Organization of the Petroleum Exporting Countries OPEC World Oil Outlook 2040 2017 edition Presented at presented at Riyadh, 15 November 2017 WOO2017 1
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OPEC s WOO 2017 Presents global energy mix outlook to 2040 It includes detailed projections for oil demand, supply, refining and trade The WOO combines the expertise of the OPEC Secretariat experts, professionals as well as input from various other sources. The WOO is a renowned and key source of energy information for policymakers, NOCs and IOCs, as well as all other energy stakeholders 3
Outline Key assumptions Energy outlook Oil outlook Critical uncertainties Key takeaways 4
Outline Key assumptions Energy outlook Oil outlook Critical uncertainties Key takeaways 5
The World is experiencing an era of demographic change Global population to increase by 1.8 billion, reaching almost 9.2 billion in 2040 India to become the most populated country in the early 2020s and population in China peaks in 2028 Population growth in OECD supported by migration Population by region (millions) million % Non-OECD OECD 10,000 2.0 OECD annual growth Non-OECD annual growth 9,000 1.8 8,000 1.6 7,000 1.4 6,000 1.2 5,000 1.0 4,000 0.8 3,000 0.6 2,000 0.4 1,000 0.2 0 0.0 2015 2020 2025 2030 2035 2040 Growth 2015 2040 % OECD 116 6 Non-OECD 1,692 94 World 1,808 100 6
Long-term economic growth will be driven by Non-OECD Countries Long-term global GDP growth estimated at an average rate of 3.5% p.a. Long-term real GDP growth rates (%, 2011 PPP) Long-term economic growth will be driven by Developing Countries, with growth in the OECD constrained by weaker demographics The size of the global economy in 2040 is estimated to be 126% that of 2016 7
Energy policies and technological development drive emissions reductions and energy efficiency The Reference Case assumes an evolutionary development of technology and energy policy in the long-term Overall, energy policies and technological development are expected to continue driving energy efficiency and emission reduction Technology will continue shaping global energy industry as a whole; oil industry in particular Current development of renewable energies and the of introduction of EVs are strong signs of such trends. 8
Outline Key assumptions Energy outlook Oil outlook Critical uncertainties Key takeaways 9
Global primary energy demand will increase by 35% Energy demand increases by 96 mboed (35%, 1.2% p.a.) Oil remains dominant (0.6% p.a.) Gas contributes most to future energy demand growth (3.6% p.a.) Coal demand peaks towards the end of the period (0.4% p.a.) Renewables record the fastest growth rate (6.8%) Fossil fuels still provide over 75% of the world s energy needs by 2040 World primary energy demand by fuel type +35% 10
Energy demand will be driven by Non-OECD countries Growth is concentrated in Non-OECD countries (98%) India & China are the two largest contributors to future energy demand Demand in the OECD peaks in the early 2030s Energy demand growth (mboed): Non-OECD: All fuel, especially gas (+29) & oil (+23) OECD: Focus on gas (+5) & other renewables (+5) Growth in primary energy demand by region & Fuel, 2015 2040 11
Energy demand and energy intensity growth Energy efficiency improvements will continue in both the OECD and non-oecd regions: Real GDP, energy demand and energy intensity growth Technological progress Energy policies, and A more service-oriented economic structure Reduction of energy intensity will accelerate 12
Outline Key assumptions Energy outlook Oil outlook Critical uncertainties Key takeaways 13
Oil demand growth remains healthy Oil demand in the medium-term (2016 2022) increases 6.9 mb/d from 95.4 mb/d to 102.3 mb/d Global oil demand growth in the medium-term IMO regulations will impact medium-term demand growth pattern: Surplus of HSFO volumes priced at a discount Volumetric processing gains related to switching from fuel oil to diesel 14
Sectorial oil demand In long term, global oil demand will increase by 15.8 mb/d, reaching 111.1 mb/d by 2040 World oil demand by sector The transportation sector will remain the main consumer of oil Demand growth decelerates over the long-term 15
Road transportation will remain the main consumer of oil products The number of passenger cars will double by 2040 The fleet composition is anticipated to change smoothly Electric vehicles will represent 12% of the global fleet by 2040 Demand in the road transport sector increases by 5.4 mb/d Light products will satisfy more than half of the long-term oil demand growth Passenger car fleet composition 16
