the shale revolution - impact on the global oil and gas market · crude oil brent, blue eur/usd,...
TRANSCRIPT
The shale revolution- impact on the global oil
and gas market
Thina Margrethe Saltvedt, Senior Analyst, Macro/Oil
March 2013 @ThinaSaltvedt
Brief intro to the oil market
Drivers of the oil price
3 •
Financial marketsEconomic growth & Monetary policy
USD
Inflation expectations
Asset pricesShort-term
Supply/DemandInventory levels
OPEC goals and dicipline
Non-OPEC prod./E&P capex
Current demand
Long-term Supply/DemandOPEC target price and spare capacity
Non-OPEC production growth
Emerging Markets’ demand
Renewable energy and regulatory changes
Illustrative – not meant to be exhaustive
Geopolitical risk
Source: PIRA, Nordea Markets
Short-end of forward curve Long-end of forward curve
Oil price – vital driver of the activity on the Norwegian Continental Shelf
4 •
Source: Nordea Markets and Reuters Ecowin
Oct11
Dec12
Feb Apr Jun Aug Oct Dec13
Feb88
92
96
100
104
108
112
116
120
124
128
88
92
96
100
104
108
112
116
120
124
128 USD/barrel
EU/US sanctions and South Sudan
Iran tests to shut Hormuz
Oil price timeline
Spain worries
USD/barrel
Nuclear talks
Nuclear talks II
EU agreement
Syria
Draghi
Iran/Israel
Euro crisis
QE3
Gaza Strip
EU embargo/US sanctions
Norway strike
Algeria
US election/ fiscal cliff
Tighter physical market
11/02/2013 Q1 Q2 Q3 Q4 Year2012E 118 109 109 109 1112013E 113 107 109 110 1102014E 110 111 111 112 111
Speculators do not set theprice trend, but magnifies
the price movement
5 •
05 06 07 08 09 10 11 12 131.1500
1.2000
1.2500
1.3000
1.3500
1.4000
1.4500
1.5000
1.5500
1.6000
1.6500
1.7000
1.7500
30
40
50
60
70
80
90
100
110
120
130
140
150
Crude Oil Brent, blue
EUR/USD, dark blue
USD/barrel EUR/USD
Inflation worries
Risk appetite on/off
Political risk and Euro crisis
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
30
50
70
90
110
130
150
4Mar08 4Mar09 4Mar10 4Mar11 4Mar12
USD
/bbl
Managed Money net positions vs. WTI price
WTI Net positions, rhs
USD and the oil price, don’t take the correlationfor granted…
Oil demand: Depends on economic growth, population growth, living standard and urbanisation
6 •
18.65
13.52
4.55
0
5
10
15
20
25
30
35
40
45
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
mb
/d
Selected Advanced economies oil demand
US Europe Japan
9.98
3.75
3.09
4.73
7.81
0
5
10
15
20
25
30
35
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
mb
/d
Selected Emerging Economies oil demand
China India Brazil FSU Middle East
Source: IEA, Nordea Markets
Emerging economiesAdvanced economies
Transportation sector accounts for more than 50% of global oilconsumption and this share is expected to increase
7 •
Source: IEA
Growth perspectives for the Light Duty Vehicle fleet in selectedregions
8 •
Source: IEA
China
India
Brazil
EU
US
57MMB/D
30MMB/D
OPEC Share of World Crude Oil Production 2011
OPEC Members
34%
Non-OPEC Countr
ies66%
Indonesia
9
Algeria LibyaIranIraq
Nigeria
Saudi Arabia
Norway
UK
Oil production (MMB/D) by country
Angola
Kuwait
QatarVenezuela
UAE
USA
Canada
Mexico
Brazil
Russia
China
Kazakhstan
OPEC Member
Source: BP Statistical Review ofWorld Energy & OPEC
Largest Non-OPEC OilProducers
Ecuador
Worldwide upstream oil and gas investment and upstream investment cost index
10 •
Source: IEA
11
Oil reserves in the Middle East and North Africa, account for more than half of the world’s oil reserves - in % of global oil reserves
SaudiArabia16.1%
Iran9.1%Iraq
8.7%
Oman0.3%Yemen
0.2%
Egypt0.3%
Qatar 1.5%
UAE5.9%
Libya2.9%
Morocco
Kuwait6.1%
Algeria0.7%
Tunisia LebanonJordan
Bahrain
Syria0.2%
Source: BP and Nordea
Nigeria2.3%
Sudan &South Sudan
0.3%
World’s top net oil exporters- only 2 politically stable
12 •
0 2 4 6 8 10
Saudi ArabiaRussiaIranUAE
KuwaitNigeria
IraqAngolaNorway
VenezuelaAlgeriaQatar
CanadaKazakhstanAzerbaijan
Million barrels per day
109
112109
20
40
60
80
100
120
140
0
1
2
3
4
5
6
4Q2002 2Q2004 4Q2005 2Q2007 4Q2008 2Q2010 4Q2011
US
D/
bb
l
mb
/d
Implied OPEC effective spare capacity and Brent price forecast
Effective spare Effective spare (f'cast) Brent 1.pos, rhs Brent (f'cast), rhs
OPEC spare capacity at uncomfortably low levels
13 • Source: PIRA, IEA, Nordea Markets
US oil production necessary to counter natural decline and
increasingly unstable production – especially in
MENA
‐1200
‐800
‐400
0
400
800
1200
1600
Thou
sand
barrels per day 10 largest oil
exporter in theworld today mayhave a net exportdeficit in 2017 –who will cover thegap?
