Asia and Global Oil & Gas Markets and Geopolitics Mikkal E. Herberg The National Bureau of Asian Research Independent Petroleum Association of America.

Asia and Global Oil & Gas Markets Asia and Global Oil & Gas Markets and Geopoliticsand Geopolitics

Mikkal E. HerbergMikkal E. HerbergThe National Bureau of Asian ResearchThe National Bureau of Asian Research

Independent Petroleum Association of AmericaIndependent Petroleum Association of America““Mid-Year Meeting and Executive Conference”Mid-Year Meeting and Executive Conference”

Naples, FloridaNaples, FloridaJune 14, 2006June 14, 2006

Asian Oil and Gas Trends to 2020Asian Oil and Gas Trends to 2020 Oil demand, imports will drive global marketOil demand, imports will drive global market

67% of recent growth, 50% of future growth67% of recent growth, 50% of future growth Economic growth, rising per capita incomesEconomic growth, rising per capita incomes Motorization, vehicle boomMotorization, vehicle boom Poor oil production prospectsPoor oil production prospects Weak demand management policiesWeak demand management policies

Largest future incremental natural gas marketLargest future incremental natural gas market China to account for 20% global energy demand China to account for 20% global energy demand

growth, largest incremental oil market (20-25% of growth, largest incremental oil market (20-25% of global growth)global growth)

India oil and gas demand growth second only to India oil and gas demand growth second only to ChinaChina

Energy security concerns growing, Asia-ME nexusEnergy security concerns growing, Asia-ME nexus Asia NOCs becoming serious competitors, partnersAsia NOCs becoming serious competitors, partners

Source: IEE Japan

Asia to Dominate Global Energy Demand Asia to Dominate Global Energy Demand GrowthGrowth

Source: IEE Japan

Oil and Coal Largest Shares, Gas Growing Oil and Coal Largest Shares, Gas Growing Rapidly from Low BaseRapidly from Low Base

Asia = 67% Global Oil Demand GrowthAsia = 67% Global Oil Demand Growth(MBD)(MBD)

WorldWorld AsiaAsia ChinaChina

19901990 1,2291,229 841841 -6 -619911991 -46-46 597597 158 158 19921992 733 733 963963 252 25219931993 -199-199 685685 251 25119941994 1,459 1,1091,459 1,109 232 23219951995 1,1271,127 993993 245 24519961996 1,5231,523 766766 282 28219971997 1,9171,917 843843 263 26319981998 446 -364446 -364 112 11219991999 1,6161,616 926926 370 37020002000 904904 808808 568 56820012001 501501 105105 46 4620022002 793793 579579 349 34920032003 1,2481,248 599599 412 41220042004 2,4642,464 1,1091,109 893893

15,714 10,55715,714 10,557 4,424 4,424

Source: BP

Asia Will Drive Oil Demand GrowthAsia Will Drive Oil Demand Growth 2002-20252002-2025

Africa 2.2

Latin America

5.1

Middle East 3.5

Other Asia 10.0

China9.0

Russia/FSU/E. Europe

2.1

W. Europe & Canada, 1.6

US 7.6

Source: DOE 2005

Total = 41 MMBD

Source: IEE Japan

China and India to Account for 70% China and India to Account for 70% of Asian Oil Demand Growthof Asian Oil Demand Growth

0

4,000

8,000

12,000

16,000

20,000

24,000

Asia’s Oil Demand Increasingly Met by Asia’s Oil Demand Increasingly Met by Imports from Outside the RegionImports from Outside the Region

Demand

Production

Imports

14.7

4.5

Source: BP

MB

D

Asia’s Future Oil Imports Will Grow byAsia’s Future Oil Imports Will Grow byMore than Current PG ExportsMore than Current PG Exports

21.2

26.9

33.6

39.8

6.8 6.1 5.03.8

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2002 2010 2020 2030

MM

BD

Source: IEA WEO 2004

Imports2002 14.42030 36.0

Demand

Supply

Mid-East Oil Exports and AsiaMid-East Oil Exports and Asia(MMBD)(MMBD)

20012001 20202020 ChangeChange

Total ME Total ME 16.216.2 25.225.2 9.0 9.0AsiaAsia 9.4 9.4 16.8 16.8 7.4 7.4North AmericaNorth America 2.8 2.8 3.2 3.2 0.4 0.4Western EuropeWestern Europe 3.1 3.1 3.9 3.9 0.8 0.8OtherOther 0.9 0.9 1.3 1.3 0.4 0.4

Asia ShareAsia Share 58% 58% 67% 67%

Source: IEE Japan 3-04

60% of current ME oil exports go to Asia

80% of future export growth will go to Asia

China’s Oil Imports RisingChina’s Oil Imports Rising

Source: IEA WEO 2004

Cumulative Gas Demand GrowthCumulative Gas Demand Growth 2001-20302001-2030

0

100

200

300

400

500

600

BC

M

OECDNorth

America

OECDEurope

TransitionEconomies

Asia LatinAmerica

Africa Middle East

Asia’s gas demand to nearly triple by 2030

Source: IEA WEO 2004

Source: IEE Japan 3-04

Gas Demand Growth Strong Gas Demand Growth Strong Across the Asian RegionAcross the Asian Region

Total Asian Natural Gas Imports Nearly TripleTotal Asian Natural Gas Imports Nearly TripleLNG and Pipeline Supplies to Grow DramaticallyLNG and Pipeline Supplies to Grow Dramatically

2002200220302030

SE Asia to NE AsiaSE Asia to NE Asia 69 69 104 104Persian Gulf to NE AsiaPersian Gulf to NE Asia 29 29 57 57Alaska to NE AsiaAlaska to NE Asia 1 1 0 0SE Asia to ChinaSE Asia to China 0 0 10 10Persian Gulf to ChinaPersian Gulf to China 0 0 13 13Persian Gulf to IndiaPersian Gulf to India 0 0 44 44Russia to NE AsiaRussia to NE Asia 0 0 22 22Russia to ChinaRussia to China 0 0 19 19

Total Total 99 99 269269of whichof which

Persian GulfPersian Gulf 29 29 114 114RussiaRussia 0 0 41 41Southeast AsiaSoutheast Asia 69 69 114 114

Imports from outside region rise five-fold Outside import share rises from 29% to 58%

IEA WEO 2004

Some ConclusionsSome Conclusions

Asia, China to drive global oil demand, markets, pricesAsia, China to drive global oil demand, markets, prices Huge rise in gas consumption, thriving LNG, pipeline gas Huge rise in gas consumption, thriving LNG, pipeline gas

projects in Asiaprojects in Asia Asia only modest upstream oil play – India, SE Asia, E. Asia only modest upstream oil play – India, SE Asia, E.

Siberia; stronger upstream natural gas playSiberia; stronger upstream natural gas play Asia NOCs inflating prices in global E&P marketAsia NOCs inflating prices in global E&P market NOCs changing competitive landscape for IOCsNOCs changing competitive landscape for IOCs China, Asia to become big players in global energy China, Asia to become big players in global energy

geopoliticsgeopolitics Persian GulfPersian Gulf Central AsiaCentral Asia RussiaRussia IEAIEA

BackgroundBackground

Source: IEE Japan

Source: IEE Japan