Fundamental Oil Market Outlook ICE Forum David Wech JBC Energy GmbH 13 November 2012 Research - Energy Studies - Consulting - Training 21 November 2012 Slide 1
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Overview Oil Demand Supply Trends incl. Shale Special Balance & Oil Price Refining Industry Trends 21 November 2012 Slide 3
Oil Demand World Oil Demand Growth 2012 & 2013 - Forecast Changes [million b/d] 2.0 1.8 JBC Energy EIA OPEC IEA 2.0 1.8 1.6 1.6 1.4 1.4 1.2 1.2 1.0 1.0 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.0 Source: OPEC, IEA, EIA, JBC Energy Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Apr-12 Jun-12 Aug-12 Oct-12 0.2 2012 2013 0.0 21 November 2012 Slide 4
Oil Demand 3,500 3,000 2,500 2,000 World Oil Demand Growth by Products ['000 b/d] Gas Oil/Diesel Jet/Kero Gasoline Fuel Oil LPG Naphtha Other Products 1,500 1,000 500 0-500 -1,000-1,500-2,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 21 November 2012 Slide 5
Supply Trends North America (US, Mexico, Canada) Oil Supply* History and Forecasts [million b/d] 20 19 JBC IEA 18 17 16 15 14 13 12 Source: IEA, JBC Energy *does not contain US biofuels 11 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 2012 2013 2014 2015 2016 2017 21 November 2012 Slide 6
Supply Trends Rest Non-OPEC Oil Supply* History and Forecasts [million b/d] 38 JBC IEA 37 36 35 Source: IEA, JBC Energy *does not contain Brazil biofuels 34 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 2012 2013 2014 2015 2016 2017 21 November 2012 Slide 7
Supply Trends Africa Total Oil Supply History IEA and Forecast [million b/d] 12.0 IEA JBC 11.5 11.0? 10.5 10.0 9.5 9.0 8.5 8.0 Source: IEA, JBC Energy Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 2012 2013 2014 2015 2016 2017 21 November 2012 Slide 8
Supply Trends 1.2 Non-OPEC Crude Supply Growth [million b/d] 0.9 0.6 0.3 0.0-0.3-0.6-0.9 US Crude Other Non-OPEC Canada Total Non-OPEC -1.2 2009 2010 2011 2012 2013 2014 2015 2016 21 November 2012 Slide 9
Supply Trends Shale Production Decline of Bakken Wells over Months after Start-up [%] 100% 90% O&GJ decline curve of the average Bakken well assessed with Dec 2011 well data Adapted decline curve with Aug 2012 production data to match JBC Energy model* 80% 70% 60% After 6 months, output of the average well reaches LESS than 50% of the first full month of production 50% 40% 30% There are strong indications that the average performance of Bakken wells weakens over time, i.e. wells drilled in 2012 show a stronger decline compared to wells drilled in 2011 and before. 20% 10% 0% *Same average decline curve is assumed for all new wells coming online since January 2005. Model is fitted to total actual Bakken production. Source: O&G Journal, JBC calculations 0 6 12 18 24 30 36 42 48 54 60 21 November 2012 Slide 10
Supply Trends Shale Bakken* Production Rate [count, b/d] 5,000 4,500 Technical limit seems to be reached with about 140 b/d. 200 180 4,000 160 Producing wells 3,500 Production per well - right scale 140 3,000 2,500 12-months moving average - right scale Average production rates per well: 2009: 122 2010: 138 2011: 134 120 100 2,000 80 1,500 60 1,000 500 0 Application of horizontal drilling and multistage hydraulic fracturing boosted Bakken output. Source: North Dakota State Government, JBC Energy calculations *includes Bakken, Sanish, Three Forks, Bakken/Three Forks Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 40 20 0 21 November 2012 Slide 11
Supply Trends Shale Production Outlook for Bakken Shale Oil [million b/d] 1.6 1.4 1.2 1.0 0.8 0.6 0.4 18,000 15,000 12,000 9,000 6,000 3,000 0 Jan- 05 Historical Bakken Production Fitted Production / Base Case Low Estimate: Decreasing Productivity High Estimate: 1.5 million b/d by 2017 Number of Bakken Active Wells [count] Historical Base Case + 8,500 wells Low Estimate + 4,600 wells High Estimate + 12,700 wells Jan- 07 Jan- 09 Jan- 11 Jan- 13 Jan- 15 Jan- 17 Due to high decline rates, additional 12,700 active wells would be needed to reach 1.5 million b/d on annual average by 2017. 0.2 0.0 Source: NDIC, JBC Energy calculations Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 21 November 2012 Slide 12
