opec’s perspective on the world oil market · 1 organization of the petroleum exporting...
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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
2
Economic & oil demand growth Economic & oil demand growth
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)
3
1.50
2.50
3.50
4.50
5.50
6.50
7.50
8.50
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
%
USA: 25.7%China: 8.1%Japan: 6.5%Germany: 3.2%India: 3.0%
China’s share in world oil consumption (%)
• 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
Source: OPEC
Cumulative increase:Demand, OPEC, Non- OPEC (mb/d)
4.14.6
1.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2003 2004 2005
mb/
d
Demand OPEC (Crude + NGLs) Non OPEC Total SupplySource: OPEC
Cumulative increase:Demand, OPEC, Non- OPEC (mb/d)
4.14.6
1.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2003 2004 2005
mb/
d
Demand OPEC (Crude + NGLs) Non OPEC Total Supply
O E C D com m ercia l o il s tocks
2300
2400
2500
2600
2700
2800
2900
Jan Feb M ar Apr M ay Jun Jul Aug Sep O c t N ov D ec2300
2400
2500
2600
2700
2800
2900
A vg. 00-04
2004
2005
M in-M ax range : 1994 -2004
A vg.00-04
2003
2004
51
48
50
52
54
56
58
Jan Feb M ar Apr M ay Jun Jul Aug Sep O ct N ov D ec
48
50
52
54
56
58C los ing levels , m b D ays of forw ard c over
O E C D com m ercia l o il s tocks
2300
2400
2500
2600
2700
2800
2900
Jan Feb M ar Apr M ay Jun Jul Aug Sep O c t N ov D ecJan Feb M ar Apr M ay Jun Jul Aug Sep O c t N ov D ec2300
2400
2500
2600
2700
2800
2900
A vg. 00-04
2004
2005
M in-M ax range : 1994 -2004
A vg.00-04
2003
2004
51
48
50
52
54
56
58
Jan Feb M ar Apr M ay Jun Jul Aug Sep O ct N ov D ec
48
50
52
54
56
58C los ing levels , m b D ays of forw ard c over
OPEC response:higher production leading to significant stock build up
OPEC response:higher production leading to significant stock build up
7
27,000
28,000
29,000
30,000
31,000
32,000
33,000
34,000
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q0627,000
28,000
29,000
30,000
31,000
32,000
33,000
34,000
OPEC 11 OPEC-11 Production, Av. SS Required OPEC crude
OPEC Crude, Production and Requirements in theShort term
27,000
28,000
29,000
30,000
31,000
32,000
33,000
34,000
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q0627,000
28,000
29,000
30,000
31,000
32,000
33,000
34,000
OPEC 11 OPEC-11 Production, Av. SS Required OPEC crude
OPEC Crude, Production and Requirements in theShort term
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005 2006 2007 2008 2009 20100
200
400
600
800
1000
1200
1400
Heavy Medium Light Net Capacity Addition (mb/d)
OPEC gross & net capacity additions by type
OPEC capacity additions: lighter streamsOPEC capacity additions: lighter streams
8
OPEC-10 capacity expansion(by country)
80
198
238
94200
28
278
70
Algeria Indonesia Iran Kuwait LibyaNigeria Qatar KSA UAE Ven Source: OPEC
70110
70
30025
200
100
100
(end 2004 – end 2005) (end 2005 – end 2006)
Accelerated OPEC capacity expansion plansAccelerated OPEC capacity expansion plans
26283032343638404244464850
2004 2005 2006 2007 2008 2009 201026283032343638404244464850
OPEC 10 Iraq Base NGLHigh High (in NGL)
Non-OPEC supply :Increase in non-OPEC supply up to 2010 is expected to be ~5 mb/d, or even moreaccording to some other sources.
Accordingly, increase in total oil supply capacity is expected to reach ~12 mb/d, or more.
