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Confidential. © 2018 IHS Markit®. All Rights Reserved.Confidential. © 2018 IHS MarkitTM. All Rights Reserved.
Oil, Shale Gas and NGL Markets:
What Does the Future Hold?13 September 2018 | Chengdu, China
Premasish Das
Executive Director, Research & Analysis, IHS Markit
Premasish.Das@ihsmarkit.com
Confidential. © 2018 IHS Markit®. All Rights Reserved.
Crude Oil Markets
2
Confidential. © 2018 IHS Markit®. All Rights Reserved.
Market’s focus shifts from too much supply to… Not enough?
2,400
2,500
2,600
2,700
2,800
2,900
3,000
3,100
3,200
Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18
OECD total oil industry stocks
Notes: Total oil industry stocks include crude, refined product, NGL, and feedstocks. Data are monthly, through April 2018.
Source: IHS Markit © 2018 IHS Markit
Mil
lio
n b
arr
els
Total
stocks
5-year
average
-2.4
-2.0
-1.6
-1.2
-0.8
-0.4
0.0
0.4
0.8
1.2
1.6
2.0
2.4
92
93
94
95
96
97
98
99
100
101
102
103
104
Q1
15
Q2
15
Q3
15
Q4
15
Q1
16
Q2
16
Q3
16
Q4
16
Q1
17
Q2
17
Q3
17
Q4
17
Q1
18
Q2
18
Q3
18
Q4
18
Q1
19
Q2
19
Q3
19
Q4
19
Implied change in global liquids inventories (right-hand side)
Demand (left-hand side)
Production (left-hand side)
World oil (liquids) demand and production, and implied change in global
liquids inventories
Source: IHS Markit © 2018 IHS Markit
Mil
lio
n b
arr
els
per
day
Outlook
Millio
n b
arre
ls p
er d
ay
3
Confidential. © 2018 IHS Markit®. All Rights Reserved.
Anticipated major supply disruptions from Iran and ongoing supply shortfalls from
Venezuela could stifle the market
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
History Current outlook
Iran crude production
Source: IHS Markit © 2018 IHS Markit
Mil
lio
n b
arr
els
per
day
Impact of
transatlantic
sanctions
targeting Iran’s
oil exports
In first half 2018, Iran
exported about 2.1 MMb/d of
crude, and consumed about
1.7 MMb/d domestically.
0.0
0.5
1.0
1.5
2.0
2.5
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
Venezeula monthly crude oil production
Source: IHS Markit © 2018 IHS Markit
Mil
lio
n b
arr
els
per
day
Outlook
4
Confidential. © 2018 IHS Markit®. All Rights Reserved.
More supply required from the Gulf 3 and Russia would make spare capacity
cushion thinner at time of rising supply risks
Gulf-3
Russia
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
Nov-16 Apr-17 Sep-17 Feb-18 Jul-18 Dec-18 May-19 Oct-19
Gulf-3 and Russia crude oil production compared with October 2016
Notes: Gulf-3 are Saudi Arabia, Kuwait, and UAE.
Source: IHS Markit © 2018 IHS Markit
Mil
lio
n b
arr
els
per
day
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
Gulf-3 indicative spare crude production capacity
Notes: Gulf-3 includes Saudi Arabia, UAE, and Kuwait.
Source: IHS Markit © 2018 IHS Markit
Mil
lio
n b
arr
els
per
day
Spare capacity declined in 1H 2016 as the
Gulf-3 ramped up oil output. Spare capacity
increased in 1Q 2017 as the Gulf-3 cut
output as part of the Vienna Alliance
production restrain deal.
5
Confidential. © 2018 IHS Markit®. All Rights Reserved.
Oil demand growth to remain robust but downward pressure exists from high oil
prices and trade war
Global liquids demand growth (MMb/d)
2017 2018 2019
OECD 0.5 0.4 0.4
Non-OECD 1.4 1.2 1.1
Total world 1.9 1.6 1.5
Changes in oil (liquids) demand by region (volume change from previous year in million barrels per day)
© 2018 IHS Markit
Notes: Mexico is included in Latin America.