Supply Trends Shale 400 Eagle Ford Shale Crude Production by Field ['000 b/d] 350 Briscoe Ranch Eagleville Eagleville (Eagle Ford 1) Eagleville (Eagle Ford 2) 300 250 200 150 100 50 Source: Texas RRC 0 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 21 November 2012 Slide 13
Supply Trends Forecast Changes Jun '08 vs. Jun '12 - Annual 2012 Average Production 2012 ['000 b/d] 2,000 1,500 1,000 Total Liquids Supply: - 2.7 million b/d Total Crude: - 2.9 million b/d OPEC Crude: - 4.1 million b/d Non-OPEC & OPEC NGLs: + 1.6 million b/d US Liquids Supply: + 1.7 million b/d 500 0-500 OPEC Crude Non-OPEC Total Liquids -1,000 Angola Iran Libya Azerbaijan Algeria Sudan Brazil Nigeria Qatar UAE Indonesia Iraq Australia Syria Yemen Venezuela Kuwait China Mexico Oman Russia Colombia Saudi Arabia United States 21 November 2012 Slide 14
Supply Trends Reserve estimates [trillion barrels] JBC Produced Other Conventional Oil Deepwater Heavy Oil & Bitumen CTL Biofuels MENA EOR Arctic Oil Shales GTL We are basing our reserve estimate on the highest feasible production volume over the next 30 years. When looking into realistic production scenarios the reserves are actually much less than originally suggested. IEA Source: IEA, JBC Energy Estimates 0 1 2 3 4 5 6 7 8 9 10 21 November 2012 Slide 15
Cost to produce one barrel of oil Balance & Oil Price 140 Marginal Cost of Oil Production [mbpd, $/bbl] 130 120 110 100 90 80 US Ethanol US Tight Oil Biodiesel Europe 70 US Deepwater 60 Oil Sands 50 40 30 North Sea WAF Offshore Brazil Ethanol 20 10 0 Source: JBC Energy 70 75 80 85 90 95 Quantity of Oil Supplied / Demanded 21 November 2012 Slide 16
Balance & Oil Price Global Liquids Supply [million b/d] 98 96 Other Supply US Ethanol Supply Ceiling* US Tight Oil Cushion Global Demand 94 1.28 1.08 0.82 92 1.36 1.23 90 0.75 3.14 1.68 88 86 84 * We assume that Saudi Arabia, Kuwait and UAE will not produce more than 10 million b/d, 2.8 million b/d and 3.2 million b/d on annual average. 2010 2011 2012 2013 2014 2015 2016 2017 21 November 2012 Slide 17
Balance & Oil Price Saudi Arabia Crude Oil Output & Crude Oil Output Capacity [million b/d] 12.5 12.0 Crude Oil Output Crude Oil Output Capacity 11.5 11.0 10.5 Production ceiling under normal circumstances: 10 million b/d annual average 10.0 9.5 9.0 Output for long term optimisation of resources: 8.5-9 million b/d 8.5 8.0 7.5 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 21 November 2012 Slide 18
Balance & Oil Price 140 135 130 125 120 115 110 105 100 95 90 85 80 75 70 65 Source: Platts, JBC Energy World Oil Price Forecast [$/bbl] Dtd. Brent Urals RCMB WTI 1st Month Dubai 1st Month 60 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 21 November 2012 Slide 19
Refining Industry Trends 24.00 22.00 Global Cracking Margins [$/bbl] 20.00 18.00 16.00 14.00 12.00 10.00 NWE Crude Basket Cracking Margin Standard (100%) Brent Cracking Margin Asian Crude Basket Cracking Margin Standard (100%) Dubai Cracking Margin 8.00 6.00 4.00 USGC Crude Basket Cracking Margin Standard (100%) LLS Cracking Margin 2.00 0.00-2.00 Source: JBC Energy calculations using H-Comet, Platts and McQuilling Jun- 12 Jul- 12 Aug- 12 Sep- 12 Oct- 12 Nov- 12 Jun- 12 Jul- 12 Aug- 12 Sep- 12 Oct- 12 Nov- 12 Jun- 12 Jul- 12 Aug- 12 Sep- 12 Oct- 12 Nov- 12 21 November 2012 Slide 20
Refining Industry Trends 100,000 90,000 80,000 70,000 60,000 50,000 40,000 World Conversion and CDU Capacity Development ['000 b/d] CDU FCC Hydro Cracking Coking 1998-2007 Average Annual Crude Supply Growth: 598,000 b/d 1998-2007 Average Annual NGL & Other Liquide Growth: 280,000 b/d 14,000 12,000 10,000 8,000 6,000 25% 2008-2018 Average Annual Crude Supply Growth: 290,000 b/d 2008-2018 Average Annual NGL & Other Liquide Growth: 330,000 b/d 27% 30,000 19% 4,000 20,000 10,000 21% 2,000 37% 0 60% Total Conversion Capacity 2007 Total CDU Capacity 2007 0 Conversion Capacity Growth 2008-2018 CDU Capacity Growth 2008-2018 21 November 2012 Slide 21
