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The Scenario Planning Service (SPS) defines and tracks the critical assumptions behind our worldwide oil and gas projections with a focus on our medium- and longer-term outlooks. Scenarios are developed as a supplement to our Reference Case projections, consistent with PIRA’s quantitative, no-nonsense approach to analyzing markets.
Anyone who has observed global energy markets over the decades recognizes that even the soundest forecast is surrounded by a wide range of uncertainty. Projections are developed on the basis of a series of assumptions — on economic growth, resource availability, government policies, technology, and the economic and political behavior of key energy suppliers. PIRA has a track record of being better than the consensus in getting these assumptions right through solid, tireless analysis and a detailed knowledge of market data. Nevertheless, there are inherent uncertainties that even the best analysis cannot eliminate.
While uncertainties can't be eliminated, they can be identified, quantified and their impact on business plans assessed. The objective of SPS is to define and track these alternative outcomes in a way that makes them useful to our clients in testing their business strategies.
SPS can help clients answer the following questions:
PIRA is not the first consultant to offer long-range oil and gas scenarios, but this service is different, taking advantage of PIRA’s no-nonsense approach to market analysis. SPS is:
The cornerstone of SPS is the Annual Scenario Guidebook, which is released each February. This comprehensive study assesses the outlook to 2030 for oil and gas markets. It provides not only the quantitative forecasts — for PIRA’s Reference Case and alternative high and low cases — but also the detailed assumptions that go behind the forecasts. These include views on the global economy, energy and environmental policy, technology, and producer strategies. Key “signposts” — developments that have the potential to fundamentally impact energy markets — are defined in the Guidebook. These signposts are subsequently monitored throughout the year by PIRA, to determine whether prices are tracking PIRA’s Reference Case outlook or deviating towards a scenario case.
View the 2013 SPS Guidebook Table of Contents
According to the 2013 Guidebook, the reality and potential of expanded production from both shale gas and shale liquids continue to have a dramatic impact on the regional and global balances for both commodities. While the production to date has been almost entirely in North America, those volumes have already been sufficient to alter global markets via changes in North American trade patterns.
Development of shale resources outside of North America is still in its early stages, but it is likely to expand rapidly before this decade is over. The impacts will go far beyond the crude and gas balances, with significant implications for relative pricing, refining, trade, energy policy, inter-fuel competition, and even the macroeconomic outlook. In regards to the flat price, developments in shale over the past 12 months, coupled with continued weakness and uncertainties in the global economy, have caused PIRA to lower its longer-term price outlook for both liquids and gas.
However, the upside price risks, particularly in the oil market, have not disappeared. No one knows how the Arab Spring will play out or how long the transition will take, but it has been chaotic to date, and the risks that the chaos will spread or lead to extended periods of ungovernable, or failed, states are very real. Dr. Mark Schwartz, director of SPS, notes, “We know that the record has been one of growing supply losses in the MENA region, and, with uncertainties over Iran still facing the market, it is perhaps not surprising that global crude prices have held flat despite the rapid and anticipated growth in shale. So, while it is easy to remain optimistic on global supply due to the success of shale liquids, it is important to note that, up to now, every barrel of incremental North American shale liquids production has been more than offset by losses of production due to political disruption.”
With U.S. coastal crude prices still connected to the global market, but gas prices disconnected, the gap between gas and liquids remains extremely wide in North America. PIRA anticipates that the market will find a way to utilize discounted natural gas in higher value applications. LNG exports from North America to oil-linked markets will rise later this decade, slowly eroding the arbitrage opportunity as U.S. gas prices are pulled up and global gas prices are pushed down. Gas use in transportation is getting increased attention around the world from the U.S. to the Middle East to China and may move forward in meaningful volumes post-2020, even with only minimal government support, according to the Guidebook.
PIRA still projects strong growth in the use of gas in electric power generation, but it notes that Europe has disappeared from the list of growth markets due to the combination of incentives for renewables, weak top-line electricity growth, high gas prices, and low carbon prices. Europe appears to have a unique combination of these characteristics, but the potential of renewables, with strong government support of production and use, may have a greater upside than many anticipated.