Oil demand in the road transportation by region OECD Demand in the road transportation sector Developing Countries Demand in the OECD will decline (-7.1 mb/d) but increase strongly in DCs (+12 mb/d) Expanding global fleet outweighs improving efficiency and increasing penetration of EVs in DCs but not in the OECD 17
Non-OPEC supply shows strong growth in the medium-term, slowing thereafter Medium-term non-opec liquids grow by 4.9 mb/d to 62 mb/d in 2022 Growth is heavily concentrated in the US (+3.8 mb/d) In the long-term, non-opec liquids modestly decline to 60.4 mb/d by 2040 Demand for OPEC crude rises steadily after 2025 to reach 41.4 mb/d by 2040 Total liquids supply, 2016-2040 18
Tight oil s increasing importance shows up in higher implied decline rates Non-OPEC supply growth is overwhelmingly driven by higher tight oil production Global tight oil supply outlook US tight oil is the most important contributor to non- OPEC supply, but peaks after 2025 Tight oil growth is also anticipated in Canada, Russia and Argentina 19
The majority of new refining capacity expansion located in Developing countries Total capacity additions until 2040 estimated at 19.6 mb/d Crude distillation capacity additions, 2017 2040 The majority of new refining capacity expansion located in Developing countries, driven by rising oil demand Expansion led by Asia-Pacific and the Middle East accounting for almost 70% of the total 20
Long-term global oil trade is set to increase gradually Global crude oil exports increase by 6.5 mb/d reaching almost 44 mb/d in 2040 Global crude oil exports by origin, 2016 2040 Between 2016 and 2025, US & Canada contribute the most to the overall increase in crude exports Middle Eastern exports increase significantly after 2025, as other exporting regions are either stagnating or in decline 21
Outline Key assumptions Energy outlook Oil outlook Critical uncertainties Key takeaways 22
Oil demand in the Economic Growth sensitivities Two alternative sensitivities: Higher GDP growth (HG) and Lower GDP growth (LG) Long-term oil demand (mb/d) Demand in 2040: Reference Case: 111.1 mb/d HG: 113.8 mb/d LG: 107.5 mb/d Overall uncertainty from GDP growth is in the range of 6 mb/d in 2040 23
Oil demand in the penetration of EVs Sensitivity Case Sensitivity Case: Penetration of EVs is higher than in the reference case Long-term oil demand (mb/d) in the reference Case and the Sensitivity Case Annual EV sales reach 80 million by 2040 Oil demand in 2040 is reduced by 2.5 mb/d compared to the Reference Case, to total 108.6 mb/d Global oil demand plateaus around this level in the second half of the 2030s 24
Oil demand in the efficiency improvements Sensitivity Case Accelerated Efficiency (AE) Case assumes more aggressive efficiency improvements Long-term oil demand (mb/d) Overall demand reduction in the AE case is 3.2 mb/d by 2040, reaching 107.9 mb/d Two-thirds of the demand reduction takes place in DCs 25
Liquids supply in the Upside/Downside Sensitivities Based on the Upside Sensitivity, demand for OPEC crude would be curbed in the medium-term; reachging 36.8 mb/d by 2040 Supply sensitivities: impact on demand for OPEC crude By contrast, in a Downside Sensitivity Case, demand for OPEC crude stays relatively flat at 33 mb/d until mid-2020s; then rises to 45 mb/d by 2040 26
Outline Key assumptions Energy outlook Oil outlook Critical uncertainties Key takeaways 27
Key takeaways Energy demand increases by 35% between 2015 and 2040 Oil is expected to remains the most important fuel Global oil demand will increase by 15.8 mb/d, reaching 111.1 mb/d There is no expectation for peak oil demand over the forecast period Medium-term non-opec liquids growth is heavily concentrated in the US US tight oil is the most important contributor to non-opec supply, but peaks after 2025, raising the need for more OPEC crude Refining capacity expansion takes place predominantly in developing countries, led by Asia- Pacific and the Middle East Crude oil exports rise, led by increases from the Middle East and US & Canada In the period to 2040, the required global oil sector investment is estimated at $10.5 trillions. 28
Thank you A comprehensive interactive version of the WOO is available at www.opec.org www.opec.org 29
Table 1.1 Population by region 30
Figure 1.1 Population growth 1990 2015 versus 2015 2040 31