Refining Margin [$/bbl] Refining Industry Trends Global Refining Capacity & Margins by Configuration (2005-08 vs 2009-11) 12.00 10.00 Hydrocracking FCC & Visbreaking Coking FCC Visbreaking Capacity as of 2011 8.00 Europe complex set-up Europe medium Average crude intake unchanged at 72,000 mbpd 6.00 US complex set-up US simple 4.00 2.00 Margin calculation based on typical European crude slate (too light for coking) and European product prices 0.00 Source: JBC Energy Europe simple 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 Global Refining Capacity ['000 b/d] 21 November 2012 Slide 22
Refining Industry Trends 2,000 CDU Net-Additions East & West of Suez ['000 b/d] 2,500 1,500 2,000 1,000 500 0-500 1,500 1,000 500 0-500 -1,000 West of Suez C&S America -1,000-1,500 North America Africa -1,500 East of Suez MIDDLE EAST FSU East Europe Non-OECD Asia OECD ASIA -2,000 2007 2009 2011 2013 2015-2,000 2007 2009 2011 2013 2015 21 November 2012 Slide 23
Refining Industry Trends 6.0 Middle East - Balance of Selected Products [million b/d] Yanbu Saudi Arabia 5.0 4.0 3.0 Jubail Saudi Arabia Ruwais UEA Jizan Saudi Arabia 2.0 1.0 0.0-1.0 LPG Naphtha Gasoline Kero/Jet Gas Oil Residual/Fuel Oil 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 21 November 2012 Slide 24
Refining Industry Trends Diesel Supply Potential 2016 from main non-european Suppliers ['000 bpd] The US refining sector has proved to be highly competitive. The expansion of the Latin American refining sector in the coming years will redirect further volumes to Europe. If US utilisation rates in 2016 were 83% instead of the projected 78% and distillate yields were 1pp higher, another 450,000 b/d of diesel would be freed for exports. Americas 2011 2016 125 220 Source:JBC Energy estimates Russia 2011 2016 0 250 Diesel supplies to Europe (mostly Med) from the listed suppliers are expected to rise by anywhere between 0.4 and 1 million b/d over the next 5-10 years. Saudi Arabia (Saudi Aramco) 2011 2016 0 80 India (Reliance) 2011 2016 115 230 Russian refining sector will be massively upgraded over the next 3-7 years and most gas oil volumes will be desulphurised domestically. The considered Yugpipeline would also push more volumes towards the Med. Total might bring its diesel share in the Jubail refinery to the Med - equivalent roughly to 20% of the overall Middle Eastern diesel length in 2016-20. While our base-case expectation is that Asian diesel supplies to Europe will remain roughly stable, a strong Indian refining investment program and higher supplies from South Korea could easily double volumes. 21 November 2012
Refining Industry Trends Spain - Oil Products Market & Refining Sector 1,800 Oil Demand by Product ['000 b/d] 300 Product Balance & Ref Util. ['000 b/d, %] 100% 1,600 200 90% 1,400 100 80% 1,200 0 70% 1,000-100 60% -200 50% 800-300 40% 600-400 30% 400-500 LPG Naphtha 20% 200-600 Gasoline Gas Oil/Diesel Jet/Kero Fuel Oil 10% 0 2005 2007 2009 2011 2013 2015 2017-700 Other Products Ref. Utilisation - Right Scale 2005 2007 2009 2011 2013 2015 2017 0% 21 November 2012
Refining Industry Trends Refinery Utilisation Rates vs. Total Product Net-Imports in Various Asian Countries [%, '000 b/d] 100% 1,000 90% 800 80% 600 400 70% 200 60% 0 50% -200-400 40% 30% 20% China India Japan South Korea Indonesia Philippines Australia Pakistan 2007 2009 2011 2013 2015-600 -800-1,000 2007 2009 2011 2013 2015 21 November 2012 Slide 27
Refining Industry Trends US Gas Oil/Diesel Exports by Destination ['000 b/d] 1,200 1,100 1,000 Europe Canada & Mexico Central & South America Other Markets 900 800 700 600 500 Jan-July 2012 vs Jan-July 2011: Total Gas Oil/Diesel Exports: +237,000 b/d (+30.9%) Total gas oil/diesel includes distillates, biomass and other renewable diesel. 400 300 200 100 0 Source: EIA Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 21 November 2012 Slide 28