For more details on the Guidebook and other SPS deliverables, refer to the next tab.
The Scenario Planning Service provides a fully consistent supplement to PIRA’s Reference Case retainer services. Specifically, clients benefit from the following service components:
Sent on an “as-events-dictate” basis, insightful assessments of specific events with the potential to alter long-term trends. Past news events that SPS has assessed include:
Clients receive two invitations to attend one of the annual roundtables, which provide an opportunity for attendees to:
Attend special in-depth presentations from senior PIRA staff on topical issues, such as:
View a sample Roundtable agenda
This dynamic database captures long-term demand, supply, pipeline shipments and LNG imports and exports at a country and regional level, providing a comprehensive and balanced global picture of natural gas. The gas demand outlook uses PIRA’s World Energy Demand Model, which calculates the total energy requirements for each of the four primary energy consuming sectors and determines which fuels are likely to meet those requirements. The gas supply outlook draws inputs from PIRA’s North American and European Natural Gas and Global LNG services.
Quarterly report that examines the latest U.S. policy developments at the local, state and federal level, including regulatory actions, legislative initiatives, court rulings, trends in public opinion, and scientific studies that influence future production activity. The analysis underpins PIRA’s fundamental assessments of future prospects for liquids and gas from fracking, which are critical to both short- and longer-term balances for North American gas and, to an increasing extent, North American and global oil.
Clients are entitled to request PIRA to use in-house tools to construct two (2) specific scenarios per year, tailored to their own views on key variables such as price, economic growth, and supply availability. When requested, we provide guidance and recommendations regarding how best to incorporate the conclusions of the scenario work into their decision-making process.
As with all PIRA services, phone and email access to PIRA’s Scenario Planning Group allows Clients to obtain timely analytical support, facilitating a more productive use of their time and maximizing the value of the written content delivered at the roundtables, via email and the Web. Clients can discuss defined scenarios or get feedback and guidance on concerns of their own.
All reports, data tables, and presentations associated with the SPS are available to clients on PIRA Online. As such, recent and archive material are easily searchable. Also available to SPS Clients on PIRA Online are PIRA’s regularly updated macroeconomic data (currencies, U.S. economy and manufacturing, world economies and air travel) and a weekly report that tracks the performance of equity markets in countries and regions around the world.
Nearly all PIRA analysts provide input to the SPS service in their respective areas of expertise. The group below are regular contributors and participants in the SPS Roundtables.
Mark A. Schwartz (President and Managing Director, Scenario Planning Group) oversees SPS. Dr. Schwartz was formerly Chief Economist of ExxonMobil Corporation where he was responsible for developing the company’s long-range economic and energy outlook. Dr. Schwartz designed and managed the implementation of the energy modeling system and database that allowed ExxonMobil to develop their base-case global energy outlook as well as alternative cases to capture the impact of changes in price, economic growth, environmental policy and other critical assumptions. Prior to this position, Mark spent five years in Exxon’s International Gas Marketing Company, where he developed the Asian gas supply/demand balance and led several multi-company studies of China’s gas pipeline and LNG options. During his 25 years at Exxon he also had assignments in Upstream Planning, Treasurers, and Corporate Planning functions. He holds a PhD in economics from the University of Pennsylvania.
Richard (Rick) Joswick (Managing Director, Global Oil) develops PIRA’s outlook for crude and products pricing, refinery margins, and inter-regional supply balances. He authors PIRA's monthly European Oil Market Forecast and participates in special projects and multi-client studies, including Bottom of the Barrel: An Updated Outlook for Residual Fuel Oil (2012). He joined PIRA in 2004 after a 20-year stint with ExxonMobil in supply logistics, planning, refining, and research. Most recently, he was responsible for Exxon's near-term oil market forecast. Prior to this position, he focused on trading and logistics, refining economics, and heavy oil upgrading and, as part of his work, developed information systems in these areas. Rick has MS and BS degrees from Rutgers University in chemical engineering.
