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  • PIRA Energy Group

    Longer-Term Global Oil Supply Volumes And Composition

    Bill Fuller Senior Director, International Oil

    Annual Retainer Client Seminar New York City: October 10-11, 2013

  • Overview and Non-OPEC Supplies

  • Call-on-OPEC Crude Continues to Grow in Long Term But Non-OPEC Covers Most of Demand Growth

    0.0

    0.5

    1.0

    1.5

    2.0

    '00-'05 '05-'10 '10-'15 '15-'20 '20-'25 '25-'30

    Total Non-OPEC Call on OPEC Crude Supply Growth Demand Growth

    Non-OPEC Growth includes increasing amounts of higher cost non-conventionals

    Annual Growths, MMB/D

  • World Oil Non-OPEC Supply Forecast Overview

    Medium Term (to 2017): Non-OPEC Growth 2013 – 2017 Averages 1.4 MMB/D

    – U.S. and Canada have strongest growth – Growth is relatively stable over the years thru 2017

    Longer Term (to 2030): Non-OPEC Growth declines slightly to average 1.0 MMB/D / Year 2020-2030

    – U.S. and Canada remain in lead group which becomes more broad based as Brazil, Mexico, FSU, China and OPEC NGL’s grow

  • Medium Term Non-OPEC Growth

    1.3 0.9 1.2 1.51.5

    1.4

    -1.0

    -0.5

    0.0

    0.5

    1.0

    1.5

    2.0

    2012 2013 2014 2015 2016 2017 USA Canada Mexico Brazil North Sea FSU China OPEC NGL Other Non-OPEC

    MMB/D Growth Per Year

    North America remains dominant region in Medium Term growth

  • Medium Term Non-OPEC Growth Components

    Development of Shale Liquids; especially strong in U.S.

    Also growing in Canada; slow beginning outside North America

    Canada: Bitumen projects are economic at forecast price

    Brazil: Development of already discovered sub salt fields

    Kazakhstan: Start up of giant Kashagan field

    OPEC NGL/Condensate: Recovery of liquids from associated gas from crude expansion projects and from non-associated gas

    projects

  • Long Term Non-OPEC Growth Continues Strong But Less U.S. Centric

    1.0

    1.1

    0.7 1.0

    1.31.1

    -0.5

    0.0

    0.5

    1.0

    1.5

    '00-'05 '05-'10 '10-'15 '15-'20 '20-'25 '25-'30

    USA Canada Mexico Brazil North Sea FSU China OPEC NGL Other Non-OPEC

    MMB/D Growth Per Year

  • Factors Leading to Continued Strong Non-OPEC Production In the Long Term

    Perceptions of evolution of oil market prices

    “Easy” oil (i.e., low cost oil) used up

    – Next increment of world resource base more expensive, supporting higher

    oil prices

    Higher oil price supports new higher cost projects

    Technological advances; as spurred on by higher prices

    Shale liquids; Oil Sands; Ultra-deep water; Sub-salt imaging

    Investment climate good in countries at forefront of technology

    Huge resource base for Shale liquids and Canadian oil sands

    Increasing Natural Gas production provides associated liquids

    High ratio oil to gas prices provides incentives for liquids recovery

    Russian tax/duty incentives to develop new frontiers; ESPO pipeline

  • U.S. Shale Play Operators Improvising to Reap Cost and Volume Improvements

    More wells per rig » Cutting single well spud-to-spud times » Pad drilling (Multiple wells from one pad) reduces time to move rigs to

    new locations

    More wells per acre » Earlier 640 acre spacing being tested to reduction to 320 or 160 » Some loss in single well recovery, but overall higher recovery

    Initial production (IP) rates improving from longer laterals and higher horsepower fracing

    Expanding into new areas / counties within formations » More activity now in Northern end of Niobrara shale

    Developing deeper layers of existing shale plays » Bakken: Three Forks Benches 2-4; Permian Basin: Wolfcamp / Cline

  • U.S. Shale Crude Peaks at Over 6 MMB/D About 2025 – Peak Growth Year is 2013

    0

    1

    2

    3

    4

    5

    6

    7

    2005 2010 2015 2020 2025 2030

    MMB/D

    Bakken Eagle Ford Permian Basin Others

    -0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

    '05-'10 '10-'15 '15-'20 '20-'25 '25-'30

    MMB/D

    Bakken Eagle Ford Permian Basin Others

  • Lower 48 Onshore Crude Production Ex Shale Crude Grows to 2020 Due To Resurgence in Permian Basin

    0

    1

    2

    3

    4

    5

    6

    1990 1995 2000 2005 2010 2015 2020 2025 2030

    Lower48 Onshore ex Shale L48 ex Shale ex Permian

    MMB/D

    1998/99 Oil Price Collapse (Asian Financial Crisis)

    2009 Price Fall (Global Recession)

    L48 Onshore ex Shale Crude

    Resurgence of Permian Basin Non- Shale Crude

    Non-Shale Non-Permian Production

  • Crude Growth in Permian Basin Mainly from Shales But Non-Shale Crude Remains Larger Component

