Outlook for Oil & the Role of OPEC by Dr Maizar Rahman - - PowerPoint PPT Presentation

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Organization of the Petroleum Exporting Countries

Outlook for Oil & the Role of OPEC

by

Dr Maizar Rahman Indonesian Governor for OPEC Acting for the Secretary General

An address to the Ministry of Energy of the Philippines and industry representatives

Manila, Philippines, 2 December 2004

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Real gross domestic product: 1960–2003

Real GDP in 1995 prices and exchange rates

5,000 10,000 15,000 20,000 25,000 30,000 35,000

1960 1970 1980 1990 2000 2003

Billion US $

OECD DCs including China

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GDP versus energy growth (world): 1971–2002

Total primary energy requirement (mtoe) Real GDP (US $ billion)

40000 45000 50000 55000 60000 65000 70000 75000 80000 13000 18000 23000 28000 33000 38000

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Energy consumption for OECD and DCs: 1971–2003

mboe/d

50 100 150 200 250 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

FCPEs DCs incl. China OECD

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Energy consumption by primary source: 1960–2003

DCs OECD

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 1 9 7 1 1 9 7 2 1 9 7 3 1 9 7 4 1 9 7 5 1 9 7 6 1 9 7 7 1 9 7 8 1 9 7 9 1 9 8 1 9 8 1 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 1 9 6 1 9 6 2 1 9 6 4 1 9 6 6 1 9 6 8 1 9 7 1 9 7 2 1 9 7 4 1 9 7 6 1 9 7 8 1 9 8 1 9 8 2 1 9 8 4 1 9 8 6 1 9 8 8 1 9 9 1 9 9 2 1 9 9 4 1 9 9 6 1 9 9 8 2 2 2 Solids Oil Gas Hydro Nuclear

OECD DCs

mboe/d

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Appeal of petroleum Unique combination of attributes Sufficiency, accessibility, versatility, transportability Low costs in many areas Established infrastructure Ever cleaner, safer and more efficient

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The resource base is not a constraint

Cumulative production, as a percentage of the estimated resource base, has been relatively stable

500 1000 1500 2000 2500 3000 3500 4000 4500 1960 1975 1990 2005 2020 bn barrels */ Source: USGC

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Resource base* Cumulative production

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OPEC crude oil

Proven reserves 891 billion barrels 78.3% of world figure Production 29 million barrels a day 40.1% of world figure

Cheaper to exploit than non-OPEC oil Increasing call on OPEC oil in coming years 51% world oil market projected for 2025

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World energy mix

%

2000 2010 2025 Oil 40.1 38.7 36.9 Gas 23.3 25.7 29.9 Solids 26.0 25.8 25.2 Hydro/nuclear/ 10.6 9.8 8.0 renewables

OPEC World Energy Model, 2004

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World oil production outlook in the reference case

million barrels a day

2002 2010 2020 2025 Non-OPEC 47.8 54.6 56.9 56.3 OPEC (incl. NGLs) 29.2 34.1 48.9 58.3 World 77.0 88.7 105.8 114.6 OPEC market share % 37.9 38.4 46.2 50.9

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Annual growth in oil demand: 2002–25

million barrels a day

0.0 0.2 0.4 0.6 0.8 1.0 1.2 OECD DCs Transition economies Asia

OPEC &

• ther exp.
• N. America
• W. Europe

OECD Pac. Africa & M.E. Latin America. FSU

• ther

Asia: 65% of DCs increase, especially China & India huge potential (e.g. low vehicle

• wnership)

But possible constraints: infrastructure, policies

China

OPEC World Energy Model, 2004

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Annual global growth in oil demand by sector

million barrels of oil equivalent a day

• 0.6
• 0.4
• 0.2

0.2 0.4 0.6 0.8 1 Transport HH/Comm Industry

• Elec. Gen.

1971-1980 1980-1990 1990-2000 2010-2025 2000-2010

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OPEC’s objectives Stable markets Reasonable prices Steady revenues Secure supply Fair returns to investors Short, medium and long terms

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Investment in production capacity

To meet increase in overall demand To replace exhausted reserves To cope with unexpected shortages Oil must be cleaner, safer and more efficient Security of demand is AS IMPORTANT AS security of supply

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Cumulative OPEC investment requirements: effect of 1% lower world economic growth

50 100 150 200 250 300 350 400 450 2000 2005 2010 2015 2020 2025 $(2003) billion

If OPEC balances the market, the uncertain volume requirements translate into huge ranges of anticipated capital outlay needs Already by 2010 an estimated uncertainty

• f $25 billion exists between the reference

case and the low economic growth case This a central concern: where lies the

• nus of maintaining sufficient spare

capacity?

