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ASPO-2005Lisbon, 19TH MAY 2005 1
PARTEXOIL AND GASPARTEXOIL AND GASPARTEXOIL AND GASPARTEXOIL AND GAS
PARTEX OIL AND GAS:
A VISION OF THE WORLD MARKET
AND THE ROLE OF GAS AS THE
FUTURE OF OIL
António Costa Silva and Fernando Barata Alves
ASPO 2005 – Lisbon, May 19 2005
ASPO-2005Lisbon, 19TH MAY 2005 2
PARTEXOIL AND GASPARTEXOIL AND GAS
INTRODUCTION
WHY THE CURRENT CRISIS?
HOW MUCH OIL IS LEFT?
THE ROLE OF GAS
WHEN WILL SUPPLY START DECLINING? THE PRODUCTION PEAK
THE GEOPOLITICAL GREAT GAME
PARTEX VISION
CONCLUSIONS
ASPO-2005Lisbon, 19TH MAY 2005 3
PARTEXOIL AND GASPARTEXOIL AND GAS
INTRODUCTION
● 2004 high oil prices
● Strong increase in the world demand
● Rapid economic growth of Asian countries - China and India
● Erosion of the spare capacity of OPEC countries
● Geopolitical factors
ASPO-2005Lisbon, 19TH MAY 2005 4
PARTEXOIL AND GASPARTEXOIL AND GAS
Source: Oilnergy
IPE BRENT CRUDE OIL PRICE
ASPO-2005Lisbon, 19TH MAY 2005 5
PARTEXOIL AND GASPARTEXOIL AND GAS
0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
7,000.0
1980 1985 1990 1995 2000 2005
Production
Consumption
Source: EIA and Commerzbank
6,000.0
(Th
ou
san
d B
arre
ls p
er D
ay)
0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
7,000.0
1980 1985 1990 1995 2000 2005
Production
Consumption
Source: EIA and Commerzbank
6,000.0
CHINA
crude oil domestic production and consumption
ASPO-2005Lisbon, 19TH MAY 2005 6
PARTEXOIL AND GASPARTEXOIL AND GAS
U.S.
Oil production and consumption
0
5
10
15
20
25
30
1950 1960 1970 1980 1990 2000 2010 2020
(Mil
lio
n b
arre
ls p
er D
ay)
Production Consumption
Source: US Dep. Energy, EIA – Energy Outlook (“Michael Klaré, Blod and Oil)
ASPO-2005Lisbon, 19TH MAY 2005 7
PARTEXOIL AND GASPARTEXOIL AND GAS
USA and ALASKA
Crude oil production and decline
(Th
ou
san
d B
arre
ls p
er d
ay)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
48 States
Alaska
Source: EIA
ASPO-2005Lisbon, 19TH MAY 2005 8
PARTEXOIL AND GASPARTEXOIL AND GAS
TightSupply/Demand
Balance
Erosion of OPECExtra-Capacity
Lack of Flexibilityin Terms ofProduction
Alternatives
Geopolitical Factor
● Decline in production in North Sea
and Alaska.
● Instability in Iraq, Venezuela and Nigeria.
● Terrorist threats in Saudi Arabia, Qatar and Kuwait.
● Inability of OPEC to control the prices.
● Inability to respond to world demand.
FACTORS EVIDENCE
WHY CURRENT HIGH OIL PRICES
Change in WorldPattern Demand
Lack of Investmentin E&D Activities
following1998 Crisis
● No seasonal effects in 2004/2005
● Fastest growth in demand in China/India
● High consumption in USA.
● Inability of producing countries to respond to growing demand.
● Continuous trend of high prices.
● OPEC’s abandonment of price range.
