WHAT EVER HAPPENED TO PEAK OIL? Benedikt Unger, February 2015

Transcription

1 WHAT EVER HAPPENED TO PEAK OIL? Benedikt Unger, February 2015

2 WHAT EVER HAPPENED TO PEAK OIL 2

3 PART 1 OIL FUNDAMENTALS WHAT EVER HAPPENED TO PEAK OIL 3

4 WHAT ABOUT PEAK OIL? The discussion about oil running out is as old as the industry itself First commercial oil wells in 2 nd half of 19 th century, geologists believed that oil would run out by 1900 The world will run out of oil in 10 years. (U.S. Bureau of Mines, 1914) There is little or no chance for oil in Kansas or Texas (U.S. Geological Survey, 1891) The world will run out of oil in 13 years. (U.S. Department of the Interior, 1939 and 1950) "The world will run out of oil and other fossil fuels by (Paul Erlich, Limits to Growth, 1973) "The world will run out of oil in 2030, and other fossil fuels in (Paul Erlich, Beyond the Limit, 2002). Throughout history, people have been wrong about the amount of oil available / recoverable Consensus among industry players that there is enough oil for the mid- to long-term There may be, however, a demand peak for oil (substitutes replacing oil in the long-term) WHAT EVER HAPPENED TO PEAK OIL 4

5 ENOUGH RESERVES TO MEET LONG-TERM DEMAND Reserves exceed cumulative historical production by a multiple 120 Production cost (real 2012 USD/bbl) Source: IEA Remaining technically recoverable oil resources (billion barrels) Already produced Non-CO2-EOR Ultra-deepwater MENA Arctic Kerogen Other conventional oil Extra heavy oil and bitumen GTL CO2-EOR Light tight oil CTL WHAT EVER HAPPENED TO PEAK OIL 5

6 TOP 5 COUNTRIES OWN BULK OF GLOBAL OIL RESERVES Many countries reserves increased dramatically between 2000 and Share of global reserves Reserves (billion barrels) Top 5 countries Top 6-10 Top Rest 0 Source: EIA, 2013 WHAT EVER HAPPENED TO PEAK OIL 6

7 ORGANISATION OF PETROL EXPORTING COUNTRIES OPEC was set up by major oil producing countries to manage nations budget requirements by influencing the oil prices with production quotas Member state Member states information 2014 production (mb/d) Fiscal break-even (USD/bbl) Saudi Arabia Iraq Iran United Arab Emirates Kuwait Venezuela Facts Set up in current members, 2 former members (Gabon, Indonesia) 2 observers (Russia, Norway) Produces around 30mb/d crude; 40% of global oil demand (when incl. NGLs) Nigeria Angola Algeria Qatar Ecuador Libya Source: EIA, Apicorp, January 2015 Head office in Vienna WHAT EVER HAPPENED TO PEAK OIL 7

8 BIG OIL VS. REALLY BIG OIL Can you name the biggest oil companies in the world by proven reserves? Hint: there are no American/European companies in the top 9 Proved reserves (billion barrels) Really big oil Big oil NOCs IOCs Source: Oil & Gas Journal, September 2013 WHAT EVER HAPPENED TO PEAK OIL 8

9 CRUDE OIL PRICES HAVE ALWAYS BEEN INFLUENCED BY INTERNATIONAL EVENTS AND CRISES US recession US recession US recession WHAT EVER HAPPENED TO PEAK OIL 9

10 SUPPLY/DEMAND BALANCE AND MARKET CYCLICALITY Oil prices react to the balance of supply and demand but both sides react slowly to the price, leading to cyclicality As any other product or service, oil prices are subject to a supply/demand balance In the short term, neither supply nor demand are very reactive to price changes The long-term cycles within the industry have led to difficulties in using lead indicators to predict price movements Short-run price setting Long-run price setting p D S p Upcycle: lack of investment leads to tighter supply, more investment needed Downcycle: market well supplied, investment interest drops Current price Current output q time WHAT EVER HAPPENED TO PEAK OIL 10

