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EDI Quarterly Volume 1, No. 2, September 2009

Editor’s Note

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by President of Energy Delta Institute Catrinus J. Jepma

Market efficiency vs security of supply? In the ‘good old days’ when the gas sector in Europe was still handled by integrated companies, security of supply (SoS) belonged to the priority concerns of those incumbents. At the same time during that period, the 1960s – 1980s, the actual level of security of gas supply on the whole was very high. SoS generally was considered to be in good hands and therefore not a subject of serious public concern. From hindsight the latter is surprising. Regarding SoS one has to distinguish at least between three quite different reasons why interruptions may occur: gas deliveries may fail: for unforeseen technical reasons; because somehow infrastructure cannot cope with demand, or because external gas supply stagnates for whatever reason. In the first case good technology helps, in the second case good planning and coordination, and in the last case good diplomacy. It is probably fair to say that compared to the current situation in those days: technology was less advanced, planning tools less developed (think of less advanced computer support), and energy diplomacy still in its infancy. In fact the then cold war and iron curtain conditions and the less mature state of European integration would seem a far less reliable background for gas supply for and within Western Europe than nowadays! And yet, in those days SoS for gas did not seem to be a matter of serious public concern. In the mean time sensor- and computer technology has developed with an incredible speed and found its way into the gas industry; advanced computerised information

Contents 1 Editor’s note 3 Brussels opens Pandora’s box 6

Geological storage of CO2: Mechanical and chemical effects on host and seal formation

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Manometric determination of supercritical gas sorpion in coal

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Does market orientation improve business per formances in a deregulating environ- ment?

14 The Gasroundabout: boosting the economy in times of recession? 15 Books, reports and upcoming conferences

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systems have been introduced capable of optimising transport capacity allocation, balancing, etc.; gas markets have been liberalised in order to introduce the flexibility of the private trading system that supposedly would help to generate market equilibriums smoothly and fast; and the cold war is something only grandparents still talk about, the iron curtain lifted some 20 years ago; while at the same time the process of integrating the European gas market proceeded considerably. And yet, nowadays SoS for gas is a matter of serious public concern. In fact, SoS all in the sudden is an issue again high on the national and European political agenda. See, for instance, the Directive on the issue proposed by the EC last July. And it has inspired European politicians – aware: that 80% of Russian gas to the EU goes via Ukraine, that Russian gas represents some 25% of EU gas supplies, and that this share is scheduled to increase further - to act, witnessing the mid-July ‘Nabucco-deal’ and the August ‘EUbrokered Ukrainian deal’. The main explanation why SoS has strongly entered the political agenda undisputedly was the unexpected gas supply interruptions last mid-January due to the Ukraine-Russian dispute about a complex set of issues, that caused serious SoS problems in Bulgaria, Romania and a few other eastern and south-eastern European countries on average almost completely dependent on Russian gas. If such supply interruptions would have been felt only once, one could have considered this to be just an unique incident. However, because the January 2009 interruptions were preceded by earlier Russia-Ukraine gas conflicts in 2006, the perception has grown that something similar may happen again. In considering this one also kept in mind president Medvedev’s public statement last summer that Russia would “never forget” the alleged Ukrainian military involvement in the 2008 Russia-Georgia conflict; the fact that prices paid by Ukraine for gas offered by Russia are still some 80% below market prices; and the complex set of initiatives to construct pipelines in South eastern Europe (Blue stream I and II, White stream, Nabucco, South Stream) that either are meant to circumvent Ukraine, or to support other than Russian gas supplies. One wonders if matters have been completely settled. This raises the issue if the recent main EU-response so far is the right track to enhance SoS. Several actions have been taken. First, in July the initiative was taken to activate the 2002 Nabuccoinitiative via the intergovernmental agreement signed between Austria, Hungary, Romania, Bulgaria and Turkey. Second, in the same month Brussels unveiled proposals via a Directive trying to deal with possible 60-day gas supply disruptions during winter conditions, and finally some month later a financial deal was struck with Ukraine. Time will tell, but a few questions seem in order.

from Iraq (Kurdistan region) and Iran are still absent, uncertain and potentially politically sensitive. In other words, uncertainty about gas supplies may make the project dependent on subsidies, at least during the initial stage, and may raise the issue what defines the boundaries of public support for SoS. Second, can Nabucco be ‘outcompeted’ by the Southstream project? The actual deliveries of gas through this infrastructure do not seem to pose any foreseeable problem once the infrastructure is there and the parties involved (Gazprom, ENI) seem to fully agree that the construction of the pipeline that will cross the Black Sea is set to start next year. Moreover, a considerable part of South and South-east of the EU can be delivered through this system and even parts of the Middle East. It seems still unclear, if Southstream would be developed faster and more effectively than Nabucco, how this may affect Nabucco’s business case. Third, how effective is it to try to secure SoS by organizing loans to Ukraine via EU-brokerage to a.o. pay its Russian gas bills and develop storage, as has been initiated recently via EBRD, WB and EIB (some 1.7 bn dollar)? The fact that this pledge together with euro 3.3 bn. IMF support for Ukraine could not prevent the Ukrainian finance minister threatening somewhat later to ‘restructure’ an about 0.5 bn dollar Naftogaz (the Ukrainian state company) foreign bond loan, would suggest that it is not at all easy to secure that Ukraine will cooperate on gas deliveries to the EU. One of the reasons is that raising gas prices within Ukraine towards market levels (now some 80% less than that) will not be politically easy. Finally, how big is the risk that the various developments turn Turkey into a position comparable to the position Ukraine has right now, i.e. the indispensible factor in much of the EU gas imports? After all, Turkey has a crucial strategic position in both Nabucco, South Stream and Blue Stream delivering gas from the Middle East and Caspian region to Europe, and therefore takes a crucial position for both Russia and the EU. In the current situation there is some balancing power in that Russia and the EU have something to offer to Turkey, such as nuclear cooperation, export potential and oil and gas imports (70%) in case of Russia and trade opportunities and possibly EU membership in case of the EU, but what if such balance gets lost? Then for the Russian-EU gas relationship Turkey’s position becomes comparable to, if not stronger than, the one Ukraine has right now. Just a few questions. Maybe securing SoS is not all that simple.

First, as far as Nabucco is concerned, the question is if the euro 8 bn./3300 km/31 bcm project linking the Caspian area with the EU and scheduled to be operational by 2014 can become commercially feasible. So far hopes are that gas will be supplied from Azerbaijan, Turkmenistan, Iraq or Iran. However, Azerbaijan also negotiated a priority deal with Russia about gas sales from the Shah Deniz field and also delivers gas to the EU via the competing ITGI infrastructure; gas supply from Turkmenistan if at all available for the Nabucco-system would additionally require solving complex disputes over use of infrastructure across the Caspian Sea; and gas supplies

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Brussel opens Pandora’s box

Rik Komduur Editor at European Energy Review

The European Commission is taking a unique initiative by setting up an organisation for purchasing gas in the Caspian Sea region. The Commission feels that private European energy groups are not making enough headway in purchasing non-Russian gas.

was too vast for individual companies. Suppliers Statoil, Norsk Hydro and Saga Petroleum united in the Gas Negotiating Committee (GFU). On the demand side, Gasunie, Gaz de France and Ruhr Gas, among others, joined forces. In 2001 the Commission broke up the GFU, but by that time the Norwegian continental shelf had been developed.

The objective of the Caspian Development Corporation, as the Commission’s planned gas purchasing organisation is called, is to buy gas collectively with a number of parties at the same price. This is a remarkable step that seems to be in complete contradiction to the principles of free market forces and the EU’s own competition regulations. Apparently, the Commission considers the greater goal of supply security to be more important than the principles of its internal market. According to Christof van Agt, senior expert at the Clingendael International Energy Programme, an energy think tank in The Hague, the Commission is introducing ‘a division between its internal and external energy policies’.

