Global Oil Supplies: Is Supply Constrained? Kevin Lindemer

Transcription

1 Global Oil Supplies: Is Supply Constrained? Kevin Lindemer

2 Is Supply Constrained? Signposts continue to indicate a supply constrained world is possible and could emerge, not-with-standing short-term easing. Global oil spare capacity has shrunk dramatically over the past few years and is not expected to expand significantly Access to resources is getting more difficult Geopolitics and resource nationalism Incremental supplies are increasingly higher cost Aging conventional oil resource base Molecules are not in short supply capacity is. North American natural gas experiencing longterm decline Bio-fuels expected to make contribution to liquid supply Copyright 2006 Global Insight, Inc. 2

3 OPEC Spare Capacity and Price 25% WTI 70 OPEC Spare Capacity/Demand (%) 20% 15% 10% 5% Spare Capacity/Demand WTI Price (Nominal $) 0% Copyright 2006 Global Insight, Inc. 3

4 Incremental Global Oil Capacity Projections non-opec Supply non-opec Decline Demand Growth OPEC Supply OPEC Decline Net Capacity Change Draft MBOPD ? Note: Assumes Iraqi production stays 2 MMBOPD through includes 250 MBOPD of restored GOM production Source: IEA, EIA, OPEC, Copyright 2006 Global Insight, Inc. Company Reports, Trade Press, ECG 4

5 Government & Energy: Will the Pendulum Swing Back? Oil prices have always been subject to political forces and concern; is that concern rising? Natural gas may be joining oil Most countries have moved to more open and deregulated markets over the past 25 years. Is that process now reversing? Perceived risks are rising in numerous hydrocarbon producing areas Accelerating production declines and low spare capacity are exacerbating perceptions of risk GLOBALLY, Government policies toward energy security, environment, and agriculture are converging A new policy environment maybe emerging over the next few years Pre-1980 s Strong Government Controls & Regulation of Markets TODAY? Open Markets Copyright 2006 Global Insight, Inc. 5

6 World Oil Production: ⅔ Increasing Risk or Falling Production Saudi Arabia Russian Fed. USA Iran Mexico Norway Venezuela U.A.E. Nigeria Kuwait United Kingdom Iraq Colombia Ecuador Sudan Chad Terrorism, Proximity to Iran Contract Enforceability, Expropriation Declining Production Gov t Stability, Sanctions, International Action Declining Production Declining Production Contract Enforceability, Expropriation Proximity to Iran Gov t Stability, Infrastructure Disruption, Internal Violence, Contract Enforceability Proximity to Iran Declining Production Terrorism, Internal Stability, Infrastructure Disruption Infrastructure Disruption, Internal Stability Infrastructure Disruption, Contract Enforceability, Expropriation Contract Enforceability, Internal Stability Terrorism, Internal Stability 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Cumulative Oil Production Copyright 2006 Global Insight, Inc. 6

7 Global E&P Spending E&P Spend (SMM) Small-Mid Industry Lrg Industry Int'l Major NOC CAGR : 15% Forecast CAGR % 23.0% 12.0% % * Note: Survey methodology raises doubts about the completeness of the spending data, especially for small-mid size independents; spending data for Saudi Aramco, KOC, Iranian Oil Company was not in original survey and was estimated separately Source: World Oil, Citibank Survey, ECG Copyright 2006 Global Insight, Inc. 7

8 Drilling Activity Drilling activity has increased by 25% to 30% over the past 4 years Industry Activity (wells/yr) US Canada China Russian Fed. Argentina Venezuela Indonesia Mexico North Sea Oman Saudi Arabia India Thailand Egypt Australia Other Copyright 2006 Global Insight, Inc. Source: World Oil 8

9 Trends in World Oil Output 90, % 80, % Oil Rate (MBOPD) 70,000 60,000 50,000 40,000 30,000 20,000 10, % 4.0% 3.0% 2.0% 1.0% World Oil 0.0% Non-OPEC Oil Non-OPEC less FSU Yearly change in Non-OPEC Production % -2.0% Year-on-Year Decline (%/yr) Copyright 2006 Global Insight, Inc. Source: EIA, BP Statistical Review 9

10 Accelerating Declines? One reason for non- OPEC production s struggle to grow has been the acceleration of decline rates Acceleration can perhaps best be illustrated in areas with relatively little new field development Aging fields, better technology and rate acceleration economics appear to be the culprits behind the acceleration of decline rates MBOPD % -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% Year-on-Year Decline (%) Source: EIA (USA lower 48 and Alaska), Canada Onshore-Light, Oman, Syria, Indonesia, Egypt, Australia), Copyright 2006 Global Insight, Inc. 10

11 Molecules appear to be there..at a price COST RANGE (Dollars per Barrel) $100 $80 $60 $40 $20 Already produced Conventional Oil Yet to be Produced Undiscovered Deepwater EOR Arctic Oil Heavy Oil Oil Shale Coal Liquefaction $ ,096 1,643 2,192 2,738 3,288 3,834 4,383 4,930 5,479 6,026 Billions of Barrels Source: IEA, EIA, Company Websites, O&G Copyright 2006 Global Insight, Inc. Journal, World Oil, Rand Corporation 11

12 Potential Canadian Heavy Oil Capacity: Heavy Oil Effective Capacity (MBOPD) FORECAST Mining In-Situ Source: Canadian Association of Petroleum Producers, National Energy Board, various industry Copyright 2006 Global Insight, Inc. and company publications, ECG 12

13 U.S. Domestic Sources of Supply 25 Accelerating declines of offshore & onshore conventional production Annual Production (TCF/yr) Non-conventional Associated Gas Offshore Production Onshore Lower 48 Production CAGR (% per year) Copyright 2006 Global Insight, Inc. Source: EIA 13

14 Potential Bio-fuels Contribution to Supply Rest of World European Union U.S. 2.5 Millions of BPD Copyright 2006 Global Insight, Inc. 14

15 Thank You! Kevin Lindemer Energy Global Insight