World Oil Outlook 8 th November, 2009 The International Energy Forum - - PowerPoint PPT Presentation

Organization of the Petroleum Exporting Countries

The Organization of Petroleum Exporting Countries

World Oil Outlook

8th November, 2009 The International Energy Forum Riyadh, Saudi Arabia

Hasan M Qabazard Director, Research Division OPEC Secretariat

Organization of the Petroleum Exporting Countries

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2.9 0.6

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1.0 5.1 1.2 3.8

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2 4 6 8 05 06 07 08 09 10 World OECD DCs

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The world has confronted a major economic turmoil and extreme price volatility

World real GDP growth (in %) Weekly average spot WTI prices, (US$/b) Spill-over of the financial crisis to the real economy has led to a severe global downturn Present world recession is the deepest and most synchronized contraction in the past sixty years Price escalation and high volatility was inconsistent with market fundamentals Financialization of oil and commodity markets led to significant speculation

79 143 32 30 60 90 120 150 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov

2006-2007 2008-2009

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Global oil demand erosion has been considerable

(year-on-year change, mb/d)

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4 8 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

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OECD demand Non-OECD demand OECD GDP DCs GDP

(demand growth: mb/d) (GDP growth: %)

The collapse in oil demand is largely a consequence of the two-pronged economic crisis World oil demand has declined in two successive years for the first time since early ’80s Oil demand reduction may be partly irreversible: contraction in OECD is to reach 4.5 mb/d in 2010

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Large overhang in oil stocks underlines weak fundamentals

(mb)

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81 25 106 70 140 210 Jan Feb Mar Apr May Jun Jul Aug Sep

Crude Total Products

75 55 130 50 100 150 Jan Feb Mar Apr May Jun Jul Aug Sep

Crude Total products

OECD commercial oil stocks (deviation from five years average) Estimated floating storage: (absolute level) Besides ample supply, inventory overhang reflects still weak state of market fundamentals Total OECD commercial oil stocks end-September ‘09 are still 106 mb above 5-year average Forward demand cover in September estimated at around 59 days Around 130 mb crude oil (~55 mb) & products (~75 mb) are kept in floating storage

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Crude price fluctuations in tandem with financial markets

Increasing use of oil as an asset class exposed the oil market to financial market volatility Crude prices have been closely following the movements in equity markets and US Dollar WTI price vs. US $ (weekly average) WTI price vs. equity market (weekly average)

30 60 90 120 150 Jul Aug Sep Nov Dec Jan Mar Apr Jun Jul Aug Oct 1.25 1.35 1.45 1.55 1.65 (2008-2009) (US$/€) (US$/b) US$/€ WTI 30 60 90 120 150 Jul Aug Sep Nov Dec Jan Mar Apr Jun Jul Aug Oct 650 900 1150 1400 1650 (2008-2009) (S&P 500 Index) (US$/b) S&P 500 WTI

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10 20 30 40 50 60 Sep- 07 Dec- 07 Mar- 08 Jun- 08 Sep- 08 Dec- 08 Mar- 09 Jun- 09 Sep- 09

Euro zone Japan USA

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OECD quarterly GDP growth (% annualized) Manufacturing index in the OECD area (September ’07 – ’09)

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6 1Q07 4Q07 3Q08 2Q09f 1Q10f 4Q10f USA Japan Euro-zone

The world economy is showing signs of stabilization

World economy now appears to be moving from a period of containing the crisis to one of recovery The 2Q is now seen to mark the bottom of the recession Economic recovery may be a lengthy one: deficits, debts, unemployment pose considerable risks

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Medium-term prospects: greater uncertainties

24 28 32 36 40

2008 2009 2010 2011 2012 2013

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Spare capacity (rs) Capacity (ls) Crude supply (ls)

OPEC crude capacity and crude supply (reference case) Oil demand & non-OPEC supply growth prospects

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2009 2010 2011 2012 2013 Oil demand growth Non-OPEC supply growth

reference protracted recession reference protracted recession

World oil demand growth is expected to rise gradually to 1.2 mb/d by 2013 (exposed to higher risks) Non-OPEC liquids negatively affected by lower prices (cancellations/delays) OPEC is investing $110-120 billion Medium-term requirements for OPEC crude oil by 2013 would not be higher than 2008 levels In the reference case spare OPEC crude oil capacity settles around 6 mb/d