There are two possible structures being considered for the CDC: one in which the CDC is formed by companies (consortium model) and one in which the CDC is an autonomous company with shareholders, such as gas suppliers, consumers, governments, and financial institutes. In the first case, the CDC will act as an intermediary, in the second it will be a gas trading company in its own right. The Commission has requested US consultancy company CERA and the World Bank to advise on the matter. CERA did not want to comment at this stage.

The CDC, as the Commission sees it, is to provide a (temporary) mechanism for market parties to purchase gas from the Caspian Sea region and the Middle East in a coordinated manner, thus providing the supplier and the provider of transport capacity “security of demand”. Both gas production in the Caspian Sea region and construction of pipelines to Europe are to be stimulated by this approach. CDC participants will subsequently sell the gas on the European market. The CDC can be dissolved once things are up and running, but no one knows when that will be. A period of 25 years has been mentioned. This construction has a precedent in the development of the enormous Troll gas field off the Norwegian coast in the mid 1980s. The project

Nabucco The Caspian Development Corporation (CDC) was conceived by a study group of the Commission focusing on the promotion of the Nabucco gas pipeline. Nabucco belongs to what in Brussels is called the Southern Energy Corridor, comprising a number of infrastructural projects that are to boost the supply of non-Russian gas to Europe. These projects include the Interconnector-Turkey-Greece-Italy pipeline (ITGI), the Trans Adriatic Pipeline (TAP) and White Stream, a link between Georgia and Rumania under the Black Sea. Ultimately, approximately 80-100 billion m3 is to be pumped to Europe via the Southern Energy Corridor each year. This is 20% of the total current European gas consumption.

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The Commission considers bringing gas from the Caspian Sea region and the Middle East to Europe to be extremely urgent. Europe is dependent on three countries – Norway, Algeria and Russia – for 90% of its gas imports. Apparently this is a case of “market failure”, in the eyes of Brussels. The EU wants to diversify both its gas sources and its gas transport routes, said EU President Barroso at a conference in Prague about the South-East Energy Corridor. So far, these plans have not been very successful. Whilst countries like Russia, China and Iran have already negotiated gas contracts with countries in the Caspian Sea region, European companies are finding it difficult to access the Caspian gas. Ferran Tarradellas, spokesman for EU Commissioner for Energy Andris Piebalgs, points out that it is difficult for the European companies to make any headway in these markets. ‘Basically, there was a need for an aggregator (the CDC) because of the nature of the market we

are entering. It is a brand new market. Producers there and buyers here have not dealt with each other before. As you know there is a lot of competition for the gas: China, Russia, Iran and many others. It therefore seemed a good idea to facilitate these trade deals by means of a single spot demand aggregator. It will also create added value for the producing countries as they can simply sell their gas to one purchasing point. This justifies our taking extraordinary measures to start business with that market.’ The European business community seems wary. Large players on the European gas market like Eon, Gaz de France and Gasterra are waiting to see which way the wind blows. The industry is surprised about the Commission’s approach, but all parties believe it is important to be involved in investigating the project. The question, of course, is to what extent the CDC is in competition with private initiatives. RWE and the Austrian OMV, both partners in the Nabucco project, set up the Caspian Energy Company last year. RWE has also recently signed

Turkey wants “a piece of the action” Turkey’s role is crucial in the South Eastern Energy Corridor. Geographically speaking, it is the only country that makes it possible to by-pass Russia when transporting gas from the Caspian region and the Middle East. However, Turkey will not simply make its pipelines available for transport from east to west at a fixed sum per cubic metre transported. ‘Turkey wants a piece of the action,’ was how Mehmet Kazarci, president of Gazbir (the umbrella organisation of Turkish gas companies), phrased it to EER. ‘We do not want to grant free rides through our pipelines.’ It is not yet clear what the Turks mean by a “piece of the action”. Negotiations between Turkey and the European Union are still underway and Ferran Tarradellas, spokesman for EU Energy Commissioner Andris Piebalgs, expects an agreement to be reached by late June/early July. Tarradellas: ‘Negotiations are progressing well. I must say that Turkey is a very good negotiator and the Turks manage to achieve a lot of positive things. They do, however, have to be things we can accept. We have to take the Turkish security of supply into consideration, but it has to be in accordance with international obligations and international market rules.’ Meanwhile, there are signs that Turkey may demand EU membership in exchange for loyal cooperation in the South Eastern Energy Corridor. That would complicate matters even more, to put it mildly. a memorandum of understanding with Turkmenistan for the supply of natural gas. However, RWE Supply & Trading spokesman, Michael Rosen, denies that RWE considers CDC to be a competitor: ‘The Caspian Energy Company is a commercial venture; so far, no commercial parties have signed up for CDC’. RWE supports the Commission’s initiatives ‘to open the link to regions with vast energy resources. The Southern Corridor is perfect for meeting this goal’, says Rosen. He does add, however, that ‘we believe that the market will offer the best solutions’. A spokesperson for the Nabucco Consortium welcomes the CDC. ‘This project may find ways to deliver Turkmen gas to Nabucco via the Caspian Sea. We very much appreciate these efforts and we are hopeful that this project will be beneficial to all involved.’

Creative solutions The consultants who are to advise on the CDC are faced with complex issues. Large volumes of gas are to be contracted. Financing is a big issue. The CDC will require a high credit rating, but it not clear what its creditworthiness will be based on. There are some legal obstacles, too. The fact that all market parties purchase gas at the same price and are thus aware of each other’s purchase price is in violation of European competition legislation. It is also possible that the CDC could acquire a dominant position if the volumes were to become too large, or if the market were to limit itself specifically to the south-eastern European market. The Commission is trying to prevent the CDC from resembling a purchasing cartel. ‘We have to set up the CDC in such a way that it does not resemble a cartel,’ says spokesman Tarradellas.

Van Agt wonders whether the Commission is sending out the right signals via the CDC. The western world fears that countries like Russia and Qatar, who have united into a gas export association called the Gas Exporting Countries Forum (GECF), are aiming to form a gas cartel. Those countries can now easily point to the Commission and say ‘you’re doing it too’. The Netherlands, for instance – a country that exports gas itself – recently joined the GECF as an observer after the CDC initiative was started up. According to Van Agt, it was hardly possible to be involved in an association like the GECF before then. In May, Norway’s Prime Minister Jens Stoltenberg, during an official state visit to Moscow, openly made overtures to Russia about cooperation on the European gas market. ‘We are both northern countries with major shared interests; we are both large producers and exporters of natural gas and electric power. This means that we are partners on the European continent. We share an interest in developing and expanding our potential on the European gas market,’ he said. One may wonder whether the Commission, with its CDC plans, has opened up Pandora’s box. The CDC, in the meantime, is gaining increasing political support from both the Commission and from other EU bodies. The Czech Republic, for instance, the European Council chair, has pressed for quick action with regard to the development of the Southern Energy Corridor. In a speech prior to the elections of the European Parliament, French President Sarkozy, too, declared himself in favour of a gas purchasing consortium such as the CDC. The US is also pushing Europe to secure energy imports from Central Asia and to construct pipelines. During an energy conference in Baku in early June, Richard Morningstar, US Special Envoy for Eurasian Energy Issues, called on Europe to come up

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with creative solutions: ‘We need creative solutions to carry Caspian energy via diverse routes to European and Eurasian markets’. It is rather remarkable that the investigation into the required structure of the CDC has been awarded to two American-dominated institutes – CERA and the World Bank. It seems that Europe does not wish to do this without US support. The US still plays a major geopolitical role in the Caspian region and played a decisive role in the realisation of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline, which also by-passes Russia.

reover that hardly have a spotless human rights record. The Commission seems to find Europe’s competitiveness of overriding importance. Brussels has evidently taken notice of the debate that has raged in recent years about the increasing dominance of state oil companies in energy producing countries vis-à-vis the western energy multinationals. It seems that Brussels has decided to support the private companies in their struggle against the power of companies like Gazprom, Chinese CNPC, Iranian NIOC and the Koreans and Japanese, who have also set their eye on oil and gas from central Asia.

