Text Box: Aberdeen Centre for Research in Energy Economics and Finance The Aberdeen Centre for Research in Energy Economics and Finance (ACREEF) was launched on 30 July 2009 by Finance Minister John Swinney (Mr Swinney’s speech) ACREEF is part of the University of Aberdeen's Business School, which has a long-established history of research in the area of Energy Economics, and brings together experts in the field and provide a focus for the implementation of high quality research. It draws on the strengths of academics within the school, including Professor Alex Kemp the Centre’s Director, who has led the research effort in Petroleum Economics, advised oil companies, several governments and the World Bank on petroleum taxation and licensing and other policy issues. He was awarded the OBE in 2006 for his services to the oil and gas industry and has recently completed The Official History of North Sea Oil and Gas, which will be published soon. The Aims and Objectives of the Centre To provide a focus for the identification and implementation of high quality research in the areas of energy economics and finance To make a substantive contribution both to academic understanding and to policy debate in energy economics in the UK and worldwide To develop and evolve a coherent research agenda and create a framework for the acquisition of funding to undertake and expand the research agenda To provide a structure within which interested individuals and groups can provide mutual support in advancing their research and create a structure within which young researchers can obtain help and advice To create a structure conducive to postgraduate study in the Business School To provide a link with other scholars, commercial companies and governments in both the UK and the rest of the world To develop UK and international links with a view to collaborative research and the exchange of personnel What contribution will the new Centre make? The issues surrounding the way energy markets work, are central to many current questions concerning the environment, sustainability and security of energy supplies. ACREEF is well placed to carry forward many of the important research agendas related to these questions. The core work in Petroleum Economics addresses important questions through financial and econometric modelling including: (1) the design of royalty/taxation/profit sharing terms to collect an appropriate share of economic rents to the state, (2) determination of the optimal depletion rates of oil and gas in petroleum producing countries, (3) forecasting activity levels in a petroleum province, (4) appropriate licensing and taxation arrangements to facilitate maximum economic recovery, (5) economics of decommissioning (including financial liability), (6) security of UK oil and gas supplies including appropriate policies to enhance such security, (7) effects of different investment hurdle criteria on activity levels, and (8) analysis of oil/gas production decline rates. Comparative studies of petroleum taxation and licensing policies in the North Sea and other petroleum jurisdictions will be undertaken, reflecting the proposed increasingly international focus of ACREEF. Some of these will be conducted in partnership with AUPEC the successful University spin-out company whose operations are mostly overseas. Work on several aspects of the economics of CO2 capture and storage will progress, including least-cost modelling of the different capture technologies using dynamic linear programming, and the design of a least-cost CO2 transportation network in the UK and UK Continental Shelf. Work will be undertaken on (1) the economics of enhanced oil recovery (EOR) from CO2 flooding and (2) the design of an integrated financial model of the whole chain of CO2 capture, transportation, injection, EOR, and permanent storage. A major element of continuing work relates to the appropriate incentives for encouraging CO2 capture and storage, and the appropriate regulatory framework for facilitating the change of use of part of the UKCS from oil/gas production to CO2 (and other gas) storage. An important current project is the evaluation of the effects of the proposal to oblige oil companies in the North Sea to purchase CO2 allowances at auction. The research examines the effects on cessation of production dates and investment in new fields. It is proposed to undertake research on the whole UK oil and gas cluster to better understand its dynamics and future market prospects including exports and diversification. All these issues are of international importance, and the intention is to further develop international contacts to enhance both the spread and quality of the research. The existence of the Centre will greatly enhance the prospects of making collaborative agreements with both positive funding and research quality benefits. Professor Kemp already has many contacts in important energy producing countries which will facilitate collaborative agreements. The initial configuration of the Centre spans a number of academic areas of the Business School. The anticipation is that it will have a broad base within the School, which will add to its strength. Context and Core Staff The University of Aberdeen has a long-established history of research in the area of Energy Economics. Professor Alex Kemp has led the research effort and has published widely in the area of Petroleum Economics over many years. He has advised oil companies, several governments and the World Bank in the areas of petroleum taxation and licensing, and was awarded the OBE in 2006 for his services to the oil and gas industry. He has recently completed The Official History of North Sea Oil and Gas which will be published soon. In recent years a considerable amount of research has also been undertaken on the economics of CO2 capture, transportation, EOR and storage. Other important academics in the Business School also bring key academic strengths to the Centre: in particular Professor Joe Swierzbinski’s expertise in auction theory and related subjects has opened extra dimensions to the proposed work of the Centre. His expertise in both financial and environmental economics complements the existing expertise in Petroleum Economics. Dr Julian Williams has particular expertise in quantitative time series modelling and structural models of complex systems. Presently the group is comprised of the following: Professor Alex Kemp - Petroleum Economics Professor Joe Swierzbinski – Environmental Economics / Auction Systems / Financial Economics Dr Sola Kasim - Econometric Analysis Applied to Energy Mrs Linda Stephen - Petroleum Economics Professor Euan Phimister - Natural Resource Economics Dr Julian Williams - Financial Econometrics including Oil Price Behaviour Dr Ian McAvinchey - Macroeconomic Analysis of Climate Change Ms Jana Schultz - Petroleum Economics Ms Maria Vahrusheva - Petroleum Economics A new post at Lecturer/ Senior Lecturer level in the areas of Energy Economics and Finance is currently being advertised. Other developments: The Business School has recently acquired the Reuters DataScope Tick History which provides millisecond-time stamped tick data covering 35 million OTC and exchange-traded instruments worldwide including commodity instruments such as oil futures. It is an invaluable tool for future research in this area. Several PhDs in the area of Energy Economics have either been completed or are currently being pursued. Examples are as follows: Evaluation of Investment in the Libyan Petroleum Industry under the new Production Sharing Agreements. The Response of British Industry to the North Sea Oil Opportunity. A comparison of the Economic and Legal Aspects of the Iranian Buy Back and Production Sharing Contracts. A Comparison of the Petroleum Taxation Systems in the UK, Norway, Denmark, and the Faroe Islands. An International Comparison of Legal and Economic Aspects of Petroleum Contracts. The Business School has also started an MSc in International Business, Energy and Petroleum. The relationship between these taught Masters programmes and the proposed centre is important. It is envisaged that the profile of the Centre will help promote applications for the MSc’s. Equally the MSc’s will provide possible research staff. This will be facilitated by the requirement that all MSc students have to undertake a research dissertation as part of their degree requirement. ACREEF will have an external Advisory Board whose members have extensive experience and knowledge of the various elements of the whole energy sector. News and other information on the progress of ACREEF will be disseminated electronically via a link to be established within the existing Business School website. Contact: Professor Alex Kemp Director of ACREEF University of Aberdeen Business School Edward Wright Building Dunbar Street Aberdeen AB24 3QY Tel: +44 (0)1224 272168 Fax: +44 (0)1224 272181 E-mail: a.g.kemp@abdn.ac.uk