Russia, the Persian Gulf, and World Oil Supply. Mikhail Khodorkovsky Washington, 7 February 2003

Transcription

1 Russia, the Persian Gulf, and World Oil Supply Mikhail Khodorkovsky Washington, 7 February 2003

2 The picture today: Main crude oil flows come from Middle East 2001 global commercial flows of crude oil (MMT)

3 The West has begun to recognize that Russia s oil reserves are much greater than previously thought Internationally audited reserves of just a few top companies have demonstrated that Western appraisals of Russia s oil reserves have been historically underestimated bln bbl bln bbl Russia s proved reserves (World Energy Council, 1998) Internationally audited ( ) proved reserves of Top 4* companies * Lukoil, YUKOS, Surgutneftegas, TNK (without Onako)

4 Russian oil industry has internal resources to finance production growth at lower than expected cost Oil industry production increase Oil industry CAPEX increase CAPEX necessary to increase production ($ per bpd) Actual Western Experts Estimates** 20, $4.4 bln mbpd 8,800 * RF Minenergo ** Richard Matzke, former VP Chevron/Texaco, 2002

5 Russia s most advanced oil companies intend to maintain operating costs at or near levels E&P Operating Expenses in 2001, USD per boe Petrobras Conoco ChevronTexaco Phillips ENI PetroChina RD Shell ExxonMobil LUKoil Statoil BP TNK TotalFinaElf Sibneft YUKOS* , , Source: Company Data, estimates based on SFAS 69 * Excludes Veteran Petroleum accrual

6 An indisputable fact: the gas reserves of Russia and the CIS are the largest in the world Traditional gas reserves 303 (bn boe) * Russian gas production (bln boe per year) 4.1 (forecast for 2005) Number of years supply 74 Bn boe (2001 actual) 83 0 Mid East (OPEC) CIS (* incl. Russia) Other OPEC countries Non-OPEC exporter countries Source: BP Amoco Statistical Review of World Energy 2000

7 Russian oil exploration and production costs are competitive today Upstream cost $/bbl Worldwide reserves and full-cycle upstream cost* of oil in $22.5/bbl $21/bbl 16 Including Government expenses $21.41/bbl $20.5/bbl $18/bbl Angola Iraq Saudi Arabia Kuwait Iran UAE Venezuela(x-heavy) Algeria Other Latin America USA, Alaska Nigeria Russia Western Siberia Kazakhstan Best Companies** Venezuela(conv) Brasil Mexico USA, Mexican Gulf (deep) USA onshore China (onshore) Western Canada Indonesia North Sea /Norway Other USA, stripper wells 100 * - exploration, development, and production excl. transportation and taxes (CERA, Sept. 2001) ** - in 2001 $3.50-$3.90 ($3.70)/bbl, 800 Reserves, bln. bbl

8 Russia s most advanced oil companies intend to maintain operating costs at or near 2002 levels Russian oil companies total costs for bringing crude to market $/bbl Transportation E&P CAPEX OPEX 0 Average for all markets Europe North America Asia (Far East)

9 Removing the bottlenecks to the development of Russia s hydrocarbon exports mln bbl/day 6 Development of oil export infrastructure Murmansk 4 Total crude for export China 2 Transneft capacity (forecast) 2010 (forecast) Source: CERA, YUKOS estimates

10 Источник: worldatlas.com Oil can be transported from Russia to the US by a shorter route than the one used for transporting crude from the Middle East

11 The Murmansk Pipeline Project Murmansk Moscow Republic of Karelia Vologda Region Arkhangel sk Region Ukhta route Ukhta Length: 3600 km CAPEX: $4.5 billion (preliminary estimate) Komi Republic Usa route Length: 2500 km CAPEX: $3.4 billion (preliminary estimate) Usa Nefteyugansk Khanty-Mansiysk Autonomous Area Project milestones 27 Nov 2002: YUKOS signs Memorandum of Understanding with Lukoil, Sibneft, and TNK April 2003: Declaration of Intent : Investment Case, Feasibility Study, Design Drawings : Construction : Operation

12 The most promising projects to the Far East: a pipeline to China Timetable July Feasibility study Detailed project Construction kbopd shipments kbopd shipments Facts and figures Length ~ 2400 km (1500 miles) Initial capacity 400 k bopd Estimated cost ~ 1.7 bln USD Agreed: pricing formula, volumes, delivery guarantees Operator - Transneft 800 kbopd capacity Angarsk Lake Baikal Chita Russia ~1600 km Mongolia ~ 800 km China Daqing

