1 Organization of the Petroleum Exporting Countries Organization of the Petroleum Exporting Countries OPEC OPEC ’ ’ s perspective s perspective on the world oil market on the world oil market 5th Russian Oil and Gas Week 31 October – 2 November 2005 Moscow, The Russian Federation Dr Adnan Shihab-Eldin Acting for the Secretary General
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OPEC’s perspective on the world oil market · 1 Organization of the Petroleum Exporting CountriesOrganization of the Petroleum Exporting Countries OPEC’s perspective on the world
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Organization of the Petroleum Exporting CountriesOrganization of the Petroleum Exporting Countries
OPECOPEC’’s perspectives perspectiveon the world oil marketon the world oil market
5th Russian Oil and Gas Week 31 October – 2 November 2005
Moscow, The Russian Federation
Dr Adnan Shihab-EldinActing for the Secretary General
Strong economic growth in DCs (e.g, China, India): growing faster than the world with increasing share in global GDPGlobalization process (export-led growth, increasing role of FDI)
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
2003 2004
2005 2006
Twenty Year Average Growth Rate
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2000 2001 2002 2003 2004 2005 2006*
USA China Others
Last 3 years avg: 1.9Last 10 years avg: 1.4Last 20 years avg: 1.2
Robust oil demand growth (particularly in Asia)China has become the 2nd largest consumer Expected growth is higher than historical trend (last 10 years avg:1.4 mb/d), but lower than the average for last 3 years (1.9 mb/d)
• China has become the second largest oil consumer.
Strong growth in Chinese oil demand Strong growth in Chinese oil demand
4
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!
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
Strong growth in Chinese oil demand Strong growth in Chinese oil demand
5
81
100
32
124 3 2
0
20
40
60
80
100
120
North S
ea US
Canada
Mexico KZ
India
Ecuad
or
2005: estimated production losses (mb)
It would equate to ~ 650tb/d.81
100
32
124 3 2
0
20
40
60
80
100
120
North S
ea US
Canada
Mexico KZ
India
Ecuad
or
2005: estimated production losses (mb)
It would equate to ~ 650tb/d.
1.1
0.5
1.30.8
-0.8
-0.3
0.3
0.8
1.3
1.8
2000 2001 2002 2003 2004 2005 2006*-0.8
-0.3
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
1.1
0.5
1.30.8
-0.8
-0.3
0.3
0.8
1.3
1.8
2000 2001 2002 2003 2004 2005 2006*-0.8
-0.3
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
Non-OPEC supplyyear-on-year change, mb/d
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 growth However, Non-OPEC supply in 2005 has been affected by unplanned shut-downs & a lower rate of growth from RussiaGradual recovery & growth in West Africa, Brazil, Canada & FSU
6
30.0
29.1
27.0
25.4
4.6
1.6
3.726.9
28.328.9
21
23
25
27
29
31
2002 2003 2004 2005*0
1
2
3
4
5IraqOPEC-10OPEC-11 cumulative change (since 2002)Call of OPEC
Note: OPEC production excludes OPEC NGL & non-conventional oil (estimated to be 4.3 mb/d in 2005).
*/ based on actual OPEC production until September and then maintaining September levels for the rest of the year.
OPEC response:additional supplies on the market by using the spare capacity (>4mb/d)accelerated projects to expand production capacity to meet rising demand & maintain spare capacity
30.0
29.1
27.0
25.4
4.6
1.6
3.726.9
28.328.9
21
23
25
27
29
31
2002 2003 2004 2005*0
1
2
3
4
5IraqOPEC-10OPEC-11 cumulative change (since 2002)Call of OPEC
Note: OPEC production excludes OPEC NGL & non-conventional oil (estimated to be 4.3 mb/d in 2005).
*/ based on actual OPEC production until September and then maintaining September levels for the rest of the year.
OPEC response:additional supplies on the market by using the spare capacity (>4mb/d)accelerated projects to expand production capacity to meet rising demand & maintain spare capacity
O v e r l o a d i n g o f R e f i n i n g I n d u s t r y
* / A s i a = J a p a n , S o u t h K o r e a , C h i n a , I n d i a a n d S i n g a p o r e . F o r s o m e A s i a n c o u n t r i e s M a y i s e s t i m a t e d .
