For 59 years, the BP Statistical Review of World Energy has fascinated the world, providing scarce objective data on energy markets. It has been doing so in an industry, where transparency has been a major issue, often compounding the problems. The Review, one of the most widely respected and authoritative publications in the field of energy economics, is often used for reference by the media, academia, world governments and energy companies.
Christof Ruehl, the man behind the BP Statistical Review of World Energy has been around recently, presenting the latest compilation, the outcome of the year-long efforts of his team, to the energy fraternity.
And this provided an opportunity to many in the industry in the region, to meet him, to hear and talk to him, to seek clarifications on the Review, if any, first hand, from the man, who literally crafted it.
We initially met briefly at the IEFS headquarters in Riyadh. By the time Ruehl finished his presentation, he was already time pressed to move on for the next item on his agenda — meeting at the Ministry of Petroleum. On one pretext or the other, our discussion hence had to be deferred until the next Friday afternoon, while he was already in Abu Dhabi.
Ruehl represents a global oil major, one has to underline and definitely his perspective on some differs with the ones prevailing in this region. There are clear points of divergence. And this makes talking to him still more interesting — providing an insight into the thinking process of someone influential enough, sitting on the other side of the table.
Introducing the 2008 Review, Tony Hayward, the CEO of BP while referring to the problems faced by the energy world, described them as “above the ground and not beneath it.” It is not an issue of availability. They are human, not geological, he asserted. The comment was eye catching. In view of the sensitivity of the issue, some eyebrows were destined to be raised in the region.
The economist in Ruehl, but has a straight forward, blunt, and very business like clarification to his boss’s comment. “The problems being faced today are basically political and geographical. Limitation to resource access is an issue.” BP as a company is indeed of the strong view that this aspect of the industry is a cause of real concern and needs to be tackled with.
Indeed not every one could agree with Ruehl. For the energy riches are often perceived a matter of national pride here in this region and history tells us that even if there are economic reasons to go otherwise, nations often tend not to.
Ruehl, the BP man, also does not agree to the contention held by many in the region, that Western oil majors are a tool in the hands of global powers, helping them achieve their imperialistic designs, to help them gain control of the energy riches of the region. “We are no tools. We are a commercial organization and we move as per commercial dictates,” asserts the BP Group chief economist and vice president. And despite, conceding Aramco as a professional organization, being run by professional of the highest order from all around the globe, when asked if the induction of oil majors in upstream sector here could be of any added advantage he diplomatically opts for “this is up to Saudi Arabia to decide.”
Referring to apparent anomaly in the report, which on one hand says, there was enough oil for at least the next 42 years and at the same time points out that global proven oil reserves have gone down in 2008 by 3 billion barrels, Ruehl says; it is basically a compilation issue. “Reserve data is generally received late. So while releasing the annual review we often use the figure of the last year, which is then updated in the due course, once the current data is received.”
Ruehl also terms the issue of peak oil, as put forward by Matt Simmons & Co. as “sheer nonsense.” If one is ready to pay a price, and make the right investments, the issue of peak oil becomes irrelevant, he asserts.
The economist in Ruehl also emphasizes that despite all the developments, fossil fuel would continue contributing “at least 80 percent to the global energy mix by 2020.”
The Saudi supergiant Ghawar, has been under increasing scrutiny over the last few years, with some suggesting, it may not continue producing at the current levels for long. The BP Group chief economist however, sees no reason not to accept the Aramco version on the subject. “I have no reasons not to believe them. Aramco knows its job well. It has delivered what it has been promising. And I don’t see any reason not to believe their version on Ghawar too,” he asserted.
And though many may not agree wit him, yet he forcefully reiterates that fundamentals — and not non-fundamentals — are in control of the oil markets. Over the next few years, Ruehl expects the prices to remain somewhat depressed. In the longer run, once demand recovers, he expects the scenario could rapidly change.
One may agree with Ruehl on issues or may even disagree, yet the fact remains that he carries an interesting insight on the subject. His words can not be taken lightly. There are indeed issues and the energy world needs to find solutions to them, hopefully not in a too distant future.