NOMADS Peak Oil Presentation Houston, Texas April 10, 2008

Transcription

1 NOMADS Peak Oil Presentation Houston, Texas April 10, 2008 Presented by Steve Crower Energy Investment Banker Denver, Colorado Starlight Investments, LLC

2 Agenda What is Peak Oil? My Conclusions How I Came to the Conclusions Production Issues Implications of Peak Oil What to do? 2

3 Peak Oil Not a Difficult Concept 3

4 Production Models Developed to Predict Peak Oil

5 The Conclusion - We are in the Peak Oil Era Peak Oil is currently occurring or will occur by years of underinvestment in infrastructure (storage, rigs, pipelines) will fuel a period of long term energy industry growth Without a catalyst for dramatic price increases (nationalism, supply disruption, etc) prices will gradually increase based on speculation of a petroleum supply potential problem and the value of a BTU of energy. The rising price of oil will force energy consumers conserve and rapidly explore other sources of energy (unconventional, coal-to-liquids, natural gas, LNG, nuclear, biofuels, wind, solar, etc.). Significant changes will occur to the American lifestyle to a world dominated by more expensive energy (housing, transportation, food). 5

6 Steve Crower - 18 years Experience University of Michigan - BS Civil Engineering Refinery Design Engineer and Large Project Construction Manager Rice University MBA, Finance FMC Technologies (NYSE:FTI) - Finance / Operations Network International - ebay for the oilfield Present Energy Investment Banker Capital One Southcoast, Inc - New Orleans, LA Starlight Investments, LLC - Denver, CO May 2005 OTC - Introduced to concept of Peak Oil 6

7 May Peak Oil Scenario All major cheap oil discoveries in the world have been found: Prior to 1970 (8), 1970 to 1990 (2), 1990 to today (1). World Energy Infra-structure has suffered from 30 years of neglect Even with massive investment the world will experience an energy shock as production peaks around 85 million bpd Oil will super spike to $105 per barrel (Goldman Sachs) will increase prices of all things touched by energy (transportation, agriculture) Sever implication for the US Cities will collapse from low density suburbs to high density urban environments (transportation) Rail will eclipse trucking as the primary transportation (transportation) End of the 3,000 mile Caesar Salad, food production would be local (agriculture) Conservation is the only short-term solution as the development of alternatives will take time to develop. Presentation ended with I hope I am wrong, but I don t think I am 7

8 Peak Oil Predictions - Three Years Later Cheap oil IS gone - A major discovery today is the Jack 2 field in the Gulf of Mexico in 7,000ft of water and 20,000ft below the earth able to come on-line in 7 years. World Energy Infra-structure is beginning to see investment. Storage and rig day-rates up Engineering houses booked for over three years Oil price super spike revised to $300 from $105. We are in the beginning of an energy shock which is grinding US economy to a significant slowdown, while others are accelerating (Brazil, Africa, Russia, Middle East). Urban living prices up slightly, suburbs losing value Rail is becoming a good investment, the index more than doubled in the past 3 years Food prices are increasing (wheat up 160%, soybeans up 90%, corn up 100%) Gas prices are increasing Energy stocks have increased dramatically and continue to raise guidance People are beginning to talk about conservation (turning out lights, car mileages is selling cars, wind farms, biodiesel subsidies, etc.), but we are just scratching the surface. A few early stage companies are looking for financing. Matt was right, but unless we have a catalyst to shock they system the transition may not have to be as violent as he predicts. 8

9 Oil Production May have Flattened Out Time Frame Production Price Range of Oil Year-Over-Year $25/bbl + 1.7% (1.2 million bpd increase) 2005 Average mbbl/d $54/bbl 2006 Average mbbl/d $61/bbl 0.81% (640 bpd increase) 2007 Average mbbl/d $65/bbl Flat (200 bpd decrease) Was 2005 the start of the Plateau? 9

10 Existing Fields Production Decline Mexico - From January 2006 to February 2007, Cantarell lost one-fifth of its production with daily output falling to 1.6 million bpd from two million bpd. Alaska - Prudhoe Bay has dropped from 2 million bpd in 1988 to its current rate of 900,000 bpd. Kuwait - Burgan field is showing signs of maturity. In November of 2005 Kuwait Oil Co lowered the production estimate to 1.7 million bpd from 1.9 million bpd. Saudi Arabia - In April 2006, a Saudi Aramco spokesman admitted that its mature fields are now declining at a rate of 8% per year, and its composite decline rate of producing fields is about 2%. Venezuela Issues with Exxon and production is down to 2.39 million in 2007 from 2.56 in Of the largest 21 fields in the world, about 9 are already in decline and some are beginning to accelerate 10

11 Consistent Reserve Reporting Required Year Abu Saudi Dubai Iran Iraq Kuwait Dhabi Arabia Venezuela Poor quality of resource accounting is a big part of the problem 11

12 Timing of Peak Oil - From Now to Never Why are Shell, Exxon and BP at the bottom of the list? 12

13 Implications of Peak Oil Import restrictions will occur before actual production peaks as exporting countries to retain supply for internal growth Hoarding of distillates could be a problem Explosion of alternative energy ideas - think back to 2000 and the.com craze when there was no bad idea Agriculture will be most dramatically affected The problem will be exacerbated by nationalism - the have not s will become the haves (maybe becoming consumers with increased wealth?) 13

14 What to do? Institute energy data reform and access to those numbers. Use existing technology to make 3rd, 4th and 5th.swipes at these fields. Expand all forms of supply. Create a renaissance of alternative energy solutions there are no bad ideas. Stop looking at inventory stockpiles as a barometer on how much oil we have.. it is never enough. 54 days in storage 37 day in emergency Continue to invest in infrastructure. Rail vs. road Pipelines Storage Conserve! Shrink food miles Use technology 14