13 Continued growth of Russian oil production and export is limited by market opportunities mln bbl per day Russian crude production and exports outside the FSU Production Exports 8-9 Market ceiling , , Source: CERA research, Yukos estimates

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15 Reduction in oil production and reserves is forecasted in politically stable regions Liquid hydrocarbons output (mln bpd) North Sea USA Source: СERA, 2002

16 If past evaluations are taken into account, the geopolitical picture of the oil industry in 10 years will be determined by the Middle East Europe/ North America (excluding deep water) FSU Western estimates of world s oil reserves distribution in late 90 s 9% 6% Deep water 9% 21% Others USA North Sea Deep water South America West Africa Middle East FSU Pacific 55% Middle East Relative size of global oil sources (reserves and production)

17 Western appraisals of Russia s oil reserves have been historically underestimated Oil reserves of Russia and top Russian oil companies (bln bbl) Russia s proved reserves (World Energy Council, 1998) Internationally audited ( ) proved reserves of Top 4* companies * Lukoil, YUKOS, Surgutneftegas, TNK (without Onako) Proved reserves (ABC1) of Top 10** * Lukoil, YUKOS, Surgutneftegas, TNK (without Onako), Sidanco, Rosneft, Tatneft, Sibneft, Slavneft, Bashneft Proved and 50% of probable reserves (C2) of Top 10** * Lukoil, YUKOS, Surgutneftegas, TNK (without Onako), Sidanco, Rosneft, Tatneft, Sibneft, Slavneft, Bashneft

18 There are grounds to believe that Middle Eastern reserves may be overstated Sudden statistical leaps in combined oil reserve figures for Abu Dhabi, Dubai, Iran, Iraq, Kuwait, and Saudi Arabia increase in one year Petroconsultants estimate World Oil Annual Reports Petroconsultants

19 Russian oil is competitive in Europe, the USA, and interior regions of the Far East Total cost of one barrel of crude shipped to principal world markets in $8.00 $11.50 $10.50 $6.50 $9.80 $7.00 $9.40 $5.20 $5.30 $6.10 $3.20 $4.40

20 Average new oil well potential in Russia is actually quite attractive compared with the rest of the world oil industry (BPD) Growing production Depleting basins Regions with limited access for super-majors

21 Several Russian companies are among the world leaders in oil industry production growth Relative Production change for selected companies, 2001/2000, % Sibneft Conoco YUKOS Phillips Rosneft TNK BP Petrobras Surgutneftegas ChevronTexaco Royal Dutch/Shell LUKoil TotalFinaElf PetroChina ExxonMobil -1% ENI * -2% * - excl. Lasmo 2% 1% 1% 1% 4% 6% 6% 5% 5% 11% 13% 17% 18% 20% Source: Company data

22 Russia can become a reliable source of crude for Europe for many years to come Western European oil consumption will be more and more dependent on imports in the future MMBPD Russia s share in 2000 Imports Possible Russian share in % 25% North Sea production Source: CERA, 2002

23 Russia can meet 10% or more of China s oil import requirements China s crude requirements (MMT) Imports from Russia Imports Chinese domestic production

24 The geopolitical imperative for today is to diversify energy sources and concentrate on the most reliable ones

25 Reducing oil market volatility mitigates the negative effects of price pressure: Crude oil (Brent, spot, $/bbl) ,00 36,00 34,00 32,00 30,00 28,00 26,00 24,00 22,00 20,00 18,00 16,00 14,00 12,00 10,00 8,00 At high prices slower economic growth increased costs in the oil industry as a whole as many low-efficiency fields are put into production windfall profits and increased lack of transparency among producers At low prices overheated economy loss of important low-efficiency fields increased risk for large-scale projects stronger monopolistic tendencies

26 A multi-polar geopolitical picture is optimal Conditions: a price range of $18-23 per barrel a mix of long-term and spot contracts a rational tax policy in producer and consumer countries

27 Russia s most advanced oil companies intend to maintain operating costs at or near 2002 levels Russian oil companies total costs for bringing crude to market $/bbl Transportation E&P CAPEX Miscellaneous Payroll Electricity Materials Average for all markets Europe North America Asia (Far East)