No Slide Title - OPEC · Title No Slide Title Author N.Guerer Created Date 9/6/2005 11:07:25 AM

1

Organization of the Petroleum Exporting CountriesOrganization of the Petroleum Exporting Countries

Oil prices:Oil prices:to the sky or to the sky or stabilisationstabilisation??

Dr Adnan Shihab-EldinActing for the Secretary General

Energy flow in the NorthNordic Energy Conference

Alfred Berg ABN AMRO30 August 2005Oslo, Norway

2

OPEC StatuteOPEC Statute

Article 2B: “The Organization shall devise ways and means of ensuring the stabilisation of prices in international oil markets, with a view to eliminating harmful and unnecessary fluctuations.”

Article 2C: “Due regard shall be given at all times to the interests of the producing nations and to the necessity of securing: a steady income to the producing countries; an efficient, regular and economic supply of petroleum to consuming nations; and a fair return on their capital to those investing in the petroleum industry.”

Interest of producing countries: owners of natural resourcesInterest of consumers & global economyInterest of investors: IOCs & NOCs

3

0

20

40

60

80

100Ja

n-80

Jan-

81Ja

n-82

Jan-

83Ja

n-84

Jan-

85Ja

n-86

Jan-

87Ja

n-88

Jan-

89Ja

n-90

Jan-

91Ja

n-92

Jan-

93Ja

n-94

Jan-

95Ja

n-96

Jan-

97Ja

n-98

Jan-

99Ja

n-00

Jan-

01Ja

n-02

Jan-

03Ja

n-04

Jan-

05

0

20

40

60

80

100Average Nominal Real**/ inflation & exchange-rate adjusted.(Base: August 2005=100, US$/b)

Although reaching historical highs in nominal terms, the real value is far below historical highs

The price of oil: distinguishing between nominal and real, (US$/b)

The price of oil: distinguishing between nominal and real, (US$/b)

4

Oil taxes & export revenues: who gets what?

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

United Kingdom

Italy

Germany

France

Japan

Canada

USA

Crude CIF Price Industry Margin Tax

Who gets what from a liter of oil in the G7?2004

5

Oil taxes & export revenues: who gets what?

Avg 2000-04 and 2004

254

324349

312

0

100

200

300

400

Bill

ion

US$

G7 Oil Taxes Revenue OPEC Oil Export Revenue

6

Revenues of major international oil companies*Revenues of major international oil companies*

603

805 752 806

977

1,232

0

250

500

750

1,000

1,250

1,500

1999 2000 2001 2002 2003 2004 2005#-30

-15

0

15

30

45

60Revenues % change in revenues % change in ORB price

(billion US$) (%)

* It includes top five IOCs, namely ExxonMobil, BP, Shell, ChevronTexaco, Total, which constituted ~39% of the total oil companies' revenues in 2003, and 55% of the revenues if the NOCs (>50% state-owned) are excluded.

# 1st half 2005.

7

OPEC Reference Basket Price (US$ / b)

OPEC Reference Basket Price (US$ / b)

57.3

16

22

28

34

40

46

52

58

Jan Feb Mar Apr May May Jun Jul Aug Sep Oct Nov Dec

2004

2005

Main reasons behind the rise in prices in 2005: •Continued strength in oil demand led by respectable performance of the world economy •Increasing market anxiety over capacity tightness with geopolitical tensions: focusing more on downstream with growth in refining capacity lagging behind demand•Oil production problems due to technical, political & natural reasons•Continuous bottlenecks at refineries running practically full capacity •Persistent volatility coupled by activities in Futures market

8

World economic & oil demand growthWorld economic & oil demand growth

Strong economic growth in DCs (e.g, China, India): growing faster than the world with increasing share in global GDPGlobalization processRobust oil demand growth (particularly in Asia)Capacity adjustment across the supply chain, in particular downstream; conversion refining capacity

0.0

0.5

1.0

1.5

2.0

2.5

3.0

72-05 87-05 94-05 03-05

aagr %avg growth (mb/d)

Oil demand growth Rates of Economic Growth (real terms, at 1995 purchasing power parity)

0

1

2

3

4

5

6

7

8

9

10

OECD DCs China World

2004 2005

2006 2007

Twenty Year Average Growth Rate

9

Strong growth in Chinese oil demand Strong growth in Chinese oil demand

1.50

2.50

3.50

4.50

5.50

6.50

7.50

8.50

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

%

USA: 25.7%China: 8.1%Japan: 6.5%Germany: 3.2%India: 3.0%

China’s share in world oil consumption (%)

• China has become the second largest oil consumer.

