Oil and gas outlook and price trends vautrain


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Oil and gas outlook and price trends vautrain

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Oil and gas outlook and price trends vautrain

  1. 1. MOGP SummitOil and Gas Outlook and Price Trends Yangon 28 March 1 Vautrain Consulting
  2. 2. Global energy demand continues risingparticularly in Asia. Global Energy Consumption Million Tonnes Oil Equivalent 5,000 4,000 North America 3,000 Latin America Europe 2,000 Russia/CIS ME/Africa Asia 1,000 0 1990 1995 2000 2005 2010 Source: BP 2 Vautrain Consulting
  3. 3. Coal and gas are the fastest growing energyresources globally.  Coal and gas have been Incremental World Energy by Primary Fuel 2000-2010 the major contributors to Million TOE energy supply over the3000 past decade.25002000  GHG and other environmental concerns1500 have been insufficient to1000 deter consumers from 500 low cost coal. 0 Coal Gas Oil Renewables Nuclear Total  Gas availability has Energy improved with rapid LNG production expansions Source: IEA around the world. 3 Vautrain Consulting
  4. 4. Petroleum demand continues to grownotwithstanding higher prices.  Petroleum demand grew 1.2% on average over the past decade.  Growth was concentrated in light transportation fuel products.  Emerging market economic growth will offset efficiency gains to result in continued oil demand expansion. 4 Vautrain Consulting
  5. 5. Shale production is changing North American oiland gas. Shale production includes both oil and gas  Production in long- discovered basins is increasing considerably. Exportable gas surplus has developed. Oil pipeline capacity is lagging depressing prices. 5 Vautrain Consulting
  6. 6. Technology is advancing rapidly.  As horizontal fracturing is a relatively new technology, producers are rapidly improving their techniques.  Fracturing procedures are becoming far more complex leading to more producible reserves per well. Horizontal laterals now run as far as 5 kilometers.  Originally focused on gas production, horizontal drilling and fracturing has found equal application to oil plays. US gas prices were far higher than crude on a BTU basis but now are 80% below crude.  Falling gas prices combined with high crude prices have realigned producer priorities. 6 Vautrain Consulting
  7. 7. Unconventional oil has the potential to renew productiongrowth even in thoroughly explored areas. Production, Million B/D R/P Ratio, years Reserves, billion bbl Reserve additions have 40 20 200 approximately matched 38 19 180 production for the past 36 18 160 decade with little 34 17 140 advance. 32 16 120 New techniques expand 30 15 100 28 14 80 potential for oil in 26 13 60 declining areas. 24 12 40 How much can this area 22 11 20 increase production? 20 10 0 1980 1985 1990 1995 2000 2005 Production R/P Reserves Note: Global production excluding OPEC, Russia and CIS nations. 7 Vautrain Consulting
  8. 8. Global Energy Outlook  Advances in gas production will trigger more rapid gas consumption growth in the next decade. Environmental pressure on coal (GHG, criteria pollutants, toxics) will increase retarding coal consumption growth. Oil will remain the primary transportation fuel notwithstanding renewables programs.  Continued renewables growth will depend on solving vexing environmental and economic questions. 8 Vautrain Consulting
  9. 9. Oil and Gas Price Oil and gas demand growth hold the promise ofstrong prices over the medium term. Current price levels are probable to be high in the longer term range. Unconventional resource plays including shale oil,shale gas and bitumen as well as coal seam methaneand others could tilt balances to surplus.Crude prices are expected to stay in the $80-110 rangefor Brent longer term.Applicability of new production techniques morebroadly holds the promise of new supply patternsemerging. 9 Vautrain Consulting
  10. 10. Asian nations are becoming more self sufficient in refining. India, South Korea and Light Fuel Product Trade 3000 Taiwan have become substantial exporters. 2500 India Exports Thousands of barrels per day 2000 China Asian nations as a Japan group are no longer a 1500 market for Atlantic 1000 Singapore Basin or Middle East South Korea refiners. 500 Taiwan 0 Thailand More Asian countries Australia have brought value- -500 Indonesia added refining into their -1000 domestic economies Vietnam and created exportable -1500 Imports Other 1990 1995 2000 2005 2010 surpluses. 10 Vautrain Consulting
  11. 11. As Asian nations become more self-sufficient,export markets West of Suez are penetrated.Thousands of Net Import by Regionbarrels per day Europe Naphtha Gasoline Jet US Kerosene Naphtha Diesel Gasoline Fuel Oil Jet 0 500 1000 Kerosene Diesel Middle East Fuel Oil Africa Naphtha 0 200 400 600 Naphtha Gasoline Gasoline Jet Jet Kerosene Kerosene Diesel Diesel Fuel Oil Fuel Oil Latin America 0 100 200 300 0 200 400 Naphtha Gasoline Jet Kerosene Diesel Fuel Oil -400 100 600 11 Vautrain Consulting
  12. 12. A global refining surplus has developed.  Negative demand growth has created excess refining in US, Europe and Japan.  Dieselization of European markets has exacerbated gasoline surplus in particular.  Simple refineries are at greatest risk of closure but some more sophisticated plants are being shuttered.  Petroplus  ConocoPhillips  Sunoco  Japanese refiners 12 Vautrain Consulting
  13. 13. Asian refinery margins will be influenced by global supply/demand. Sour Crude Net Cash Cost Over the short term surpluses Margin—South East Asia will continue to weigh on margins. Over the medium term more Atlantic Basin refinery closures will create a more balanced market.$/bbl  Changes in demand patterns, particularly for fuel oil, could improve margins. Refining profits are probable to strengthen to 2015 13 Vautrain Consulting
  14. 14. John H. VautrainJohn@Vautrain.com +6681 894 9861 14 Vautrain Consulting