Sadad Ibrahim Al HusseiniIndependent Consultant

Long-Term Oil Supply Outlook: Constraints on Increasing Production Capacity

A Detailed Assessment of Global Oil Capacity and Prices

Through 2030

Dr. Sadad I. Al Husseini

Oil and Money Conference

London

October 30, 2007

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Brent IPE wave Bonny Dubai Oman WTI Mars

Platts Average MonthlyMarketwire October 25, 2007

$/barrel

Oil prices continue to rise in spite of OPEC capacity announcements

New projects are attempting to mitigate prices, e.g. Saudi Arabia

Oil Facilities Capacity O/S Date Value ($)

Qatif 500 k b/d 2005 3 B

Abu Safa 150 k b/d 2005 1 B

Haradh – 3 300 k b/d 2006 2 B

Hawiyah / Haradh Gas 125 k b/d NGL 2007/8 4 B

Khursaniya (AFK) 500 k b/d 2007/8 5 B

80 k b/d NGL 2007/8

Shaybah 250 k b/d 2008 2 B

Nuaim 100 k b/d 2008 1 B

Khurais 1,200 k b/d 2009/10 8 B

Manifa 900 k b/d 2011/12 9 B

Other Support Projects 19 B

Total Projects 4,105 k b/d 54 B

And the Arabian Gulf countries are proposing 15 refinery projects 6 of which are in Saudi Arabia

Location Capacity, b/d Start-up

Saudi Arabia East & West Coast topping refs. 400,000 2012

Jubail - Total 400,000 2012

Yanbu - Conoco 400,000 2013

Ras Tanura/Dow Chemicals 175,000 + 2012

Jizan 200,000 - 400,000 2012

Kuwait Al-Zawr 615,000 2012

UAE Fujairah - Conoco 400,000 2012/2013

Ruwais 300,000 ?

Oman Duqum 300,000 2012/2013

Qatar Shaheen 250,000 2011

Ras Laffan Condensate 140,000 2008

Iran Arak 100,000 2009

Qeshm 160,000 2012

Condensate Splitters 360,000 2010-2011

Total 4,400,000

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

2004 January 2005 January 2006 January 2007 January 2008 January

70,000

75,000

80,000

85,000

90,000

95,000

100,000

Brent World Production

$ / barrel

1000 b/d

Platts average monthly marketwire, EIA monthly global oil production

However actual production has not increased and even1 million bd would have a minimal impact. . .

+ 1 M b/d

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

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1993

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1999

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2009

OPEC

Non-OPEC

FSU

WORLD

Thousand b/doil, condensates

& NGLs$ 80

$ 60

$ 20

$ 40

$/b Brent

And no “idle” OPEC capacity remains to be tapped

Source: BP - 2007

$ Brent

1986 1996 2006

North America 101.6 89.3 59.9

S. & Cent. America 64.6 90.8 103.5

Europe & Eurasia 76.8 84.6 144.4

Middle East 536.7 672.2 742.7

Africa 58.0 74.9 117.2

Asia Pacific 39.7 39.2 40.5

TOTAL WORLD 877.4 1049.0 1208.2

> 400 billion barrels of reserves replacements and growth have materialized in 10 years !

BP Statistical Review, 2007

These developments raise key issues

Why are oil, condensates and NGL capacities not responding to increased oil prices?

Are there actual political, economic or physical impediments to increasing oil capacities?

Given the “abundance” of reserves, what is the long term outlook for oil supplies and prices?

Proven> 90%

Probable> 50%

Potential> 5%

Resource:Uneconomicvolume &

commerciality

Proven oil In Place – high confidenceDeveloped – clear recovery factorUndeveloped – good. recov. est.

Probable oil in place – confident Developed - prelim. recovery factorUndeveloped – est. fair recovery

Potential oil in place – low confiden.Drilled – v. low recovery factorUndrilled – recovery likely poor

Likely presence but undelineated OIP or GIP

Technically present butphysically inaccessible

hydrocarbons

Conceptually PossibleHydrocarbons, incl. EHCs

Future resolution thru exploration

& relevant technology

Oil, Gas,Shales, EHC

& to be discoveredresources

(speculativeoutlook)

Profitability orTechnology

currently inadequate

Growth thru pricing,delineation or

IOR/EOR technology

Growth thru delineation, testing& development

Available access but lacks good

reservoirand fluids data

General geological,seismic and/or

physicalindications

Statisticalreliability

ProductionOutlook

Technical basis

Growth thru actualreservoir mgmt. &

performance

Improved Oil recovery thru

existing technology

Clear opportunity with existing technology

Indicative data &potential opportunity

ActualReserves :0.9 Trillion

“Reserves” are inflated with >300 B bbls of “resources”

