Abstract
This chapter identifies the major geostrategic challenges that have emerged during the last two decades and assesses their implications for the global oil and gas sectors. The historical development of oil prices shows that there have been two major periods of volatility, 1973–1986 and 1998–present, each of which was preceded by two relatively stable periods. The two oil price shocks of the 1970s that were triggered by geopolitical events had long-term effects on global politics and economics. Major oil and gas producers faced the challenges of declining consumption on the demand side, as consumers turned to alternative energies, energy efficiency improved, and non-Organization of Petroleum Exporting Countries (OPEC) oil supplies increased. The crisis in the 2000s, on the other hand, had similar but more intense consequences, deeply altering the structure of oil and gas markets. We identify two major challenges facing the oil and gas industry: energy substitution and resource scarcity. While the substitution of coal and renewables threatens to reduce oil and gas demand, resource scarcity is expected to promote the development of unconventional hydrocarbon resources such as shale oil and gas and heavy oil. Unlike in the 1970s, oil consumption did not decline when oil prices peaked in the 2000s. Moreover, the recent fall in oil and gas prices created a fiscal challenge for conventional producers, such as OPEC countries, and non-OPEC countries like Russia and Mexico, whose governmental budgets depend on export revenues. These fiscal challenges are expected to increase competition between national oil companies (NOCs) and international oil companies (IOCs), necessitating structural change in the governance of the industry. The NOCs are expected to continue dominating the industry and due to the increasing intervention of the corresponding governments, the next decades could experience a rise in state capitalism not only in major oil and gas producing countries but also in the global energy business.
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Notes
- 1.
The numbers correspond to annual averages of the Brent crude oil prices. Hence, although in summer of 2008 oil prices skyrocketed to roughly $147/bbl, the annual average of 2008 was roughly $107/bbl.
- 2.
Unconventional oil and gas is described as “any source of hydrocarbons that requires production technologies significantly different from those used in currently exploited reservoirs” by IEA ( 2013, pp. 29–30). Unconventional oil includes kerogen shale (also referred to as oil shale), oil sands, light tight oil (LTO, and oil derived from coal-to-liquids (CTL) and gas-to-liquids (GTL) technologies; whereas unconventional gas is divided into four broad categories such as tight gas, shale gas, coal-bed methane (CBM), and methane hydrates.
- 3.
Khan (2017, pp. 419–420, and references therein) also gives the details of all manner of conspiracy theories, which launched as a result of sudden collapse in crude oil prices.
- 4.
Since the oldest available data for Turkmenistan in BP (2016) is 2.4 Tcm for the year 1997, the reserve value for this country is taken as zero for 1980.
- 5.
The shale gas reserves have been revised and decreased to 175.6 Tcf from 199.7 Tcf in year-end 2014. In 2015 25.9 Tcf is discovered and 15.2 Tcf is produced.
- 6.
http://beta.fortune.com/global500/ [Accessed 22/07/2016].
- 7.
Private companies are sometimes called privately owned oil companies (POCs).
- 8.
Also called state-owned enterprises (SOEs)
- 9.
According to Hoyos (2007), “Seven Sisters” is a term coined in the 1950s by businessman Enrico Mattei, then head of the Italian state oil company ENİ and “Seven Brothers” refer to the recently emerged state-owned oil companies in emerging-market economies, such as Saudi Aramco (Saudi Arabia), China National Petroleum Corporation (China), Gazprom (Russia), National Iranian Oil Company (Iran), Petrobras (Brazil), PDVSA (Venezuela), and Petronas (Malaysia).
- 10.
http://beta.fortune.com/global500/ [Accessed 22/07/2016].
- 11.
http://top250.platts.com/Top250Rankings [Accessed 22/07/2016].
- 12.
- 13.
https://molgroup.info/en/ [Accessed 22/07/2016].
- 14.
- 15.
New nationalism or neo-nationalism, which was first used by Gingrich and Banks (2006, p. 5) to define “the nationalism of the current phase of transnational and global development,” which rose especially in Western Europe and United States after 2010. Some authors consider it as “nationalist resistance to global liberalism” (Stephens 2016).
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Acknowledgement
The authors would also like to thank Dr. John Bowlus, Visiting Scientist, Kadir Has University, Center for Energy and Sustainable Development (CESD), and Duygu Durmaz, Strategy Development and Research Center, for critically editing the manuscript.
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Ediger, V.Ş., Berk, I. (2018). Geostrategic Challenges in the Oil and Gas Sectors. In: Dorsman, A., Ediger, V., Karan, M. (eds) Energy Economy, Finance and Geostrategy. Springer, Cham. https://doi.org/10.1007/978-3-319-76867-0_9
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