But the biggest question perhaps is why private energy companies would need the EU’s assistance in doing business – in countries mo-

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Geological storage of CO2: Mechanical and chemical effects on host and seal formations

Suzanne Hangx Phd Student at Utrecht University

Global warming and CO2 mitigation strategies The socio-economic impact of global warming resulting from anthropogenic CO2 emissions has lead to much attention for carbon mitigation strategies in recent years. It has been widely recognised that significant reduction of current CO2 emissions is necessary to maintain atmospheric greenhouse gas concentrations at around 450 ppm CO2 equivalent, thus limiting climate change1. Reduction targets of the European Union suggest a 30% reduction of 1990-levels by 2020 and even up to 80% by 20502. One of the most promising ways of disposing of CO2 is through Carbon Capture and Storage (CCS), entailing CO2 capture at source, followed by long-term geological storage, involving the subsurface injection of liquid or supercritical CO2. Possible storage sites include depleted oil and gas reservoirs, saline aquifers and unminable coal seams. The former is relevant for countries with an extensive hydrocarbon production and transport infrastructure, such as the Netherlands. To assess the efficiency, safety, useable CO2 sequestration capacity and cost of any of these geological storage or mitigation options, the controlling chemical and physical processes must be understood at a quantitative level. Long-term subsurface storage of CO2 in depleted reservoirs, or aquifers, may induce a range of chemical and mechanical processes in response to of disturbances in existing chemical equilibria and in the state of stress within the reservoir-caprock system. Such processes include, but are not limited to, mineralisation reactions, reservoir creep induced by CO2water-rock interactions, and mechanical failure of and permeability development in the seal formation. While some of these processes, such as mineralisation, may enhance the CO2 storage capacity of a reservoir, others may potentially reduce reservoir and caprock integrity, causing leakage of CO2 to the geological environment and ultimately to the atmosphere.

Main mechanisms and processes occuring during subsurface storage of CO2 Geological storage of CO2 in depleted oil and gas reservoirs, and in aquifers, entails a wide range of hydrological, chemical and mechanical processes, which influence trapping of the injected CO2 (see Figure 1). In such formations, CO2 can be stored in two main ways: (1) in the pore space, as a supercritical phase (structural trapping) and/or dissolved in the pore fluid (hydrodynamic trapping), and (2) through mineral trapping, i.e. formation of stable carbonated minerals (mineral trapping)3-5. However, mineralisation reactions are very slow6-8 and most depleted reservoirs have low mineralisation potential6,9. Therefore, CO2 injected into a depleted reservoir, or aquifer, will mainly be present in the supercritical phase and/or dissolved in any residual formation fluid6,9, and will be kept in place by a top seal formation (caprock) and/or by sealed faults bounding the reservoir (large-scale structural trapping). Currently, several test sites for CO2 injection and storage are in operation worldwide, making use of both aquifers and reservoirs. These include aquifers, such as Sleipner and Snøhvit, Norway, Frio, United States; and hydrocarbon reservoirs, such as In Salah, Algeria; Ketzin, Germany; Teapot Dome and Rangely, Unites States; Weyburn and Zama Field, Canada; Nagaoka, Japan; Otway Basin, Australia; and Le Lacq, France. More test sites

are planned in the Barendrecht gas field in the Netherlands, and the Michigan Basin, United States, and Gorgon, Australia, aquifers amongst others.

Hydrodynamic trapping modes and the properties of CO2 Hydrodynamic trapping involves the storage of CO2 as a dissolved phase in the reservoir pore fluid (solubility trapping – see Figure 1, box 1) and/or as a liquid or supercritical phase in bubbles in the formationfluid- filled pore space (capillary trapping – see Figure 1, box 2)10. Immobility of the CO2 is achieved by the local hydrological regime, i.e. the very low flow velocity of the formation fluid5. CO2 will generally be injected into a given reservoir or aquifer at depths of > 800 m (PCO2 > 8 MPa) and stored as either a dense liquid or supercritical phase5. The amount of CO2 that can be stored by either solubility or capillary trapping, its chemical activity, and its interaction with prefluid and rock, are controlled by its thermodynamic properties, and can be predicted using so-called Equations of State (EOS)11. At the reservoir scale, dissolution of CO2 into the reservoir brine is slow, as it depends on the diffusion of the CO2 through the pore water12, and will initially contribute only a few percent to the total CO2 trapping capacity of a reservoir or aquifer. While CO2 will dissolve in the pore fluid, water will also dissolve in the CO2 phase13. Under reservoir conditions (T = 50-100°C, PCO2 > 8 MPa), this is typically < 5 mol-% but can lead to local (partial) desiccation (i.e. drying out) of the reservoir14 and to reaction between rock and the CO2-rich phase3. In addition, as CO2 moves through a given reservoir, away from the injection point, pore fluid brine present will be displaced by the CO2 phase. As liquid or supercritical CO2 passes through pores and pore throats, and if the pore fluid content is high enough, part of the CO2 phase may become disconnected and trapped in the pores. The strong non-wetting behaviour of CO2 (high contact angle)15,16 results in high capillary pressures, especially in the far field, where PCO2 is lower and the interfacial tension (IFT) of the CO2/brine system is high17-19. This is called capillary trapping.

Mineral trapping of CO2 - geochemical effects In contrast to hydrodynamic trapping, which results in CO2 storage sensu-stricto, mineralisation leads to fixation of the injected CO2 through the precipitation of carbonate minerals (see Figure 1, box 3). The principle behind CO2 sequestration by mineral trapping is based on a number of sequential chemical reactions: (1) CO2 dissolves in the reservoir water to form carbonic acid, and subsequently bicarbonate; (2) H+ attacks minerals in the rock and, depending on composition, releases relevant cations (e.g. Ca2+, Mg2+, Fe2+); (3) the bicarbonate reacts with cations present in the reservoir water in order to form stable carbonates, such as calcite (CaCO3), siderite (FeCO3), magnesite (MgCO3) or dolomite (CaMg(CO3)2). When CO2 is injected into an impure sandstone reservoir, feldspars, micas and clays present in the rock will act as the cation sources, and protons present in the reservoir water will leach out the necessary cations from the silicate structure,

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Figure 1: Schematic diagram illustrating a CO2 injection site consisting of a depleted oil or gas reservoir. After injection CO2 spreads through the reservoir, displacing reservoir fluid and exerting forces on the overlying caprock. We have highlighted five of the key storage (box 1-3) and leakage (4-5) mechanisms that may occur after CO2 injection. (taken from Hangx, 2009, Geological storage of CO2 - Mechanical and chemical effects on host and seal formation)

precipitating carbonates, secondary clays and silica, according to the following, more general overall reaction4: feldspar + clays + CO2 â&#x2020;&#x2019; calcite + dolomite + kaolinite + quartz (1) However, mineral trapping is a slow, long-term process20 that strongly depends on the availability of reactive minerals, such as feldspars, Mg/ Fe-rich clays and micas, and Fe-oxides or olivine 8,21-30. Aside from geochemical aspects of mineral trapping, dissolution of the minerals in a given host rock, and precipitation of secondary phases may lead to changes in the transport properties (i.e. porosity and permeability) of the reservoir 4, and to changes in mechanical properties (creep, strength, dilatation). However, very few studies attempt to couple geochemical, hydrological and especially mechanical processes occurring within the reservoir rock as a result of CO2 injection 7,30-32. Numerical modelling efforts for sandstone reservoirs predict only a few percent decrease in solid volume (i.e. porosity) as a result of aluminosilicate reacting with CO2 over a time span of > 1000 years 7,30. In contrast, reaction rates of silicate minerals such as olivine and pyroxene are up to 4-6 orders of magnitude faster under reservoir conditions 33,34 and give rise to a solid volume increase of up to 80%, which may be undesirable. However, reaction of these minerals with CO2 and water are only of interest for CO2 injection into peridotites and fractured basalts 35, as these minerals are rarely found in large quantities in sedimentary formations. In addition to fluid-rock interactions, salt precipitation from brine as a result of desiccation may also affect permeability and CO2 injectivity 14,36 and should be taken into account, as it may strongly affect reservoir permeability.

