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1 Vautrain Consulting Oil and Gas Outlook and Price Trends Yangon 28 March MOGP Summit
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1 Vautrain Consulting
Oil and Gas Outlook
and Price Trends Yangon 28 March
MOGP Summit
2 Vautrain Consulting
Global energy demand continues rising
particularly in Asia.
0
1,000
2,000
3,000
4,000
5,000
1990 1995 2000 2005 2010
North America
Latin America
Europe
Russia/CIS
ME/Africa
Asia
Source: BP
Million Tonnes Oil Equivalent
Global Energy Consumption
3 Vautrain Consulting
Coal and gas are the fastest growing energy
resources globally.
0
500
1000
1500
2000
2500
3000
Coal Gas Oil Renewables Nuclear TotalEnergy
Million TOE
Incremental World Energy by Primary Fuel 2000-2010 Coal and gas have been
the major contributors to
energy supply over the
past decade.
GHG and other
environmental concerns
have been insufficient to
deter consumers from
low cost coal.
Gas availability has
improved with rapid LNG
production expansions
around the world. Source: IEA
4 Vautrain Consulting
Petroleum demand continues to grow
notwithstanding higher prices.
Petroleum demand grew
1.2% on average over the
past decade.
Growth was concentrated
in light transportation fuel
products.
Emerging market
economic growth will
offset efficiency gains to
result in continued oil
demand expansion.
5 Vautrain Consulting
Shale production is changing North American oil
and gas.
Shale production
includes both oil and gas
Production in long-
discovered basins is
increasing considerably.
Exportable gas surplus
has developed.
Oil pipeline capacity is
lagging depressing prices.
6 Vautrain Consulting
Technology is advancing rapidly.
As horizontal fracturing is a relatively new
technology, producers are rapidly improving their
techniques.
Fracturing procedures are becoming far more
complex leading to more producible reserves per well.
Horizontal laterals now run as far as 5 kilometers.
Originally focused on gas production, horizontal
drilling and fracturing has found equal application to
oil plays.
US gas prices were far higher than crude on a
BTU basis but now are 80% below crude.
Falling gas prices combined with high crude
prices have realigned producer priorities.
7 Vautrain Consulting
Unconventional oil has the potential to renew production
growth even in thoroughly explored areas.
10
11
12
13
14
15
16
17
18
19
20
1980 1985 1990 1995 2000 2005
0
20
40
60
80
100
120
140
160
180
200
Production R/P Reserves
Production, Million B/D
R/P Ratio, years Reserves, billion bbl
20
22
24
26
28
30
32
34
36
38
40
Note: Global production excluding
OPEC, Russia and CIS nations.
Reserve additions have
approximately matched
production for the past
decade with little
advance.
New techniques expand
potential for oil in
declining areas.
How much can this area
increase production?
8 Vautrain Consulting
Global Energy Outlook
Advances in gas production will trigger more rapid gas consumption growth in the next decade. Environmental pressure on coal (GHG, criteria pollutants, toxics) will increase retarding coal consumption growth. Oil will remain the primary transportation fuel notwithstanding renewables programs. Continued renewables growth will depend on solving vexing environmental and economic questions.
9 Vautrain Consulting
Oil and Gas Price
Oil and gas demand growth hold the promise of
strong prices over the medium term.
Current price levels are probable to be high in the
longer term range.
Unconventional resource plays including shale oil,
shale gas and bitumen as well as coal seam methane
and others could tilt balances to surplus.
Crude prices are expected to stay in the $80-110 range
for Brent longer term.
Applicability of new production techniques more
broadly holds the promise of new supply patterns
emerging.
10 Vautrain Consulting
Asian nations are becoming more self sufficient
in refining.
-1500
-1000
-500
0
500
1000
1500
2000
2500
3000
1990 1995 2000 2005 2010
India
China
Japan
Singapore
South
Korea
Taiwan
Thailand
Australia
Indonesia
Vietnam
Other
India, South Korea and
Taiwan have become
substantial exporters.
Asian nations as a
group are no longer a
market for Atlantic
Basin or Middle East
refiners.
More Asian countries
have brought value-
added refining into their
domestic economies
and created exportable
surpluses.
Light Fuel Product Trade
Imports
Exports
Th
ou
sa
nd
s o
f b
arr
els
pe
r d
ay
11 Vautrain Consulting
As Asian nations become more self-sufficient,
export markets West of Suez are penetrated.
0 500 1000
Fuel OilDiesel
KeroseneJet
GasolineNaphtha
Net Import by Region
US
Europe
-400 100 600
Fuel Oil
Diesel
Kerosene
Jet
Gasoline
Naphtha
Latin America 0 200 400
Fuel Oil
Diesel
Kerosene
Jet
Gasoline
Naphtha
Africa
0 100 200 300
Fuel Oil
DieselKerosene
JetGasoline
Naphtha
Middle East
0 200 400 600
Fuel Oil
DieselKerosene
JetGasoline
Naphtha
Thousands of
barrels per day
12 Vautrain Consulting
A global refining surplus has developed.
Negative demand growth has created excess refining in US, Europe and Japan. Dieselization of European markets has exacerbated gasoline surplus in particular. Simple refineries are at greatest risk of closure but some more sophisticated plants are being shuttered. Petroplus ConocoPhillips Sunoco Japanese refiners
13 Vautrain Consulting
Asian refinery margins will be influenced by
global supply/demand.
Over the short term surpluses will continue to weigh on margins.
Over the medium term more Atlantic Basin refinery closures will create a more balanced market.
Changes in demand patterns, particularly for fuel oil, could improve margins.
Refining profits are probable to strengthen to 2015
Sour Crude Net Cash Cost
Margin—South East Asia
$/b
bl
