energy future sources and challenges - stratas advisorslp.stratasadvisors.com › rs › 879-ofy-001...

UPSTREAM | MIDSTREAM | DOWNSTREAM | FUEL & TRANSPORT

Energy – Future Sources and Challenges

John Paisie Executive Vice-President

[email protected]

TEL +1.713.260.4628 / MOBILE +1.832.517.7544

September 14, 2017

mailto:[email protected]

© Stratas Advisors. All rights reserved. 2

• Global consulting and advisory firm

• Coverage of the energy sector and related

industries

• Focused on helping clients achieve tangible results

• Clients include IOCs, NOCs, independents, energy

consumers, financial entities and policy-makers

• Research and consulting staff comprises

professionals located in key global energy 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/


Service Matrix

Upstream Midstream DownstreamFuel &

Transportation

Executive

SuiteBy Region By Industry

North

American

Shale

North

American

Shale-Related

Infrastructure

Global Refining

& Products

Global Fuel

SpecificationsThe Executive

Dialogue

AfricaHeavy

Industries

International

Shale Service

North

American Oil

North American

Refining &

Products

Global

Alternative

Fuels

Global Risk

OutlookAsia Logistics

Global

Hydrocarbon

Supply

North

American NGL

Base

Petrochemicals

Global Biofuels

Assessment

Macroeco-

nomic OutlookEurope

Power

Global Heavy

Crude Oil

Outlook

North

American

Natural Gas

Catalyst Market

Outlook

Global Biofuels

Outlook

Global Energy

Scenarios

Latin

AmericaPetrochemical

Global

Upstream

Projects

Analytics

Global Natural

Gas Outlook

Global Syngas

Conversion Global

Automotive

Long-term

Price

Forecasting

Middle East Financial

Global NGL

Outlook

Short-term

Price

Forecasting

North

America

Global LNGRussia &

CIS


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

Short-term


Key Market ThemesHow market thinking has progressed this year

January 2017 September 2017

Showing weakness; led by US

gasoline data

Global

DemandShowing strength; supported

by Asian pricing spreads

OPEC cuts portend market

tightening

Global

Supply

OPEC cuts proven insufficient,

but extension might work

(March ‘18 vs. June ‘18)

Prices pushing higher while

forward curve remain flat

Crude

PricesPrices need to be higher to

support US production growth

Could be under pressure with

weak demand

Product

Prices /

Cracks

Strong global demand

supporting high cracks and

runs

New administration likely to

promote pro-business,

nationalist agenda

PolicyAdmin unlikely to shift US

policy in immediate term


Scenarios


Brent Price by Scenario

• Scenario 1

OPEC deal holds with

strong demand

• Scenario 2

OPEC deal collapses with

strong demand

• Scenario 3

OPEC deal holds with

strong weak demand

• Scenario 4

OPEC deal collapses with

weak demand

Looking Further Out


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

Millio

n b

/d

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


Oil Demand by Sector

0

20

40

60

80

100

120

140

2016 2025 2035

Millio

n b

/d

Non-Road Transportation Commercial & Residential Industrial

On-Road Transportation Other Electricity Generation


• The transportation sector will represent an increasing portion of overall oil demand

• Furthermore, the bulk of incremental demand will stem from the transportation sector


China Product Demand

0

1,000

2,000

3,000

4,000

5,000

6,000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Motor gasoline Diesel Other Gasoil Fuel oil

Tb

/d


US Product Demand

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Motor gasoline Diesel Other Gasoil Fuel oil

Tb

/d


Global Electric Vehicle Sales

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Nu

mb

er

of

Ve

hic

les

Mil

lio

ns

Canada United States Australia China - People's Republic India

Indonesia Japan Malaysia Pakistan Philippines

Russia South Korea Taiwan Thailand Austria

Belgium Czech Republic Denmark Finland France

Germany Greece Hungary Iceland Ireland

Italy Luxembourg Netherlands Norway Portugal

Spain Sweden Switzerland Turkey United Kingdom

Poland Argentina Brazil Chile Colombia

Mexico Peru Venezuela


Global EV & PHEV % of Sales

80%

82%

84%

86%

88%

90%

92%

94%

96%

98%

100%

Perc

en

tag

e o

f N

ew

Sale

s

Global - All Other LDVs Global EV & PHEV


US Electric Vehicle Sales

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Nu

mb

er

of

Veh

icle

s

PC - 100 Mile Electric Vehicle PC - 200 Mile Electric Vehicle PC - Plug-In 10 Gasoline Hybrid

PC - Plug-In 40 Gasoline Hybrid LDT - 100 Mile Electric Vehicle LDT - 200 Mile Electric Vehicle