Figure 1.2 Population trends in developing Asia and Middle East & Africa 32
Figure 1.3 Total population and annual growth 33
Figure 1.4 Age structure in the world and in the OECD region and China 34
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Table 1.2 Medium-term annual real GDP growth rates in the Reference Case 36
Table 1.3 Long-term annual real GDP growth rates in the Reference Case 37
Figure 1.5 Long-term GDP growth rates (2016 2040) by components 38
Figure 1.7 Real GDP per capita in 2016 and 2040 39
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Table 2.1 region Total primary energy demand by 41
Table 2.2 fuel type World primary energy demand by 42
Figure 2.2 Growth in energy demand by fuel type, 2015 2040 43
Table 2.3 fuel type OECD primary energy demand by 44
Table 2.4 Developing countries primary energy demand by fuel type 45
Table 2.5 Eurasia primary energy demand by fuel type 46
Figure 2.3 Growth in energy demand by fuel type and region, 2015 2040 47
Table 2.6 fuel type China primary energy demand by 48
Table 2.7 fuel type India primary energy demand by 49
Figure 2.4 Energy demand growth by region, 2015 2040 50
Figure 2.5 Coal demand growth by major regions, 2015 2040 51
Table 2.8 Coal demand by region 52
Table 2.9 Gas demand by region 53
Figure 2.6 Natural gas demand by major regions, 2015 2040 54
Figure 2.7 Number of nuclear reactors by region, 2017 55
Figure 2.8 Nuclear energy demand by region, 2015 2040 56
Table 2.10 Hydropower demand by region 57
Figure 2.9 Hydropower demand by major regions, 2015 2040 58
Figure 2.10 Outlook for biomass demand by region, 2015 2040 59
Figure 2.11 Global expansion of other renewables, 2015 2040 60
Figure 2.12 Annual CO 2 emissions from the combustion of fossil fuels, 1990 2040 61
Figure 2.13 Per capita CO 2 emissions in the Reference Case, 1990 2040 62
Figure 2.14 Cumulative CO 2 emissions from 1900, 1990 2040 63
Figure 2.15 Global energy demand and real GDP, 1970 2040 64
Figure 2.16 Real GDP, energy demand and energy intensity growth 65
Energy demand per capita vs GDP Rapid economic expansion in the developing world has lifted millions of people out of poverty Real GDP, energy demand and energy intensity growth In 2015, average energy consumption in the DCs had tripled compared to 1970 However, the gap is still wide and energy poverty remains a critical issue, particularly in India and Africa 66
Figure 2.17 Energy consumption per capita versus GDP at PPP per capita, 2015 2040 67
68
Table 3.1 Medium-term oil demand in the Reference Case 69
Figure 3.1 Global oil demand growth in the medium-term in the Reference Case 70
Figure 3.2 Annual oil demand growth in the OECD (2017 2022) 71
Figure 3.3 Annual oil demand growth in the Developing countries (2017 2022) 72
Figure 3.4 Average annual oil demand growth between 2016 and 2022 73
Figure 3.5 Oil demand revision (with respect to the WOO 2016) in 2022 74
Table 3.2 Long-term oil demand in the Reference Case 75
Figure 3.6 Average annual oil demand growth in the Reference Case 76
Figure 3.7 Oil demand revision (with respect to WOO 2016) in 2040 77
Table 3.3 Long-term oil demand by product category in the Reference Case 78
Figure 3.8 Demand growth by product category in the long-term 79
Figure 3.9 Share of the different sectors in demand by product, 2016 and 2040 80
Table 3.4 Sectoral oil demand in the Reference Case 81
Figure 3.10 Sectoral oil demand growth in the Reference Case 82
Figure 3.11 Sectoral oil demand in the OECD, 2016 and 2040 83
Figure 3.12 Sectoral oil demand in Developing countries, 2016 and 2040 84
Table 3.5 Projection of number of passenger cars 85
Table 3.6 Projection of number of commercial vehicles 86
Figure 3.13 Composition of new passenger car sales according to technology, 2016 and 2040 87
Figure 3.14 Passenger car fleet composition, 2016 2040 88
Figure 3.15 Composition of new commercial vehicle sales according to technology, 2016 and 2040 89
Figure 3.16 Commercial vehicle fleet composition, 2016 2040 90
Table 3.7 Oil demand in the road transportation sector by region 91
Figure 3.17 Demand in road transportation in the OECD, 2016 and 2040 92
Figure 3.18 Demand in road transportation in Developing countries, 2016 and 2040 93
Table 3.8 Oil demand in the road transportation sector by segment 94
Figure 3.19 Oil demand in the road transportation sector by product 95
Figure 3.20 Passenger car fleet in the Reference Case (first series) and in the MaaS case (second series) 96