1.1 Trillion Depleted

ContingentResources:1.1 Trillion

Prospective&

SpeculativeResources:2.0 Trillion

Some capacity is from very mature reservoirs –

e.g. 75% of Iran’s productionDepletion

Status

2005

M b/d

2010

M b/d

2015

M b/d

00 – 29% 0.450 0.850 1.117

29 – 49% 0.470 0.818 0.838

50 – 69% 2.363 1.955 1.627

70 – 97% 0.555 0.326 0.217

Est. Capacity 3.838 3.949 3.799

EIA outlook 4.2 4.2 4.3Iran officials 4.2 4.6 - 5.4

Iraq - 6 Iran - 8 Kuwait - 5 UAE - 6 KSA - 12 Qatar - 1

8 - Kirkuk12 - Rumaila16 - Majnoon21- RumailaNorth24 - Zubair27 - West Qurna

14 - Gachsaran15 - Ahwaz17 - Marun25 - Agha Jari32 - Rag e Safid34 - Bibi Hakimeh36 - Azadegan37 - Parsi

2 - Burgan23 -Raudhatain29 - Sabriya33 - Minagish35 - Um Gudair

7 - Zakum18 - Murban – Bab20 - Murban Bu Hasa26 - Fateh30 - Asab31 - Um Shaif

1 - Ghawar3 - Safaniya4 - Zuluf5 - Manifa6 - Khurais9 - Abqaiq10 - Berri11 - Shaybah13 - Marjan19 - Qatif22 - Abu Safa28 -Khursaniya

38 - Dukhan

49.5 Billion 84.6 Billion 90.2 Billion 45.7 Billion 336 Billion 3.2 Billion

The giant fields of the Arabian Gulf average 41% depletion

Est. original reserves ~ 605 B barrelsEst. remaining reserves ~ 360 B barrels

Technology is good but does not diminish production complexities

5 kms.

Oil Field Structural extent

3-D seismic survey

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

2019

2022

2025

2028

Venezuela

Trinidad and Tobago

Peru

Ecuador

Cuba

Colombia

Chile

Brazil

Argentina

Offshore Brazil oil and Venezuelan EHCs are important but the offshore fields are smaller and

there are offsetting declines in S. America

1000 b/d

South America:

Oil outlook needs detailed scrutiny:

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

1980

198319

86

198919

9219

95

199820

01

200420

07

201020

13

201620

1920

22

202520

28

Tunisia

Sudan

South Africa

Nigeria

Mauritania

Libya

Gabon

Equatorial Guinea

Egypt

Cote d'Ivoire (IvoryCoast)

Congo (Kinshasa)

Congo (Brazzaville)

Chad

Cameroon

Angola

Algeria

Africa’s capacity increases mainly in Angola and Nigeria but declines within a decade due to the

diminishing size of discoveries

1000 b/d

Africa

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

8,000.00

9,000.00

10,000.00

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1983

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2010

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2019

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2025

2028

United Kingdom

Turkey

Romania

Poland

Norw ay

Netherlands

Italy

Hungary

Germany

France

Denmark

Croatia

Austria

The North Sea has peaked and is in rapid decline

1000 b/d

Europe / North Sea

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

18,000.00

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1983

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2013

2016

2019

2022

2025

2028

Uzbekistan

Ukraine

Turkmenistan

Russia

Kazakhstan

Former U.S.S.R.

Belarus

Azerbaijan

A revitalized industry may sustain high production assuming geopolitical cooperation

1000 b/dFSU / Caspian

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

1980

1983

1986

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2010

2013

2016

2019

2022

2025

2028

Yemen

United Arab Emirates

Syria

Saudi Arabia

Qatar

Oman

Kuw ait

Iraq

Iran

Bahrain

The Arabian Gulf has the resources but regionalturmoil undermines growth.

1000 b/d

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70,000.00

80,000.00

90,000.00

100,000.00

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028

Asia & Ocn.

Africa

ME

FSU

Europe

S. & C.Am.

N. America

1000 b/d

The total outlook: a 15 year production plateau . . .

20068 M b/d NGLs

EIA 2007 hi price case

10.00

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100.00

110.00

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80,000

82,000

84,000

86,000

88,000

90,000

92,000

94,000

96,000

98,000

100 ,000

B rent

W . Prod.

$ 12 / b increase per 1 M b / d / yrshortfall

2004 - 2006 : $ 3/ b/ yr per 1 % GDP

Supply/demand shortfall

Demand momentum~ 1.5 M b / d / year

“Virtual” 0 % excess capacity

GDP growth and supply shortfalls will raise the floor of oil prices $ 12 / year per million b/d shortfall

1000/b/d

$ / b

Conclusions

• Proven oil “reserves” are overstated by >300 billion

barrels of speculative “resources”.

• Global oil and NGL capacity is on a 15 year plateau

constrained by mature reservoirs and finite reserves.

• The momentum of growing oil demand and the gap with

limited supplies will drive up the floor of oil prices

$ 12 / yr for each million barrels of shortfall.