Data in table may not add up due to rounding.
Source: IHS Markit
(0.20)
(0.10)
0.00
0.10
0.20
0.30
0.40
0.50
2017 2018 2019
North America
(0.20)
(0.10)
0.00
0.10
0.20
0.30
0.40
0.50
2017 2018 2019
Latin America
(0.20)
0.00
0.20
0.40
2017 2018 2019
Europe
(0.20)
(0.10)
0.00
0.10
0.20
0.30
0.40
0.50
2017 2018 2019
Middle East
(0.20)
(0.10)
0.00
0.10
0.20
0.30
0.40
0.50
2017 2018 2019
Africa
(0.20)
(0.10)
0.00
0.10
0.20
0.30
0.40
0.50
2017 2018 2019
Eurasia
(0.20)
(0.10)
0.00
0.10
0.20
0.30
0.40
0.50
2017 2018 2019
India
(0.20)
(0.10)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
2017 2018 2019
China
(0.20)
(0.10)
0.00
0.10
0.20
0.30
0.40
0.50
2017 2018 2019
Non-OECD Asia ex. China & India
(0.20)
0.00
0.20
0.40
2017 2018 2019
OECD Asia Pacific
6
Confidential. © 2018 IHS Markit®. All Rights Reserved.
Strong US shale growth all but certain led by strong growth from Permian basin
8.7
9.4
8.8
9.4
10.7
11.9
7.0
8.0
9.0
10.0
11.0
12.0
13.0
2014 2015 2016 2017 2018 2019
History Outlook
Monthly US crude oil production
Source: US EIA (history); IHS Markit (outlook) © 2018 IHS Markit
Mil
lio
n b
arr
els
per
day
Square markers are annual average production for
each year.
7
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
Bakken Permian Eagle Ford
Niobrara / Wattenberg SCOOP/STACK
US tight oil production by play
Source: IHS Markit, EIA © 2018 IHS Markit
Mil
lio
n b
arr
els
per
day
Outlook
Confidential. © 2018 IHS Markit®. All Rights Reserved.
Global conventional base production average aggregate decline rate of
~2.5% requires new tranches of supply
0
10
20
30
40
50
60
70
80
90
100
2000 2005 2010 2015 2020 2025 2030 2035 2040
Base Sanctioned Unsanctioned Tight Oil YTF
Global crude & condensate production by development
Source: IHS Markit © 2018 IHS Markit
MM
b/d
8
Confidential. © 2018 IHS Markit®. All Rights Reserved.
Key messages
• Rising supply risks from Iran and Venezuela will keep the oil market on the edge amid shrinking
spare capacity. While US production will continue to rise alleviating some of the concerns, looming
logistical constraints could tame the growth in the 2019.
• Prospects for world oil demand growth remain bright for now – but trade wars and higher oil prices
and currency depreciations in the emerging markets are big downside risks.
• As over 40 MMb/d of new supply needed to meet long term demand offsetting global declines, oil
price should be high enough to incentivize investments in marginal high cost crude oil production.