Structural trapping of CO2 - geomechanical and hydromechanical effects The main factor affecting (large-scale) structural trapping, and the key to successful long-term geologicalCO2 storage as a whole, is

maintaining seal integrity. The key aspects 37 influencing seal integrity are: (1) reactivation of faults within or bounding the reservoir, (2) reactivation of faults within the caprock or overburden, (3) mechanical damage and induced shear failure of unfaulted caprock, (4) hydraulic fracturing near the point of injection and (5) well bore leakage. To date, most efforts have focused on predicting (numerically) the geomechanical response of reservoir and overlying caprock to CO2 injection. It is possible that CO2 will reactivate existing faults, either in the reservoir or in the overlying caprock 38,39. There are several important mechanisms 37 that can cause fault reactivation during fluid depletion or injection. These include pore pressure changes in fault planes and connected porosity throughout the reservoir rock, which may reactivate faults in the reservoir 39-31. In addition, CO2-enhanced creep processes may cause compaction, while the poro-eleastic response of the reservoir to CO2 injection may result in reservoir heave, as seen in Figure 1, box 4 and 5. Such processes can potentially cause flexure of the top-seal, which may result in the reactivation of faults in the caprock or overburden 42,43 and/or induce shear failure, leading to the formation of new faults 42. As these mechanisms are dependent on the magnitude of the changes in the state of stress, this puts constraints on the maximum CO2 pressure that can be injected. Furthermore, hydraulic fracturing near the injection point, as a result of high injection rates and cold injection fluids 37, as well as bore-hole instability, such as casing impairment 44 and well bore cement degradation 45, may pose additional problems for maintaining seal integrity.

The road so far: outstanding research questions It will be clear from the above that geological storage of CO2 in depleted oil and gas reservoirs and aquifers is a complex matter, influenced by many, in their own rights complex, interlinked processes and mechanisms (see also Figure 2). This has lead to many questions regarding in-situ rates of mineralisation reactions, fluid flow, effects of CO2-water interaction on mechanical processes operating, such as

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Fig 2: Schematic diagram showing the subsurface processes that are perturbed by CO2 injection, and the concomitant changes in temperature, pressure and pore fluid density. As can be seen, porosity and permeability are the key variables linking the hydrological, geochemical and geomechanical regimes [after Johnson et al., 2004].

compaction creep, and the influence these phenomena may have on transport properties (i.e. permeability). Over the past two decades, much research has focussed on elucidating some of these key questions, through geochemical7,8,30,46 as well as geomechanical modelling37-39,43,46,47 and through experimental efforts31,35,48-52. One of the focuses of experimental studies has been to determine the nature and rates of mineralisation reactions24,33,49,50,53 to assess mineral trapping potential. In addition, experimental studies have been performed to determine capillary entry pressures54, CO2 wettability55,56 and relative permeabilities57,58 of host and seal rocks. However, to date, very little experimental data exists on the effect of CO2 on coupled chemical-mechanical processes occurring in reservoir and seal formations, and indeed on purely mechanical damage, for real rocks under in-situ conditions. Results from appropriate geo-mechanical experiments, together with fluid-rock interaction rate data, are essential to provide a basis for the (finite element) modelling efforts required to predict long-term behaviour and performance of geological CO2 storage systems, such as depleted reservoirs and aquifers. Recent work performed at the High Pressure and Temperature Laboratory at Utrecht University has focused on obtaining a fundamental understanding of the effect of CO2 on mineralisation reactions and on timedependent (i.e. long-term) reservoir compaction or creep phenomena, as well as on caprock stability and permeability development. The work was carried out in the context of the Dutch National Research Program CATO on CO2 capture, transport and storage, in close collaboration with Shell International Exploration and Production. The relevant phase of CATO (CATO-1, 2004-2008) has aimed to build a knowledge network on all aspects of CO2 mitigation strategies of relevance to the Netherlands. The research performed at the HPT-lab was incorporated in the CATO program under WorkPackage 4 on Mineralisation and it has been directed at reaction and deformation effects in sandstone and anhydrite, which are the main rock types representing potential host and seal formations for subsurface CO2 storage in the Netherlands. Laboratory measurements, such as in-situ batch reaction, compaction creep, triaxial compression and permeametry experiments, were performed to investigate several important chemical and mechanical processes. Though lab-experiments are, geologically speaking, short-

term they can be used to predict long-term behaviour since they study the factual, physical and/or chemical processes occurring in nature. As already pointed out, within the context of geological CO2 storage both chemical and mechanical processes will be of importance. In this case, mechanical effects related to pressure changes as a result of CO2 injection will be taking effect relatively shortly after injection, while chemical processes (mineralisation) will become active in the longer term, due to the slow interaction between rock and CO2. Results of experiments on feldspar-bearing sandstone show that mineralisation reactions are strongly dependent on the mineralogical composition of the host rock since only specific minerals (e.g. feldspars, clays) react with CO2 to form carbonates. In addition, reactions are slow and it can take hundreds of years before mineralisation of CO2 will play a role. Even if all reactive minerals would react than the effect of these reactions on the host rock will be minimal as they are only present in small quantities (generally < 5 vol%). Therefore, dissolution of these minerals (and possible precipitation of secondary phases) may affect the porosity of the host rock to some extent but it will not compromise the load-bearing capacity of the reservoir. Our experiments have shown that reservoir compaction, and related subsidence, as a result of mineral dissolution/reaction or CO2- related creep effects are not to be expected. In contrast, much more important will be the poro-elastic response of the reservoir, as a result of high pressure CO2 injection. In response to pressure changes in the reservoir, and possible heave, changes in the state of stress of the overlying caprock may occur. As a result of these stress changes, the caprock may become more permeable, or even fail, which will lead to the formation of preferential leakage pathways and possibly reduce caprock integrity. A potential risk associated with anhydrite caprocks is that CO2 might gain access to interbedded carbonates with sufficient permeability to allow lateral migration. Our experiments have shown that CO2, or other high-pressure fluids, do not affect the strength of anhydrite. In addition, calculations on simple, elastic flexure of a hypothetical anhydrite caprock, combined with our strength and permeability data, have shown that caprock integrity will not be compromised by mechanical damage and permeability development. As CO2 will not be able to penetrate the caprock, the effect of CO2-rock

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interaction will most likely be of little importance. The results obtained in our experiments can be combined with (finite element) modelling efforts in order to predict the long-term response of the reservoir-caprock system to high-pressure CO2 injection. However, it should be noted that the chemical interaction between CO2 and pre-existing faults still needs investigation. In the case of anhydritecemented faults, dissolution of anhydrite and the concomitant precipitation of calcite will result in a 20% solid volume decrease, which may enhance fault permeability and potentially lead to fault reactivation.