26283032343638404244464850
2004 2005 2006 2007 2008 2009 201026283032343638404244464850
OPEC NGL High High (in NGL)
26283032343638404244464850
2004 2005 2006 2007 2008 2009 201026283032343638404244464850
OPEC 10 Iraq Base NGLHigh High (in NGL)
Non-OPEC supply :Increase in non-OPEC supply up to 2010 is expected to be ~5 mb/d, or even moreaccording to some other sources.
Accordingly, increase in total oil supply capacity is expected to reach ~12 mb/d, or more.
26283032343638404244464850
2004 2005 2006 2007 2008 2009 201026283032343638404244464850
OPEC NGL High High (in NGL)
26283032343638404244464850
2004 2005 2006 2007 2008 2009 201026283032343638404244464850
OPEC NGL High High (in NGL)
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Refinery utilization trend: shrinking refinery spare capacity!
6 0
6 5
7 0
7 5
8 0
8 5
9 0
9 5
1 9 8 0 1 9 8 4 1 9 8 8 1 9 9 2 1 9 9 6 2 0 0 0 2 0 0 4
US AO EC DW O R L D
S ource: B P S tatis t ic a l R eview , 2005. 0%
10%
20%
30%
40%
50%
60%
70%
80%
2000 2001 2002 2003 2004
USA and Canada Northern EuropeMediterranean Asia
Ratio of conversion total refinery capacity
OPEC S t i t
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
10
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
1.0
1.5
2.0
2.5
3.0
2005 2006 2007 2008 2009 2010
mb/d
0.0
0.5
1.0
1.5
2.0
2.5
3.0
mb/d
Crude Demand (reference)Demand (tight market) Refining Capacity
After Katrina0.5
0.0
Refinery expansion lagging behind demand growthRefinery expansion lagging behind demand growth
13
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
36
43
50
57
64
71
5-Oct-04 30-Nov-04 25-Jan-05 22-Mar-05 17-May-05 12-Jul-05 6-Sep-05600
680
760
840
920
1000
Open interest WTI(U
S$/
bbl)
Open interest (futures)
'000 contracts
NYMEX open interest (futures) vs. WTI price
14
Although reaching historical highs in nominal terms, the real value are still well below levels reached in early 1980s.
The price of oil: distinguishing between nominal and real, (US$/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!
16
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
Reference 2010 2015 2020 2025
OECD 51.4 52.7 53.8 54.7DCs 34.4 40.3 46.4 52.8Transition economies 5.1 5.4 5.7 5.9
Total World 90.9 98.4 105.9 113.4
Tight market scenario 93.1 101.9 111.2Soft market scenario 89.2 94.4 99.0
111.299.0
17
M.East OPEC contribution to world oil trade is expected to increase from ~30% to ~40% in 2025.
26 2729
1310 12
0
10
20
30
40
2005 2015 2025Oil demand Oil import requirements
North Americamb/d
2530
38
31
23
16
0
10
20
30
40
2005 2015 2025Oil demand Oil import requirements
Asiamb/d
16 17 171412
10
0
10
20
30
40
2005 2015 2025Oil demand Oil import requirements
Europe mb/d
7
-25
-32
-44
9
-50
-40
-30
-20
-10
0
10
2005 2015 2025Oil demand Oil import requirements
OPEC mb/d 10
3 5 5
-8-10 -10
-20
-10
0
10
20
2005 2015 2025Oil demand Oil import requirements
FSU mb/d
(mb/d)2005 2015 2025 2005 2015 2025
North America 25 27 29 10 12 13Latin America 5 6 7 0 0 1Europe 16 17 17 10 12 14FSU 4 5 5 -8 -10 -10Asia 23 30 38 16 23 31 China 7 10 13 3 6 10M.East & Africa 3 4 5 -3 -3 -2OPEC 7 9 10 -25 -32 -44
Oil Demand Net Oil Import Req.
Regional oil demand & net import requirements(mb/d)
Regional oil demand & net import requirements(mb/d)
18
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