ASPO-2005Lisbon, 19TH MAY 2005 9
PARTEXOIL AND GASPARTEXOIL AND GAS
02
4
6
810
12
14
16
1985 2005
(M barrels per Day)
Source: EIA
15
1
OPEC EXTRA-CAPACITY
ASPO-2005Lisbon, 19TH MAY 2005 10
PARTEXOIL AND GASPARTEXOIL AND GAS
(billion US$)
02468
1012
1998 2003
10 largest quoted western oil companies
Source: Wood Mackenzie
11
8
EXPLORATION EXPENDITURE
ASPO-2005Lisbon, 19TH MAY 2005 11
PARTEXOIL AND GASPARTEXOIL AND GAS
Unbalanced Demand/Supply and Consequences
● Tight supply/demand balance
● Domestic production in the United States continues to decline
● Decline in production in the Alaska and North Sea is affecting developed economies
● Competition from China and India
● Lower than expected spare capacity from OPEC countries
● Drive for a more balanced energy mix with a continued growth of demand for
natural gas.
● Reactivation of the consumption of other fuels like coal.
● Development of a Hybrid-Energy Model
ASPO-2005Lisbon, 19TH MAY 2005 12
PARTEXOIL AND GASPARTEXOIL AND GAS
LONG TERM WORLD PRIMARY ENERGY SUPPLY
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
6500
1971 2000 2010 2020 2030
Mto
e
OilCoalGasNuclearHydroOther Renewables
Source: US Dep. Energy, EIA
ASPO-2005Lisbon, 19TH MAY 2005 13
PARTEXOIL AND GASPARTEXOIL AND GAS
Source: BP Statistical Review of World Energy 2004
Distribution of proved oil reserves 2003
OIL RESERVES ISSUE
ASPO-2005Lisbon, 19TH MAY 2005 14
PARTEXOIL AND GASPARTEXOIL AND GAS
2 500
1 500
1 000
500
2 000
1925 1950 1975 2000 2025 2050 2075
Source: US Geological Survey
Oil discovery in Gbbl
Cumulative oil production in Gbbl
Gas discovery in Gboe
Cumulative gas production in Gboe
Evolution of Oil and Gas World Production and Discovery
ASPO-2005Lisbon, 19TH MAY 2005 15
PARTEXOIL AND GASPARTEXOIL AND GAS
Conventional Oil
Gas
WORLD OIL AND GAS RESERVES (in billion barrels)
ESTIMATEDREMAININGRESERVES
1147
1153 (*)
ESTIMATEDUNDISCOVERED
RESERVES
470
850 (*)
( * ) barrels of oil equivalent (boe)
Source: BP, TOTAL, USGS,CERA and IFP
New Technologies 200 50
Heavy Oil 430 70
ASPO-2005Lisbon, 19TH MAY 2005 16
PARTEXOIL AND GASPARTEXOIL AND GAS
THE OIL RESERVES ISSUE
● Potential in the deep off-shore of the Gulf of Mexico, Brazil,
Angola and Gulf of Guinea
● 75% of the world’s production come from fields that began
producing over 25 years ago
● Additional potential to recover the probable and possible
reserves of the conventional oil using Enhanced Recovery
Methods (EOR)
● Current average ultimate recovery in a worldwide basis
ranges from 30 to 35%
● Unconventional oil reserves like Canadian Tar Sands and
Venezuela extra-heavy oil from the Orenoco Belt;
● Huge amount of gas reserves
ASPO-2005Lisbon, 19TH MAY 2005 17
PARTEXOIL AND GASPARTEXOIL AND GAS
2.5
2.0
1.5
1.0
0.5
0
10.0
8.0
6.0
4.0
2.0
0
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
EOR production % of World production
EO
R p
rod
uct
ion
(M
Mb
bl/d
)
% o
f W
orld
pro
du
ctio
n
Source: OGJ (Oil and Gas Journal)
2.5
2.0
1.5
1.0
0.5
0
10.0
8.0
6.0
4.0
2.0
0
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
EOR production % of World production
EO
R p
rod
uc
tio
n (
MM
bb
l/d
)
% o
f W
orl
d p
rod
uc
tio
n
Source: OGJ (Oil and Gas Journal)
EOR vs WORLD PRODUCTION
ASPO-2005Lisbon, 19TH MAY 2005 18
PARTEXOIL AND GASPARTEXOIL AND GAS
WORLD OIL RESERVES: A BALANCED APPROACH
NEGATIVE TRENDS POSITIVE TRENDS
● Few Giant Discoveries since early 90’s
● Current Production from increasingly mature fields
● Declining discoveries: 1 bbl is found for every 3 bbls produced
● Production decline in the North Sea, Alaska, USA
● Reliability of Reserves Estimates: Poor reporting
● Majors declining Reserves Replenishment Ratios
● Untapped reserves in the Middle East (Iraq/Saudi Arabia)
● The “Omani” paradygm
● Deep-offshore, polar and arctic oil potential
● Unconventional oil reserves: Venezuela/Canada
● Technology Role:- Seabed Logging- Digital Field concept
● Average Ultimate Recovery is low (30/35%); room for enhancement
ASPO-2005Lisbon, 19TH MAY 2005 19
PARTEXOIL AND GASPARTEXOIL AND GAS
HOW MUCH OIL IS LEFT?