    0.0

    0.5

    1.0

    1.5

    2.0

    2.5

    3.0

    2005 2010 2015 2020 2025 2030 TX Permian Non-Shale NM Permian Non-Shale TX Permian Shale Crude NM Permian Shale Crude

    MMB/D

    Total Non-Shale

    Growth in Non-Shale crude reflects growth in rigs drilling vertically

  • U.S. Gulf of Mexico Forecast Assumes Backlog of New Fields Begin Production

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    0.5

    1.0

    1.5

    2.0

    2.5

    1995 2000 2005 2010 2015 2020 2025 2030

    Fields Started Before 2013 Identified New Unidentified New

    MMB/D

    Unidentified “New”

    (Post-2013) Production

    Decline rates of “Older” production (Pre-2013) estimated at ~16%/Yr

    Macondo spill April 2010 led to increased regulations

    Identified Named Fields

    Cost escalation and storm loss dented output in 2000’s decade

    New GOM output highs reflect: Higher oil prices since 2010 Good resource potential Technological advances Good fiscal environment Lack cheaper alternatives

  • Alaska Production Expected to Grow After 2025

    0.0

    0.2

    0.4

    0.6

    0.8

    1.0

    1.2

    1.4

    1.6

    1.8

    1990 1995 2000 2005 2010 2015 2020 2025 2030

    Cook Inlet Existing North Slope New Named Fields New NPR-A New Central New Ugnu Heavy Federal Offshore Shale Crude ANWR

    MMB/D

  • U.S. NGL Production Almost Doubles by 2030 With Large Growth in Ethane

    0

    1

    2

    3

    4

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    6

    2010 2015 2020 2025 2030

    Barnett Marcellus/Utica Eagle Ford Anadarko/Other Permian Bakken/Rockies Other Shales Non-Shale

    0

    1

    2

    3

    4

    5

    6

    2010 2015 2020 2025 2030 Pentanes+ Butanes Propane Ethane

    By Source By GradeMMB/D MMB/D

  • U.S. Total Oil Supply Growth Remains Strong in Medium Term then Tapers off Long Term

    0 2 4 6 8

    10 12 14 16 18 20

    1990 2000 2010 2020 2030

    MMB/D

    Shale Crude Shale NGL Non-Shale Crude On. Non-Shale Crude Off. Non-Shale NGL Biofuels Other Liquids Refinery Gain

    -0.4

    -0.2

    0.0

    0.2

    0.4

    0.6

    0.8

    1.0

    95 -0

    0

    00 -0

    5

    05 -1

    0

    10 -1

    5

    15 -2

    0

    20 -2

    5

    25 -3

    0

    MMB/DProduction Growth

  • Canadian Total Crude Growth is Mainly Oil Sands And Remains Strong Both Medium Term and Long Term

    0

    1

    2

    3

    4

    5

    6

    7

    1990 2000 2010 2020 2030

    Heavy Light/Medium Atlantic Synthetic Bitumen Condensate

    Production

    -50

    0

    50

    100

    150

    200

    250

    '9 5-

    '0 0

    '0 0-

    '0 5

    '0 5-

    '1 0

    '1 0-

    '1 5

    '1 5-

    '2 0

    '2 0-

    '2 5

    '2 5-

    '3 0

    Heavy Light/Medium Atlantic Synthetic Bitumen Condensate

    Growth / YearMMB/D MB/D

    Light Includes Shale Crude

  • Canada Oil Sands Projects – Breakevens and Forecast Volume Discounts

    CAPEX ($Cdn/bbl

    of capacity, Cdn$2010)

    Economic Threshold (WTI US$

    equivalent/bbl, US$2010)

    1 - Mining, Extraction and Upgrading

    $85,000- $105,000

    $85-$95

    2 - Mining and Extraction Only (No upgrading)

    $60,000- $75,000

    $65-$75

    3 - Steam-assisted Gravity Drainage (SAGD)/Cyclic Steam Stimulation (CSS)

    $25,000- $40,000

    $50-$60

    Includes an after-tax rate of return of 10 to 15%.

    Source: Canada National Energy Board (NEB) Nov2011

  • Canada Risked Shale / Tight Oil Resource Base - Estimated Ultimately Recoverable Reserves (EUR)

    0

    2

    4

    6

    8

    10

    12 Bn Bbls, Crude & Condensate Total Canada Crude &

    Condensate EUR 68 Bn Bbls

  • Canada Shale Crude Production

    0 100 200 300 400 500 600 700 800 900

    1000

    2005 2010 2015 2020 2025 2030

    MB/D

    Bakken Viking Cardium Montney Duvernay Other Producing New Probable New Possible

    -10 0

    10 20 30 40 50 60 70

    '0 0-

    '0 5

    '0 5-

    '1 0

    '1 0-

    '1 5

    '1 5-

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    '3 0

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