Navigating a Path to Improved Energy Security

Transcription

1 Navigating a Path to Improved Energy Security Louisiana Energy Conference New Orleans, LA June 12, 2014 THOMAS A. PETRIE, CFA PETRIE PARTNERS, CHAIRMAN

2 Topics How did we get to where we are today The oil price Supercycle M&A consolidation waves Evolution of technology Today s Transformed Outlook Natural gas Oil and NGLs Path to energy flexibility Conclusions Shale Gale news / awareness is ubiquitous Shifting globalization trends 1

3 The Oil Price Supercycle WORLD EVENTS AND OIL PRICES NOMINAL PRICING ( ) $160 $140 Fiscal Cliff fallout concerns Syrian civil war escalates $120 $100 Prices spike on Iraq war, rapid demand increases, constrained OPEC capacity, low inventories, etc. $80 $60 $40 Iranian Revolution shah deposed Iran-Iraq War begins; oil prices peak Saudis abandon swing producer role; oil prices collapse Gulf War ends OPEC agrees to quota increase Prices rise sharply on OPEC cutbacks, increased demand Back from the abyss $20 $0 $0 OPEC agrees to quotas 1973 Arab Oil Embargo Iraq invades Kuwait Prices fall sharply on 9/11 attacks, economy weakness Fear of global economic meltdown

4 M&A Consolidation Waves THE ACQUISITIONS OF COMPANIES THAT HAVE CREATED BIG OIL Source: Thomas A. Petrie s Following Oil. 3

5 Evolution of Technology HUBBERT S 1956 PREDICTION OF FUTURE U.S. PRODUCTION OF CRUDE OIL Premised on the old exploration model Source: Hubbert prediction of 1956 of future production of crude oil in the conterminous United States and adjacent continental shelves. (Hubbert, 1956, fig. 21. Reproduced with the permission of American Petroleum Institute). 4

6 Evolution of Technology HORIZONTAL WELLS THE SHIFTING TO THE EXPLOITATION MODEL 5

7 Evolution of Technology CONFIRMED SOURCES OF UNCONVENTIONAL SHALE GAS AND OIL SHALE PRODUCTION Horn River 100+ Tcfe Bakken BBoe 700 1,400 Tcfe from gas and liquids-rich gas shale plays BBoe from unconventional oil shale plays Utica 24+ Tcfe Montney 70 Tcfe Marcellus Tcfe Fayetteville Tcfe Niobrara Woodford 4 6 BBoe Tcfe Mississippian Haynesville 3-6 BBoe Tcfe Granite Wash Permian Eagle Ford Barnett 9+ Tcfe 2-20 BBoe Tcfe Tcfe Source: United States Geological Survey, EIA and Select Wall Street research. 6

8 Today s Transformed Outlook Powerful production increases are resulting from application of wellincentivized capital focused on unconventional fossil fuel resources The land rush is largely over; efficiency of execution is now critical High-grading of validated development projects is the new priority Avoidance of pitfalls still matters (capital destruction is still possible) Oil and NGL resource potential has expanded possibly four-fold Natural gas resource potential is probably at least 10-fold higher 7

9 Today s Transformed Outlook POTENTIAL GAS PRODUCTION RATE THAT COULD BE DELIVERED BY THE MAJOR U.S. SHALE PLAYS UP TO Bcf / Day Marcellus Haynesville Woodford Fayetteville Barnett Initial Projections Actual Source: The Future of Natural Gas, An Interdisciplinary MIT Study, page 35. 8

10 Today s Transformed Outlook U.S. OIL PRODUCTION BY TYPE IN NEW POLICIES SCENARIO MBopd Light Tight Oil Other Unconventional Oil NGLS Crude Oil: Oil: Fields yet-to-be found Field yet-to-be developed Currently producing Note: The World Energy Model supply model starts producing yet-to-find oil after it has put all yetto-develop fields into production. In reality, some yet-to-find fields would start production earlier than shown in the figure. Source: IEA, World Energy Outlook

11 Today s Transformed Outlook A PATH TO PETROLEUM FLEXIBILITY 2010 US Production 7.0 MMBpd US Imports 10.5 MMBpd Total US Demand 17.5 MMBpd Oil equivalent of gas exports NA 2018 Canadian Oil Supplies 2.5 MMBpd US Production 10.0 MMBpd Non North American Imports 8.0 MMBpd US Imports 6.9 MMBpd Total US Demand 16.9 MMBpd Demand reduction from 2010 to 2018 results from fuel efficiencies and hybrid vehicles Oil equivalent of gas exports 0.6 MMBpd Canadian Oil Supplies 3.0 MMBpd Non North American Imports 3.9 MMBpd Demand reduction from 2018 to 2025 results from fuel efficiencies and gas/electric vehicles 2025 US Production 11.0 MMBpd US Imports 4.2 MMBpd Total US Demand 15.2 MMBpd Oil equivalent of gas exports 1.5 MMBpd North American Constructive surplus 0.8 MMBpd Increase in production combined with decrease in demand signals the likelihood of domestic surplus Canadian Oil Supplies 3.5 MMBpd Non North American Imports 0.7 MMBpd Source: IEA, World Energy Outlook 2012 and Thomas A. Petrie s Following Oil. 10

12 Conclusions SHALE GALE NEWS / AWARENESS IS UBIQUITOUS Germany turns against West on Russia Americans Want to Pull Back From World Stage, Poll Finds 11

13 Conclusions SHIFTING GLOBALIZATION TRENDS Evolving Power Triangles Russia Ukraine Turkey Syria Iran? China Historical view: To US and West Saudi Arabia New view to east India 12