● Upward trend of remaining reserves over the past few decades
● Forecasts have remained relatively constant
● Better knowledge of the oil and gas basins of the world combined with the
stronger technology supporting exploration and production
● Reserves growth has basically followed demand
● Replacement of production with new reserves
● 2004 year end indicators put the majors below 100% RRR
ASPO-2005Lisbon, 19TH MAY 2005 20
PARTEXOIL AND GASPARTEXOIL AND GAS
0
500
1000
1500
2000
2500
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
Bill
ion
Bar
rels
CUM PRODUCTION TOTAL PROVEN RESERVES
WORLD RESERVES AND WORLD CUMULATIVE PRODUCTION
0
500
1000
1500
2000
2500
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
Bill
ion
Bar
rels
CUM PRODUCTION TOTAL PROVEN RESERVES
WORLD RESERVES AND WORLD CUMULATIVE PRODUCTION
WORLD RESERVES and
WORLD CUMULATIVE PRODUCTION
ASPO-2005Lisbon, 19TH MAY 2005 21
PARTEXOIL AND GASPARTEXOIL AND GAS
0
500
1000
1500
2000
2500
3000
3500
4000
1940 1950 1960 1970 1980 1990 2000 2010 2020 2030
Bill
ion
Bar
rels
World Oil Reserves Estimates of the Original Volumes
0
500
1000
1500
2000
2500
3000
3500
4000
1940 1950 1960 1970 1980 1990 2000 2010 2020 2030
Bill
ion
Bar
rels
World Oil Reserves Estimates of the Original Volumes
WORLD OIL RESERVES
ESTIMATES of the ORIGINAL VOLUMES
ASPO-2005Lisbon, 19TH MAY 2005 22
PARTEXOIL AND GASPARTEXOIL AND GAS
0
200
400
600
800
1000
1200
1975 1980 1985 1990 1995 2000 2005
Bill
ion
Bar
rels
Middle East World Rest of the World
WORLD PROVEN RESERVES HISTORY
Source: BP statistical review 2004
0
200
400
600
800
1000
1200
1975 1980 1985 1990 1995 2000 2005
Bill
ion
Bar
rels
Middle East World Rest of the World
WORLD PROVEN RESERVES HISTORY
Source: BP statistical review 2004
WORLD PROVEN RESERVES HISTORY
ASPO-2005Lisbon, 19TH MAY 2005 23
PARTEXOIL AND GASPARTEXOIL AND GAS Evolution of Gas Reserves:
1982, 1992 and 2002
Middle East
FSU
Rest of the World
2003
2532
1991
1682
TotalWorld6205
1993
1568
2040
1372
TotalWorld4980
1983
931
1271
1070
TotalWorld3272
Evolution of Gas Reserves(in Tcf)
Source: BP Statistical Review of World Energy 2004
ASPO-2005Lisbon, 19TH MAY 2005 24
PARTEXOIL AND GASPARTEXOIL AND GAS
Source: BP Statistical Review of World Energy 2004
Distribution of proved natural gas reservesat end of 2003
Source: BP Statistical Review of World Energy 2004
Distribution of proved natural gas reservesat end of 2003
ASPO-2005Lisbon, 19TH MAY 2005 25
PARTEXOIL AND GASPARTEXOIL AND GAS
Expansion of gas utilization:
• Substitution for power generators
• Use in transportation
• Gas to liquids (GTL) technology improvements
• Environmental pressures
ASPO-2005Lisbon, 19TH MAY 2005 26
PARTEXOIL AND GASPARTEXOIL AND GAS
WORLD GAS CONSUMPTION
(Bcm)
2577
3377
4254
4 29220137
300
676
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2000 2010 2020
Gas Consumption GTL LNG
Source: BP Statistical Review / Cedigaz
WORLD GAS CONSUMPTION
(Bcm)
2577
3377
4254
4 29220137
300
676
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2000 2010 2020
Gas Consumption GTL LNG
Source: BP Statistical Review / Cedigaz
ASPO-2005Lisbon, 19TH MAY 2005 27
PARTEXOIL AND GASPARTEXOIL AND GAS
WHEN WILL SUPPLY START DECLINING?