Opposing CCS: coastal spreading of olivine Of course, also objections have been made to the method of CCS to reduce CO2 emissions, such as the idea proposed by Emeritus Prof. Dr. R.D. Schuiling, who has received a lot of media attention59-61 with his “Green Beaches” proposal. It consists of coastal spreading of sandgrade (100-300μm) olivine along beaches worldwide, with natural weathering reactions promoting increased atmospheric CO2 uptake by seawater. It has been presented in the media as a cheap, safe and green alternative for current CCS technologies but has not been quantitatively evaluated. In order for the method to compete with current CCS technology, it has to be able to reduce atmospheric CO2 concentrations significantly within the next 15-20 years, i.e. a steady state uptake rate

of ~6.25 Gt/yr by approximately 2025. We performed a critical analysis of feasibility by investigating the dissolution rate of olivine under Earth surface conditions, the CO2 uptake capacity of the dominant reaction and the CO2 footprint of the method. The main conclusions reached are that dissolution rates of sand-grade olivine are orders of magnitude too slow to be significant within the next few decades. In order to speed up these rates, much finer grained, dust-grade material (< 10 μm) is required. However, this fine particulate matter poses possible public health risks, especially as fine-grained olivine-rich material may contain asbestos minerals. In addition, though the CO2 uptake capacity of the (suggested) reaction is significant (i.e. 1.25 ton CO2 per ton of olivine) and the direct CO2 footprint acceptable (< 20%); vast quantities of material (> 5.0 Gt of olivine/yr) are required to achieve useful CO2 uptake targets. Since olivine rocks are highly localised in their occurrence, this poses major infrastructural and worldwide transport challenges, on the scale of present oil and gas transport. On this basis, we infer that coastal spreading of olivine is not viable on the scale needed and cannot replace current CCS technology.

References A list of the references can be provided on request. Please sent an e-mail to the following address: quarterly@energydelta.nl

Manometric determination of supercritical gas sorption in coal A topic of current interest is the reduction or stabilization of the atmospheric carbon dioxide concentration. Even so, carbon dioxide emitting fossil fuels will be required to meet the growing demand for energy for at least the next 100 years. Sequestration of carbon dioxide in underground coal can prevent the emission of carbon dioxide, while increasing the production of methane from underground coal can help meeting the local or global demand for energy. It has been hypothesized that the production of coalbed methane can be enhanced by the injection of carbon dioxide containing gas. Additional production of methane from underground coal has a direct impact on the gas market. In addition, the possibility of sequestering carbon dioxide in underground coal provides an opportunity for companies interested in expanding their portfolio. The global resources of coalbed methane are approximately as large as the global proven reserves of natural gas, while the storage potential for carbon dioxide of underground coal is estimated at 300-964 Gigatonne, which is 10 to 30 times the annual global emission of carbon dioxide. In addition, the omnipresence of coal implies that such technology is of interest to many countries, including the Netherlands. Computer simulations of reservoirs are used to determine whether the production of coalbed methane and the sequestration of carbon dioxide in a particular underground coal is economically viable. The predictive ability of such models will improve with better understanding of the occurring physical and chemical processes. In addition, the relationship between these processes and the properties of the coal can be important for the production and sequestration. These physical and

Patrick van Hemert Phd Student at Technical University of Delft

chemical processes and their relationship with the properties of the coal are not yet fully understood. Experimental research is a powerful tool for the investigation of these processes and their relationship with the properties of the coal. The sorption of gas in coal is expected to be one of the important processes in the production of methane from and sequestration of carbon dioxide in underground coal. Several hypotheses have been formulated for the sorption of supercritical gas in coal. However, none of these hypotheses have been validated for a wide range of conditions. It is expected that a large database is required to identify the correct hypothesis because of the heterogeneity of coal and the dependence of the hypotheses on empirical parameters. Moreover, the differences between the sorption behaviors of the various hypotheses can be quite small. Therefore, accurate data of the sorption of gas in coal is required. The manometric method is an often-used method in the Earth Sciences and the Chemical Engineering for the determination of sorption. However, it has been suggested that its accuracy is insufficient for experiments at conditions relevant to underground coal. Therefore, the aims of this thesis are to optimize the manometric method for such conditions and to investigate the accuracy of the optimized method. An additional third aim is to use the apparatus to obtain experimental data of the sorption of various gases in coal for various pressure and temperature conditions. The following topics are addressed in this thesis: 1. the production of methane from coal when injecting carbon dioxide, nitrogen, a mixture of nitrogen and carbon dioxide or a mixture of hydrogen and carbon dioxide;

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2. development of a state-of-the-art manometric apparatus with an a priori1 error analysis; 3. verification of the equation of state for carbon dioxide at the conditions of interest; 4. an independent assessment of the accuracy of the developed manometric apparatus with an inter-laboratory comparison; 5. experimental data of the sorption of carbon dioxide, methane and nitrogen in Selar Cornish coal for pressures between 1.0 and 16.0 MPa at a temperature of 318 and 338 K. All these aspects contribute to either improving the manometric method for the determination of sorption or provide observations on the sorption processes in coal. The main achievement is the development of a state-of-the-art manometric apparatus with an a priori error estimate ranging between 0.02 and 0.08 mole/kg, a maximum a posteriori2 error of 0.2 mole/kg and a maximum deviation of 13\% in the fitted parameters when compared to the weighted average of the inter-laboratory comparison. The following interesting observations regarding the sorption of supercritical gas in coal have been made 1. the sorption of gas at equilibrium in Selar Cornish coal depends on pressure, temperature and the properties of the gas; 2. the sorption and desorption isotherms of methane and nitrogen in Selar Cornish coal at 318 and 338 K show no hysteresis; 3. more time than previously assumed is required to attain sorption equilibrium; 4. the time required to attain sorption equilibrium in Selar Cornish coal depends on the temperature and the properties of the gas. In conclusion, the manometric method has been improved to provide

accurate data of sorption of supercritical gas in coal. Using the improved apparatus, the construction of a large database of sorption determinations has been initiated. This database will allow the development of a theory that describes the sorption process. This theory provides better understanding of some of the physical and chemical processes occurring in underground coal when producing coalbed methane from or storing carbon dioxide in underground coal. This theory will improve the predictive ability of reservoir models used to identify economically viable projects for the production of methane or the sequestration of carbon dioxide. The possibility of producing methane from underground coal is of direct interest to the gas market. The possibility of sequestering carbon dioxide in underground coal is relevant for companies interested in expanding their portfolio with underground sequestration of carbon dioxide. The production of methane from or the sequestration of carbon dioxide in underground coals can be optimized with greater understanding of the relevant processes. This thesis provides an improved apparatus for the determination of properties of these processes that will be used to obtain experimental data to increase the current understanding.

References 1 A priori errors are estimated from the limitations of the measurements, assumptions and equations used in the determination. 2 A posteriori errors are defined in this thesis as the observed discrepancies between duplicate measurements

Patrick van Hemert successfully defended his thesis on the 1st of September 2009. The full Ph.D can be provided on request. Please sent an e-mail to the following address: quarterly@energydelta.nl

Does market orientation improve business performances in a deregulating environment?

Gido dâ&#x20AC;&#x2122;Hont Manager Data management / metering , RWE

Introduction Until the end of the last century, public utilities such as gas, electricity, telecoms and rail, were vertically integrated, typically state-owned, monopolies. The growing evidence in the positive effects of liberalisation, first in telecoms, and later in electricity and gas, gave the European Commission arguments to prove that market forces produce a better allocation of resources and greater effectiveness in the supply of services. Therefore they decided that the principles of the single market â&#x20AC;&#x201C;the free movement of goods, persons, services and capital- should be extended to these public utilities. As a result, the Electricity Directive 96/92/EC and Gas Directive 98/30/EC were adopted in 1996 and 1998, and had to be implemented by February 1999 and August 2000, respectively (Newbery, 2002). These directives were the starting point for of a single European market for electricity and gas, with the intention to achieve increased

comptetitiveness, security of supply and protection of the environment (European Commission 1998; 2000) Recently, however, there is much debate about the results of market liberalisation and the privatisation of vertically integrated, state-owned Energy Companies. The starting point of this debate dates from 2000 and is the so-called Californian Electricity Crisis. Due to price controls, public utility companies were paying more for electricity than they were allowed to charge customers, based on retail price caps. This, in the end, led to the bankruptcy of Pacific Gas and Electric and the public bailout of Southern California Edison. This caused a shortage in energy supplies and blackouts. Some observers blamed the problems on the format of the wholesale auctions in California, while others focused on the way that transmission capacity is priced and how prices varied by