10

Strong growth in Chinese oil demand Strong growth in Chinese oil demand

0

3

6

9

12

15

18

21

24

27

India

China

Brazil

UK

USA

Oil demand, barrels per capita per year

Per capita oil demand ratios

India ChinaBrazil 6 3UK 14 7USA 34 16

Structural change in the economy - growing faster than the rest of the world, fueled by strong growth in oilLong-way to go: in line with rising per capita income levels, low per capita oil demand is yet to approach levels of other countries!

11

Overloading of Refining IndustryOverloading of Refining Industry

*/Asia = Japan, South Korea, China, India and Singapore. For some Asian countries May is estimated.

Shrinking Refining Spare Capacity in key refinery regions

0

1

2

3

4

5

6

7

8

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

mb/d

EU15 & Norway USA Asia*

0

1

2

3

4

5

6

7

8

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

mb/d


75

80

85

90

95

100

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

%


Increasing refinery utilization ratesin major consuming regions

Inadequate past investment and increasingly stringent product specifications have resulted in a lack of effective global refining capacity;Shrinking Refining Spare Capacity in key refinery regions leading to persistent operational bottlenecks, now running at close 100% in major consuming regions

12

Persistent price volatilityPersistent price volatility

WTI prices vs. US crude commercial oil stocks

R2 = 0.69

0

10

20

30

40

50

60

70

255 270 285 300 315 330 345 360

1994 - 2003 2004Jan 2005 - August 2005 Linear (1994 - 2003)

(US

$/b)

(million barrels)

Recent observed stocks-price relationship does not fit into historical trendUS stocks doesn't support current higher oil price

13


growing use of oil futures as a form of financial instrumentNYMEX hit a record high in 2005 surpassing the record in 2004.The average volume of contracts rose in 2005 to 237 million contracts compared to 179 million contracts in 2003OPEN interest also shows a higher record in 2005 of 792 million contracts compared to 542 million contracts in 2003

WTI futures contracts at NYMEX (million bbls)

0

100

200

300

400

500

600

700

800

900

2003 2004 20050

50

100

150

200

250

300

NYMEX volume traded OPEN interest (outstanding)NYMEX volume traded: cum. chg. OPEN interest (outstanding): cum. chg.

14


R2 = 0.8

10

20

30

40

50

60

70

100 150 200 250 300 350NYMEX daily average volume traded (mb)

US$

/b

18 August 2005

R2 = 0.8

10

20

30

40

50

60

70

100 150 200 250 300 350NYMEX daily average volume traded (mb)

US$

/b

18 August 2005

NYMEX daily oil average volume traded vs. WTI price

15

The price of oil: distinguishing between nominal and real

The price of oil: distinguishing between nominal and real

OPEC R. Basket price in real and nominal terms (Base: 2005 = 100, US$/b)

0

10

20

30

40

50

60

70

80

90

1970

1975

1980

1985

1990

1995

2000

2005

Nominal Real**/inflation & exchange-rate adjusted.

Despite another significant rise in prices so far this year, no visible impact on economic growth.

16

OPEC crude oil production, 2002-2005(based on secondary sources, mb/d)

OPEC crude oil production, 2002-2005(based on secondary sources, mb/d)

25.4

27.0

29.1

30.0

3.7

4.6

1.6

21

23

25

27

29

31

2002 2003 2004 2005*0

1

2

3

4

5IraqOPEC-10OPEC-11 cumulative change

Note: OPEC production excludes OPEC NGL & non-conventional oil (estimated to be 4.2mb/d in 2005).* / As of August 2005, OPEC production is assumed to be at July level of 30.2 mb/d.

Call of OPEC 28.928.3

26.9

17

OECD commercial oil stocks OECD commercial oil stocks

In fact, without prompt OPEC actions, it is hard to imagine what the market would be today!

Days of forward coverClosing levels (mb)

2300

2400

2500

2600

2700

2800

2900

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Avg. 00-04

2004

2005

Min-Max range: 1994-2004

Avg.00-04

2004

48

50

52

54

56

58

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2000-2004 Max/Min

2005

18

Source of non-OPEC supplyyear-on-year change, mb/d


While growth in non-OPEC supply up to 2003 were exceeding that of demand, since then had been significantly below demand growthNon-OPEC supply is expected to increase as a result of the start-up of new projects particularly in deepwater in Latin America, West Africa, GOM and AsiaRussia is expected to increase, but at much lower rates

1.1

0.7 1.00.8

-0.7

-0.2

0.3

0.8

1.3

1.8

2000 2001 2002 2003 2004 2005 2006*-0.7

-0.2

0.3

0.8

1.3

1.8

C h i n a OECD Pacific OECD W.Europe OECD N.America

Total DCs Fsu- ex Russia Net Non-OPEC

Russia

Last 3y avg: 0.9

Last 10y avg: 0.8

Last 20y avg: 0.4

19



With currently observed slowing pace of Russian oil supply growth (e.g., policy measures, change in required technology), indications points to production levels to oscillate around 9.5-10.5 mb/d towards the end of the decade.