S h r i n k i n g R e f i n i n g S p a r e C a p a c i t y i n k e y r e f i n e r y r e g i o n s
0
1
2
3
4
5
6
7
8
J a n -0 2
J u l -0 2
J a n -0 3
J u l -0 3
J a n -0 4
J u l -0 4
J a n -0 5
m b / d
E U 1 5 & N o r w a y U S A A s i a *
I n c r e a s i n g R e f i n e r y U t i l i z a t i o n R a t e i n k e y m a r k e t s
7 5
8 0
8 5
9 0
9 5
1 0 0
J a n -0 2
J u l -0 2
J a n -0 3
J u l -0 3
J a n -0 4
J u l -0 4
J a n -0 5
%
E U 1 5 & N o r w a y U S A A s i a *
Tightness in global refinery system Tightness in global refinery system
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OPEC is attending to rising product demand both domestic & Asia-pacific region, as well as to meet higher product specificationsPursue global downstream investments, particularly in Asia-pacific region By implementing of these plans, they would be able to install over 4.6 mb/d new capacity (i.e. about 3.8 mb/d refinery capacity and 800,000 b/d condensate splitter).Major part of these new capacities will be invested by Saudi Arabia and Kuwait. Similarly most of these projects would be either in the Middle East or in Asia.
Downstream challengesDownstream challenges
Investment needs in the refinery sector: 2005 - 2015
11
0
10
20
30
40
50
60
70
Upstreamprofits
Upstreaminvestments
Downstreamprofits
Downstreaminvestments
1989 2004
(Billion US$)
*/ It includes ExxonMobil, BP, Shell, ChevronTexaco, Total.
Comparison of profits vs investments of major international oil companies* (1989 - 2004)
Comparison of profits vs investments of major international oil companies* (1989 - 2004)
Upstream Downstream Upstream Downstream
Change (bn US$) 52 19 19 2 Ratio of downstream to total (%) 74 26 91 9 Ratio of investments to profits (%) 36 10
investmentsprofitsComparison of profits vs investments over the 1989-2004 period
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Incremental product demand compared with crude and refining capacity expansion
Sources: Capacity estimates based on published reports by different sources as well as Secretariat assessment
Lag in investment will allow capacity build up only as of 2007
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
Increasing activity in the Futures market Increasing activity in the Futures market
Although reaching historical highs in nominal terms, the real value are still well below levels reached in early 1980s.
The price of oil: distinguishing between nominal and real, (US$/b)
The price of oil: distinguishing between nominal and real, (US$/b)
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
100
Average Nominal Real*
*/ inflation & exchange-rate adjusted.(Base: September 2005=100, US$/b)
15
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1975 1980 1985 1990 1995 2000
World USA Japan China
Declining oil intensity boe / PPP - $1,000 (1995) GDP
Declining oil intensity boe / PPP - $1,000 (1995) GDP
Steady decline in oil intensities!
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Oil Demand Outlook, mb/dOil Demand Outlook, mb/d
“Four-fifths of the increase in demand of 30 mb/d over the period 2005–2025 comes from developing countries Transportation continues to be the dominant source of growth (~60 %)Many uncertainties: GDP, technology, policy – substantial downside risks
Regional oil demand & net import requirements(mb/d)
Regional oil demand & net import requirements(mb/d)
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Proven reserves 891 billion barrels 78% of world figureProduction > 30 million barrels a day ~ 40% of world figureExports > 21 million barrels a day ~50% of world figure
Cheaper to exploit than non-OPEC oilIncreasing call on OPEC oil in coming years>50% world oil market projected for 2025
Proven CrudeOil Reserves
15.0
21.3
Crude Oil Production
12.4
58.5
Proven GasReserves
9.8
51.0
Gas Marketed Production
7.8
83.0
0
10
20
30
40
50
60
70
80
90
100
Proven CrudeOil Reserves
Crude Oil Production
Proven GasReserves
Gas Marketed ProductionOPEC Middle East OPEC Rest Non-OPEC
ch63.7
29.1
39.2
9.2
Oil Resources
Source : OPEC
Oil resources and availabilityOil resources and availability
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Organization of the Petroleum Exporting CountriesOrganization of the Petroleum Exporting Countries