The Norwegian Ministry of Petroleum and Energy. Oslo, 17 February 2015

Transcription

1 The Norwegian Ministry of Petroleum and Energy Oslo, 17 February 2015

2 USD/bbl USD/bbl Oil price plunge triggers market reset Historical Brent crude oil prices IEA import price assumptions Brent MT February 2015 MT June % drop in crude oil prices June early January 2015 Partial rebound since then, but market does not expect full recovery From backwardation to contango Is the age of triple-digit oil prices over?

3 IMF backpedals on economic recovery 4.2% 4.0% 3.8% 3.6% 3.4% 3.2% 3.0% MTOMR 2015 IMF Jan-15 IMF Oct-14 IMF Jul economic growth revised from 4% to 3.8% and again to 3.5% over a six-month period

4 mb/d Business as unusual Implied OPEC spare capacity World demand growth World supply capacity growth The market response to lower prices is asymmetrical Supply has become more price-elastic, demand less so

5 Supply

6 mb/d Slowing supply growth OPEC crude capacity OPEC NGLs Non-OPEC World Global capacity growth cut to annual average 860 kb/d through 2020, down from 1.4 mb/d in

7 kb/d Non-OPEC growth drops from record high Annual non-opec supply growth PG and biofuels Other Asia China Middle East Africa Latin America Other Europe FSU OECD Pacific OECD Europe OECD Americas Total Non-OPEC supply grows by 3.4 mb/d to 60 mb/d by 2020 Annual growth slows to average 560 kb/d vs 1.9 mb/d in 2014

8 kb/d US, Brazil and Canada top sources of growth Not shown: US supply to grow 2.2 mb/d Main growth sources remain the same as before the price drop

9 Low price cuts mid-term non-opec growth expectations by 2.8 mb/d Change in 6-year growth outlook (kb/d) Russia US Canada Non-OPEC Africa Norway Colombia Non-OPEC Middle East China Other FSU

10 mb/d mb/d Diverging supply paths 2.0 Change in US liquids production 0.30 Change in Russian liquids production Feb Q Feb Q2014 US production growth slows in , then rebounds Russian output contracts by 560 kb/d by 2020

11 mb/d mb/d North America remains backbone of non-opec growth 14 US total oil production 6 Canada total oil production LTO Gulf of Mexico NGLs Other liquids Other crude and cond NGLs Alberta L&M Bitumen Synthetics Other US production nears 14 mb/d, Canada 5.0 mb/d by 2020 Most of US output is LTO and NGL by the start of next decade Bitumen, synthetics make up 60% of Canada s production by 2020

12 US LTO and shale-play condensate breakevens rise 100% 80% 60% 40% 20% 0% USD/b below 40 USD/b USD/b USD/b USD/b above 100 Source: Rystad Energy About 41% of US LTO and shale condensate breakeven prices at $50/bbl or lower in 2014 Depletion of sweet spots to offset efficiency gains and lower costs

13 Brazil hit by project delays, low prices kb/d Campos Santos Other Brazil total 2014 forecast Supply swung back into growth in 2H14 Petrobras debt and legal problems raise hurdles

14 mb/d Russia biggest casualty of price fall Current data June 2014 Ruble collapse partially offsets drop in dollar prices Tax regime blunts impact on companies; government takes biggest hit Greenfield startups delayed Sanctions hit Arctic and LTO

15 mb/d North Sea suffers setback UK Norway Other Ann. Change (rhs) Price slump delays projects, production contracts through 2020

16 mb/d Low price delays impact of Mexican reform Current data June 2014 Growth expected to kick in in

17 mb/d kb/d Caspian growth elusive 2.0 Kazakhstan total oil production 900 Azerbaijan total oil production Production gains post-2017 after Kashagan comes online Limited success in stemming rapid declines in Azerbaijan s ACG fields

18 mb/d China s production holds steady on EOR Daqing Shengli Changqinq Other Legacy fields, especially Daqing and Changqing, see EOR benefits through 2020

19 Biofuels production inches higher mb/d mb/d of oil equivalent Volumetric Adjusted for energy content 4% 3% % 1% % United States biofuels OECD Europe biofuels Brazil biofuels Rest of the world biofuels World Biofuels, energy adjusted As % of global road transport fuel demand Biofuel consumption is mandate-driven

20 mb/d Price drop curbs OPEC crude capacity growth Current data June 2014 Growth expectations reduced to 200 kb/d annually, vs 350 kb/d prior to the price drop

