aspo-2005 lisbon, 19th may 2005 1 partex oil and gas partex oil and gas partex oil and gas partex...

ASPO-2005Lisbon, 19TH MAY 2005 1

PARTEXOIL AND GASPARTEXOIL AND GASPARTEXOIL AND GASPARTEXOIL AND GAS

PARTEX OIL AND GAS:

A VISION OF THE WORLD MARKET

AND THE ROLE OF GAS AS THE

FUTURE OF OIL

António Costa Silva and Fernando Barata Alves

ASPO 2005 – Lisbon, May 19 2005


PARTEXOIL AND GASPARTEXOIL AND GAS

INTRODUCTION

WHY THE CURRENT CRISIS?

HOW MUCH OIL IS LEFT?

THE ROLE OF GAS

WHEN WILL SUPPLY START DECLINING? THE PRODUCTION PEAK

THE GEOPOLITICAL GREAT GAME

PARTEX VISION

CONCLUSIONS



INTRODUCTION

● 2004 high oil prices

● Strong increase in the world demand

● Rapid economic growth of Asian countries - China and India

● Erosion of the spare capacity of OPEC countries

● Geopolitical factors



Source: Oilnergy

IPE BRENT CRUDE OIL PRICE



0

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

7,000.0

1980 1985 1990 1995 2000 2005

Production

Consumption

Source: EIA and Commerzbank

6,000.0

(Th

ou

san

d B

arre

ls p

er D

ay)

0

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

7,000.0

1980 1985 1990 1995 2000 2005

Production

Consumption

Source: EIA and Commerzbank

6,000.0

CHINA

crude oil domestic production and consumption



U.S.

Oil production and consumption

0

5

10

15

20

25

30

1950 1960 1970 1980 1990 2000 2010 2020

(Mil

lio

n b

arre

ls p

er D

ay)

Production Consumption

Source: US Dep. Energy, EIA – Energy Outlook (“Michael Klaré, Blod and Oil)



USA and ALASKA

Crude oil production and decline

(Th

ou

san

d B

arre

ls p

er d

ay)

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

48 States

Alaska

Source: EIA



TightSupply/Demand

Balance

Erosion of OPECExtra-Capacity

Lack of Flexibilityin Terms ofProduction

Alternatives

Geopolitical Factor

● Decline in production in North Sea

and Alaska.

● Instability in Iraq, Venezuela and Nigeria.

● Terrorist threats in Saudi Arabia, Qatar and Kuwait.

● Inability of OPEC to control the prices.

● Inability to respond to world demand.

FACTORS EVIDENCE

WHY CURRENT HIGH OIL PRICES

Change in WorldPattern Demand

Lack of Investmentin E&D Activities

following1998 Crisis

● No seasonal effects in 2004/2005

● Fastest growth in demand in China/India

● High consumption in USA.

● Inability of producing countries to respond to growing demand.

● Continuous trend of high prices.

● OPEC’s abandonment of price range.



02

4

6

810

12

14

16

1985 2005

(M barrels per Day)

Source: EIA

15

1

OPEC EXTRA-CAPACITY



(billion US$)

02468

1012

1998 2003

10 largest quoted western oil companies

Source: Wood Mackenzie

11

8

EXPLORATION EXPENDITURE



Unbalanced Demand/Supply and Consequences

● Tight supply/demand balance

● Domestic production in the United States continues to decline

● Decline in production in the Alaska and North Sea is affecting developed economies

● Competition from China and India

● Lower than expected spare capacity from OPEC countries

● Drive for a more balanced energy mix with a continued growth of demand for

natural gas.

● Reactivation of the consumption of other fuels like coal.

● Development of a Hybrid-Energy Model



LONG TERM WORLD PRIMARY ENERGY SUPPLY

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

1971 2000 2010 2020 2030

Mto

e

OilCoalGasNuclearHydroOther Renewables

Source: US Dep. Energy, EIA



Source: BP Statistical Review of World Energy 2004

Distribution of proved oil reserves 2003

OIL RESERVES ISSUE



2 500

1 500

1 000

500

2 000

1925 1950 1975 2000 2025 2050 2075

Source: US Geological Survey

Oil discovery in Gbbl

Cumulative oil production in Gbbl

Gas discovery in Gboe

Cumulative gas production in Gboe

Evolution of Oil and Gas World Production and Discovery



Conventional Oil

Gas

WORLD OIL AND GAS RESERVES (in billion barrels)

ESTIMATEDREMAININGRESERVES

1147

1153 (*)

ESTIMATEDUNDISCOVERED

RESERVES

470

850 (*)

( * ) barrels of oil equivalent (boe)

