International Journal of Global Energy Issues (5 papers in press)

• Hedging Strategies and the Financing of the International Oil Pollution Compensation Funds
  by Sandrine SPAETER, André SCHMITT 
  Abstract: The maritime oil transport is regulated by the 1992 Civil Liability Convention for Oil Damage and the 1992 Oil Pollution Compensation Fund Convention. In this compensation regime, contributions of oil firms are based on the aggregate risk of the Fund and are assessed each time an oil spill is registered. In this paper, we present the main characteristics of such a compensation regime and we explain why oil firms would benefit from a reorganization of the financing of the Fund. We highlight the arguments that justify the introduction of financial hedging instruments in the management of the compensation system related to oil spills.
  Keywords: Oil spill; IOPC Fund; risk management; insurance; financial hedging.
   
• Carbon Dioxide Capture and Storage Scenarios: A Case Study of the East Midlands and Yorkshire (UK)
  by Clair Gough, Michelle Bentham, Simon Shackley, Sam Holloway 
  Abstract: This paper uses quantitative electricity supply scenarios to explore the potential for CO2 storage at locations in the Southern North Sea basin from point sources within a case study region consisting of the East Midlands combined with Yorkshire and Humberside in the UK. The reactions to these scenarios from a variety of stakeholders from the public and private sectors are explored using an assessment process. The scenarios demonstrate that there is sufficient storage capacity within reservoirs in the Southern North Sea basin for CO2 generated within the region’s power stations to 2050 and beyond, even under a high fossil fuel scenario. CCS was typically seen as offering significant potential for CO2 mitigation by a small but varied selection of professional stakeholders although consensus over the preferred approach to a low carbon electricity supply was far from evident.
  Keywords: geological CO2 sequestration; climate change mitigation; stakeholder perceptions; integrated assessment; carbon dioxide storage; carbon dioxide capture; UK; United Kingdom.
   
• Structural break and elasticity of coal demand in China: Empirical findings from 1980-2006
  by Jian-Ling Jiao, ying Fan, Yi-Ming Wei 
  Abstract: Coal is the principal primary energy source in China. Research on coal demand is vital for informing China’s economic development. In this paper, the theoretical structural break of coal demand has been tested using annual time series data from 1980 to 2006. Results indicate that coal demand has undergone an intercept structural break during the period 1997-2000 (from -0.536 breaking to -0.702). Then long- and short-term relationships between coal demand, income variability, coal price and oil price are explored using a time series modelling technique. Simultaneously, the elasticities of coal demand are tested, with respect to income, coal price and oil price. Evidence suggests that the long-run elasticities are 0.560, -1.161, 0.733 respectively; with short-term elasticities being 0.716, -0.067, 0.017. The conclusion is that there is an integrated relationship among coal demand, income variability, coal price and oil price. China’s coal demand will be influenced by the relationship in future. However, the influence from the change of coal price and oil price in the short-term are -0.067 and 0.017, and are insignificant from zero in statistics. This may predicate the unreasonableness existed in the mechanism of China’s primary energy pricing. That is, the price of primary energy can not effectively develop the function of allocating resources.
  Keywords: coal demand; structural break; elasticity; China; energy pricing.
   
• Consumers' Choices among Alternative Electricity Programmes in Geneva - An Empirical Analysis
  by Sylvain Weber, Andrea Baranzini, Emmanuel Fragnière 
  Abstract: Services Industriels de Genève} (SIG) is the monopoly which delivers natural gas, water and electricity in the Canton of Geneva (Switzerland). A few years ago, SIG offered to Geneva households the possibility to choose among 6 different types of electricity products. Those new electricity products differ in particular because of the origin of their production (natural gas, hydraulic, solar, asf.) and of their price. Through a survey research, we collected information about households' choices among the different electricity products. By a series of logistic regressions, we assess what determines households' knowledge of the different electricity products which are offered by SIG, as well as the factors explaining their choices among them.
  Keywords: energy prices; customer choice; logit models; Switzerland; electricity products.
   
• LNG Project Valuation with Financial Leasing Contracts
  by Magne Emhjellen, Kjell Løvås, Petter Osmundsen 
  Abstract: Financial leasing is prevalent in LNG projects. Actually, in many LNG infrastructure projects, leasing is the only option for oil companies. A common approach in such settings is to treat financial leasing costs as operating cost and discount with the firm’s weighted average cost of capital (WACC). This method, which is applied on huge investments in LNG infrastructure, overstates project profitability and may lead to overinvestment. Since financial leasing payments are contractual and deterministic, a separate cash flow valuation is called for, with a lower discount rate for financial leasing costs. We present a correct method for calculating the net present value of projects when there are no investment alternatives, i.e., when leasing is the only option. Finally, we demonstrate through a real LNG project example, the magnitude in the project net present value error with the current valuation method.
  Keywords: Project Valuation; Capital Budgeting; Financial leasing; Financial cost