21 OPEC wins back some market share Share of total supply inches back up, but not the share of global capacity

22 OPEC growth hinges on Iraq mb/d Iraq Rest of OPEC OPEC Price drop, ISIL add to Iraq institutional and infrastructure constraints Total Iraq growth estimated at 1.1 mb/d in ; elevated risks Low prices can be double-edged

23 mb/d kb/d UAE to post notable growth Offshore growth Onshore growth Total Abu Dhabi, IOCs press ahead with expansion plans Upper Zakum due to add 250 kb/d by 2017 Stakes in giant onshore Adco concession being awarded

24 Nigerian capacity to contract Low oil price further delays costly deep-water projects Investment already set back by long-running deadlock over Petroleum Industry Bill

25 Libya: OPEC s wildcard mb/d Militants target energy industry

26 Battle for market share just starting How will OPEC make room for expanding Iraq and an Iran freed from sanctions?

27 Demand

28 Mixed demand response Revised demand growth prospects FSU Middle East Africa Latin America India US Low price dampens outlook for oil exporters Oil importers enjoy benefits but kb/d weak economic recovery, subsidy cuts, forex, fuel-switching provide offset

29 Currency weakness dampens price effect in many countries Domestically-priced Brent crude indices, Jan2008 Jul2008 Jan2009 Jul2009 Jan2010 Jul2010 Jan2011 Jul2011 Jan2012 Jul2012 Jan2013 Jul2013 Jan2014 Jul2014 US Europe Russia China

30 mb/d Modest demand growth still foreseen % 2.5% Other NonOECD % NonOECD Asia % % OECD % -2.5% World Growth Rate +1.2% per annum, Below pre-great Recession trend (1.9%, ) Net gain of 6.6mb/d, nearly 1 mb/d above supply capacity growth

31 Eastward pull unabated Europe FSU Asia/Pacific 345 Americas 158 Middle East Africa Average global demand growth (kb/d) % % % OECD/IEA, 2015 This map is w ithout prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

32 mb/d OECD share of demand continues to decline % 55% 50% 45% 40% Other non-oecd Middle East Former Soviet Union Other Asia China OECD OECD share Non-OECD demand overtook OECD in 2014 OECD declines further overall Non-OECD continues to grow, but at slower rate

33 Middle Eastern demand growth expectations reduced by turmoil, price Change to prior demand forecast Still key growth area at 2.6% gains per annum, or 1.4 mb/d total over War and unrest take toll Lower price cuts exporter-country GDP Countries with low buffers harder hit Subsidy reductions

34 mb/d China shifting gears 1,2 1,0 0,8 0,6 0,4 0,2 0,0-0,2-0, LPG Naphtha Motor gasoline Jet and kerosene Gasoil/diesel Residual fuel Other products +2.6% per annum, Slower stage of economic growth, IMF foresees sub-7% GDP trend Focus shifts from oil-intensive exports to consumer sector Diesel less dominant

35 mb/d Indian demand seen gaining momentum Other products Residual fuel Gasoil/diesel Jet and kerosene Motor gasoline Naphtha LPG +3.4% per annum, Growing confidence in economy Worst of subsidy cuts has passed

36 mb/d OECD Asian demand contracts further Other products Residual fuel Gasoil/diesel Jet and kerosene Motor gasoline Naphtha LPG Non-OECD Asia Oceania -0.6% per annum, Ongoing power-sector switching, out-of-oil Weak macroeconomic momentum and heady efficiency gains

37 mb/d European demand outlook weak on slow rebound Other products Residual fuel Gasoil/diesel Jet and kerosene Motor gasoline Naphtha LPG -0.7% per annum, Persistent macroeconomic weakness curbs demand Deflation concerns Efficiency gains

38 mb/d US bucks the OECD demand trend Other products Residual fuel Gasoil/diesel Jet and kerosene Motor gasoline Naphtha LPG +0.3% per annum, Supported by robust macroeconomic backdrop Efficiency gains trim gasoline and jet/kerosene

39 Lower prices at the pump lift US gasoline demand outlook Efficiency gains still cuts use

40 Marine Bunkers

41 Emission rules catch up with marine sector 0.1% sulphur-content cap in ECAs effective 1 January 2015 Elsewhere 3.5% cap since 2012, to be cut to 0.5% in 2020 or 2025 Uncertainty on timing

42 Bunker fuel mix to undergo step change mb/d Oil-based marine fuel consumption in international navigation Gasoil Residual Fuel Oil As the global cap is implemented, 3 options available to ship owners: gasoil, scrubbers, LNG Up to 2.2 mb/d could switch from fuel oil to marine gasoil: Marine gasoil notionally set to rise to 3.1 mb/d Residual fuel oil set to decrease to 1 mb/d