THE PRODUCTION PEAK
• Estimate future production profiles, the growth rate, the time for
peak production and the start of decline
• Factors involved:
- Reserves
- Costs
- Technology
- Strategies
• Technology and expertise will definitively play a fundamental role in
turning uneconomical reserves into real barrels
ASPO-2005Lisbon, 19TH MAY 2005 28
PARTEXOIL AND GASPARTEXOIL AND GAS
● Based on Campbell and Laherrère previous work
● The exact decline point will be dependent on:– Price driven demands– Conservation policies– Ability to produce non-conventional reserves
● There are no absolute certainties regarding the timing of the peak production and the best approach is to define a range of possibilities supported by meaningful assumptions.
● Production increase is not solely dependent on reserves, but also on the cost to develop them
● Less critical in the Middle East, where large volumes are easily available, when compared to the rest of the world
PARTEX MODEL: BASIC ASSUMPTIONS
ASPO-2005Lisbon, 19TH MAY 2005 29
PARTEXOIL AND GASPARTEXOIL AND GAS
Reserves
World Demand● Equilibrium demand/supply will control growth
● Economic growth “cooling” effects.
● Annual oil demand growth at minimum 1 to 3%.
● In the long-run look to both oil and gas peaks.● Gas will be the future of oil.● Political will to prepare the future Hybrid
Energy Model.
Technology
Non-ConventionalOil
● Canadian Tar Sands
● Orenoco Belt in Venezuela (heavy oil)
● Ability to produce.
PARTEX MODEL FOR WORLD OIL AND GASPEAK PRODUCTION
● Exploration technology emerging from Seabed Logging.● Integration of technologies● Deep water/Arctic/Middle-East-Irak
Hydrocarbon-Model
● Not restricted to proven reserves
● Amount of ultimate oil recovery 2,500 bill. barrels
● Amount of ultimate gas reserves 2,500 boe
ASPO-2005Lisbon, 19TH MAY 2005 30
PARTEXOIL AND GASPARTEXOIL AND GAS
THE ROLE OF TECHNOLOGY
AREAS TOOLS OBJECTIVES
Exploration Seabed Logging (SBL)
● Based on electro-magnetic methods
● Integration with 3D Seismic
● Better Resolution
Development/Production(new approaches in
gathering and processing data)
● Detects what is happening in the reservoir
● Better placement of wells
● Steer and complete wells through different zones of the reservoir
● Remote gathering of well and field data
● Optimised decision process
Digital Field Concept
I. Remote Sensing: combination of seismic and sensors
II. Visualization: 3D imaging and modelling
III. Intelligent Drilling and Completions: control of production from each reservoir zone
IV. Automation
V. Data Integration: various sources
ASPO-2005Lisbon, 19TH MAY 2005 31
PARTEXOIL AND GASPARTEXOIL AND GAS
FORECAST OF WORLD OIL AND GAS PRODUCTION
- LOWER GROWTH SCENARIO
0
20
40
60
80
100
120
140
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
Mil
lio
n B
arre
ls /
Day
OIL GAS
FORECAST OF WORLD OIL AND GAS PRODUCTION LOWER GROWTH SCENARIO