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location (Borenstein, 2002). In the discussions, following this crisis, the deregulation supporters insisted the cause of the problem was that the regulator still held too much control over the market, and true market processes were hampered, whereas opponents of deregulation stated that the fully regulated system had worked for 40 years without blackouts. In The Netherlands, there is recently much debate with regard to the (proposed) take-over of formerly vertically integrated dutch Energy Companies Essent by Germany’s RWE and Nuon by Sweden’s Vattenfall. The root of this debate goes back to the implementation of the so-called ‘Splitsingswet’ in 2007. This dutch law forces vertically integrated Energy companies to ownership unbundling of their transmission networks from all other commercial activities. In the view of the dutch government, this ownership unbundling is necessary to facilitate competition as well as efficiency of network management. In addition, ownership unbundling might enable shareholders – mainly local and regional public authorities - to sell their shares in production and supply, raising both liquidity of local and regional public authorities and incentives for efficiency in these parts of the holding. The opponents of ownership unbundling claim that foreign take-overs of the production and supply business of dutch energy companies form a threat for security of supplies and may lead to a loss of jobs and an increase of customer prices. We believe that the European Energy Market and subsequently the national energy markets of EU-member states are an interesting and dynamic environment. Therefore we chose this environment to set up our research. Firms that want to keep pace with their changing environment need to have knowledge about their environment combined with the ability to adapt their strategy based on this knowledge. In scholarly literature, the concept that covers these strategic aspects is referred to as Market Orientation. We assume that Firms active in the European Energy Market, must have a level of Market Orientation that enables them to keep pace with their changing environment. Therefore we focus in this research on Market Orientation and its relation to Business Performance. The Research Problem that will be addressed is how and to what extent Market Orientation improves Business Performance in the context of a Deregulating Environment.

from their research that are relevant for our research are Knowledge of Customers and Knowledge of Competitors (Mahon and Murray, 1980: 131). This framework will be combined with the framework presented by Matsuno, Mentzer & Ozsomer (2002). They describe a direct link between Entrepreneurial Proclivity and Market Orientation. Aditionally, Lumpkin & Des (1996) are followed in stating that organisational factors can also have influence on Market or Entrepreneurial Orientation. More specifically, the concept Hierarchy of Decision Making is included in the research framework. The link between the Concepts leads to the following Research Model:

Methodology To gather empirical data, we conducted a survey amongst managers of RWE Energy Netherlands, RWE Transgas (Czech Republic) and RWE npower (UK). Our total sample consisted of 143 respondents, representing 93 organisational units of the three different Firms. The number of respondents that completed the survey before the final deadline was 107, representing 76 organisational units: a response rate of 74,8 %. Additional to our survey we interviewed four managers of the different Firms to enrich our insights in the companies in general and the research results in particular.

Conclusions H1 (confirmed): Market Orientation positively influences Business Performance.

Our research supports existing scholarly literature on this topic and reconfirms that Market Orientation is an important characteristic of high performing Firms. Although earlier empirical research (Covin, 1991; Zahra & Covin, 1995; Lumpkin & Des, 1996, 2001; Matsuno, Mentzer & Ozsomer, 2002; Narver, Slater & MacLachlan 2004; Griffith, Noble & Chen, 2006) on the relation between Market Orientation (or related concepts) and Business Performance shows mixed results, in our research we found significant proof for our hypothesis that Market Orientation has a positive influence on Business Performance.

Research Model and Hypotheses

H2 (confirmed): A lower level of External Regulation positively

Based on an extensive research of scholarly literature we developed a research framework. From this research framework we derived five hypotheses that are tested in a statistical analysis of the data gathered in our empirical research. In our research we build on a wide range of scholarly literature in our assumption that Market Orientation will have a positive influence on Business Performance (Covin, 1991; Zahra & Covin, 1995; Lumpkin & Des, 1996, 2001; Matsuno, Mentzer & Ozsomer, 2002; Narver, Slater & MacLachlan 2004; Griffith, Noble & Chen, 2006). Furthermore, based on the scholarly literature we assume that the relation between Market Orientation and Business Performance is moderated by the influence of the external environment and more specifically by the level of External Regulation. We assume that the relation between Market Orientation and Business Performance is weaker in an environment with a high level of External Regulation and that the relation is stronger in an environment with a low or changing level of External Regulation, such as the deregulating energy market (Lumpkin & Des, 1996; Tellefsen, 1999; Hooley et al., 2000; Subramanian & Gopalakrishna, 2001). Furthermore, in our research, part of the framework presented by Griffith, Noble & Chen (2006) will be followed. The Knowledge topics

Our research confirms that a lower level of External Regulation positively moderates the relationship between Market Orientation and Business Performance. This is in line with scholarly literature, in which we found several reports of researchers that tested the influence of contextual factors on the relation between Market Orientation and Business Performance (Lumpkin & Des, 1996; Tellefsen, 1999; Hooley et al., 2000; Subramanian & Gopalakrishna, 2001). The results of nearly all of these studies show that a higher level of contextual factors such as Dynamism, Market Changes, Turbulence or Intensity of Competition positively moderates the relationship between Market Orientation and Business Performance. Based on our research results it is fair to state that with the confirmation of this hypothesis, we can also confirm our assumption that a Deregulating Environment increases the level of some of the following contextual factors: Dynamism, Market Changes, Turbulence and Intensity of Competition. Furthermore we like to underline that our finding is in line with the statement of Lumpkin

moderates the relationship between Market Orientation and Business Performance.

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Entrepreneurial Proclivity (Independent) Knowledge of Customers (Independent) Knowledge of Competitors (Independent)

Market Orientation ((In)Dependent)

Hierarchy of Decision Making (Independent)

Business Performance (Dependent)

External Regulation (Moderator)

Figure 1: Research model

Nr.

Hypothesis

1

Market Orientation positively influences Business Performance

2

A lower level of External Regulation positively moderates the relation between Market Orientation and Business Performance

3

A higher level of Entrepreneurial Proclivity positively influences the level of Market Orientation

4

A higher level of Knowledge positively influences the level of Market Orientation

5

A lower level of Hierarchy of Decision Making positively influences the level of Market Orientation

Table 1: Hypotheses

& Des (1996) that the relation between Market Orientation and Business Performance is context dependent. In our research this means that a high level of External Regulation weakens the relation between Market Orientation and Business Performance and a low level of External Regulation strengthens the relation between Market Orientation and Business Performance.

H3 (rejected): A higher level of Entrepreneurial Proclivity positively influences the level of Market Orientation.

This hypothesis was not confirmed by our survey research. We developed our hypothesis mainly based on earlier research by Matsuno, Mentzer & Ozsomer (2002) and Griffith, Noble & Chen (2006). Looking back to the research of Matsuno, Mentzer & Ozsomer (2002) we must note that they used the Firm as unit of analysis and that their respondents were Marketing executives of U.S. based Manufacturing Firms. The research of Griffith, Noble & Chen (2006) also used the Firm as unit of analysis and their

respondents were directors of retail Firms in the U.S. Market. So, important differences between these researches and our research are the unit of analysis (Firm vs. Organisational Unit), the geographic location (U.S.A. vs. Europe) and the Market Environment (Manufacturing & Retail vs. Energy Market). Probably these differences can provide an explanation for the rejection of our hypothesis. For instance, the difference in unit of analysis: based on the literature we assume a direct and positive relation between Entrepreneurial Proclivity and Market Orientation on Firm level but on the level of Organisational Units this is probably only true for so-called â&#x20AC;&#x2DC;frontlineâ&#x20AC;&#x2122; units, those units that are closest to the Market and to the customers and are therefore best located to take risks and pro-actively enter the Market with entrepreneurial initiatives. This is not possible for organisational units that are located more distant from the Market, and therefore the relation between Entrepreneurial Proclivity and Market Orientation is probably less strong.

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H4 (rejected): A higher level of Knowledge positively influences

capability of Market Responsiveness, the responsive part of Market Orientation.

