changing oil and gas landscape - stratas...

UPSTREAM | MIDSTREAM | DOWNSTREAM | FUEL & TRANSPORT

www.stratasadvisors.com

Changing Oil and Gas Landscape

John Paisie President

[email protected]

TEL +1.713.260.4628 / MOBILE +1.832.517.7544

mailto:[email protected]

© Stratas Advisors. All rights reserved. 2

• Stratas Advisors is a global consulting and advisory firm that

covers the full spectrum of the energy sector and closely

linked industries

• The world’s leading businesses, governments and

institutions turn to us for data, analysis and insight (IOCs,

NOCs, independents, energy consumers and financial

entities)

• We help our clients achieve tangible results through informed

strategic decision-making and implementation planning

• Key differentiators include

– Global coverage with deep local knowledge

– Integrated analysis across the entire energy value

chain, including macro-level analysis (geopolitics,

macro-economics, policies and regulations)

• Our research and consulting staff comprises professionals

located on the ground in key global energy market centers

• Combined, our team brings over 500 years of combined

energy industry expertise, including

– Technical (Petroleum Engineers, Geologists, Process Engineers)

– Economists

– Political Scientists

– Financial Analysts

Who We Are

www.stratasadvisors.com

http://www.stratasadvisors.com/


Strategic insights across the energy value chain

Dedicated Teams for Each Segment

Upstream

Drill down with a ground-

level look at the fields,

wells and companies

involved in E&P.

Midstream

Move confidently in

new frontiers that are

being shaped by

changing supply/

demand dynamics

coupled with

investments in pipeline,

rail and ship logistics.

Downstream

Thrive in an

environment where

crude oil supply

dynamics and product

demand trends are

structurally evolving.

Fuel & Transport

Accelerate innovation with

a comprehensive

understanding of policies

pertaining to petroleum-

based fuels, biofuels and

other alternative fuels.


Integrated Service Offering

Upstream

Macro & Geo-Political

Midstream

Downstream

Fuel & Transport

LT & ST Price Forecasting


Services

An innovative online portal of

data, information and insights

across the oil & gas value

chain and macro-level issues

that includes GIS mapping

and interactive data tools

Advisory

Customized retainer

arrangements with access to

senior Stratas Advisors staff

who will answer your

questions about:

• Macro-level developments

• Energy markets

• Industry events and trends

• Investment risks and

opportunities

Consulting

A full range of consulting

support, allowing you to gain

an external perspective on

strategic matters and to

respond proactively by

implementing the

appropriate initiatives for

success

Helping clients achieve tangible results

What We Offer


Service Matrix

Macro Upstream Midstream DownstreamFuel &

Transportation

Stratas Energy

Perspectives

Enhanced Shale

Service

North American

Shale-Related

Infrastructure

Global Refining &

Products

Global Fuel

Specifications

Long-term Price

ForecastingStratasScope

North American

Midstream (Oil,

Natural Gas, NGLs)

North American Refining

& Products

Global Alternative

Fuels

Short-term Price

Forecasting

Global Hydrocarbon

Supply

Global Natural Gas

OutlookBase Petrochemicals

Global Biofuels

Assessment

Global Heavy Crude

OutlookGlobal LNG Catalyst Market Outlook

Global Biofuels

Outlook

Global Upstream

Projects AnalyticsGlobal NGLs Outlook

Global Syngas

Conversion

Global Transport

Fuel Outlook

Global Automotive


Examples of Consulting Offerings

Strategic

Alignment

Competitive

Assessment

Portfolio

Management

Organization

Development

Market

Studies

Value

Management

Transaction

Support

Risk

Management

Energy

Supply

Opportunity

Assessment

Supply

Chain

Strategic Initiatives

Performance Improvement Programs

Communication

Management

External Assessment

Client-Focused


Examples of Advisory Retainers

Macro-Level

Energy Markets

Transactions &

Investment

Analysis

Competitive

Assessment

Providing coverage of the geopolitical issues, economic trends and policy and

regulatory developments that will shape the future environment

Providing integrated coverage of the energy markets including crude oil, oil

products, natural gas, NGLs, coal and renewables (prices)

Providing a forward-looking assessment of the competitive landscape of the oil &

gas sector across the entire value chain from a global and regional perspective

including comparisons of strategy, structural positioning and financial performance

