Research InterestsModeling power systems, electricity markets, renewable energy, game theory, complex problem solving and climate change
Bertrand is a research fellow focusing on the impact of market regulation and liberalization in energy markets. An experienced energy systems model developer (linear optimization and mixed complementary problems), he is working on developing the KAPSARC Energy Model (KEM) as a decision support tool for analyzing price regulation in energy economies. Bertrand has contributed to the development of KEM Saudi Arabia and is the lead developer of KEM China, studying the impact of government regulation in the coal, power and natural gas markets. He was previously employed as a research assistant at the Canadian Space Agency.
Natural gas development across the member states of the Gulf Cooperation Council (GCC) — including Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, Oman and Bahrain —has become a priority for achieving long-term energy security and for supporting economic diversification initiatives (Shabaneh et al. 2020).
Structural changes in the global oil sector are disrupting conventional market dynamics and the roles played by competing and cooperating producers. Industry players are adjusting to the shale (or ‘tight’) oil revolution and the possibility of plateauing or peaking global oil demand. In particular, OPEC and Saudi Arabia, its top producer, are reshaping the organization’s role as the primary residual supplier to the world oil market. In recent years, OPEC has invited other major exporters, including Russia, to cooperate under the OPEC+ production agreement in an effort to stabilize prices.
China’s domestic oil production has lagged the rapid growth in the country’s oil consumption since 2000, leading to a large, and growing, reliance on crude imports to meet demand. Factors including China’s current market structure and regulatory environment impede further development of the country’s oil industry, despite a number of policies aimed at protecting domestic producers.
Using a short-run equilibrium model of China’s oil and gas supply industry, calibrated to 2016 data, the authors assessed the impact of market access barriers on China’s domestic production.
Key findings included:
Lifting all import constraints could have increased China’s import demand by around 0.29 million barrels per day in 2016.
Opening China’s market to cheaper oil imports in 2016 could have saved approximately $2.8 billion, equivalent to 1.7% of the country’s oil supply costs, primarily due to import substitution for the roughly 9% of domestic production that operates uncompetitively.
Improved utilization of the country’s pipeline network could cut China’s oil transportation costs by up to $600 million.
The level of uneconomic oil production in China is highly sensitive to the international oil price. At $50/bbl about 9 million tonnes of domestic supplies are found to be uneconomic, accounting for about $2.5 billion of additional costs. At an average $80/bbl the number drops to 6.6 million tonnes, at a cost of $1.1 billion.
Rising crude oil import prices since mid-2017 may allow policymakers to further deregulate China’s domestic oil sector.
Despite significant progress made by China in liberalizing its natural gas market, certain key areas such as market access and pricing mechanisms remain heavily monopolized or controlled by the government. To assess how such distortions impact the market, we developed a Mixed Complementarity Problem model of China’s natural gas supply industry, calibrated to 2015 data.
Saudi Arabia plans to reform and privatize its power generation sector as part of the Kingdom’s Vision 2030. To provide analytical insights, we developed a model that simulates the restructuring of the electricity market, along with reforming fuel prices to an energy equivalent of $3/MMBtu.
When energy sectors transition from government-controlled to market-driven systems, the legacy regulatory instruments can create unintended market distortions and lead to higher costs. In China, the most notable regulatory throwback is ceilings on electricity prices that generators can charge utilities, which are specified by plant type and region. We built a mixed complementarity model calibrated to 2012 data to examine the impact of these price caps on the electricity and coal sectors.
China’s coal industry grew at unprecedented rates during the first decade of the 2000s in order to support equally unprecedented economic growth. In that type of environment, it is impossible for the capacities of every link in the supply chain to be correctly sized all the time. In order to understand the consequences of such mismatches, KAPSARC has developed a production and multi modal transshipment model of China’s domestic coal market, calibrated to 2011 data. This allows us to examine what the global and domestic consequences might have been had the bottlenecks not existed in 2011.
Most renewable powered desalination schemes are hybrids that displace fossil fuel power when renewable power is available. Their economic viability depends only on whether the renewable power source can generate electricity more cheaply than the fuels that it displaces. The framework used here by KAPSARC compares standalone plants that are powered only by renewable energy and therefore incorporate storage, either of input energy to allow the plant to run full time or of produced water to level out the production of an oversized plant.
