Market Report SeriesOil 2018 – Analysis and Forecasts to 2023

Columbia University – Centre on Global Energy Policy, New York, May 22nd 2018

© IEA 2018

Robust global oil demand growth to 2023

China and India account for almost half of world oil demand growth of 6.9 mb/d.

World oil demand growth (y-o-y change)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2017 2018 2019 2020 2021 2022 2023

mb/d

Rest ofthe world

India

China

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Petrochemicals drive global oil demand growth to 2023

Petrochemical feedstocks (ethane and naphtha) responsible for 25% of global oil demand growth

Feedstock requirements for new steam crackers

0

100

200

300

400

500

600

700

US China Russia Others

kb/d

Naphtha

Ethane

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IMO 2020 specs – enormous implications for products mix

HSFO replaced by a new 0.5% fuel and gasoil. Gasoil availability is the main constraint.

0

500

1 000

1 500

2 000

2 500

3 000

3 500

2015 2016 2017 2018 2019 2020 2021 2022 2023

kb/d

Bunker HS FO Marine gasoil Marine FO 0.5%

0%10%20%30%40%50%60%70%80%90%

2015 2016 2017 2018 2019 2020 2021 2022 2023

%

Marine bunkers in OECD and major non-OECD countries

Volumes (kb/d) and Shares (%)

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China use of alternative fuels displacing oil

Growing switch in fleets to electric vehicle’s, CNG, LNG

0102030405060708090100

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2012 2013 2014 2015 2016 2017

kb/d1 000 Vehicles

China NGVs China Evs Gasoline displaced (Right)

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50

100

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250

300

350

400

0

100

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300

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2012 2013 2014 2015 2016 2017

kb/d1 000 Vehicles

LNG trucks Electric buses Diesel displaced (Right)

Gasoline displacement Diesel displacement

© IEA 2018

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

2010 2011 2012 2013 2014 2015 2016 2017

mb/d

OPEC

Non-OPEC

Oil industry needs to replace one North Sea each year

Ageing oil fields lose more than 3 mb/d per year despite slowing decline rates.

Output loss from post-peak conventional crude oil fields

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Only limited uptick in global upstream spending

Producers spend more on short cycle supply, especially US LTO. Investments in conventional fields remain depressed, but some signs of renewed interest in offshore.

Global oil and gas upstream capital spending 2012-2018

-25%

-26%

*Preliminary based on selection of investment updates

0100200300400500600700800900

2012 2013 2014 2015 2016 2017 2018*

USD billion

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Booming non-OPEC supply in early years of forecast…

… more than covers demand growth to 2020. By 2023, non-OPEC supply grows by 5.2 mb/d. OPEC capacity rises only 1.2 mb/d due to Venezuelan collapse and limited increases elsewhere.

Changes in global oil supply capacity 2017-2023

-1.0

0.0

1.0

2.0

3.0

4.0

US

Bra

zil

Can

ada

Iraq

Iran

Nor

way

Col

ombi

a

Indo

nesi

a

Chi

na

Mex

ico

Ang

ola

Ven

ezue

la

mb/d

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Supply growth front loaded & dominated by US & NGLs

But will projects be brought forward? Projects sanctioned today tend to have shorter lead-time.

0.0

0.5

1.0

1.5

2.0

2.5

2017 2018 2019 2020 2021 2022 2023

mb/d

Non-OPEC OPEC-2

0

2

4

6

8

OPEC Non-OPEC Total

mb/d Biofuels

Proc.gainsNon-conv

NGLs

LTO

Crude

Global

Global liquids capacity growth Global oil supply capacity growth 2017-23

© IEA 2018

0 2 4 6 8

10 12 14 16 18

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

mb/d

LTO

Gulf ofMexicoNGLs

Alaska

Other

Higher oil prices unleash second wave of US supply

Total output reaches 17 mb/d by 2023 – and could be even higher if prices rise/bottlenecks ease.

0 2 4 6 8

10 12 14 16 18

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

mb/d

LTO

Gulf ofMexicoNGLs

Alaska

Other

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US bottlenecks ease, export capacity more than doubles

New pipeline projects ease constraints. US export capacity rises to 4.9 mb/d by 2023. Corpus Christi solidifies position as largest US export hub.

0.0

0.1

0.2

0.3

0.42017 2018 2019 2020 2021 2022 2023

mb/d Expected Texas pipeline deficit

1.6

2.1

2.6

3.1

3.6

4.1

4.6

5.1

2017 2018 2019 2020 2021 2022 2023

mb/d US crude export capacity

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US oil enters global markets

Refiners in Asia and Europe look for suitable crude oil to produce petrochemical feedstocks andlow-sulphur fuels

US LTO first wave

US LTO second wave

Low-sulphur, low residue feedstocksLow-sulphur and

petchemfeedstocks

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China net crude oil imports double the US in 2023

0

2

4

6

8

10

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

mb/d

US

China

India

Indian imports, too, surpass the US in 2023 as shale growth reduces US import dependence.

Net crude oil imports

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Spare capacity cushion shrinks to lowest level since 2007

Supply/demand tighter at the end of the forecast

20.00

24.00

28.00

32.00

36.00

40.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Global Oil Market Balance

OPEC Crude Capacity Call on OPEC Crude + Stock Ch.

mb/d

© IEA 2018

Conclusions

• Robust world oil demand growth to 2023 – petrochemicals key driver.

• Non-OPEC output growth exceeds demand increase through 2020.

• US, Brazil, Canada, Norway dominate growth. New infrastructure investments relieve US export bottlenecks.

• US crude finds new markets as refiners seek light, low sulphur crude to meet petrochemical demand and IMO specifications.

• More upstream investment needed today to meet future demand and offset 3 mb/d of declines from mature oil fields each year.

• As spare capacity cushion shrinks, supply security concerns remain critical.

© IEA 2018