Market Report Series. Spanish Energy Club, Madrid, 3 May 2018

Transcription

1 Market Report Series Oil 2018 Spanish Energy Club, Madrid, 3 May 2018 Neil Atkinson, Head of Oil Industry and Markets Division Toril Bosoni, Senior Oil Market Analyst, Oil Industry and Markets Division

2 Robust global oil demand growth to World oil demand growth (y-o-y change) Rest of the world India China China and India account for almost half of world oil demand growth

3 China use of alternative fuels displacing oil Gasoline displacement kb/d Vehicles China NGVs China Evs Gasoline displaced (Right) Vehicles Diesel displacement kb/d LNG trucks Electric buses Diesel displaced (Right) times less buses and trucks having 4 times more impact than Electric cars and NGVs

4 Petrochemicals drive global oil demand growth to 2023 Feedstock requirements for new steam crackers 700 kb/d Naphtha Ethane US China Russia Others Petrochemical feedstocks (ethane and naphtha) responsible for 25% of global oil demand growth

5 Oil demand growth by product Oil demand growth by product And fuel oil breakdown (y-o-y y changes) LPG & ethane Naphtha Motor gasoline Jet fuel & kerosene 0.5 Gasoil/diesel Residual fuel oil Other products Total products LPG & ethane + naphtha + gasoline Jet fuel & kerosene + other 2.0 products Gasoil/diesel Inland FO New bunker ULSFO Bunker HSFO Total products Very large shift in demand in 2020 and following adjustments reflect IMO induced switch

6 Only limited uptick in global upstream spending Global oil and gas upstream capital spending USD billion -25% -26% * *Preliminary based on selection of investment updates Producers spend more on short cycle supply, especially US LTO. Investments in conventional fields remain depressed, but some signs of renewed interest in offshore.

7 With tight budgets, spending geared to short-cycle oil 12% 10% 8% 6% 4% 2% 0% Global Selected observed decline rates 15% 10% 5% 0% Offshore/Onshore % 15% 10% 5% 0% Key countries World Non-OPEC OPEC Offshore Onshore Russia Norway Brazil Modest capex/opex injections can in many cases bring rapid results in terms of output.

8 Oil industry needs to replace one North Sea each year 0.0 Output loss from post-peak conventional crude oil fields -1.0 OPEC Non-OPEC Ageing oil fields lose more than 3 per year despite slowing decline rates.

9 Booming non-opec supply growth reshapes world oil market Changes in global oil supply capacity US l Brazil Canada a Iraq Iran Norway Colombia Indonesia China Mexico Angola Venezuela more than covers demand growth for next three years. By 2023, non-opec supply grows by 5.2. OPEC oil capacity rises only 1.2 due to Venezuelan collapse and limited increases elsewhere.

10 Supply growth front loaded & restricted to LTO, other supply Global liquids capacity growth Global oil supply capacity growth Non-OPEC OPEC OPEC Non-OPEC Total Biofuels Proc. gains Non-conv NGLs LTO Crude Global But will projects be brought forward? Projects sanctioned today tend to have shorter lead-time.

11 Higher oil prices unleash second wave of US supply LTO Gulf of Mexico NGLs Alaska Other Total output reaches 17 by 2023 and could be even higher if prices rise.

12 Brazil, second largest source of supply growth to Onshore Campos Basin Santos Basin Other crude NGLs Pre-salt increase offset declines in the onshore and Campos basin. Output up 1, to 3.75.

13 Canadian oil pipelines stretched to the limit kb/d Keystone XL Trans Mountain Keystone Rangeland/Milk River Spectra Express Mainline Oil available for export Takeaway capacity to remain insufficient until 2021, forcing increase in rail exports.

14 North Sea renaissance as development costs drop by half North Sea oil supply North Sea annual change kb/d Norway UK Offshore Other Number of projects sanctioned over past few years will lift supply to highest since 2010.

15 What s in store for Russia s oil production? Next generation oil projects (hl (shale, Arctic, deep water) require considerable financial ilsupport and advanced technologies, face considerable sanctions risk Domestic factors: tax and sector reform, increased horizontal drilling, import substitution Overseas factors: diversification, hedging with overseas reserve replacement Russia oil supply Brownfields Greenfields NGLs Source: IEA Market Report Series: Oil 2018

16 Asian oil supply downtrend continues Asian oil supply Asia supply: Annual change kb/d China India Indonesia Malaysia Thailand Vietnam Australia Others Declines ease as spending picks up modestly. Crude declines offset by CTL output in China.

17 US pipeline bottlenecks ease, export capacity more than doubles 0,0 Expected Texas pipeline deficit 5,1 US crude export capacity 4,6 0,1 4,1 0,2 3,6 3,1 0,3 2,6 2,1 0, , New pipeline projects (Permian Express, EPIC) ease constraints. US export capacity rises to 4.9 by Corpus Christi solidifies position as largest US export hub.

18 US oil finds new markets Low-sulphur and petchem feedstocks US LTO first wave Low-sulphur, low residue f d feedstocks k US LTO second wave Refiners in Asia and Europe look for suitable crude oil to produce petrochemical feedstocks and low-sulphur fuels

19 China net crude oil imports double the US in 2023 Net crude oil imports US China India Indian imports, too, surpass the US in 2023 as shale growth reduces US import dependence.

20 Most incremental crude exports come from non-opec Changes in net crude exports, Africa Angola Algeria Nigeria Egypt Libya Middle East Kuwait Oman Saudi UAE Iraq Latin America Venezuela Colombia Brazil FSU/Norway Kazakh Russia Norway North America Mexico Canada US US refining capacity has absorbed most of the first wave of the Shale. Second wave goes to exports.

21 Future crude oil slate perceptions Refiners need to invest into units to convert both very heavy and very light feedstocks.

22 Middle East wants to refine more oil 3.0 Refining capacity additions 3.0 Middle East capacity expansion China India Middle East Upstream Refining Middle East accounts for 30% of global refining capacity growth. International downstream expansion becomes a strategic objective for the region s NOCs.

23 Spare capacity cushion shrinks to lowest level since ,00 Global Oil Market Balance 36,00 32,00 28,00 24,00 20, OPEC Crude Capacity Call on OPEC Crude + Stock Ch. Supply/demand tighter at the end of the forecast

24 Key uncertainties Demand substitution, price subsidies/taxes OPEC/Non-OPEC production management Prices US LTO potential, midstream bottlenecks Investment strategies going g forward, dividend strategies, interest rates Cost inflation Geopolitical risk/sanctions/trade

25 Conclusions Robust world oil demand growth to 2023 driven mainly by petrochemicals. Non-OPEC output growth exceeds demand increase through US, Brazil, Canada, Norway dominate growth. New infrastructure investments relieve US export bottlenecks. US crude finds new markets as refiners seek light, low sulphur crude to meet petrochemical demand and IMO specifications. More upstream investment needed today to meet future demand and offset 3 of declines from mature oil fields each year. As spare capacity cushion shrinks, supply security concerns remain critical.

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