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Energy and oil demand are set to grow

(demand by fuel type, mtoe)

Demand for energy will grow, albeit at a lower pace Fossil fuels satisfy more than 80% of global energy needs over the projection period Oil remains the leading source of energy – fast growth in natural gas Low base for renewable energy – continue to grow fast, but limited impact on energy mix

Growth (% pa) Fuel shares (%) 2007-2030 2007 2010 2020 2030 Oil 0.8 36.4 35.1 33.1 30.9 Coal 1.5 28.2 28.5 28.8 28.1 Gas 1.9 22.3 22.6 23.2 24.1 Nuclear 1.6 6.6 6.7 6.5 6.7 Hydro 2.3 2.4 2.6 2.7 2.8 Biomass 3.4 3.5 3.9 4.6 5.4 Other renewables 7.4 0.5 0.6 1.1 1.9 Total 1.5 8

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World oil demand outlook

reference case (mb/d)

Oil demand grows by 1%, or less then 1 mb/d per annum over the forecast period World oil demand increases by 20 mb/d from 2008 to 2030, but nearly 8 mb/d lower than WOO 2008 Structural shift: OECD demand declines Developing countries consumption accounts for over 95% of the net increase, mainly in Asian region Disparity in per capita oil use among regions will remain a critical issue

Change Growth ('08-'30) p.a. 2008 2015 2020 2025 2030 '30 -'08 % mb/d OECD 47.5 45.5 45.0 44.3 43.4

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DCs 33.0 39.3 44.8 50.2 56.1 23.1 2.4 1.05 China 8.0 10.4 12.3 14.1 15.9 8.0 3.2 0.36 Other Asia 9.3 11.0 12.9 14.9 17.2 8.0 2.9 0.36 Transition economies 5.1 5.4 5.7 5.9 6.1 1.0 0.8 0.05 World 85.6 90.2 95.4 100.4 105.6 20.1 1.0 0.91

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Transportation sector: main source of oil demand growth

Nearly half of world oil consumption will stem from transportation by 2030 Passenger cars and commercial vehicles: saturation versus economic activity Greater potential for growth in the stock of vehicles in developing countries Passenger car ownership per 1,000 of population, 2006 Average annual global growth in oil demand by sector

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Conventional liquids’ resource base is sufficient

Date of assessment release

Increasing resource base levels (improved technology, enhanced recovery) Technology blurs distinction between conventional and non-conventional oil Resource base likely to continue to grow … especially with non-conventional oil World’s conventional oil resources Incremental world oil supply 1980-2030

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World oil supply long-term outlook

reference case (mb/d)

Non-OPEC crude oil plus NGL supply: a steady plateau of 45 mb/d before beginning a gradual decline after 2020 Total non-OPEC supply continues to rise (large growth from Canadian oil sands and biofuels) Rapid increase in OPEC NGL Demand for OPEC crude rises to 41 mb/d by 2030, however it is 2.5 mb/d lower than WOO 2008

Change Growth ('08-'30) p.a. 2008 2015 2020 2025 2030 '30 -'08 % mb/d OECD 19.6 18.7 19.1 19.3 19.6 0.0 0.0 0.00 DCS, excl. OPEC 16.1 17.3 18.0 18.3 18.3 2.2 0.6 0.10 Russia 9.8 10.2 10.5 10.6 10.6 0.9 0.4 0.04 Caspian 2.9 4.0 4.4 4.7 5.1 2.2 2.6 0.10 Non-OPEC 50.3 52.4 54.3 55.4 56.3 6.0 0.5 0.27 non-conventional 3.1 5.0 6.8 8.6 10.7 7.6 5.8 0.34 OPEC 35.5 38.1 41.4 45.3 49.6 14.1 1.5 0.64 OPEC NGLs 4.3 5.8 6.7 7.4 8.0 3.7 2.8 0.17 OPEC crude 31.2 32.0 34.3 37.4 41.1 9.9 1.3 0.45

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OPEC crude oil share will not be much different than today

