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Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam
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Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Jan 11, 2016

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Page 1: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Oil production outlook 2006

Separating facts from fiction

De Waag, 1 November 2006, Amsterdam

Page 2: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

• Terminology

• Current situation

• Production outlook until 2010

• Beyond 2010

• Discussion

Page 3: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Oil sits under pressure in the ground

Page 4: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Liquids production

• Conventional oil (light + medium crude oil - >20 degrees API)

• Unconventional oil ( heavy + extra heavy crude oil - <20 degrees API)

• Natural Gas Liquids

• Processing gains

• Biofuels / coal to liquids / gas to liquids (not included in this outlook)

Resources Total amount of oil in the ground

Reserves Recoverable amount of oil in the ground

Terminology

Page 5: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

“The Canadian tar sands contain 1.8 billion barrels

of oil, seven times as much as the known reserves

of Saudi-Arabia. At least 300 billion barrels are

recoverable, 15% more then Saudi reserves.”

The world needs oil production flows!

Unconventional oil needs to be heated or

diluted before being produced. Production

has entirely different mechanisms/timelines.

Don’t compare apples with oranges

Page 6: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

• Terminology

• Current situation

• Production outlook until 2010

• Beyond 2010

• Discussion

Page 7: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Why worry about oil prices and availability?

Source: Dutch Central Bureau for Statistics

Dutch consumption = 1 million barrels per day

23 %

41 %

Road transport

Air + Ship transport

25 % Industry

8%

3%

Energy production

Farming & Households

Page 8: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

2001 - China joins the WTO

Page 9: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Steel prices double in three years

Source: World Watch Institute

Page 10: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Scramble for oil begins in 2002

Source: Cambridge Energy Research Associates

Page 11: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

New price reality emerges

Source: IEA, EIA

Page 12: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

• Terminology

• Current situation

• Production outlook until 2010

• Beyond 2010

• Discussion

Page 13: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Why I look at flows, not reserves

• TSHTF when flows can’t meet the required demand

• Reserve data is weak and usually biased• Reliable Middle East + Russian data remains undisclosed• Western data is unreliable due to financial rules instead of geological

• New project flows can be monitored

• Outright, visible, decline/depletion can be listed

• The demand that can be met established

Page 14: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Decline running at 4% or 5% annually

Source: International Energy Agency, ASPO Netherlands Database

Page 15: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

4% - Demand / supply barely in balance

Source: ASPO Netherlands Database

Page 16: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

5% - Demand destruction of 5 mb/d by 2010

Source: ASPO Netherlands Database

Page 17: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

That’s only the theoretical scenario

• Project slippage (happens regularly)

• Increasing taxes/tighter terms (happening)

• Accelerating decline (happening)

• Upheaval in major producers (Iraq, Nigeria, Venezuela)

• Accelerating demand growth (China, India)

• Rig shortage >500 offshore rigs need to be replaced within 5 years

• “The big crew change” (half of the personnel will retire within 10 years)

What will the oil price do on the short term?

• Base price level of 50 – 75 dollars per barrel likely too conservative

• Superspike period (goldman sachs) >100 dollars per barrel

Page 18: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

• Terminology

• Current situation

• Production outlook until 2010

• Beyond 2010

• Discussion

Page 19: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

What do we need between 2010 - 2015?

Source: ASPO Netherlands Database

Page 20: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Present activity planned for 2010 – 2015:

• Conventional crude + NGL projects ~ 7 Mb/d

• Unconventional crude projects ~ 3 Mb/d

Divided by the largest increments :

• Saudi Arabia (1.5 mb/d), Iraq (1.3 mb/d), Iran (1.0 mb/d), Kazakhstan (1.0 mb/d), Canada (0.7 mb/d), Brazil (0.6 mb/d), Angola (0.5 mb/d)

We need another 10 Mb/d to keep production flat!

Don’t place your bets on meeting demand

Page 21: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Where is the oil discovery miracle?

Discoveries

• Peaked in the ‘60s

• Production > discovery since ’80s

• Discovery rate in last four years lowest since WWII

• 75% of conventional oil already found (USGS assessment)

Where are the ten annual “Jack” discoveries as promised by the

International Energy Agency?

Source: IHS Energy (Conventional crude oil + NGL)

Page 22: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Europe needs to find a new large supplier

Source: WoodMackenzie, International Energy Agency

Russia:

Past production 135 Gb

Current proven Reserves 74.4 Gb

Likely ultimate prod. of 250 Gb

IEA expectation:

Flat production until 2030

Ultimate of 300 Gb

Page 23: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

There are warnings, but who is listening?

Amsterdam, 7 June 2006, World Gas Conference

Thierry Desmarest, CEO of Total oil company:

“The capacity of raising (oil) production is a real challenge ... if we stay with this type of production growth our impression is that peak production could be reached around 2020.”

“We say to governments, it's urgent to take action plans to reduce oil demand growth.”

Source: Reuters

Page 24: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Peak oil crisis can be solved

What’s on the horizon for transport• Super fuel efficient cars • Efficient and cheap electrical cars• 2nd generation biofuels (created using little energy)

The Netherlands could become the knowledge centre for high quality chemical products produced with biofuels

In the meantime, the world has to “tighten it’s belt” on moving products, food and people:

• Minimize long distant truck deliveries• Minimize transport by car• Maximize moving goods by water• Grow foods more regionally (within Europe)

Page 25: Oil production outlook 2006 Separating facts from fiction De Waag, 1 November 2006, Amsterdam.

Thank you for listening

http://www.peakoil.nl

[email protected]