Energy Perspectives 2016Long-term macro and market outlookColumbia University, 16 November 2016Eirik Wærness, Senior vice president and Chief economist

Macro and market outlook to 2040 – www.statoil.com/energyperspectives

Energy Perspectives 2016

2

The triple energy challenge – a balancing act

Satisfying demand

Risk/reward

balanceSustainability

• Population growth

• GDP growth

• Increasing energy demand

• Fighting decline from existing fields

• Price uncertainty

• Cost challenges

• Risk elements

• Policy uncertainty

• Clean and affordable

energy for all

• Limiting greenhouse

gas emissions

• Policy gap between

targets and measures

3

Significant uncertainty and large changes

4

… this calls for using scenarios

Supply and demand factors (indexed 2002=100)

Source: The Economist Source: DOE, CEIC, IEA, IRENA

0

2000

4000

6000

8000

10000

12000

0

200

400

600

800

1000

1200

1400

1600

2000 2003 2006 2009 2012 2015

US shale oil prod.

Chinese int.tourists

New Chinese cars

Chinese airpassengers

Solar capacity(rhs)

Several futures are possible…Rivalry, Reform, Renewal* - but the world is twice as rich and more efficient

Energy intensityIndex, 1990=100

0

20

40

60

80

100

120

1990 2000 2010 2020 2030 2040

Reform Renewal Rivalry

World GDP and energy demandIndex, 1990=100

0

100

200

300

400

500

1990 2000 2010 2020 2030 2040

Reform Renewal Rivalry

Source: IEA (history), Statoil (projections) *Rivalry: Geopolitical uncertainty, regional conflicts; Reform: COP21 followed up and tightened; Renewal: Energy revolution delivering emissions consistent with 2°-C target

2013 Renewal

Reform

Rivalry

5

World GDP growth rates%

0

1

2

3

4

'90-'0'0-'10 '10-'20 '20-'30 '30-'40

Reform Renewal Rivalry

Source: BigThink, IEA, Statoil (projections)

A strong trend affecting economics and energy

6

All growth in energy demand in emerging economies, in particular in Asia

World energy demand per regionBn toe

0

4

8

12

16

20

Ref Ren Riv Ref Ren Riv

Rest of world India China

OECD Pacific OECD Europe OECD Americas

2020 20402013

The global population centre is in Asia

Each small square represents 1 million people

Speeding up the change in global energy mix

7

… with Renewal displaying a paradigm shift

0%

20%

40%

60%

80%

100%

197

3

198

3

199

3

200

3

201

3

204

0 R

efo

rm

204

0 R

en

ew

al

204

0 R

ivalr

y

New RES

Biofuelsand waste

Hydro

Nuclear

Gas

Oil

Solid fuels0

5

10

15

20

197

3

198

3

199

3

200

3

201

3

204

0 R

efo

rm

204

0 R

en

ew

al

204

0 R

ivalr

y

Historical

Bn toe

Source: IEA (history), Statoil (projections)

OECD Americas energy mix changes gradually

0%

20%

40%

60%

80%

100%

197

3

198

3

199

3

200

3

201

3

204

0 R

efo

rm

204

0 R

en

ew

al

204

0 R

ivalr

y

New RES

Biofuelsand waste

Hydro

Nuclear

Gas

Oil

Solid fuels

0

1

2

3

197

3

198

3

199

3

200

3

201

3

204

0 R

efo

rm

204

0 R

en

ew

al

204

0 R

ivalr

y

Bn toe

… but Renewal displays a paradigm shift

CO2 emissions determined by demand and mix

9

Source: IEA (history), Statoil (projections)

Climate policies: Driving Renewal, contributing to Reform

Reform

450Renewal

NPRivalry

0

10

20

30

40

Statoil IEA

20402013

World CO2 emissionsBillion tons

World CO2 emissionsBillion tons

0

10

20

30

40

Ref Ren Riv

Rest of world India China

OECD Pacific OECD Europe OECD Americas

20402013

Technology shift for light duty vehicles

10

Light Duty Vehicle fleet composition

Billions

Source: IEA (history), Statoil (projections)

Sales Light Duty Vehicles

Millions

… in all scenarios, and a revolution in Renewal

Fuel mix in Final Energy Demand for LDVs

%

0

20

40

60

80

100

Ref Ren Riv

Electricity Biomass Gas Oil

2013 2040

0

20

40

60

80

100

120

140

Ref Ren Riv

Th

ou

sa

nd

s

Other Plug-in hybrids

Electric vehicles Diesel

Gasoline

20402013

0

1

2

3

Ref Ren Riv

Other Plug-in hybrids

Electric vehicles Diesel

Gasoline

20402013

Technology changes in LDVs in OECD Americas

Light Duty Vehicle fleet composition

Millions

Source: IEA (history), Statoil (projections)

