Transcript Slide 1
Mikkal E. Herberg BP Foundation Senior Research Fellow Pacific Council on International Policy Argus Americas Crude Summit 2010 Houston, Texas January 27, 2010 Structural demand shift Strong “baseload” demand once global economy recovers Annual Growth 2009-20 (kb/d) China 440 India 140 Other Asia 80 Middle East 290 Total Source: FACTS Global Energy 0.9-1.0 mmb/d Divergent Worlds (Monthly moving avg) 51,000 150.00 100.00 49,000 48,000 47,000 46,000 OECD Demand WTI OECD $/bbl kb/d 50,000 50.00 0.00 120.00 33,000 Non-OECD Non-OECD 100.00 80.00 60.00 31,000 40.00 29,000 Non OECD Demand 27,000 Source: FACTS Global Energy WTI 20.00 0.00 $/bbl kb/d 35,000 mmb/d change vs earlier year Non-OPEC Production Plateau * Average of 5 years change vs year earlier. Source: FACTS Global Energy • Clear lesson from 2003-2008 oil price run-up… Non-OPEC supply plateau • OPEC faces a natural decline of some 1.5 mmb/d. – Much new capacity is needed just to stay in the same place. • OPEC may have trouble adding up to 1 mmb/d of additional capacity annually, which may be required as non-OPEC plateaus. – Political, legal, and management problems are unlikely to allow for new capacity additions large enough to respond to the demand growth. – Is the oil there? No one really knows for sure—reserves are simply guesstimates driven by politics in certain countries. – At the very least, OPEC will have an easier time sustaining price levels. – Global oil production is likely to reach a plateau of 95-100 mmb/d by mid-next decade. This is not a geological limit, but a geopolitical limit. – Fear of tight crude availability driving Asian scramble for control, access to crude production import sources; esp. China 5 4000 3500 Asia-Pacific 3000 Latin America FSU mb/d 2500 2000 Africa 1500 1000 500 0 2003 Middle East 2004 2005 2006 2007 2008 Mismatch? Incremental Crudes, 2009 to 2015 (mmb/d) 8.00 7.00 6.00 4.45 5.00 4.00 1.92 3.00 2.00 1.14 0.78 3.95 2.03 1.00 Major implications for: • Relative crude price • Refinery profitability • Refinery utilization 0.00 ME Add Crudes ME Domestic Ref ME Crude Exports Source: FACTS Global Energy 7 SA & KPC o/s Projects Available to Others AP Ref Designed for ME Crudes Region will expand West African crude imports, Angola, Nigeria, EG, Congo Crude imports from Russia to expand from 200 mbd currently to perhaps 600 mbd by 2015 ESPO Pipeline 300 mbd to China Kozmino Pacific port exports to Asia 300 mbd, first rail, then pipeline Kazakhstan to China will expand from 200 mbd to 400 mbd with expansion of Central Asia oil pipeline; longer term Kashagan and Tengiz expansion questions Increase likely in Latin America Venezuela growth as refining capacity grows Brazil later with Pre-Salt exports 1,800 1,600 AP CDU Additions 1,400 AP Conversion Additions kb/d 1,200 1,000 800 600 400 200 0 2009 2010 2011 Source: FACTS Global Energy 2012 2013 2014 2015 Global Pressure: Capacity Growth Outpacing Demand (Including Closures of 1.7 mmb/d) Tightness 3.0 Rebalancing Surplus (1st wave) Surplus (2nd wave) 2.5 2.0 mmb/d 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 2003 2004 2005 2006 2007 Growth in Demand Source: FACTS Global Energy 2008 2009 2010 2011 2012 Growth in Refining Capacity 2013 2014 2015 • Policy in China will not allow product imports to grow drastically. • China will add 3.2 mmb/d of refining capacity between January 2009 and the end of 2015. • Little change in fuel oil imports; gasoline exports to continue; China will flip to become a net exporter of diesel. Only major fuel to witness substantial growth in imports is naphtha. China Petroleum Product Balance (Net Import) / Net Export (kb/d) 600 400 LPG 200 Naphtha 0 Gasoline Kero/jet -200 Gasoil Fuel Oil -400 -600 -800 1998 Source: FACTS Global Energy 12 2002 2006 2008 2009 Year 2010 2013 2015 India Petroleum Product Balance 1,400 (Net Import) / Net Export (kb/d) 1,200 1,000 LPG 800 Naphtha 600 Gasoline 400 Kero/jet 200 Gasoil Fuel Oil 0 -200 -400 -600 1998 2002 2006 Source: FACTS Global Energy 13 2008 2009 Year 2010 2013 2015 Implications for Refinery Utilization Rates 95% 6-7 mmb/d of closures required to bring utilization back to 84% in 2015—Feasible? 90% Middle East Asia 85% North America 80% World Europe 75% 70% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 Source: FACTS Global Energy 14 Past and Projected Refining Margins for Dubai Crude, Singapore Market (US$/bbl)* 8.0 7.0 Hydroskimming 6.0 5.0 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 -3.0 * Actual up to 2008 and forecasts in 2009$ thereafter; Cracking yield is based on RCC. Source: FACTS Global Energy 15 Cracking