Global Energy Outlook Offshore Center Danmark Esbjerg Jon Fløgstad, Manager Nordic Oil & Gas Ernst & Young September 13 th, 2012
Agenda Introduction Short-term perspectives Longer-term perspectives Concluding remarks Page 2
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Short-term perspectives
Current environment short term outlook Extreme oil & gas price volatility Political unrest in key producing geographies Constrained capital availability Regulatory and fiscal uncertainty Dislocations / disruptions Infrastructure issues Global economy still with downside risks High geopolitical risks expect the unexpected Near-consensus confidence in sustainable high oil prices Less consensus for natural gas prices Page 6
Longer-term perspectives
Some key facts & figures Global population + 1,7 B Annual average growth + 3,5% Oil demand 87 -> 99 mbbls/d Energy demand + 40% Global investments in energy infrastructure $ 38 trillion Gas demand growth: 1,7% p.a. Oil demand growth: 0,7% p.a. Page 8 Source: IEA, World Energy Outlook 2011
Fossil fuels will continue to dominate the energy mix 100 % 90 % 80 % 70 % Energy demand by fuel type 60 % 50 % 40 % 30 % Nuclear Renewables Gas Oil Coal 20 % 10 % 0 % 2009 2015 2020 2030 Page 9 Source: IEA, World Energy Outlook 2011
Underlying oil & gas demand is strong Increasing role for natural gas, largely driven by demand from power sector Huge investment challenge Change in oil and gas demand (2010 vs. 2025) China India Middle East Other Asia Africa Gas Oil Latin America Europe North America -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Page 10 Source: IEA, World Energy Outlook 2011
Changing patterns of oil supply New unconventional oil supplies offset decline in conventional oil output 120 Oil supply growth (mb/d) 25% Change in oil supply (2010 vs. 2030 in mb/d) 100 20% Natural Gas Liquids 80 15% Gas to liquids 60 40 20 0 8% 9% 6% 5% 3% 2010 2015 2020 2025 2030 10% 5% 0% Venezuelan extra-heavy oil Canadian oil sands Unconventional Oil Conventional Oil Conventional Oil Natural Gas Liquids Unconventional Oil -6-4 -2 0 2 4 6 Biofuels Share of unconventional (RH scale) Non-OPEC OPEC Page 11 Source: IEA, World Energy Outlook 2011
Tcm Tcm Sizeable unconventional gas potential to be unlocked Unconventional gas production Gas supply growth 5 35% 5 4 30% 29% 4 25% 3 21% 20% 3 2 14% 15% 2 10% 1 1 5% 0 0% 2010 2015 2020 2025 2030 Non-OECD OECD Share of unconventional (RH scale) 1,4 1,2 1 0,8 0,6 0,4 0,2 0 2010 2020 2035 Share of unconventional in total gas production 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2010 2020 2035 Mexico European Union Australia China Canada US US Canada China Mexico European Union Australia Page 12 Source: IEA, World Energy Outlook 2011
$ trillion Major investment challenge ahead Cumulative investment in energy infrastructure (2011-2035) $ billion Coal Oil Gas Power Biofuels 1 164 9 997 9 497 16 883 356 0 % 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 % Over $19 trillion investment required in oil & gas supply 25 Investment in oil & gas supply infrastructure (2011-2035) 20 15 10 5 0 Upstream Oil Upstream Gas Refining Gas T&D Page 13 Source: IEA
$ trillion Spending being directed to upstream projects 8 7 Cumulative oil & gas investment by region (2012 2035) 6 5 4 3 Predominantly NOC controlled markets investment likely to be under-estimated 2 1 Gas Transmission & Distribution Upstream Gas Refining 0 Americas Europe (inc. Russia) Asia + Oceania Africa Middle East Upstream Oil Page 14 Source: IEA
Investment in mature and developing basins Projects under development (starting production within five years) 2 Oil sands Heavy Oil Conventional Deepwater 3 9 4 Conventional Deepwater EOR Conventional Deepwater EOR 5 Conventional Deepwater Conventional 11 10 Conventional Conventional Deepwater 6 7 Conventional Deepwater EOR Conventional LNG 8 Developing Mature Projects with a minimum proved plus probable (2P) reserves of 25 million barrels of oil equivalent or greater 1 Conventional LNG Page 15 Source: IHS Herold Inc.
BNOK Million Sm 3 o.e. per year BDKK Million Sm 3 o.e. per year High activity level expected on the Norwegian Continental Shelf 25 Investments on the DCS 35 Historical and forecast production of oil and gas Denmark 30 25 5 20 15 10 5 1 2012 2013 2014 2015 2016 Operations Transport Investments in fields 0 1980 1990 2000 2010 2020 2030 Oil Production Sales Gas Production Investments on the NCS Historical and forecast production of oil and gas Norway 200 300 150 200 100 50 100 0 2012 2013 2014 2015 2016 Well costs Existing facilities New subsea facilities New fixed and floating facilities Pipelines and onshore facilities Exploration and consept studies 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 Oil Gas NGL Condensate Reserves Resources in fields Page 16 Source: Danish Energy Agency, NPD
Concluding remarks
Challenges going forward Increasing longer-term energy demand Changing demand patterns Declining production from existing fields Increasing exploration, development and production costs The pace of technological change versus the length of the investment lifecycle Page 18
The energy and natural resources trilemma Page 19 New operational and unfamiliar environments HS&E risk REDUCE AND MINIMIZE ENVIRONMENTAL IMPACT Competition from new technologies Gas demand growth : 1.7% p.a Climate change concerns OPTIMIZE COST IEA 2011-2035 Forecast c.$20 trillion of oil and gas investment required Oil demand growth: 0.7% p.a Uncertain energy policy Cost containment Price volatility Worsening fiscal terms Human capital deficit Access to reserves ENSURE SECURITY OF SUPPLY
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