Source: BP, TOTAL, USGS,CERA and IFP

New Technologies 200 50

Heavy Oil 430 70



THE OIL RESERVES ISSUE

● Potential in the deep off-shore of the Gulf of Mexico, Brazil,

Angola and Gulf of Guinea

● 75% of the world’s production come from fields that began

producing over 25 years ago

● Additional potential to recover the probable and possible

reserves of the conventional oil using Enhanced Recovery

Methods (EOR)

● Current average ultimate recovery in a worldwide basis

ranges from 30 to 35%

● Unconventional oil reserves like Canadian Tar Sands and

Venezuela extra-heavy oil from the Orenoco Belt;

● Huge amount of gas reserves



2.5

2.0

1.5

1.0

0.5

0

10.0

8.0

6.0

4.0

2.0

0

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

EOR production % of World production

EO

R p

rod

uct

ion

(M

Mb

bl/d

)

% o

f W

orld

pro

du

ctio

n

Source: OGJ (Oil and Gas Journal)

2.5

2.0

1.5

1.0

0.5

0

10.0

8.0

6.0

4.0

2.0

0

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

EOR production % of World production

EO

R p

rod

uc

tio

n (

MM

bb

l/d

)

% o

f W

orl

d p

rod

uc

tio

n

Source: OGJ (Oil and Gas Journal)

EOR vs WORLD PRODUCTION



WORLD OIL RESERVES: A BALANCED APPROACH

NEGATIVE TRENDS POSITIVE TRENDS

● Few Giant Discoveries since early 90’s

● Current Production from increasingly mature fields

● Declining discoveries: 1 bbl is found for every 3 bbls produced

● Production decline in the North Sea, Alaska, USA

● Reliability of Reserves Estimates: Poor reporting

● Majors declining Reserves Replenishment Ratios

● Untapped reserves in the Middle East (Iraq/Saudi Arabia)

● The “Omani” paradygm

● Deep-offshore, polar and arctic oil potential

● Unconventional oil reserves: Venezuela/Canada

● Technology Role:- Seabed Logging- Digital Field concept

● Average Ultimate Recovery is low (30/35%); room for enhancement



HOW MUCH OIL IS LEFT?

● Upward trend of remaining reserves over the past few decades

● Forecasts have remained relatively constant

● Better knowledge of the oil and gas basins of the world combined with the

stronger technology supporting exploration and production

● Reserves growth has basically followed demand

● Replacement of production with new reserves

● 2004 year end indicators put the majors below 100% RRR



0

500

1000

1500

2000

2500

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

Bill

ion

Bar

rels

CUM PRODUCTION TOTAL PROVEN RESERVES

WORLD RESERVES AND WORLD CUMULATIVE PRODUCTION

0

500

1000

1500

2000

2500

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

Bill

ion

Bar

rels

CUM PRODUCTION TOTAL PROVEN RESERVES

WORLD RESERVES AND WORLD CUMULATIVE PRODUCTION

WORLD RESERVES and

WORLD CUMULATIVE PRODUCTION



0

500

1000

1500

2000

2500

3000

3500

4000

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030

Bill

ion

Bar

rels

World Oil Reserves Estimates of the Original Volumes

0

500

1000

1500

2000

2500

3000

3500

4000

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030

Bill

ion

Bar

rels

World Oil Reserves Estimates of the Original Volumes

WORLD OIL RESERVES

ESTIMATES of the ORIGINAL VOLUMES



0

200

400

600

800

1000

1200

1975 1980 1985 1990 1995 2000 2005

Bill

ion

Bar

rels

Middle East World Rest of the World

WORLD PROVEN RESERVES HISTORY

Source: BP statistical review 2004

0

200

400

600

800

1000

1200

1975 1980 1985 1990 1995 2000 2005

Bill

ion

Bar

rels

Middle East World Rest of the World


Source: BP statistical review 2004



PARTEXOIL AND GASPARTEXOIL AND GAS Evolution of Gas Reserves:

1982, 1992 and 2002

Middle East

FSU

Rest of the World

2003

2532

1991

1682

TotalWorld6205

1993

1568

2040

1372

TotalWorld4980

1983

931

1271

1070

TotalWorld3272

Evolution of Gas Reserves(in Tcf)





Distribution of proved natural gas reservesat end of 2003


Distribution of proved natural gas reservesat end of 2003



Expansion of gas utilization:

• Substitution for power generators

• Use in transportation

• Gas to liquids (GTL) technology improvements

• Environmental pressures



WORLD GAS CONSUMPTION

(Bcm)

2577

3377

4254

4 29220137

300

676

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2000 2010 2020

Gas Consumption GTL LNG

Source: BP Statistical Review / Cedigaz

WORLD GAS CONSUMPTION

(Bcm)

2577

3377

4254

4 29220137

300

676

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2000 2010 2020

Gas Consumption GTL LNG

Source: BP Statistical Review / Cedigaz



WHEN WILL SUPPLY START DECLINING?

