Special Focus on Independent Oil & Gas
Table 1: Likely “Price Positive” Scenarios In 2012 Issue
Iran’s nuclear ambitions
Current situation
Iran appears to be developing the capacity for nuclear weapons against international wishes
Significant internal dissent in Saudi Arabia
There have apparently been low levels of internal dissent in Saudi Arabia, especially in minority Shia areas.
Significant internal dissent in Iran
There are a number of causes of potential internal dissent, most importantly economic conditions (especially inflation), and friction between religious leaders and the President
Break-up of the Iraqi government
Following the US withdrawal, the Shia and Sunni factions within the Iraqi government appear to have split
Continuing unrest in Syria
Violent protests against the Assad regime continue; there are reports of continuing desertions from the government military
Increased political pressure on Israel by Egypt and other Muslim nations
It appears that the future government of Egypt will be dominated by Islamic popularists; the new government will probably put pressure on Israel by various means
Disruptive scenario
A military strike by Israel and/or the US against Iranian nuclear sites with Iranian retaliation
Impact on the oil price
Iran would probably seek to close the Straits of Hormuz, stopping oil and gas exports through that route, sending oil prices sharply higher
Levels of internal dissent increase and spread geographically, putting the operations of oil installations under threat
Economic conditions, and/or internal political ructions, and/or a spill-over from Syria, cause increased levels of internal dissent; operation of oil installations might come under threat
Saudi oil exports would probably drop and oil prices would likely be driven sharply upwards by higher risk premiums
Iranian oil exports would probably drop and oil prices would likely be driven sharply upwards by higher risk premiums
De facto separation of the Shia areas of South and East Iraq from the Sunni areas in the North and West
Possible disruption of Iraqi exports through Turkey and Syria, or the danger of terrorist attacks on industry installations throughout the country
Violent protests escalate into a de facto civil war, led by the Sunni majority
The Sunni-led revolt worries the Shia-led governments of Iraq and Iran, which try and bolster their own positions, increasing the risk premium in the oil price
Egypt unilaterally abrogates its peace treaty with Israel; violence increases around Gaza and the West Bank.
Unless there is military action between Israel and a significant regional power (which we do not expect), it is unlikely that physical supply would be disrupted. However, oil prices would probably be driven upwards by higher risk premiums
Increased internal dissent in Russia, in reaction to the 2012 Presidential Election
Following the disputed Duma elections of December 2011, presidential elections are due to be held in March 2012
Political dissent causes a loss of political legitimacy for the newly-elected President Putin; inward and domestic investment slows due to uncertainty
Probably little disruption to oil and gas exports in 2012. However, oil prices are likely to be affected by higher risk premium. Lower production profile of oil and gas in the medium term
Source: Westhouse Securities
Drillers and Dealers :::
::: February 2012 Edition
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