Incremental OPEC and non-OPEC supply OPEC’s crude share in world oil supply

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Over the long-term, increase in non-crude will moderate the need for higher crude supply The share of OPEC crude in total supply by 2030 remains below 40%

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Uncertainties pose investment risks for OPEC MCs

Cumulative OPEC upstream investment requirements Possible waste of precious resources Negative effects upon future investments Upstream development investment requirements by 2020 lie within $180 to $430 billion range

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31 mb/d → $180 billion 48 mb/d → $430 billion

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Security of demand is an integral part of energy security

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Changing world oil demand projections for 2025 Oil demand projection figures have been repeatedly revised down The security and predictability of demand are as important as the security of supply

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Policy measures in major consuming countries impact oil demand

US Energy Independence and Security Act CAFE standards Renewable fuels standards (EISA targets) EU Climate and Energy Legislative Package 20-20-20 package 10% renewables target for the transportation sector Binding targets for CO2 emissions from new cars Japan’s promotion of measures to cope with global warming Energy saving measures in all sectors China’s energy conservation law Policy measures promoting new transportation technologies Electric and hydrogen-fuelled cars

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Distillation capacity expansion exceeds requirements

Additional cumulative refinery crude runs required and potential*

*/ Potential: based on expected distillation capacity expansion Required: based on projected demand increases

The refining tightness for distillation capacity has turned into over-capacity – to the extent that substantial closures are expected, especially in the OECD

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Longer-term additional capacity requirements still substantial

Global capacity requirements by process type, 2008-2030

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The majority of the refinery capacity expansions to 2030 are projected to be in the Asia-Pacific (mainly China) and Middle East regions The global refining system will require around $780 billion (2008 dollars) of investment to 2030

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10 20 30 40 50 2007 2015 2020 2025 2030

mb/d Asia - Pacific Middle East FSU Europe Africa Latin America US & Canada

Global crude oil imports by region, 2007 -2030

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Growing share of the Asia-Pacific in global crude oil imports The Middle East will remain the major source of imports, but an increasing percentage of volumes will also come from other regions and countries such as Africa, Russia and the Caspian

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Sustainable development: a challenge for humanity

Energy is central to poverty eradication, sustainable development and the achievement of the Millennium Development Goals 1.6 billion people have no access to electricity 2.5 billion people still rely on traditional biomass Collective responsibility to help poorer nations Future energy growth must support all three pillars of sustainable development

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CO2 emissions: the historical responsibility of developed countries

Cumulative CO2 emissions since 1900 GHG emissions will grow: mitigation options include Carbon Capture & Storage (CCS), conservation and sinks Historical responsibility of developed countries regarding the state of the Earth’s atmosphere Ensure mitigation response measures and emission reduction commitments are fair and just Developed countries should take the lead in mitigation, adaptation, funding & technology transfer Looking for a win-win outcome for climate change negotiations Per capita CO2 emissions (reference case)

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Core industry challenges

Timely & sufficient investments along the entire supply chain Adequacy of the human resources skills base Technology role in expanding production improved recovery rates deployment of cleaner technologies Technology supporting sustainable development & environment promotion of technologies that address climate change concerns industrialized countries should take the lead in CCS The critical importance of Research & Development & Deployment Transfer of technology is vital

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The role of NOCs and IOCs: enhanced cooperation

Many common objectives and challenges: Important to enhance relationships among NOCs, as well as between NOCs and IOCs On such issues as the environment, the development of new technologies, such as Carbon Capture and Storage (CCS), and helping in the development of manpower and training (local content) Such cooperation can also help bring down the high costs of services, which are putting further pressure on well-devised output expansion strategies Aid further information exchange, as well as help evolve larger and more developed research networks Support broader socio-economic development and diversification

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Common interest and shared responsibilities

Increasingly complex global energy system Challenges und major uncertainties Growing interdependence Energy security should be treated as a shared responsibility by all parties This is essential for the stable and sustainable oil market

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In conclusion

Critical to bring all strands of the market together Overall goal is to provide a stable setting for expanding necessary investments steady growth in economies meeting environmental concerns eradicating energy poverty In-depth dialogue and cooperation among all stakeholders is the way forward

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www.opec.org

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