THE PRODUCTION PEAK

• Estimate future production profiles, the growth rate, the time for

peak production and the start of decline

• Factors involved:

- Reserves

- Costs

- Technology

- Strategies

• Technology and expertise will definitively play a fundamental role in

turning uneconomical reserves into real barrels



● Based on Campbell and Laherrère previous work

● The exact decline point will be dependent on:– Price driven demands– Conservation policies– Ability to produce non-conventional reserves

● There are no absolute certainties regarding the timing of the peak production and the best approach is to define a range of possibilities supported by meaningful assumptions.

● Production increase is not solely dependent on reserves, but also on the cost to develop them

● Less critical in the Middle East, where large volumes are easily available, when compared to the rest of the world

PARTEX MODEL: BASIC ASSUMPTIONS



Reserves

World Demand● Equilibrium demand/supply will control growth

● Economic growth “cooling” effects.

● Annual oil demand growth at minimum 1 to 3%.

● In the long-run look to both oil and gas peaks.● Gas will be the future of oil.● Political will to prepare the future Hybrid

Energy Model.

Technology

Non-ConventionalOil

● Canadian Tar Sands

● Orenoco Belt in Venezuela (heavy oil)

● Ability to produce.

PARTEX MODEL FOR WORLD OIL AND GASPEAK PRODUCTION

● Exploration technology emerging from Seabed Logging.● Integration of technologies● Deep water/Arctic/Middle-East-Irak

Hydrocarbon-Model

● Not restricted to proven reserves

● Amount of ultimate oil recovery 2,500 bill. barrels

● Amount of ultimate gas reserves 2,500 boe



THE ROLE OF TECHNOLOGY

AREAS TOOLS OBJECTIVES

Exploration Seabed Logging (SBL)

● Based on electro-magnetic methods

● Integration with 3D Seismic

● Better Resolution

Development/Production(new approaches in

gathering and processing data)

● Detects what is happening in the reservoir

● Better placement of wells

● Steer and complete wells through different zones of the reservoir

● Remote gathering of well and field data

● Optimised decision process

Digital Field Concept

I. Remote Sensing: combination of seismic and sensors

II. Visualization: 3D imaging and modelling

III. Intelligent Drilling and Completions: control of production from each reservoir zone

IV. Automation

V. Data Integration: various sources



FORECAST OF WORLD OIL AND GAS PRODUCTION

- LOWER GROWTH SCENARIO

0

20

40

60

80

100

120

140

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Mil

lio

n B

arre

ls /

Day

OIL GAS

FORECAST OF WORLD OIL AND GAS PRODUCTION LOWER GROWTH SCENARIO



OIL GAS

FORECAST OF WORLD OIL AND GAS PRODUCTION HIGHER GROWTH SCENARIO

0

20

40

60

80

100

120

140

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Mil

lio

n B

arre

ls /

Day

FORECAST OF WORLD OIL AND GAS PRODUCTION

- HIGHER GROWTH SCENARIO



FORECAST OF WORLD OIL PRODUCTION(HIGHER GROWTH SCENARIO)- THE EFFECT OF TECHNOLOGY

FORECAST OF WORLD OIL PRODUCTIONHIGHER GROWTH SCENARIOTHE EFFECT OF TECHNOLOGY

0

20

40

60

80

100

120

140

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Mil

lio

n B

arre

ls /

Day

KNOWN TECHNOLOGY

NEW TECHNOLOGIES



FORECAST OF OIL PRODUCTION(HIGHER GROWTH SCENARIO)- MIDDLE EAST AND REST OF THE WORLD

FORECAST OF OIL PRODUCTIONHIGHER GROWTH SCENARIOMIDDLE EAST AND REST OF THE WORLD

0

20

40

60

80

100

120

140

1965 1975 1985 1995 2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

Mil

lio

n B

arre

ls /

Day

MIDDLE EAST REST OF THE WORLD



INVESTMENT FORECAST(HIGHER OIL GROWTH SCENARIO)

INVESTMENT FORECASTHIGHER OIL GROWTH SCENARIO

0

50

100

150

200

250

300

2005 2015 2025 2035 2045 2055 2065 2075 2085 2095

Bil

lio

n U

SD

/ Y

ear

MIDDLE EAST REST OF THE WORLD



GEOPOLITICAL GREAT GAME

Weaknesses of Great Economic Powers

Demographic Factor

Difficulty of Oil Companies to replace and have access to Reserves

Growing Depletion of World Oil Reserves

Emergence of China and India

Balance of Power: State-Owned Companies of Producing Countries

• Decline of production in Alaska and North Sea.• Difficulty of Oil Companies to access new reserves.