ASPO-2005Lisbon, 19TH MAY 2005 32
PARTEXOIL AND GASPARTEXOIL AND GAS
OIL GAS
FORECAST OF WORLD OIL AND GAS PRODUCTION HIGHER GROWTH SCENARIO
0
20
40
60
80
100
120
140
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
Mil
lio
n B
arre
ls /
Day
FORECAST OF WORLD OIL AND GAS PRODUCTION
- HIGHER GROWTH SCENARIO
ASPO-2005Lisbon, 19TH MAY 2005 33
PARTEXOIL AND GASPARTEXOIL AND GAS
FORECAST OF WORLD OIL PRODUCTION(HIGHER GROWTH SCENARIO)- THE EFFECT OF TECHNOLOGY
FORECAST OF WORLD OIL PRODUCTIONHIGHER GROWTH SCENARIOTHE EFFECT OF TECHNOLOGY
0
20
40
60
80
100
120
140
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
Mil
lio
n B
arre
ls /
Day
KNOWN TECHNOLOGY
NEW TECHNOLOGIES
ASPO-2005Lisbon, 19TH MAY 2005 34
PARTEXOIL AND GASPARTEXOIL AND GAS
FORECAST OF OIL PRODUCTION(HIGHER GROWTH SCENARIO)- MIDDLE EAST AND REST OF THE WORLD
FORECAST OF OIL PRODUCTIONHIGHER GROWTH SCENARIOMIDDLE EAST AND REST OF THE WORLD
0
20
40
60
80
100
120
140
1965 1975 1985 1995 2005 2015 2025 2035 2045 2055 2065 2075 2085 2095
Mil
lio
n B
arre
ls /
Day
MIDDLE EAST REST OF THE WORLD
ASPO-2005Lisbon, 19TH MAY 2005 35
PARTEXOIL AND GASPARTEXOIL AND GAS
INVESTMENT FORECAST(HIGHER OIL GROWTH SCENARIO)
INVESTMENT FORECASTHIGHER OIL GROWTH SCENARIO
0
50
100
150
200
250
300
2005 2015 2025 2035 2045 2055 2065 2075 2085 2095
Bil
lio
n U
SD
/ Y
ear
MIDDLE EAST REST OF THE WORLD
ASPO-2005Lisbon, 19TH MAY 2005 36
PARTEXOIL AND GASPARTEXOIL AND GAS
GEOPOLITICAL GREAT GAME
Weaknesses of Great Economic Powers
Demographic Factor
Difficulty of Oil Companies to replace and have access to Reserves
Growing Depletion of World Oil Reserves
Emergence of China and India
Balance of Power: State-Owned Companies of Producing Countries
• Decline of production in Alaska and North Sea.• Difficulty of Oil Companies to access new reserves.
• Role of OPEC countries.• Middle East has 64% of oil reserves.
• More competition for oil and gas reserves.• Links through State-Owned Companies.
• Inability to respond to growing world demand.
• Low reserves replenishment ratios.
• Growth in population.• Growth in energy needs.• Limited resources
• Scarce domestic resources.• Fierce competition and new alliances.
Increasing Energy Dependence of Western Countries
FACTORS EVIDENCE
GEOPOLITICAL GREAT GAME
Weaknesses of Great Economic Powers
Demographic Factor
Difficulty of Oil Companies to replace and have access to Reserves
Growing Depletion of World Oil Reserves
Emergence of China and India
Balance of Power: State-Owned Companies of Producing Countries
• Decline of production in Alaska and North Sea.• Difficulty of Oil Companies to access new reserves.
• Role of OPEC countries.• Middle East has 64% of oil reserves.
• More competition for oil and gas reserves.• Links through State-Owned Companies.
• Inability to respond to growing world demand.
• Low reserves replenishment ratios.