Providing analysis of transactions and capital investments associated with the oil &

gas sector across the entire value chain from a global and regional perspective

In addition to the above retainers, Stratas Advisors can develop a retainer that is

customized for a client’s specific needs


Agenda

Item Time slot

Introduction and Key Themes 8:30 – 9:00 A

Assessment of Hydrocarbon Supply and Crude Markets 9:00 – 9:45A

Assessment of Transport Sector 9:45 – 10:30A

Break 10:30 – 11:00 A

Outlook for Refining 11:00 – 11:45A

Outlook for Fuel Specifications 11:45 – 12:15P

Lunch 12:15 -1:15P

Assessment of NGLs and Feedstocks 1:15 -1:45P

Outlook for Petrochemicals 1:45 – 2:30P

Opportunities and Challenges Facing GCC-based refiners

and Final Remarks

2:30 – 3:00P

Major Themes


Major Themes

Changing

Energy Mix

Intensifying

Regulatory

Environment

Shifting

Energy Flows

Evolving

Transportation

Sector


• Shale – North America and

beyond

• Non-shale – growth areas,

declining areas

• Natural gas – new importance

Changing Energy Mix

• Clean sources of energy –

increased focus

• Alternative fuels –

transportation & non-

transportation

Source of marginal production –

across time horizons

Supply/Demand Dynamics


GDP Forecast

2016 Total GDP: 76.24 trillion USD 2035 Total GDP: 123.47 trillion USD

Source: Stratas Advisors , 2010 prices and exchange rates

Africa, 2.37, 3.1%

Asia, 24.58, 32.2%

Europe, 20.61, 27.0%

Latin America,

5.65, 7.4%

Middle East, 2.25, 2.9%

North America,

18.66, 24.5%

Russia & CIS, 2.12,

2.8%

Africa, 4.63, 4%

Asia, 48.69, 39%

Europe, 26.71, 22%Latin

America, 9.42, 8%

Middle East, 3.76, 3%

North America,

27.05, 22%

Russia & CIS, 3.22,

2%


Oil Demand by Region

0

20

40

60

80

100

120

140

2016 2025 2035

MM

BD

Africa Asia Europe Latin America Middle East North America

Source: Stratas Advisors

• Global oil demand is expected to continued to increase

• Asia will represent the overwhelming portion of future demand growth

• Demand in North America and Europe is expected to decline


Natural Gas Demand by Region

0

50

100

150

200

250

300

350

400

450

2016 2025 2035

BC

FD

Africa Asia Europe Latin America Middle East North America


• Global demand for natural gas is expected to continued to increase

• Asia will represent the overwhelming portion of future demand growth


Shifting Energy Flows

Differing rates of

economic growth

Expanding role of US as an

energy supplier

Shifting focus from Atlantic

Basin to Pacific Basin

Geopolitics – OPEC, Russia,

Middle East, China/US

Bottlenecks, dislocations and

investment needs


US Crude Production / Exports

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

20172018201920202021202220232024202520262027

MB

D

Crude Production

0

500

1000

1500

2000

2500

3000

3500

4000

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

MB

D

Crude ExportsSource: Stratas Advisors


• US crude oil production is

forecasted to increase from 9.4

MMBD to 13.6 MMBD by 2027

• Simultaneously, US crude

exports are forecasted to

increase from 728 MBD to nearly

3.4 MMBD by 2027


US Crude Flows − 2027

Units | MBPD

2,119

544

408315


Intensifying Regulatory Environment

Upstream-

Related

Standards

Tightening Fuel

Specifications

GHG

Subsidies and

Mandates

• The expansion

and the impact

will ebb and flow

• Regulations,

however. will

continue…

• …to impact

future supply

and demand


Evolving Transportation Sector

• Electrification

• Digitization

• Autonomous

• Efficiency

• Clean

Common Drivers Light-Duty

Size of fleet, Powertrain

Heavy-duty and Off-Road

Still dependent on diesel

Marine

IMO, Shipping Patterns

Rail

Freight, Passengers

Aviation

Number of flights, Point-to-Point


Importance of Transportation

0

20

40

60

80

100

120

2015 2035

MM

BD

Oil Demand

Transportation Other

• The portion of oil demand in 2015 represented by the transportation sector was 57%

• By 2035 the portion of oil demand represented by the transportation is forecasted to

still remain around 60%


Conclusions


Scenario Narratives

• Upside Case: Shifting to a New Global Framework

– Technology / carbon reduction focus

• Reference Case: Muddling Through

– Business as usual / focus on efficiency

• Downside Case: Breakdown into Multi-Polarization

– Energy Security Focus


Scenario Inputs

Factor Reference Upside Downside

GDP Growth Moderate Strong Weak

Technology

penetration

Power-focused;

efficiency gains

strong but new tech

minimal on

transportation

Aggressive

penetration of

renewables and

EVs; strong

efficiency gains

Moderate, but

based on

energy security,

not carbon

Geopolitical

stability

Regional conflicts Focus on global

cooperation

Trade wars,

conflict ridden

Policy Limited meaningful

action; some

countries take action

Widespread

carbon-reduction

focus

Energy-security

focused

Relative Impact of Factors


Oil Price Outlook – Brent Crude

0

20

40

60

80

100

120

140

2010 2015 2020 2025 2030 2035

$/B

BL

(n

om

inal)