• Role of OPEC countries.• Middle East has 64% of oil reserves.

• More competition for oil and gas reserves.• Links through State-Owned Companies.

• Inability to respond to growing world demand.

• Low reserves replenishment ratios.

• Growth in population.• Growth in energy needs.• Limited resources

• Scarce domestic resources.• Fierce competition and new alliances.

Increasing Energy Dependence of Western Countries

FACTORS EVIDENCE


Weaknesses of Great Economic Powers

Demographic Factor

Difficulty of Oil Companies to replace and have access to Reserves

Growing Depletion of World Oil Reserves

Emergence of China and India

Balance of Power: State-Owned Companies of Producing Countries

• Decline of production in Alaska and North Sea.• Difficulty of Oil Companies to access new reserves.

• Role of OPEC countries.• Middle East has 64% of oil reserves.

• More competition for oil and gas reserves.• Links through State-Owned Companies.

• Inability to respond to growing world demand.

• Low reserves replenishment ratios.

• Growth in population.• Growth in energy needs.• Limited resources

• Scarce domestic resources.• Fierce competition and new alliances.

Increasing Energy Dependence of Western Countries

FACTORS EVIDENCE




0

2

4

6

8

10

12

14

1900 2000 2050

0

5

10

15

20

25

30w

orl

d p

op

ula

tio

n (

bill

ion

peo

ple

)

ener

gy

con

sum

pti

on

per

yea

r(b

illio

ns

of

tep

)

world population energy consumption

Evolution of World Population and Consumption of Energy

0

2

4

6

8

10

12

14

1900 2000 2050

0

5

10

15

20

25

30w

orl

d p

op

ula

tio

n (

bill

ion

peo

ple

)

ener

gy

con

sum

pti

on

per

yea

r(b

illio

ns

of

tep

)

world population energy consumption

Evolution of World Population and Consumption of Energy

THE DEMOGRAPHIC FACTOR



China

India

Rest of Word

WORLD POPULATION: China and India

China

India

Rest of Word

Source: us Department of Energy



PROVED OIL RESERVES: China and India

China

India

Rest of Word


PROVED OIL RESERVES: China and India

China

India

Rest of Word




Renew the Portfolioof Oil Reserves

Diversificationof Assets

Production Growth

PrudentFinancial Strategy

● Consolidate/Extend existing partnerships.

● Reinforce strategic positions.

● Access to competitive new reserves.

● Balance exploration risk with assets already in production.● Ability to prospect identification and evaluation.● Improve the Internal Rate of Return.

● Efficient use of capital to support revenues, growth and profitability.● Global portfolio management to reach an equilibrium among risk, profitability and growth.● Good Cost Control.

● Broader presence in gas.● Special attention to LPG, LNG, GTL.● Promote renewable energies.● Geographical diversification.

THE VISION THE FUTURE

PARTEX VISION: A MULTI-ENERGY COMPANY



● The current oil price spike is explained by structural changes in the oil and gas industry

● These structural changes will remain in the near-future

● Oil and gas reserves are finite and with the current levels of demand and production it must be stressed that this century will witness the peak of oil production

● There are no absolute certainties regarding the timing of the peak and the best approach is to define a range of possibilities supported by meaningful assumptions.

● PARTEX lower production scenario shows an expected production peak for oil by 2040 and for gas by 2060; assuming a stronger oil production growth in line with EIA forecasts, oil peak is expected by 2025 and the gas peak delayed until 2055.

CONCLUSIONS



● Production increase is not solely dependent on reserves, but also on the cost to develop them

● Overall investment should clearly impact oil production increase expectations since it will be the trigger to the implementation of other energy alternatives.

● High oil prices has been the drive for a more balanced energy mix with a continued growth of demand for natural gas.

● High oil prices created also conditions for the reactivation of the consumption of other fuels like coal, nuclear and renewables. A new Hybrid-Energy Model will emerge.

● Geopolitical factors may play a significant role in the world energy market

● The demographic factor is also a key variable to shape the evolution trend of the energy market

● A possible trend is the conversion of the oil-based companies to multi-energy companies.

CONCLUSIONS (Cont.)

aspo-2005 lisbon, 19th may 2005 1 partex oil and gas partex oil and gas partex oil and gas partex...

Documents

gas partex oil

oil slide

gas source

gas introduction

gas usa

role of gas

natural gas

alaska crude oil production