Changes in export volumes in 2017 from 2011
2.0
4.0
6.0
8.0
10.0
12.0
14.0 High Production/low Demand
Moderate
Low production
US crude import
Oil exporters’ budget breakeven oil prices to increasingly affect oil price formation
14 • Source: PIRA
020406080
100120140 2007 2009 2011 2012USD/barrel
US shale oil
production and the US economy
What triggered the shale revolution?Increasing oil/gas prices and a technology breakthrough
16 •
Hydraulic Fracturing and Horizontal Drilling
Shale oil revolution necessary to counterbalance supply-side disturbances outside North America
17 •
Source: Baker Hughes and Reuters Ecowin
0
500
1,000
1,500
2,000
2,500
Jun05 Jun06 Jun07 Jun08 Jun09 Jun10 Jun11 Jun12
US Rig countBaker Hughes
US Oil US Natural Gas US totalSource: Reuters EcoWin
90 92 94 96 98 00 02 04 06 08 10 120
25
50
75
100
125
150
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5 USD per mmBtu
Natural Gas Henry Hub, lhs
WTI light sweet crude, rhs
USD per barrel
OilNatural gas Total
Oil
18 •
US shale oil production can turn US into the world’s
largest oil producer by the end of this decade
Source: PIRA
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Low production
Moderate production
High production/improving energy efficiency
Oil import as a share of GDP
Rapid US crude production growth 2010-25 reflects shale crude development and higher oil prices
19 • Source: PIRA
US crude imports – number of suppliers increasedCanada’s market share growing
20 •
0
1000
2000
3000
4000
5000
6000
7000
8000
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Russia
Mexico
Colombia
Canada
Brazil
Iraq
Ecuador
Angola
Algeria
Nigeria
Saudi Arabia
Source: EIA
Fuel efficiency and energy conservation
Shale oil is not a lowcost oil
21 • Source: PIRA and Reuters Ecowin
Shale oil well type curve – need constant drilling of new wells to level production
0
10
20
30
40
50
60
70
80
90
100
$/B
bl
Wellhead Breakeven
Current WTI ≈ $82/Bbl
Existing and proposed mid-continent crude oil pipelines
22 • Source: PIRA
World oil supply – still fields yet-to-be found to cover expected future oil demand growth
23 •
Source: IEA
US shale gas
production – cheap gas can
boost US industrial
growth
Unconventional gas plays in North America – impressive growth in shale gas production the last few years
25 •
2010 2012
Source: IHS CERA
Enough to satisfy more than 100 years of consumption at current rates
Shale gas accounts for more than 35% of total US production
26 • Source: PIRA
US proposed liquification sites and nearby shale gas plays
27 • Source: PIRA
Price spreads expected to narrow as natural gas marketbecomes more transparent and global
28 • Source: PIRA
Initial assessment of shale gas resources in 48 major shale basins in 32 countries indicates large potential
29 • Source: EIA
1,069
1,225
624
1,042
1,404
396tcm
US outlook for natural gas-intensive industries, especially chemicals and manufacturing industries will benefit from cheap gas
30 • Source: IHS
ChemicalsManufacturingTotal
Economic and employment contribution of unconventional gas in the US
31 •
By 2015 the annual contribution of unconventional gas activity to GDP near USD 200bn
Source: IHS
Direct contribution: Impact on the core producing industries such as exploring, producing, transporting and delivering to downstream elements or providing onsite servicesIndirect contribution: Impact on the supply chain and their supplier industriesInduced contribution: Expenditure induced impact through household income
Value added to GDP
From 2010 to 2035 the employment contributions of the conventional gas industry more than double
EU 27 import of natural gas - % of extra EU imports by country of origin
32 •
9.4%
0.7%
1.0%
1.1%
4.3%
11.0%
12.9%
26.6%
33.0%
11.8%
2.7%
1.0%
1.1%
3.2%
5.2%
14.2%
27.8%
33.0%
Other third countries
Libya
Egypt
Trinidad and Tobago
Nigeria
Qatar
Algeria
Norway
Russia
2010 2011
Source: Eurostat
Norwegian export of naturla gas split on
33 •
Contact details:
Thina Margrethe Saltvedt
Senior Macro/Oil Analyst
Commodities Research
Nordea Markets
Phone: +47 22 48 79 93
Mobile: +47 90 63 40 75
@ThinaSaltvedt
34 •
Nordea Markets is the name of the Markets departments of Nordea Bank Norge ASA, Nordea Bank AB (publ), Nordea Bank Finland Plc and Nordea Bank Danmark A/S.
The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea Markets as of the date of this document and are subject to change without notice. This notice is not an exhaustive description of the described product or the risks related to it, and it should not be relied on as such, nor is it a substitute
for the judgement of the recipient.
The information provided herein is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein has no regard to the specific investment objectives, the financial situation or particular needs of any particular recipient. Relevant and specific professional advice should always be
obtained before making any investment or credit decision. It is important to note that past performance is not indicative of future results.
Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction.
This document may not be reproduced, distributed or published for any purpose without the prior written consent from Nordea Markets.