External observers worry about whether Saudi domestic consumption of oil will crowd out exports. This is based on simple extrapolations which suggest that in a little more than 20 years Saudi Arabia may become a net importer of hydrocarbon fuels. However, our research does not support this. Based on the “baseline scenario” macroeconomic assumptions in Oxford Economics’ global economic and industry models, we project Saudi Arabia’s energy balances until 2032 using the KAPSARC Energy Model (KEM).
Saudi Arabia aims to reduce the growth of its energy demand. This paper outlines an approach that could help the country to reduce substantively its current fuel consumption and could result in a net economic gain without increasing current end consumer prices and while maintaining positive utility sector net cash flows. Using a new multi-sector equilibrium model developed by KAPSARC (the KAPSARC Energy Model or KEM), we estimate the magnitudes of the potential economic gains that different policies would generate. Our long term static version of the model reveals that an annual economic gain exceeding 23 billion USD in 2011, or almost 5% of that year’s GDP, could have been achieved while the water and power sectors continue to live within their cash flows. Our approach—which introduces investment credits for solar and nuclear and allows more natural gas consumption in the power sector—achieves almost all the benefit of raising inter-sector transfer prices for fuels to world market equivalences, but only moderately increases current transfer prices. Importantly, this gain does not require an increase in consumer prices of electricity or water.
Standard economic optimization models represent markets in perfect competition. They are commonly used, though they may not accurately represent real-world policies and regulations. Equilibrium models built using a mixed complementarity problem (MCP) approach are capable of simulating more flexible pricing structures, including regulated prices. This approach can provide a more accurate representation of real-world economic systems. However, it is significantly more difficult to develop and requires more complex formulations, as well as advanced skill sets.
In our previous Instant Insight, The Global Methane Pledge: What It Means for the Oil and Gas Industry Post-COP26, we shed light on the increased momentum behind the issue of methane emissions and how it is taking center stage in major climate change forums. As of the time of writing, 111 countries have signed the Global Methane Pledge to collectively decrease global methane emissions by 30% by 2030 from 2020 levels.
From 2023 onward, the European Union’s (EU’s) Carbon Border Adjustment Mechanism (CBAM) will require importers to declare the embedded carbon emissions of electricity, iron, steel, aluminum, cement and fertilizers. The CBAM will ultimately transition into a carbon import tax, with the goal of resolving carbon leakages in the EU’s emission trading system (ETS).
Integrated oil and gas (O&G) companies operate vertically integrated businesses that span the O&G value chain. In this way, they can leverage expertise across multiple domains rather than just focusing on exploration and production (E&P). Examples of such companies include British Petroleum (BP), Cenovus Energy, Chevron, Eni, Imperial Oil, ExxonMobil, Repsol, Royal Dutch Shell, Suncor Energy and TotalEnergies. Integrated O&G companies played a central role in advancing energy availability and economic growth during the 20th century.
The last decade saw dramatic changes in the energy sector, including the shale oil and gas boom in the United States (U.S.), a commodity down-cycle, and heightened awareness of the global climate challenge. In response, the Gulf Cooperation Council (GCC) member countries launched economic reforms to diversify government revenues away from hydrocarbon exports and restructure domestic energy prices to manage rapidly rising energy demand.
Motivation and objective of the study
What if OPEC decided to abandon organizing residual production collectively, transitioning the world permanently to a competitive oil market? This commentary is based on a forthcoming KAPSARC paper, “Cooperate or Compete? Insights from Simulating a Global Oil Market with No Residual Supplier” (Rioux et al. 2020). It constructs scenarios in which OPEC members, or OPEC members other than Saudi Arabia, start behaving as competitive price takers in 2020 and stop participating as part of a collective residual oil supplier. This analysis employs a standard economic equilibrium model to simulate the transition to a purely competitive world oil market from 2020 to 2030.
Co-hosted With Khalifa University and International Association for Energy Economics (IAEE) Natural gas has been instrumental in meeting growing power demand in Gulf Cooperation Council (GCC) countries and establishing industrial bases that have contributed to their economic growth. Within the last decade, regional gas demand has grown by 100 billion cubic meters (bcm), placing GCC […]
Gas is envisaged as the fuel of choice in the power sector and is the ideal fuel to help transition toward clean, sustainable, and affordable energy access. As vital as gas is for electricity generation, the petrochemical industry, the transportation sector, and heating, many oil operators flare associated gas, a by-product of oil extraction, at […]