Reference case Low economic growth $122-173 billion $258-382 billion $70-95 billion

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Today’s oil market

OPEC concerned about high oil prices and volatility

38.6

16 19 22 25 28 31 34 37 40 43 46 49 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 16 19 22 25 28 31 34 37 40 43 46 49

Min-max range: 2000-03

Avg.'00-'03 2003 2004

Note: orange rings denote OPEC Conferences.

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Today’s oil market Market well-supplied with crude

but

Higher-than-expected demand Downstream bottlenecks Geopolitical tensions Speculation

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Increasing tightness in world refinery capacity Increasing tightness in world refinery capacity

60 65 70 75 80 85 90 95 1993 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08

World refinery capacity (mb/d) World oil demand (mb/d)

?

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Inter product spread (Light products prices difference vs. fuel oil) -

US$/bbl

5 10 15 20 25 30 35 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04

Regular Gasoline Unl.87 Gasoil (0.2% S)

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OECD Commercial Oil Stocks (mb)

2300 2400 2500 2600 2700 2800 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2300 2400 2500 2600 2700 2800

• Avg. 99-03

2003 2002 2004

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Factors in oil price movements WTI (Nymex)

48.44 46.11 35.73 35.66 34.27 42.33 48.70 42.12 55.17 30 35 40 45 50 55 60 4 / 1 / 2 4 4 / 8 / 2 4 4 / 1 5 / 2 4 4 / 2 2 / 2 4 4 / 2 9 / 2 4 5 / 6 / 2 4 5 / 1 3 / 2 4 5 / 2 / 2 4 5 / 2 7 / 2 4 6 / 3 / 2 4 6 / 1 / 2 4 6 / 1 7 / 2 4 6 / 2 4 / 2 4 7 / 1 / 2 4 7 / 8 / 2 4 7 / 1 5 / 2 4 7 / 2 2 / 2 4 7 / 2 9 / 2 4 8 / 5 / 2 4 8 / 1 2 / 2 4 8 / 1 9 / 2 4 8 / 2 6 / 2 4 9 / 2 / 2 4 9 / 9 / 2 4 9 / 1 6 / 2 4 9 / 2 3 / 2 4 9 / 3 / 2 4 1 / 7 / 2 4 1 / 1 4 / 2 4 1 / 2 1 / 2 4 1 / 2 8 / 2 4 1 1 / 4 / 2 4 1 1 / 1 1 / 2 4 1 1 / 1 8 / 2 4 ($/bbl) June 1 131OPEC Conference (+ 2.5 million b/d) Halt of Iraq

• il export

Return to normal level

• f Iraq oil

export April 21 Terrorist attack at al- Khobar Expansion

• f Iraq

struggle (S ) Sadr agreed to w ithdrow its forces from Najaf June 29 Saudi Oil Minister's press conference, Decrease of U.S. crude oil inventory Al-qaida's threat to US presidential election August 19 grow ing concerns to Yukos oil production Expansion

• f Iraq

struggle (Sadr) Resumption of Iraq oil export Sadr agreed to w ithdrow its forces from Najaf Halt of Iraq oil export from north Decrease of U.S. crude oil Concerns for Hurricane in Mexican Gulf grow ing concern to Yukos oil production

• Oct. 22 & 26

Concerns for Nigerian Rebels Decrease

• f U.S.

crude oil longer halt of Mexican Gulf

• il production

Nigerian General Strike 132OPEC Conf.( + 1 million b/d) Saudi Oil Minister's announcment to increase production capacities(to 11 millionb/d) Fears of possible terro in US Rrecovery of Mexican Gulf production, increase

• f US crude oil inventory,

slow dow n of Chinese PresidentB ush's reelection Decrase of US heating oil inventory Winter Supply concerns

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OPEC’s production agreements*

Objective: reasonable prices and stability Three-stage OPEC-10 output ceiling rise from 23.5 mb/d to:

25.5 mb/d from 1 July 26.0 mb/d from 1 August 27.0 mb/d from 1 November

Total rise 3.5 mb/d

*Agreements made at OPEC Conferences in Beirut on 3 June and Vienna on 15 September

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OPEC crude oil production and capacity

24 26 28 30 32 34 36 1998 1999 2000 2001 2002 2003 200 Capacity Production */ The production ranges for '04 & '05 are based on required OPEC crude for the balance from the survey of forecasts. 04* 2005* production

min max

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Dialogue and cooperation

Big advances in recent years

The industry is much better off if there is an underlying consensus on such major issues as price stability, security, investment, the environment and sustainable development

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Rising to the challenges

Globalisation Technology Environment Sustainable development

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Thank You