Russian oil supply growth

0

100

200

300

400

500

600

700

800

900

Jan-

04Fe

b-04

Mar-0

4Ap

r-04

May-

04Ju

n-04

Jul-0

4Au

g-04

Sep-

04Oc

t-04

Nov-

04De

c-04

Jan-

05Fe

b-05

Mar-0

5Ap

r-05

May-

05Ju

n-05

Jul-0

5Au

g-05

Sep-

05Oc

t-05

Nov-

05De

c-05

mb/

d

-1%0%1%2%3%4%5%6%7%8%9%10%11%

y-o-

ygro

wth,

%

Volume % growth

20

World oil demand & supply balance(mb/d)

World oil demand & supply balance(mb/d)

1Q05 2Q05 3Q05 4Q05 2005 05/04 1Q06 2Q06 3Q06 4Q06 2006 06/05

Demand (a) 83.6 81.9 83.4 85.7 83.6 1.6 85.3 83.3 84.9 87.3 85.2 1.6

Supply 83.9 84.6 84.7 85.7 84.7 1.8 Non-OPEC (b) 50.3 50.5 50.3 50.9 50.5 0.7 51.2 50.9 51.2 52.7 51.5 1.0 OPEC NGL (c) 4.1 4.2 4.2 4.3 4.2 0.2 4.4 4.5 4.6 4.7 4.5 0.3 OPEC Crude oil 29.5 29.9 30.2 30.5 30.0 0.9

a-(b+c) 29.2 27.1 28.8 30.5 28.9 0.6 29.7 27.9 29.1 29.9 29.2 0.3

Balance (d) 0.3 2.8 1.4 0.0 1.1

Seasonal stock chg.: ('00-'04) -0.7 0.9 0.3 -0.6 -0.7 0.9 0.3 -0.6Stock change (e) OECD commercial -0.1 1.3 OECD SPR 0.1 0.1 Oil in Water 0.2 0.0Remaining to Balance (d-e) 0.0 1.4

21

30.3

33.1 33.9

38.7

35

24

27

30

33

36

39

42

Jan-03 Jan-04 Jan-05 end 2005 2006 201024

27

30

33

36

39

42Capacity additionCapacityCapacityProduction

40.0

32

Note: OPEC production as of 2005 reflectsestimated required OPEC volumes.

(mb/d) Jan 04 Jan 05 End 05 2006

Production capacity 30.8 31.6 33.1 33.9Addition to capacity 0.4 0.9 1.5 0.7Production* 28.2 29.3 30.0Spare capacity (vol) 2.6 2.4 3.1Spare capacity (%) 8.4 7.4 9.4

*/ End 05 production is based on estimated required OPEC volumes.Note: Net capacity increase for Iraq is expected to be 0.5 - 1.0 mb/d by 2010.

Accelerated production capacity expansion plans

OPEC production capacity & additions(mb/d)

OPEC production capacity & additions(mb/d)

NGL: 3.7 mb/d

NGL: 4.5 mb/d

NGL: 6.4 mb/d

22

Expected cumulative growth in OPEC capacity,non-OPEC supply and refinery capacity

Expected cumulative growth in OPEC capacity,non-OPEC supply and refinery capacity

0

2000

4000

6000

8000

10000

12000

2004

2005

2006

2007

2008

2009

mb/d

0

2000

4000

6000

8000

10000

12000

Non-OPEC OPEC CapacityRefinery Capacity

23

Growth in world oil supply versus demandand refinery capacity

Growth in world oil supply versus demandand refinery capacity

-2000

-1000

0

1000

2000

3000

2003

2004

2005

-2000

-1000

0

1000

2000

3000

Non-OPEC OPEC OPEC Capacity

Demand Refinery Capacity

24

Oil Demand Outlook, mb/dOil Demand Outlook, mb/dReference 2010 2015 2020 2025 OECD 50.7 52.0 53.0 53.9 DCs 33.8 39.2 45.1 51.3 Transition economies 5.3 5.6 5.9 6.1 Total World 89.9 96.8 104.0 111.3

High scenario 90.8 99.1 108.0 Low scenario 88.7 93.4 97.6

“Dynamics-as-usual”: observed patterns, no new strong policy drivesOil demand increases by an average of 1.5 mb/d annuallyFour-fifths of the increase in demand of 28 mb/d over the period 2005–2025comes from developing countries Transportation continues to be the dominant source of growth (~60 %)Many uncertainties: GDP, technology, policy – substantial downside risksIssue of security of demand