Upside Case Downside Case Reference Case

Business as usual –

increasing demand with

cost inflation

Demand pops on strong

growth, but wanes as

fracking spreads and world

moves away from CO2

Demand weak; price

oscillates as OPEC invests

to suppress new

investment and gain share


Natural Gas Price Outlook – Henry Hub

Exports drive greater demand –

both through LNG and pipeline –

setting marginal price

Strong gas demand as world

becomes more CO2

focused; price increases

temper as fracking spreads

Price remains US centric as trade

is stymied and carbon reduction

remains of minimal concern

0

1

2

3

4

5

6

7

8

9

10

2010 2015 2020 2025 2030 2035

$/M

Mb

tu(n

om

ina

l)

Upside Case Downside Case Base Case


Looking Forward

Hydrocarbons will remain an

important part of the energy mix

Economic

growth

Climate and

Environment

Geopolitics

Tomorrow will not be the

same as today

Volatility, Cyclicality and

Uncertainty

Tensions

Strategic Implications


Need to Take a Strategic Approach

• Understand your portfolio of businesses within the context of current environment and future

environment

• Invest only in assets and positions for which structural advantages can be established – structural

disadvantages cannot be overcome through improving operations

• Consider opportunities across time horizons and in terms of materiality – and the organizational

capabilities required for success

• Assess current and future risk factors – and the ability to manage – and the impact on ability to drive

risk-adjusted returns

• Utilize a comprehensive business model that links forward-looking strategies with capabilities,

assets and external network to drive value for all stakeholders


Portfolio Assessment

Key QuestionsSBU 1

SBU 2

SBU 3

SBU 4

Capital invested

Value

Value destroying

business unit Shareholder

value

Value creating business unit

Historical SBU

ROI relative to

cost of capital

Past growth in SBU asset base

Positive

Negative

No growth/decline Growth

• Which business units are creating

shareholder value?

• Which business units are

destroying shareholder value?

• Was the historical capital allocation

effective in creating optimal value?

• Has there been over-investment in

some of the mature business units

• Have growth opportunities been

adequately supported? Size of bubble

indicates revenue


Structural and Operational Factors

Invest only in assets and positions for which structural advantages can be established

– structural disadvantages cannot be overcome through improving operations

Midstream Processing Distribution Conversion Upstream

Level of profitability Level of profitability Level of profitability Level of profitability Level of profitability

Structural factors

Operational factors

Complexity

Scale

Location

Feedstock

Utilization

Energy costs

Overhead

Network efficiencies

Regional

balances

Terminal assets

Network density

Pricing policies

Throughputs

Clients

Cost structure

Inventory management

Operational flexibility

Storage capacity and location

Shipping assets

Integration with processing

Hydrocarbon balance

Quality characteristics

Production

profile

F&D costs

Replacement costs

Lifting costs

Equipment restraints

Cost structure

Operational flexibility

Competitive landscape

Complexity

Scale

Location

Feedstock


Opportunity Screening

Sector Opportunities

0.0

2.0

4.0

6.0

8.0

10.0

Av

era

ge

An

nu

al

CA

PE

X (

Bil

lio

n U

SD

)

SHORT TERM CAPTURE LONG TERM CAPTURE

Long term nicheShort term niche

Long term strategicShort term strategic

Short term opportunities

(≤ 2 years)

Long term opportunities

(3+ years)

Size of bubble = return

on man-hours

Color of bubble = Level of

current capabilities

Medium

Low

High

Have current

capabilities

Some current

capabilities

Little or no

capabilities today

Consider opportunities across time horizons and in terms of materiality – and the

organizational capabilities required for success


Risk Management

Assess the current and future risk factors – and the ability to manage – and the

impact on risk-adjusted returns


Comprehensive Business Model

Strategic Intent

External Network

Core Capabilities Asset Portfolio

Strategic flexibility

Key differentiators

Internal and external alignment

Financial metrics

Operational metrics

Unique opportunities

Value Proposition

Customers

Other stakeholders

Relationships

Scope of offerings

Geographic coverage

Aspirations and goals

Strategic priorities

Performance requirements

Skill levels

Key processes

Supporting tools

Suppliers

Partners

Alliances

Tangible

Intangible

Value chain positioning

Leverage

points

Capital

intensity

Organizationscope

Utilize a comprehensive business model that links forward-looking strategies with

capabilities, assets and external network to drive value for all stakeholders

Bogotá | Brussels | Denver | Houston | London | Melbourne | Mexico City

New Delhi | New York | San Diego | São Paulo | Singapore | Washington, D.C.

Stratas Advisors, a Hart Energy company, is a global consulting and advisory firm that covers the full spectrum of the energy

sector and related industries. We can help you develop a deeper understanding of the developments that are shaping the future

of oil & gas. Our support includes customized consulting that is focused on a client’s specific strategic objectives, competitive

challenges and asset base. Additionally, we offer support through subscription services and comprehensive market studies

UPSTREAM | MIDSTREAM | DOWNSTREAM | FUEL & TRANSPORT

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changing oil and gas landscape - stratas...

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