• Growth in population.• Growth in energy needs.• Limited resources
• Scarce domestic resources.• Fierce competition and new alliances.
Increasing Energy Dependence of Western Countries
FACTORS EVIDENCE
GEOPOLITICAL GREAT GAME
ASPO-2005Lisbon, 19TH MAY 2005 37
PARTEXOIL AND GASPARTEXOIL AND GAS
0
2
4
6
8
10
12
14
1900 2000 2050
0
5
10
15
20
25
30w
orl
d p
op
ula
tio
n (
bill
ion
peo
ple
)
ener
gy
con
sum
pti
on
per
yea
r(b
illio
ns
of
tep
)
world population energy consumption
Evolution of World Population and Consumption of Energy
0
2
4
6
8
10
12
14
1900 2000 2050
0
5
10
15
20
25
30w
orl
d p
op
ula
tio
n (
bill
ion
peo
ple
)
ener
gy
con
sum
pti
on
per
yea
r(b
illio
ns
of
tep
)
world population energy consumption
Evolution of World Population and Consumption of Energy
THE DEMOGRAPHIC FACTOR
ASPO-2005Lisbon, 19TH MAY 2005 38
PARTEXOIL AND GASPARTEXOIL AND GAS
China
India
Rest of Word
WORLD POPULATION: China and India
China
India
Rest of Word
Source: us Department of Energy
ASPO-2005Lisbon, 19TH MAY 2005 39
PARTEXOIL AND GASPARTEXOIL AND GAS
PROVED OIL RESERVES: China and India
China
India
Rest of Word
Source: us Department of Energy
PROVED OIL RESERVES: China and India
China
India
Rest of Word
Source: us Department of Energy
ASPO-2005Lisbon, 19TH MAY 2005 40
PARTEXOIL AND GASPARTEXOIL AND GAS
Renew the Portfolioof Oil Reserves
Diversificationof Assets
Production Growth
PrudentFinancial Strategy
● Consolidate/Extend existing partnerships.
● Reinforce strategic positions.
● Access to competitive new reserves.
● Balance exploration risk with assets already in production.● Ability to prospect identification and evaluation.● Improve the Internal Rate of Return.
● Efficient use of capital to support revenues, growth and profitability.● Global portfolio management to reach an equilibrium among risk, profitability and growth.● Good Cost Control.
● Broader presence in gas.● Special attention to LPG, LNG, GTL.● Promote renewable energies.● Geographical diversification.
THE VISION THE FUTURE
PARTEX VISION: A MULTI-ENERGY COMPANY
ASPO-2005Lisbon, 19TH MAY 2005 41
PARTEXOIL AND GASPARTEXOIL AND GAS
● The current oil price spike is explained by structural changes in the oil and gas industry
● These structural changes will remain in the near-future
● Oil and gas reserves are finite and with the current levels of demand and production it must be stressed that this century will witness the peak of oil production
● There are no absolute certainties regarding the timing of the peak and the best approach is to define a range of possibilities supported by meaningful assumptions.
● PARTEX lower production scenario shows an expected production peak for oil by 2040 and for gas by 2060; assuming a stronger oil production growth in line with EIA forecasts, oil peak is expected by 2025 and the gas peak delayed until 2055.
CONCLUSIONS
ASPO-2005Lisbon, 19TH MAY 2005 42
PARTEXOIL AND GASPARTEXOIL AND GAS
● Production increase is not solely dependent on reserves, but also on the cost to develop them
● Overall investment should clearly impact oil production increase expectations since it will be the trigger to the implementation of other energy alternatives.
● High oil prices has been the drive for a more balanced energy mix with a continued growth of demand for natural gas.
● High oil prices created also conditions for the reactivation of the consumption of other fuels like coal, nuclear and renewables. A new Hybrid-Energy Model will emerge.
● Geopolitical factors may play a significant role in the world energy market
● The demographic factor is also a key variable to shape the evolution trend of the energy market
● A possible trend is the conversion of the oil-based companies to multi-energy companies.
CONCLUSIONS (Cont.)
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