Figure 3.21 Total miles driven in the Reference Case (dotted lines) and in the MaaS case (solid lines) 97
Table 3.9 Oil demand in the aviation sector by region 98
Figure 3.23 Marine bunker demand by fuel type in the medium-term 99
Table 3.10 Oil demand in the marine bunkers sector in the Reference Case 100
Figure 3.24 Product demand in the marine bunkers sector 101
Figure 3.25 Global basic petrochemicals capacity 102
Table 3.11 Oil demand in the petrochemicals sector in the Reference Case 103
Figure 3.26 Regional demand in the petrochemicals sector by product 104
Table 3.12 Oil demand in rail and domestic waterways in the Reference Case 105
Table 3.13 Oil demand in other industry in the Reference Case 106
Table 3.14 Oil demand in residential/ commercial/agriculture in the Reference Case 107
Table 3.15 Oil demand in electricity generation in the Reference Case 108
109
Table 4.1 Medium-term liquids supply outlook in the Reference Case 110
Figure 4.1 Select contributors to non-opec total liquids change, 2016 2022 111
Figure 4.2 Revisions to medium-term Reference Case (vs. WOO 2016) for total liquids supply 112
Figure 4.3 Non-OPEC liquids change by year 113
Figure 4.4 Regional growth in non-opec liquids supply, 2016 2022 and 2022 2040 114
Table 4.2 Medium-term non-opec crude and NGLs supply outlook in the Reference Case 115
Figure 4.5 Medium-term non-opec crude and NGLs supply outlook in the Reference Case 116
Figure 4.6 US components of crude and NGLs production over the medium-term 117
Figure 4.7 Cost of drilling oil and gas wells in the US 118
Figure 4.8 US oil rig count by major basin 119
Figure 4.9 Evolution of wellhead breakeven prices by play 120
Figure 4.10 Oil rig activity in the Permian 121
Figure 4.11 Global tight oil supply outlook in the Reference Case 122
Table 4.4 Global unconventional NGLs supply outlook in the Reference Case 123
Table 4.5 Medium-term other liquids supply outlook in the Reference Case 124
Figure 4.12 Canada components of crude and NGLs production over the medium-term 125
Figure 4.13 Mexico crude and NGLs production over the medium-term 126
Figure 4.14 Brazil crude and NGLs production over the medium-term 127
Figure 4.15 Russia crude and NGLs production over the medium-term 128
Table 4.6 Medium-term non-opec biofuels supply outlook in the Reference Case 129
Figure 4.16 Long-term non-opec liquids supply outlook in the Reference Case 130
Table 4.7 Long-term liquids supply outlook in the Reference Case 131
Figure 4.17 Regional change in non-opec liquids supply in the Reference Case 132
Table 4.8 Long-term non-opec crude and NGLs supply outlook in the Reference Case 133
Table 4.9 Long-term other liquids supply outlook in the Reference Case 134
Table 4.10 Long-term non-opec biofuels supply outlook in the Reference Case 135
Figure 4.18 Historical and projected annual upstream investment 136
Figure 4.19 Annual upstream investment requirements for capacity additions in the Reference Case, 2017 2040 137
Figure 4.20 Global crude supply by API gravity category, 2015 2040 (share) 138
Figure 4.21 Global crude supply by API gravity category, 2015 2040 (volume) 139
Figure 4.22 US & Canada crude supply by API gravity category, 2015 2040 (volume) 140
Figure 4.23 Average global crude quality 141
Figure 4.24 Average OPEC crude quality 142
Figure 4.25 Average non-opec crude quality 143
144
Table 5.1 Global refinery base capacity per different sources 145
Table 5.2 Assessed available base capacity as of January 2017 146
Figure 5.1 Annual distillation capacity additions and total projects investment 147
Table 5.2 Assessed available base capacity as of January 2017 148
Figure 5.2 Distillation capacity additions from existing projects, 2017 2022 149
Figure 5.3 Additional cumulative refinery crude runs, required and potential 150
Figure 5.4 Additional cumulative refinery crude runs, US & Canada, required and potential 151
Figure 5.5 Additional cumulative refinery crude runs, Europe, required and potential 152
Figure 5.6 Additional cumulative refinery crude runs, China, required and potential 153
Figure 5.7 Additional cumulative refinery crude runs, Asia-Pacific excl. China, required and potential 154
Figure 5.8 Additional cumulative refinery crude runs, Middle East, required and potential 155
Figure 5.9 Additional cumulative refinery crude runs, Russia & Caspian, required and potential 156
Figure 5.10 Additional cumulative refinery crude runs, Africa, required and potential 157
Figure 5.11 Additional cumulative refinery crude runs, Latin America, required and potential 158