This hypothesis was not confirmed by our survey research. We developed our hypothesis mainly based on earlier research by Griffith, Noble & Chen (2006). The results from their research show that Firm Performance is driven by a Firm’s ability to develop Knowledge, but also to convert this Knowledge into the dynamic capability of Market Responsiveness. The results of their study show that Entrepreneurial Proclivity not only aids in the accumulation of Knowledge, but can aid (as well as hinder) the conversion of these resources into dynamic capabilities. In short, a high level of Knowledge in itself is insufficient to increase the level of Market Orientation. This high level of Knowledge must be combined with the ability of a Firm or organisational unit, to convert this Knowledge into the dynamic capability of Market Responsiveness, the responsive part of Market Orientation. So, an explanation for the rejection of our hypothesis can be that the organisational units in our survey have sufficient levels of Knowledge but lack the dynamic capability of transferring this Knowledge into Market Responsiveness.

Finally we recommend that Management should work on lowering the level of Hierarchy of Decision Making, since otherwise there is a severe risk that initiatives from employees operating close to the Market will not get through the hierarchy of the Firm and interesting ideas will die an early death. We therefore recommend Management to actively stimulate Entrepreneurial initiatives from employees. As our research proves, these initiatives can be interesting sources for Market Orientation.

H5 (confirmed): A lower level of Hierarchy of Decision Making

Borenstein S. (2002), The Trouble With Electricity Markets: Understanding California’s Restructuring Disaster, Journal of Economic Perspectives, Vol. 16, No. 1, pp. 191–211

the level of Market Orientation.

positively influences the level of Market Orientation.

We found proof in the results of our research that if the level of Hierarchy of Decision Making decreases, the level of Market Orientation increases. This finding is in line with other research on this topic (Lumpkin & Des, 1996; Gray, Matear, Boshoff & Matheson, 1998). We believe that low levels of Hierarchy of Decision Making stimulates initiatives from employees who operate close to the Market and that they are ‘empowered’ to develop initiatives and can decide on follow-up by themselves instead of having to work it through the hierarchy of the Firm before a decision is made (Quinn & Spreitzer, 1996; Cardinal, 2001).

Managerial recommendations

• We recommend Management of Firms active in a Deregulating Market to deliberately strive for a high level of Market Orientation. • We recommend Management to build up Knowledge and improve the ability to convert this Knowledge into the Dynamic Capability of Market Responsiveness. • We recommend Management to work on lowering the level of Hierarchy of Decision Making in the Firm and actively stimulate Entrepreneurial initiatives from employees. In our research we reconfirmed the scholarly literature and concluded that Market Orientation is an important driver for Business Performance. Therefore we recommend Management to deliberately strive for a high level of Market Orientation in their area of responsibility. Furthermore, our research showed that the relation between Market Orientation is strengthened in the context of a Deregulating Environment. So we recommend Management of companies active in a Deregulating Market, to strive even more for a high level of Market Orientation. Our research shows that a high level of Knowledge in itself is insufficient to increase the level of Market Orientation. This high level of Knowledge must be combined with the ability of a Firm or organisational unit, to convert this Knowledge into the dynamic

Gino d’Hont is active in the Energy market since 2001. After leading several projects in different Energy Firms he started in 2004 as Manager of two teams at RWE Energy Netherlands. On the 15th of September 2009, Gino defended his research and graduated with distinction. If you are interested in the full report, you can contact Gino via e-mail: gino.dhont@rwe.nl

References

Cardinal L.B. (2001), Technological Innovation in the Pharmaceutical Industry: The Use of Organizational Control in Managing Research and Development, Organization Science, Vol. 12, No. 1, pp. 19-36 Covin J. (1991), Entrepreneurial versus Conservative Firms: a Comparison of Strategies and Performance, Joumal of Management Studies 28:5, pp. 439-462 European Commission (1998), Opening up to choice: The single electricity market. European Commission (2000), Opening up to choice: Launching the single European gas market. Gray B., Matear S., Boshoff C. & Matheson P. (1998), Developing a better measure of market orientation, European Journal of Marketing, Vol. 32 No. 9/10, pp. 884-903 Griffith D.A., Noble S.M. & Chen Q. (2006), The performance implications of entrepreneurial proclivity: A dynamic capabilities approach, Journal of Retailing 82 , pp. 51–62 Hooley G., Cox T., Fahy J., Shipley D., Beracs J., Fonfara K. & Snoj B. (2000), Market Orientation in the Transition Economies of Central Europe: Tests of the Narver and Slater Market Orientation Scales, Journal of Business Research 50, pp. 273–285 Lumpkin G.T. & Des G.G. (1996), Clarifying the Entrepreneurial Orientation Construct and Linking It to Performance, The Academy of Management Review, Vol. 21, No. 1, pp. 135-172 Lumpkin G.T. & Des G.G. (2001), Linking two Dimensions of Entrepreneurial Orientation to Firm Performance: The moderating role of Environment and Industry Life Cycle, Journal of Business Venturing 16, pp. 429–451

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Mahon J.F. & Murray E.A. (1980), Deregulation and Strategic Transformation, Journal of Contemporary Business Vol. 9, 2, pp. 123-138

Quinn R.E. & Spreitzer R.M. (1996), The Road to Empowerment: Seven Questions Every Leader Should Consider, Organizational Dynamics, pp. 37-49

Matsuno K., Mentzer J.T. & Ozsomer A (2002), The effects of entrepreneurial proclivity and market orientation on Business Performance, Journal of Marketing Vol. 66, 3, pp. 18-32

Subramanian R. & Gopalakrishna P. (2001), The Market Orientation-Performance Relationship in the Context of a Developing Economy; An Empirical Analysis, Journal of Business Research 53, pp. 1-13

Narver J.C., Slater S.F. & MacLachlan D.L. (2004), Responsive and Proactive Market Orientation and New-Product Success, Journal of Product Innovation Management 21, pp. 334–347 Newbery D.M. (2002), European Deregulation; Problems of liberalising the electricity industry, European Economic Review 46, pp. 919–927

The Gasroundabout: boosting the economy in times of recession? The Dutch government has forgone an important chance to stimulate accelerated economic recovery during the G-20 summit at the begin of April 2009. The start-up of a large scale energy project like the ‘gas roundabout’ would have been a good decision. Investments in the energy supply are frequently mentioned as a solution to the financial crisis. The energy sector is also in the current economic tidings very healthy and has a stabile long-term-focus with respect to investment policy. In the US, Obama has taken the first steps by announcing a set of measures to stimulate investments in (renewable) energy. Also attractive tax measures have come into effect. As leading gas country, the Netherlands holds a strong trump card: strengthening the role of gas in the European energy supply. After all the security of energy supply and the contribution of gas to achieve the ambitious CO2 climate goals directly affect European interests. The Netherlands, as natural gas country with almost 50 years of experience and expertise in the field of gas, should take the role of pioneer in this matter. The role of the Netherlands as gas roundabout for Europe has been discussed for some time. Unfortunately tangible actions failed to occur. To realize the actual gas roundabout, the government for out network preferable should choose for a public/private partnership whereby also foreign parties can invest. The Netherlands should be open to foreign participation in its national gas infrastructure. The gas distribution network both national and regional is in government hands, as if it were a roundabout with the sign “private property: restricted access”. At the moment the Dutch company Gasunie already participates in foreign networks. Opening up or cooperating implies that also important international parties in the gas market should be able to own parts of the roundabout. Not only storage facilities and LNG terminals, but also other parts of the distribution networks. In this way these parties

Tellefsen B. (1999), Constituent Market Orientation, Journal of Market Focused Management 4, pp. 103-124 Zahra S.A. & Covin J.G. (1995), Contextual Influences on the Corporate Entrepreneurship Performance Relationship: A Longitudinal Analysis, Journal of Business Venturing 10, pp. 43-58