11 OIL MAKING GLOBAL NEWS MARKET SENTIMENT Reaction and over-reaction WHAT EVER HAPPENED TO PEAK OIL 11

12 A WEAKENED OIL CARTEL How U.S. Light Tight Oil has changed the game and how can affect OPEC s role in the future Power of OPEC U.S. LTO Spare capacity Source flexibility / low cost Short-term, small investments Source flexibility U.S. crude imports U.S. crude production U.S. crude imports (mb/month) U.S. crude production (mb/month) WHAT EVER HAPPENED TO PEAK OIL 12

13 PART 2 CASE STUDY: THE GREAT OIL PRICE SLIDE OF 2014/15 WHAT EVER HAPPENED TO PEAK OIL 13

14 CASE STUDY THE GREAT OIL PRICE SLIDE OF 2014/2015 Use the following information to explain why the oil price has dropped from ~$120/bbl to ~$50/bbl between mid-2014 and early-2015 U.S. production from 2001 to 2015 Libyan production between 2011 and 2014 Year-on-Year change (% of global production) 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% Oil demand in key regions Oil prices (Brent) from 2001 to 2015 Oil demand (mb/d) U.S. Demand European Demand Chinese Demand Monthly crude oil price $/bbl (nominal) WHAT EVER HAPPENED TO PEAK OIL 14

15 US CRUDE OIL PRODUCTION HAS INCREASED SHARPLY FOLLOWING YEARS OF STAGNATION this has continued in 2014 as global demand has slowed 2.0% Year-on-Year change (% of global production) 1.5% 1.0% 0.5% 0.0% -0.5% % Source: BP Statistical Review of World Energy 2014 & EIA WHAT EVER HAPPENED TO PEAK OIL 15

16 THE US CRUDE PRODUCTION GROWTH HAS EXCEEDED OTHER SOURCES BY A LARGE MARGIN while OPEC output has been steady Source: EIA WHAT EVER HAPPENED TO PEAK OIL 16

17 THIS PRODUCTION GROWTH WAS MASKED BY DISRUPTIONS Numerous Middle-Eastern countries were experiencing political unrest (example: Libya) Source: Reuters WHAT EVER HAPPENED TO PEAK OIL 17

18 RESULTING DROP IN OIL PRICES HAS BEEN VERY SHARP Once disrupted production came back on line, the prices responded sharply (surprising many); and as a result, the confidence interval has grown WTI price ($/bbl, nominal) Spot price Futures price (July 2014) Futures price (January 2015) * based on options trading 95% confidence interval* (Jul 2014) 95% confidence interval* (Jan 2015) Jan 2013 Mar 2013 May 2013 Jul 2013 Sep 2013 Nov 2013 Jan 2014 Mar 2014 May 2014 Jul 2014 Sep 2014 Nov 2014 Jan 2015 Mar 2015 May 2015 Jul 2015 Sep 2015 Nov 2015 Jan 2016 Mar 2016 May 2016 Jul 2016 Sep 2016 Nov 2016 Source: EIA WHAT EVER HAPPENED TO PEAK OIL 18

19 LONG-TERM OUTLOOK FOR OIL Most OPEC countries are stagnating, North American oil is expected to grow Headlines Supply: Still upside potential in OPEC countries with recent turmoil (specifically Iraq) Canadian oil sands and Venezuelan heavy oil feasible from certain minimum price Decreasing production from big non-opec states, including UK, Norway, Russia Headlines Demand: U.S. demand has peaked in 2005, rising for the first time in 2014, due to low prices European demand weak, no significant growth expected Demand growth will come mainly from developing economies WHAT EVER HAPPENED TO PEAK OIL 19

20 TAKE-HOME THOUGHTS Due to long investment-cycles, oil market is highly cyclical OPEC s power comes from spare capacity and flexibility of production, which is now being undermined by U.S. LTO Current perception that recoverable resources can meet demand beyond 2035 In the long term, will we see peak oil? (And will it be peak oil supply or peak oil demand?) WHAT EVER HAPPENED TO PEAK OIL 20

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