Figure 5.12 Net cumulative regional refining potential surplus/deficit versus requirements 159
Table 5.4 Global demand growth and refinery distillation capacity additions by period in the Reference Case 160
Figure 5.13 Crude distillation capacity additions in the Reference Case, 2017 2040 161
Table 5.5 Net refinery closures, recent and projected, by region 162
Figure 5.14 Net refinery closures, recent and projected, by region 163
Figure 5.15 Global oil demand, refining capacity and crude runs, 1980 2022 164
Table 5.6 Crude unit throughputs and utilizations 165
Table 5.7 Estimation of secondary process additions from existing projects, 2017 2022 166
Figure 5.16 Conversion projects by region, 2017 2022 167
Table 5.8 Global cumulative potential for incremental product output, 2017 2022 168
Figure 5.17 Expected surplus/deficit of incremental product output from existing refining projects, 2017 2022 169
Table 5.9 Global capacity requirements by process, 2017 2040 170
Figure 5.18 Global secondary capacity requirements by process type, 2017 2040 171
Figure 5.19 Conversion capacity requirements by region, 2017 2040 172
Figure 5.20 Desulphurization capacity requirements by region, 2017 2040 173
Figure 5.21 Desulphurization capacity requirements by product and region, 2017 2040 174
Figure 5.22 Octane capacity requirements by process and region, 2017 2040 175
Figure 5.23 Cost of refinery projects by region, 2017 2022 176
Figure 5.24 Projected refinery direct investments above assessed projects 177
Figure 5.25 Refinery investments in the Reference Case 178
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Figure 6.1 Inter-regional crude oil and products exports, 2016 2040 180
Figure 6.2 Crude oil supply outlook to 2040 181
Figure 6.3 Change in crude oil supply between 2016 and 2040 182
Figure 6.4 Global crude oil exports by origin, 2016 2040 183
Figure 6.5 Crude oil exports from the Middle East by major destinations, 2016 2040 184
Figure 6.6 Crude oil exports from Latin America by major destinations, 2016 2040 185
Figure 6.7 Crude oil exports from Russia & Caspian by major destinations, 2016 2040 186
Figure 6.8 Crude oil exports from Africa by major destinations, 2016 2040 187
Figure 6.9 Crude oil exports from the US & Canada by major destinations, 2016 2040 188
Figure 6.10 Crude oil imports to the US & Canada by origin, 2016 2040 189
Figure 6.11 Crude oil imports to Europe by origin, 2016 2040 190
Figure 6.12 Crude oil imports to the Asia- Pacific by origin, 2016 2040 191
Figure 6.13 Regional net crude oil imports, 2016, 2020 and 2040 192
Figure 6.14 Regional net imports of liquid products, 2020, 2030 and 2040 193
194
Figure 7.1 Average annual global GDP growth (2016 2040) under the different sensitivities 195
Figure 7.2 Average annual global GDP growth under the different sensitivities 196
Table 7.1 Average GDP growth rates under the different sensitivities 197
Figure 7.3 World oil demand in the economic growth sensitivities 198
Table 7.2 Oil demand in the higher economic growth sensitivity 199
Table 7.3 Oil demand in the lower economic growth sensitivity 200
Figure 7.4 EV sales in the Reference Case and the Sensitivity Case 201
Figure 7.5 EV penetration in the car fleet in the Reference Case and the Sensitivity Case 202
Figure 7.6 Oil demand in the passenger car segment in the Reference Case and the Sensitivity Case 203
Figure 7.7 Oil demand in the Reference Case and the Sensitivity Case 204
Figure 7.8 Oil intensity in major regions 205
Figure 7.9 Oil demand reduction in Accelerated Efficiency sensitivity compared to Reference Case in 2040, by region 206
Figure 7.10 Oil demand reduction in Accelerated Efficiency sensitivity compared to Reference Case in 2040, by sector 207
Figure 7.11 Oil demand in the Accelerated Efficiency sensitivity compared to the Reference Case 208
Figure 7.12 Non-OPEC supply in the upside/downside supply sensitivities 209
Figure 7.13 Additional supply in the upside sensitivity by country, compared to the Reference Case 210
Figure 7.14 Additional supply in the upside sensitivity by source, compared to the Reference Case 211
Figure 7.15 Reductions to liquids supply in the downside supply sensitivity by country, compared to the Reference Case 212
Figure 7.16 Reductions to liquids supply in the downside supply sensitivity by source, compared to the Reference Case 213
Figure 7.17 Upside/downside supply sensitivities: impact on demand for OPEC crude 214