43 Oil Trade and Refining

44 mb/d Crude trade has peaked 36.0 Inter-regional crude trade Crude trade peaked at 36 mb in 2012 and declined swiftly over on lower US import needs, higher Middle East runs Declines expected to moderate and partially reverse in the medium term

45 World crude markets fragmenting Crude Exports in 2020 and Growth in for Key Trade Routes 1 (million barrels per day) OECD Americas 2 OECD Europe 3.6 (-0.5) 0.5 (-0.1) 0.4 Asia 0.2 Oceania (+0.1) (+0.2) (-0.5) (+0.3) (-0.1) (+0.1) (-0.6) China OECD 0.2 (+0.1) 1.5 (+0.1) (+0.5) (-0.3) 5.5 (+0.1) Other Asia (+0.6) 0.6 (+0.4) Red number in brackets denotes growth in period Excludes Intra-Regional Trade (+0.1) 2 Includes Chile 3 Includes Israel Crude trade will continue to shift eastwards

46 kb/d Non-OECD crude imports expected to overtake the OECD in 2020 kb/d Regional crude exports, yearly change Regional crude imports, yearly change Africa FSU Latin America Middle East OECD Europe OECD Americas OECD Asia Oceania Other Asia Other Europe China Later than previously expected following: Impact of low prices on North American and North Sea production Slowing non-oecd demand growth

47 Middle Eastern producers compete for market share in Asia Middle East export growth, China Oth Asia OECD Eur Africa FSU Oth Eur L. America OECD Am OECD AO mb/d End in sight for the Asian premium?

48 Russia s pivot to Asia FSU export growth, China Oth Asia Oth Eur Mid East L. America OECD Am Africa OECD AO OECD Eur mb/d Rosneft supply deals with CNPC, Sinopec, Essar, PetroVietnam European crude demand attrition

49 kb/d Refining surplus lingers despite scaling back Global crude distillation capacity additions OECD Americas OECD Europe OECD Asia Oceania China Other Asia Middle East Other non-oecd Total Net New capacity of 6.4 mb/d by 2020, led by non-oecd Asia, Middle East Brief margin respite in 2014 on shutdowns

50 Non-OECD accounts for 90% of growth Others 14% OECD 10% Latin America 8% China 24% Middle East 26% Other Asia 18% Non-OECD Asia adds 42% of total, or 2.7 mb/d of crude distillation capacity Middle East expands capacity by a further 1.7 mb/d, taking total capacity to 10.3 mb/d at the end of the decade

51 mb/d Non-OECD expansions front-loaded Non- OECD refinery capacity additions China Other Asia Middle East FSU Latin America Africa Projects planned during boom years are now being completed strong growth in 2014 despite weak product demand Expansions slow at the end of the forecast period, but many projects could be revived if conditions allow

52 mb/d $/bbl Lower surplus capacity props up margins Global surplus refinery capacity Simple refining margins Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Med Urals NWE Brent NWE Urals Singapore Dubai Surplus global refining capacity hit 6-year low ~3 mb in 2014 as OECD refinery closures offset new non-oecd capacity Refinery margins gets significant boost from mid-year New capacity puts system under renewed pressure from 2015 onward

53 mb/d More OECD closures in the cards OECD refinery closures 100% OECD refinery utilisation rates % 80% 70% 60% Americas Europe Asia Oceania 50% Americas Europe Asia Oceania Total of 4.8 mb/d of capacity shut in OECD since 2008 Additional 450 kb/d announced in Asia Oceania through 2017 More shutdowns likely to be announced

54 Light distillate surplus emerge Product supply balances: naphtha / gasoline Regional balances in 2014 and 2020 (kb/d) OECD Americas turning naphtha/gasoline net exporter European excess persist despite refinery shutdowns

55 mb/d mb/d Looming diesel wall Middle distillate supply/demand balance Fuel oil supply/demand balance Refinery Supply Demand Refinery Supply Demand Further refinery investments are required to produce the necessary gasoil Higher middle distillate demand will increase distillate cracks and shipping costs Adjustments in midstream infrastructure required

56 Europe s middle distillate import dependence Product supply balances: gasoil / kerosene Regional balances in 2014 and 2020 (kb/d) Asia set to become a middle distillate net-importer China to become a gasoil exporter?

57 Fuel oil challenges Product supply balances: fuel oil Regional balances in 2014 and 2020 (kb/d) Fuel oil tightens ahead of 2020, as refiners upgrade but then become massively oversupplied on marine shift Global fuel oil demand remains remarkably stable through 2019

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