9
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Shale Gas and NGL Markets
10
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Permian will be the dominant play for crude oil; and non-associated gas production
will increase in Marcellus and Utica
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2001 2005 2009 2013 2017 2021 2025
Permian
Wattenberg
Niobrara
SCOOP/STACK
Powder RiverBasin
Eagle Ford
Barnett
Bakken
Other
US crude oil production
Source: IHS Markit © 2018 IHS Markit
Th
ou
san
d b
/d
0
20
40
60
80
100
120
2001 2005 2009 2013 2017 2021 2025
Utica
Marcellus
Permian
SCOOP/STACK
Eagle Ford
Bakken
Wattenberg
Niobrara
Barnett
Haynesville
Other
US natural gas production
Source: IHS Markit © 2018 IHS Markit
Bcf/
d
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Increasing crude oil and gas production from Permian, Eagle Ford and Marcellus
plays will boost NGL production from the US
0
1
2
3
4
5
6
7
2000 2005 2010 2015 2020 2025
Chart Title
Other gas sourced Bakken Barnett Niobrara
Woodford SCOOP/STACK Eagle Ford Permian
Utica Marcellus
NGL production from key shale gas and tight oil plays
Source: IHS Markit © 2018 IHS Markit
Mil
lio
n b
/d
0
1
2
3
4
5
6
7
2000 2005 2010 2015 2020 2025
Ethane Propane Normal Butane Isobutane Natural Gasoline
US NGL production by product
Source: IHS Markit © 2018 IHS Markit
Mil
lio
n b
/d
12
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Volume and pace of ethane exports to China will depend on US export terminal
capacity and the cracker build up in China
0.0
0.5
1.0
1.5
2.0
2.5
2000 2005 2010 2015 2020 2025
PADD 3 PADD 2 PADD 1
US ethane chemical demand
Source: IHS Markit © 2018 IHS Markit
Mil
lio
n b
/d
0
100
200
300
400
500
600
2010 2012 2014 2016 2018 2020 2022 2024
Canada Norway UK Sweden India Brazil Mexico China
US ethane exports by destination
Source: IHS Markit © 2018 IHS Markit
Th
ou
san
d b
/d
13
1st Wave 2nd Wave
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Long list of ethane crackers are being planned, but how many will come?
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No. CompanyEthylene/
KTAConsume Ethane/KTA Status
1 Juneng Heavy Industry 2,000 2,600 EIA
2 Bohai Chemical 1,000 1,300 FS
3 Nanshan Group 2,000 2,600 EIA
4 Yangmei Hengyuan 1,500 2,000 FS
5 Satellite PC 2,500 3,250 EIA
6 SP Chemicals 650 270 Constructing
7 Guangxi Invest./Huayi 1,000 1,300 FS
8Guanghui/
Tongkun2,000 2,600 FS
9 Fujian Yuantai 2,000 2,600 FS
10 Fujian Yongrong 1,500 1,950 FS
TOTAL 16,150 20,470
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More supply availability from the United States and the Middle East will be cleared
as petrochemicals feedstock in Asia
3 3 59
1421
2529
3035 34
32
35
36
3836
2322 22
22
27
29
2727
0
10
20
30
40
50
60
70
80
90
100
2010 2011 2012 2013 2014 2015 2016 2017
US ME Others
Global LPG trade by source
Source: IHS Markit
Mil
lio
n to
ns
© 2018 IHS Markit
-60
-50
-40
-30
-20
-10
0
10
20
30
40
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Price-sensitive demand
Chemical demand
Base surplus/(deficit) excl. chemical demand
Net surplus/(deficit)
Asia and Middle East price-sensitive LPG demand
Source: IHS Markit © 2018 IHS Markit
MM
t p
er
year
15
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Increased condensate production in Canada could lead to exports of US natural
gasoline to Asia
0
100
200
300
400
500
600
700
2000 2005 2010 2015 2020 2025
Refinery Chemical Other Exports
US natural gasoline demand and exports
Source: IHS Markit © 2018 IHS Markit
Th
ou
san
d b
arr
els
per
day
0
200
400
600
2014 2016 2018 2020 2022 2024
Q3 2017 Q3 2016
Western Canada condensate supply
Th
ou
san
d B
arr
els
Per
Day
Source: IHS Markit © 2018 IHS Markit
16
200 kbd of Canadian condensate could
displace 7 MTA of US natural gasoline
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Key messages
• Rapidly rising associated gas production from Permian, coupled with increasing non-associated
production from Marcellus and Utica will keep Henry Hub prices in check.
• Ethane availability from the US would rise despite rising domestic demand from ethane-based
ethylene capacity but it is quite uncertain how many of ethane crackers would be built in China.
• Dramatic increases in US exports have resulted in major changes in global LPG trade flows and
Asia becoming the global “demand sink”.
17
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Thank you
18
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