LDT - Plug-In 10 Gasoline Hybrid LDT - Plug-In 40 Gasoline Hybrid


U.S. EV & PHEV New Sales Penetration Rates – Driven by CAFE Compliance

United States: EV & PHEV Sales % (2016-2035)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Perc

en

tag

e o

f N

ew

Sale

s

PC - All Other LDT - All Other PC - EV & PHEV LDT - EV & PHEV


Europe Electric Vehicle Sales

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Nu

mb

er

of

Veh

icle

s

Austria Belgium Czech Republic Denmark Finland France

Germany Greece Hungary Iceland Ireland Italy

Luxembourg Netherlands Norway Portugal Spain Sweden

Switzerland Turkey United Kingdom Poland


Europe EV & PHEV New Sales Penetration Rates – Driven by E.C. Target ( 2021- 95

gCO2/Km); Additionally driven by country level legislative bans (France, Germany, etc.)

Europe: EV & PHEV Sales % (2016-2035)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Perc

en

tag

e o

f N

ew

Sale

s

All Other LDVs EV & PHEV


China Electric Vehicle Sales

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Nu

mb

er

of

Veh

icle

s

Plug-In Gasoline Hybrid Plug-In Diesel Hybrid Electric


China EV & PHEV New Sales Penetration Rates – Driven by ‘NEV’ Program

China: EV & PHEV Sales % (2016-2035)

86%

88%

90%

92%

94%

96%

98%

100%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Perc

en

tag

e o

f N

ew

Sale

s

All Other LDVs EV & PHEV


Oil Production

0

20

40

60

80

100

120

2016 2025 2035

Millio

n B

bl/d

Oil Production* By Region

AFRICA LATIN AMERICA ASIA PACIFIC NORTH AMERICAEUROPE MIDDLE EAST RUSSIA & CIS

*: Oil Production Include Crude Oil and Field CondensateSource: Stratas Advisors

• North American production is forecasted to increase substantially during the next 20

years – increasing from 12.6 MMBPD to 21.2 MMBPD

• Production from the Middle East will increase even more – from 28.7 MMBPD to

nearly 41.0 MMBPD


Oil Production

0

20

40

60

80

100

120

2016 2025 2035

Millio

n B

bl/d

Oil Production OPEC** vs Non-OPEC

OPEC CRUDE OPEC CONDENSATE NON-OPEC CRUDE NON-OPEC CONDENSATE

**: OPEC Group: Algeria, Angola, Libya, Nigeria, Gabon, Ecuador, Venezuela, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, UAE


• OPEC will continue to play an important role over the next 20 years

• OPEC’s share of production will increase from around 40% to 43%


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


Natural Gas Demand by Sector

0

100

200

300

400

500

600

2016 2025 2035

BC

FD

Non-Road Transportation Commercial & Residential Industrial

On-Road Transportation Other Electricity Generation


• The bulk of future demand growth will come from the industrial and electricity

generation sectors

• Demand associated with electricity generation will increase by 55%


Natural Gas Production

0

100

200

300

400

500

600

2016 2025 2035

Billio

n C

f/d

Natural Gas*** Production By Region

AFRICA LATIN AMERICA ASIA PACIFIC NORTH AMERICAEUROPE MIDDLE EAST RUSSIA & CIS

***: Marketed Dry Natural Gas ProductionSource: Stratas Advisors

• The bulk of future supply will come from North America and Russia & CIS

• Production from North America is forecasted to nearly double over the next 20 years


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


Reference Case – Muddling Through

0

50

100

150

200

250

300

350

400

450

2010 2015 2020 2025 2030 2035 2040

Oil and Oil Products Natural Gas Coal Renewables Hydro Nuclear

mm

bo

ed


Upside Case – New Global Framework m

mb

oed

0

50

100

150

200

250

300

350

400

450

2010 2015 2020 2025 2030 2035 2040



Downside Case – Breakdown in Multi-Poles

0

50

100

150

200

250

300

350

400

450

2010 2015 2020 2025 2030 2035 2040


mm

bo

ed


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

inal)

Upside Case Downside Case Base Case

Conclusion


Key Takeaways

• Non-OECD demand and demand growth – across the value chain – will

continue to grow in importance

• Sales of electric vehicles are increasing – but a major upward shift is not

expected until the second half of the 2020s

• OPEC is not going away – even with increasing North American shale-

related production

• The US energy sector is becoming more integrated with and dependent on

the rest of the world

• Utilization of alternative fuel sources will continue to grow – but

hydrocarbons will still play a major role

• There will be more volatility with respect to the oil market in comparison to

the natural gas market

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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energy future sources and challenges - stratas advisorslp.stratasadvisors.com › rs › 879-ofy-001...

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