Frederick W.A. (Bill) Fuller (Senior Director, Global Oil) has over 35 years of energy forecasting and analytical experience. During his 30-year tenure with Exxon International, Bill was the Advisor to Exxon’s Industry Group, providing briefings to supply management, and analyzing and forecasting oil market trends. In sales and marketing, Bill negotiated oil prices on sales to Exxon affiliates, established posted prices in the Caribbean and Asia, and oversaw tanker operations. Bill holds a BS chemical engineering from Cornell University
Peter Jaquette (Senior Director, Global Oil Group) oversees PIRA’s World Energy Demand Model and is the coordinator of the Planning for Tomorrow study series. Peter joined PIRA in 2007 with more than 25 years of experience in corporate strategic planning and economic consulting, including 14 years with ARCO and nine years with Weyerhaeuser, where he was involved in evaluating cellulosic ethanol and other energy projects. Peter has a B.A. in economics from Swarthmore College and an M.A. in economics from Stanford University.
Ira B. Joseph (Executive Director, International Gas) manages PIRA’s European Natural Gas Service. Ira joined PIRA in 1999 after working as director of Business Development at SageMaker, Inc., an enterprise information portal that provides a platform for integrating internal and external energy content. Prior, Ira held positions at Energy Intelligence Group (EIG) for over a decade, as Senior Editor of Petroleum Intelligence Weekly and Editor-in-Chief of World Gas Intelligence. He has authored several books on crude oil marketing and natural gas, including versions of EIG’s International Crude Oil Market Handbook and World Gas Handbook. Ira holds an MA in International Economics from Johns Hopkins School of Advanced International Studies
Michelle Patron (Senior Director, Political Risk) oversees PIRA’s political risk coverage and has over a decade of experience analyzing international energy issues. Prior to joining PIRA in 2004, Michelle was a Fellow at the Council on Foreign Relations and worked as an international policy advisor at the U.S. DOE. She advised the U.S. Energy Secretary and other senior U.S. officials on relations with major energy producing and consuming countries including Venezuela, Mexico, Brazil, China, Nigeria and the European Union. In 2001, Michelle served as Energy Attaché for the U.S. Department of Energy at the U.S. Embassy in Beijing. Prior to DOE, she worked at the International Energy Agency, the White House, UNICEF and the Center for International Environmental Law. Michelle holds a BA from Columbia University and an MA from Johns Hopkins School of Advanced International Studies (SAIS).
Dan Klein (Senior Director, International Coal) oversees PIRA’s International Coal Retainer Service. He is responsible for the International Thermal Coal Market Forecast and International Coal Markets Scorecard, and he contributes to the U.S. Coal Market Forecast. Prior to directing the International Coal Service, Mr. Klein was a member of PIRA’s North American Electricity team. He has a BA in economics from Calvin College.
Roman Kramarchuk (Managing Director, Emissions and Clean Energy) heads up PIRA's Greenhouse Gas Emissions and North American Environmental Markets services. He joined PIRA in 2005, coming from the U.S. EPA’s Clean Air Markets Division, where he was extensively involved in the development of the CAIR and CAMR (Mercury) Rules and the BART Guidelines. His previous experience includes work with PA Consulting / PHB Hagler Bailly, where he evaluated strategies regarding power sector fuel choice, allowance purchases, and capital investments in pollution control equipment and advised on power plant development and acquisition, transmission expansion and asset valuation. He has a MPP from the Kennedy School of Government at Harvard and a BA in economics and BSE in system engineering from the University of Pennsylvania.
Alan Struth (Director, Global Oil) is the author of PIRA’s Japan Weekly Oil Analysis and the Asia-Pacific Oil Market Forecast as well as various macro-economic reports. Prior to joining PIRA in 2002, he was Director of Oil Market Analysis at Honeywell in Houston. Previously, he served as Chief Economist for Phillips Petroleum and was responsible for forecasting and economic analysis. Alan has over 25 years of industry experience, focusing on financial and market analysis, economics, policy analysis, forecasting and planning. He received a B.A. in economics from Rice University and a M.S. from the University of Pennsylvania.
SPS can be purchased on its own or as an add-on to a company's existing license to Global Oil, North American Natural Gas, or European Natural Gas. When adding to an existing retainer, a discount applies. For prices and licensing options, please contact your PIRA account executive.