Market Report Series Oil 2018

Transcription

1 Market Report Series Oil 218 Norwegian Ministry of Energy, 17 April 218 Neil Atkinson, Head of Oil Industry and Markets Division Toril Bosoni, Senior Oil Market Analyst, Oil Industry and Markets Division

2 Robust global oil demand growth to World oil demand growth (y-o-y change) Rest of the world India China China and India account for almost half of world oil demand growth

3 China use of alternative fuels displacing oil Vehicles Gasoline displacement kb/d China NGVs China Evs Gasoline displaced (Right) Vehicles Diesel displacement kb/d LNG trucks Electric buses Diesel displaced (Right) times less buses and trucks having 4 times more impact than Electric cars and NGVs

4 Petrochemicals drive global oil demand growth to 223 Feedstock requirements for new steam crackers 7 kb/d Naphtha Ethane 1 US China Russia Others Petrochemical feedstocks (ethane and naphtha) responsible for 25% of global oil demand growth

5 Oil demand growth by product Oil demand growth by product And fuel oil breakdown (y-o-y changes) LPG & ethane Naphtha Motor gasoline Jet fuel & kerosene Gasoil/diesel Residual fuel oil Other products Total products LPG & ethane + naphtha + gasoline Jet fuel & kerosene + other products Gasoil/diesel Inland FO New bunker ULSFO Bunker HSFO Total products Very large shift in demand in 22 and following adjustments reflect IMO induced switch

6 Only limited uptick in global upstream spending Global oil and gas upstream capital spending USD billion -25% -26% * *Preliminary based on selection of investment updates Producers spend more on short cycle supply, especially US LTO. Investments in conventional fields remain depressed, but some signs of renewed interest in offshore.

7 With tight budgets, spending geared to short-cycle oil Selected observed decline rates 12% Global 15% Offshore/Onshore 2% Key countries 1% 8% 1% 15% 6% 1% 4% 2% 5% 5% % % % World Non-OPEC OPEC Offshore Onshore Russia Norway Brazil Modest capex/opex injections can in many cases bring rapid results in terms of output.

8 Oil industry needs to replace one North Sea each year. Output loss from post-peak conventional crude oil fields -1. OPEC Non-OPEC Ageing oil fields lose more than 3 per year despite slowing decline rates.

9 US Brazil Canada Iraq Iran Norway Colombia Indonesia China Mexico Angola Venezuela Booming non-opec supply growth reshapes world oil market Changes in global oil supply capacity more than covers demand growth for next three years. By 223, non-opec supply grows by 5.2. OPEC oil capacity rises only 1.2 due to Venezuelan collapse and limited increases elsewhere.

10 Higher oil prices unleash second wave of US supply LTO Gulf of Mexico NGLs Alaska Other Total output reaches 17 by 223 and could be even higher if prices rise.

11 Jury out on US LTO potential in the longer term Wellhead break-even by play USD/bbl Permian Midland Permian Delaware Niobrara Eagle Ford Bakken Other LTO production by play Break-even prices moving higher, along with rising costs and lower productivity in some areas.

12 Supply growth front loaded, and restricted to LTO, other supply Global liquids capacity growth Global oil supply capacity growth Non-OPEC OPEC OPEC Non-OPEC Total Biofuels Proc. gains Non-conv NGLs LTO Crude Global But will this be rolled-over? Projects sanctioned today tend to have shorter lead-time.

13 Brazil, second largest source of supply growth to Onshore Campos Basin Santos Basin Other crude NGLs Pre-salt increase offset declines in the onshore and Campos basin. Output up 1, to 3.75.

14 Canadian oil pipelines stretched to the limit kb/d Keystone XL Trans Mountain Keystone Rangeland/Milk River Spectra Express Mainline Oil available for export Takeaway capacity to remain insufficient until 221, forcing increase in rail exports.

15 US pipeline bottlenecks ease, export capacity more than doubles, Expected Texas pipeline deficit 5,1 US crude export capacity 4,6,1 4,1,2 3,6 3,1,3 2,6 2,1, , New pipeline projects (Permian Express, EPIC) ease constraints. US export capacity rises to 4.9 by 223. Corpus Christi solidifies position as largest US export hub.

16 US oil finds new markets Low-sulphur and petchem feedstocks US LTO first wave Low-sulphur, low residue feedstocks US LTO second wave Refiners in Asia and Europe look for suitable crude oil to produce petrochemical feedstocks and low-sulphur fuels

17 North Sea renaissance as development costs drop by half North Sea oil supply kb/d Norway UK Offshore Other North Sea annual change Number of projects sanctioned over past few years will lift supply to highest since 21.

18 What s in store for Russia s oil production future? Next generation oil projects (shale, Arctic, deepwater) require considerable financial support and advanced technologies, face considerable sanctions risk Domestic factors: tax and sector reform, increased horizontal drilling, import substitution Overseas factors: diversification, hedging with overseas reserve replacement Russia oil supply Brownfields Greenfields NGLs Source: IEA Market Report Series: Oil 218

19 Asian oil supply downtrend continues Asian oil supply Asia supply: Annual change kb/d China India Indonesia Malaysia Thailand Vietnam Australia Others Declines ease as spending picks up modestly. Crude declines offset by CTL output in China.

20 China net crude oil imports double the US in 223 Net crude oil imports US China India Indian imports, too, surpass the US in 223 as shale growth reduces US import dependence.

21 Spare capacity cushion shrinks to lowest level since 27 4, Global Oil Market Balance 36, 32, 28, 24, 2, OPEC Crude Capacity Call on OPEC Crude + Stock Ch. Supply/demand tighter at the end of the forecast

22 Key uncertainties Demand substitution, price subsidies/taxes OPEC/Non-OPEC production management Prices US LTO potential, midstream bottlenecks Investment strategies going forward, dividend strategies, interest rates Cost inflation Geopolitical risk/sanctions/trade

23 Conclusions Robust world oil demand growth to 223 driven mainly by petrochemicals. Non-OPEC output growth exceeds demand increase through 22. 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 of declines from mature oil fields each year. As spare capacity cushion shrinks, supply security concerns remain critical.

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