25

Regional oil demand & net import requirements (mb/d)

Regional oil demand & net import requirements (mb/d)

26 2729

1310 12

0

10

20

30

40

2005 2015 2025Oil demand Oil import requirements

North Americamb/d

2530

38

31

23

16

0

10

20

30

40


Asiamb/d

16 17 171412

10

0

10

20

30

40


Europe mb/d

7

-25

-32

-44

9

-50

-40

-30

-20

-10

0

10


OPEC mb/d 10

3 5 5

-8-10 -10

-20

-10

0

10

20


FSU mb/d

(mb/d)2005 2015 2025 2005 2015 2025

North America 25 27 29 10 12 13Latin America 5 6 7 0 0 1Europe 16 17 17 10 12 14FSU 4 5 5 -8 -10 -10Asia 23 30 38 16 23 31 China 7 10 13 3 6 10M.East & Africa 3 4 5 -3 -3 -2OPEC 7 9 10 -25 -32 -44

Oil Demand Net Oil Import Req.

M.East OPEC contribution to world oil trade is expected to increase from ~30% to ~40% in 2025.

26

A Prospective Depletion Curve for the World's Conventional and Non-Conventional Oil to 2075

0

20

40

60

80

100

120

140

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070

C onvent io nal N on- C o nvent io nal ( current recoverab le)f urt her nc Impro ved reco very A dd it io n

data modeled

Milli

on b

/d

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Cummulative production

Remaining reserves

Reserves growth

Undiscovered

650 bn barrels (10% of 7 Gb OIP)

3400 bn barrels recoverable resource

Recoverable resource

Conventional Oil Non-Conventional Oil

~ 50

% o

f O

IP

27

World oil supply: cumulative production & reserve growth

World oil supply: cumulative production & reserve growth

Thomas Ahlbrandt, USGS, ‘Global Perspective on Petroleum Resources with a Middle East / North Africa Focus’, 2005.

28

Investment in OPEC Member CountriesInvestment in OPEC Member Countries

Numerous possibilitiesExtent of IOC involvement varies, from large to little or

noneCombination/partnership — IOCs + NOCs

AgreementsFair and workable

Open and transparentIncentives for investorAssurances for owner

Commitment to long-termMany uncertainties, which can be costly

Increasing attention on downstream

International oil companies (IOCs) National oil companies (NOCs)

29

Uncertainties:pose a challenge to investment levels!

Uncertainties:pose a challenge to investment levels!

Drivers of uncertainties over future supply and demand growth and future scale of investment that will be required

The world economy

Energy policies impacting supply/demand

Technology developments

Oil price path

30

0

5

10

15

20

25

30

35

NorthAmerica

LatinAmerica

Africa Europe FSU MEGulf

AsiaPacific

$ bi

llion

20.119.8

2.9

14.8 12.5 13.7

30.3

* Gasoline, Jet Kerosene and Distillate

increasing demand for lighter productslimited flexibility

Average Global Crude Slate2004 2015

API 33.36 33.12% SULPHUR 1.17 1.27

significant investment requirements (> $130 billion over the next decade)

Downstream challengesDownstream challenges

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2000

2001

2002

2003

2004

2005

(mb/

d)Light products Oil Demand Growth

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2000

2001

2002

2003

2004

2005

(mb/

d)Light products Oil Demand Growth

31

World refining capacity expansion 2004-20101000 b/d

World refining capacity expansion 2004-20101000 b/d

570

973

650

1178 1110

1370

1450

-100

300

700

1100

1500

1900

2004 2005 2006 2007 2008 2009 2010

Capacity increase

Range (exc. OPEC est.)Lag in investment will allow capacity build up only as of 2007

32

Continued cooperation & genuine dialogue: underlying consensus on handling major issues of mutual concern for the benefit of all.

International Energy Forum; International Energy Agency; EU-OPEC Energy Dialogue; Euro-Mediterranean Dialogue;EU-Gulf Cooperation Council; Asian Oil and Gas Ministers Round Table; Non-OPEC at OPEC Conferences; OPEC & Non-OPEC experts meetings …

Recalling the active role of Norway: contributions towards market stability efforts & enhancing producer-consumer dialogue, technology & environmentEffective engagement on all interrelated issues:

Security of supply and demandPrice stabilityEnergy policiesMultilateral issuesTechnology (e.g., cleaner oil technologies, CO2 capture combined with EOR)

Dialogue and cooperationDialogue and cooperation

33

No Slide Title - OPEC · Title No Slide Title Author N.Guerer Created Date 9/6/2005 11:07:25 AM

Documents