical supply shock to size remedies.

  4. Discuss relationship between physical supply security and price volatility.

  5. Discuss the extent to which price volatility may be considered as a threat to security (including economic and social stability) of importing countries.

  6. Discuss whether “excessive” price volatility may be quantitatively defined and, if so, evaluate potential remedies to it.

Participants: GRCF, OME, RAMBOLL, PSI, ERIRAS, CNRS 

Description of work

Task 1: Quantitative analysis of EU vulnerability to oil risks

Lead: OME; all WP5.1 participants

Based on the scenarios built in Work Package 4 and other scenarios specifically relevant to the oil sector, this task will address objectives 1-3 above in a quantitative approach based on a model of the global oil industry. Qualitative inputs will come from tasks 2-4 below.


Task 2: Geopolitical Issues

Lead: GRCF; all WP5.1 participants

This task will aim at discussing, categorizing and evaluating the potential impact of geopolitical factors affecting physical oil supplies, which include government policies deliberately or otherwise affecting the level of oil supplies either temporarily or in the longer run; domestic or international armed conflict (civil wars or other domestic disturbances such as protracted and extended strikes; international wars), and non-governmental use of violence (notably terrorist activities, sabotage etc.); affecting production and/or key logistic links (notably pipelines, crude oil separation plants, refineries, loading/unloading facilities, maritime transport and safe passage through international chokepoints or waterways under sovereign control).


Task 3:  Technical Issues

Lead: RAMBOLL; all WP5.1 participants

Technical risks for the oil sector include all aspects of production, transportation, refinery, distribution. They also include the impact of acts of God such as hurricanes, earthquakes etc. The task will aim at estimating the probability and impact of these events to feed into the quantitative analysis of vulnerability in Task 1.

Task 4: Economic/Regulatory Issues

Lead: OME; all WP5.1 participants

Regulatory issues affect almost all aspects of the oil industry. Our discussion will be primarily focussed on international and importing countries’ law and regulations. These include notably norms concerning the maritime transportation of crude oil and products, rules of navigation in international choke points, the regulatory and institutional framework within which international oil markets function and price discovery takes place, rules concerning competition and industrial concentration, rules concerning product specifications and protection of the environment as they affect, inter alia, the localisation of refineries and other downstream installations, working and strategic stocks at all levels. They also include the norms deriving from international or regional compacts such as the IEA, the ECT, the Energy Community and all other relevant agreements in which the EU and/or its member countries are party.

Workpackage 5.1 is carried out under the co-ordination of GRCF
Seventh Framework Programme

This website reflects only the views of the SECURE Consortium and does not represent the opinion of the European Community.
The European Community is not liable for any use that may be made of the information contained herein.