Volko de Jong Partner Relations Management

Siebe Postuma Partner Advisory Service | Sector Oil & Gas | Ernst & Young

are more inclined to provide access to their gas supplies and because of this arrange the important security of supply for the Netherlands and Europe. This ‘opening up’ will further strengthen the image of the Netherlands as a trading hub for gas. The merger at the end of 2008 between APX and ENDEX is a good starting point to further stimulate the gas trade. It seems logical that the Netherlands as a small country will seek more actively the cooperation with Belgium and Germany. The powerful gashub in Zeebrugge and the German gas market are elements in this respect. The Dutch Gas roundabout furthermore will only functions if all participants know the rules. The lack of harmonisation in European energy regulation forms an other obstruction for gas producing countries. As long as regulation remains unclear about investment conditions and regulated price-making, it becomes less attractive to participate in LNG terminals, underground gas storages or distribution networks. This warning was given recently by the CEO of ExxonMobil in The Dutch Financial Times (Het Financieel Dagblad). The gas roundabout offers unprecedented opportunities for the Netherlands, also for the development of our knowledge economy. After all, in the area of gas technology and expertise the Dutch have a strong position. This is the moment to speed up in the area of harmonised regulation and to choose the right partnerships with parties in and outside Europe. Precisely foreign companies can and want to add more value to the gas value chain. Let’s make sure to keep on making rounds but choose the right exit on this favourable roundabout. This is a time to act. Especially because the unique position in the area of gas gives the Netherlands an unique opportunity to come out of the economic recession. Contact information: Siebe Postuma: siebe.postuma@nl.ey.com Volko de Jong: dejong@energydelta.nl

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Books, reports and conferences Evans, D.J. & Chadwick, R.A.(eds) Underground Gas Storage: Worldwide Experiences and Future Development in the UK and Europe. Geological Society, London, Special Publications #313; June 2009 ISBN 978-186239-272-4 The UK will import 90% of its gas by 2020 and new underground storage facilities are needed. New coal-fired power-stations will require clean-coal technologies and underground CO2 storage to reduce greenhouse gas emissions. This volume reviews the technologies and issues involved in the underground storage of natural gas and CO2. More information about this book is available at: http://www.geolsoc.org.uk/gsl/publications/bookshop/page2838.html

Murray, B. Meeting the Challenge? Power markets and Economics: energy costs, trading and emissions. Published by Wiley. February 2009 ISBN: 978-0-470-77966-8 The book’s author Barrie Murray has provided an in depth expert investigation of the various models of energy market reform that have been adopted throughout the world, together with some useful insights into how well such reforms have succeeded in meeting their original objectives and ongoing events.

makers alike. Though this section is focused on the electricity markets, many readers will find this section useful in understanding the market dealings in the European oil and gas sectors. However, the fourth section raises many of the concerns that are likely to face the industry worldwide in the future. Barrie Murray suggests that investment, in alternative energy generation is likely to gather pace, while he foresees nuclear energy being the largest contributor by fuel type by 2050. Another beneficiary of investment is likely to be continued expansion of the coal and gas sectors as new discoveries and technologies are implemented to meet tougher environmental targets. This book is written from an engineer’s viewpoint; though many readers would have appreciated a greater emphasis within the book concerning the impact of vital geopolitical and energy security issues on the energy sector. Overall, this is a remarkable book which provides essential data for any informed discussion of this vital problem that is so often dominated by ill-informed debate This book review has been written by Nicolas Newman, editor of Oxford prospect, on the 27th of August 2009. More information about this book is available at: http://www.oxfordprospect.co.uk/powermarketsandeconomics.htm

In addition, the author examines the new development challenges that face consumer, markets and policy makers in various countries, which arise from climate change, economic conditions and technological developments.

Kavalov, B., Petric, H., Georgakaki, A., July 2009. Liquefied Natural Gas for Europe – Some Important Issues for Consideration.

The book is divided into four digestible sections. The first provides a background briefing into the reasons why countries initially sought to reform their domestic energy sectors. Barrie examines the various models adopted by developed and developing nations. He enquires into how successful such adopted solutions have been in meeting the challenges that emerged. In addition, this section provides an outline of the market, their respective roles and the market mechanisms, together with how demand and capacity restraints impact on the final market price.

This paper focuses on the influence of LNG on the security, diversity and affordability of natural gas supply and the role of the Gas Exporting Countries Forum (GECF) in this process. The authors discuss the Energy efficiency and greenhouse gas performance of LNG in comparison to natural gas distributed by pipeline. Also the quality of LNG and some of the complications due to higher quality of LNG with existing equipment in Europe are discussed. The authors conclude with the key developments and challenges associated with the shipping aspect of the LNG supply chain, such as the amount of qualified crew and traffic delays due to safety regulations.

The second section describes how power generation costs are calculated and how the impact of plant utilization, fuel prices emission trading schemes and EU directives can have on both conventional and alternative generation costs. There are some useful cost comparison case studies between nuclear and other energy technologies. In addition, there is an international comparison of the impact on end user prices that demand and supply will have on transmission and distribution as it applies to the European experience. It is clear from reading this book that many of the environmental targets set by the green movement will have substantial negative impact on Europe’s energy sector and on its power users. It is not surprising that Europe’s politicians are having to adopt a more politically and economically achievable course, less harmful to their economies. The third section provides a detailed examination into the intricacies of energy market structures, capacity, regulation domestic and international energy trading and investment. However the comparisons between the Single European Electricity Market and that of Southern Africa will make for noteworthy reading for investors, operators and policy

Contact information: E-mail: Boyan.Kavalov@ec.europa.eu Tel.: +31 224 56 54 78 This paper is availaible at: http://ie.jrc.ec.europa.eu/

Ledesma, D., July 2009, The Changing Relationship Between NOCs and IOCs in the LNG Chain. In this paper Ledesma examines the relationship between NOCs and IOCs in the LNG chain. Several factors indicated to influence the relationship are the stage of development from both companies and the division of power which is due to nationalism and gas prices. The paper then proceeds to explain how the IOC can add value to the NOC and what the prerequisites are for a successful cooperation. Finally the focus turns to external factors influencing the relationship between IOC and NOC such as the relation with the destination

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market and the services of shipping companies. The author concludes by giving suggestions to IOC managers on how they can adapt their approach in order to continue having successful relationships with IOCs. Contact information: The paper is available at: http://www.oxfordenergy.org/pdfs/NG32.pdf.

Upcoming conferences October 12-13: The Energy Forum 12 to 13 October 2009 London, United Kingdom Contact name: James Campbell Website: http://www.marketforce.eu.com/energy

November 19-20: European Transmission and Distribution Strategies Amsterdam, Netherlands Contact: Stacey Knox Website: http://www.platts.com/ConferenceDetail. aspx?xmlpath=2009/pc988/index.xml

October 19-20: European Energy Efficiency Strategies Brussels, Belgium Contact: Stacey Knox Website: http://www.platts.com/ConferenceDetail. aspx?xmlpath=2009/pc987/index.xml

December 8-10: Smart Utility 2009 London, United Kingdom Contact: Elisa Ramella Website: http://www.smartutilityevent.com

October 26-27: Smart Grid Policy & Implementation Arlington, Virginia Contact: Galitte Den Website: http://www.platts.com/ConferenceDetail. aspx?xmlpath=2009/pc917/index.xml

EDI Quarterly is published in order to inform our readers not only about what is going on in EDI, but also and in particular to provide information, perspectives and points of view about gas and energy market developments. Read the latest developments in the energy industry, daily published on the website of EDI. Editor in Chief Prof. Catrinus J. Jepma President of Energy Delta Institute Editors Leo Hoenders Marius Popescu EDI Quarterly contact information: Energy Delta Institute Laan Corpus den Hoorn 300 P.O. Box 11073 9700 CB GRONINGEN The Netherlands Tel.: +31 (0)50 - 5248331 Fax: +31 (0)50 - 5248301 quarterly@energydelta.nl

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EDI Quarterly Vol. 1. No. 2  

The EDI Quarterly is a publication focusing on news from the energy research community presented in an accessible manner for the business co...

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