Sales Light Duty Vehicles

Millions

… and revolution in Renewal

Fuel mix in Final Energy Demand for LDVs

%

0

20

40

60

80

100

Ref Ren Riv

Electricity Biomass Gas Oil

2013 2040

0

5

10

15

20

Ref Ren Riv

Th

ou

sa

nd

s

Other Plug-in hybrids

Electric vehicles Diesel

Gasoline

20402013

0

50

100

150

200

250

300

350

Ref Ren Riv

Other Plug-in hybrids

Electric vehicles Diesel

Gasoline

20402013

Fuel mix change in electricity

12

Large investments in new renewables required, especially in Renewal

Solar and wind generation capacityGW

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Ref Ren Riv

Solar Wind

20402013

Electricity generation mix%

0

20

40

60

80

100

Ref Ren Riv

Geothermal Solar Wind

Biomass Hydro Nuclear

Gas Oil Coal

20402013

De-carbonization of power in OECD Americas…will require large investments in new renewables

Solar and wind generation capacityGW

0

400

800

1,200

1,600

2,000

Ref Ren Riv

Solar Wind

20402013

Electricity generation mix%

0

20

40

60

80

100

Ref Ren Riv

Geothermal Solar Wind

Biomass Hydro Nuclear

Gas Oil Coal

20402013

Other sectors are more challenging to change… and demand here will grow as the economy grows…

Fuel mix in Final Energy Demand for

Residential, Commercial & Industrial sectors Bn toe

Fuel mix in Final Energy Demand for Transport

excluding LDVsBn toe

0

0.5

1

1.5

2

2.5

Ref Ren Riv

Coal Oil Gas Biomass Electricity

2013 2040

0

2

4

6

8

10

12

Ref Ren Riv

Coal Oil Gas Biomass New RES Electricity Heat

2013 2040

Source: IEA (history), Statoil (projections)

14

Global oil and gas demand growth variesLarge variation across sectors – significant growth in non-energy demand

Source: IEA (history), Statoil (projections)

10.6

-14.0

23.8

-30

-20

-10

0

10

20

30

Reform Renewal Rivalry

OtherTransformation

Power & Heat

Non-Energy

Transport

OtherStationary

Residential

Industry

Change in oil demand 2013-2040Mbd

1,229

-9

1,166

-1,500

-1,000

-500

0

500

1,000

1,500

Reform Renewal Rivalry

Change in gas demand 2013-2040Bcm

North American oil demand will decrease…despite growth in non-energy demand

Source: IEA (history), Statoil (projections)

-4.2

-10.0

-0.2

-12

-9

-6

-3

0

3

6

Reform Renewal Rivalry

OtherTransformation

Power & Heat

Non-Energy

Transport

OtherStationary

Residential

Industry

Change in oil demand 2013-2040Mbd

255

-178

437

-1,200

-900

-600

-300

0

300

600

Reform Renewal Rivalry

Change in gas demand 2013-2040Bcm

Huge investments needed in oil, gas and renewable electricity

Source: Statoil

…to replace production and ensure sustainability

New oil production 2015-2040Mbd

New gas production 2015-2040Bcm

Incremental New RES production 2015-40Thousand TWh

0

50

100

150

2015 2040

Rivalry add-onReform add-onRenewal add-onPotential legacy productionMin legacy productionHistoryRenXXRefXXRivXX

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2015 2040

Reform add-on

Rivalry add-on

Renewal add-on

Potential legacy production

Min legacy production

History

RenXX

RefXX

RivXX

0

5

10

15

20

25

30

35

40

2015 2040

Hist

Renewal add-on

Reform add-on

Rivalry add-on

Legacy production

History

RenXX

RivXX

17

Source: Statoil, IEA (WEO 2015), EIA, BP, ExxonMobil

Wide span in forecasts

18

Oil demand

Million barrels per dayGas demand

Billion cubic meters

70

80

90

100

110

120

130

2015 2020 2025 2030 2035 2040

Reform Rivalry RenewalIEA NP IEA 450 EIABP XOM History

3000

3500

4000

4500

5000

5500

6000

2015 2020 2025 2030 2035 2040

Reform Rivalry RenewalIEA NP IEA 450 EIABP XOM History

Source: Statoil, IEA (WEO 2015), EIA, BP, ExxonMobil

19