Refining Industry Trends 1,600 Asian Refining Industry Developments and Crude Imports ['000 b/d] 1,400 1,200 1,000 800 600 400 200 0-200 Asian CDU Net Additions Crude Intake Change Crude Import Change 2007 2008 2009 2010 2011 2012 2013 2014 2015 21 November 2012 Slide 29
Refining Industry Trends 6.00 Asian Premium Versus MED [$/bbl] 5.00 NB: Assumes all Med buyers pay on the basis of the loading-month-average of ICE BWAVE for the loading month. 4.00 3.00 2.00 1.00 0.00-1.00-2.00-3.00 Arab Light Asia (FOB) vs. Arab Light Med (FOB) -4.00 Source: Saudi Aramco, Platts, ICE Yearly Average Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 21 November 2012 Slide 30
Refining Industry Trends Singapore Cracking Margins: 3-Mth Rolling Average [$/bbl] 10.00 JBC Basket Cracking Margin 3-Mth Rolling Avg Dubai Cracking Margin 3-Mth Rolling Avg 8.00 6.00 4.00 2.00 0.00-2.00 Source: JBC Energy calculations based on Platts data Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 21 November 2012 Slide 31
Refining Industry Trends Saudi Arabian Crude Market [million b/d] 11.0 Total Crude Supply Domestic Use - Right Scale Exports 4.0 10.0 3.5 9.0 3.0 8.0 2.5 7.0 2.0 6.0 1.5 5.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1.0 21 November 2012 Slide 32
Refining Industry Trends US Crude Imports from West Africa and the Middle East [million b/d, %] 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 Imports from the Middle East are increasing while WAF flows have collapsed 30% 27% 24% 21% 18% 15% 12% 1.00 0.50 0.00 Source: EIA, JBC Energy Mideast-3 (Saudi Arabia, Iraq, Kuwait) WAF-3 (Nigeria, Angola, Congo-Brazz) % US Crud Imports from WAF-3 -RHS % US Crude Imports from Mideast-3 -RHS Aug-Oct '12 figures are preliminary Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 9% 6% 3% 21 November 2012 Slide 33
Refining Industry Trends 1.00 0.90 0.80 Angola Nigeria Major West African Crude Flows to OECD Europe [mbpd] More Nigerian crude is being sent to Europe now than in 2011, a year in which the bulk of Libyan barrels were not on the market 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Source: IEA 2005 2006 2007 2008 2009 2010 2011 2012 (YTD) 21 November 2012 Slide 34
Refining Industry Trends Major Interregional Crude Oil Flows - 2011/2012/2013/2015 ['000 b/d] North America 338 1823 2046 1142 2689 2229 2501 1978 2424 1946 1876 South America 198 792 198 503 187 Europe 1864 2041 2374 2387 Africa 4861 2946 2704 2189 2019 489 487 468 461 2706 4537 4587 4567 Middle East 2897 3198 4189 FSU East 1218 6243 6021 6027 5133 1459 1706 2167 Non-OECD Asia 5367 5187 4975 4587 OECD Asia 2011 2012 2013 2015 504 987 1078 1312 Source: JBC Energy estimates Flows >500,000 b/d displayed 21 November 2012 Slide 35
Refining Industry Trends Global Refining Spare Capacity [million b/d] Theoretical Spare Capacity Assuming 100% of existing capacity can be operated across all regions at all times Maintenance Offline due to average level of maintenance and outages Seasonal Demand Adjustment Capacity that exists only to deal with seasonal peaks in demand Europe FSU EAST ASIA MIDDLE EAST AFRICA North America CENTRAL & SOUTH AMERICA Uneconomic/out dated capacity Capacity not realistically available to be ramped up to meet external demand Realistically Available Spare Capacity Capacity available on reasonably short notice, capable of meeting external demand based on economic incentives Source: JBC Energy Calculations 0 2 4 6 8 10 12 14 16 18 20 22 21 November 2012 Slide 36
Refining Industry Trends 3.0 Liquids Supply Growth [million b/d] 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0-1.5-2.0-2.5 Other Non-OPEC Crude OPEC Crude US Crude NGLs Biofuels & Other Liquids 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 21 November 2012 Slide 37
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