2009 Oil and Natural Gas Sector Report
Turkish Petroleum Corporation General Directorate
2009 Oil and Natural Gas Sector Report
March 2010
CONTENTS
OIL and NATURAL GAS SECTOR VIEW IN THE WORLD ......................................................... 3
Oil Sector............................................................................................................................................... 3 Oil Consumption .............................................................................................................................. 3 Oil Reserve....................................................................................................................................... 4 Oil Production .................................................................................................................................. 5 Refinery…………………………………………………………………………………................ 5 Oil Prices .......................................................................................................................................... 6 Natural Gas Sector ................................................................................................................................ 6 Natural Gas Consumption …………................................................................................................ 6 Natural Gas Reserve.……………………………………………………………………................ 7 Natural Gas Production..................................................................................................................... 7 Natural Gas Trade ……….…............................................................................................................ 8 Natural Gas Storage……....…........................................................................................................... 8 Natural Gas Prices..………..….......................................................................................................... 9 EXPECTED ISSUES in OIL and NATURAL GAS SECTORS in 2010…….................................... 9 OIL and NATURAL GAS SECTOR VIEW IN TURKEY................................................................ 11 POSITION of TPAO in SECTOR ....................................................................................................... 13 TPAO in the International Market .................................................................................................... 13 TPAO in the National Market ......................................................................................................... 15 Natural Gas Storage ......................................................................................................................... 17
REFINERY SECTOR..........…………………………………………………………………................. 17 Overview …………….…………………………………………………………………………... 17 Processed Crude Oil in Refineries……………………………………………………………….. 18
Oil Products Produced in Refineries……............………………………………………. 18 Competitive Power of the Sector………………………………………………………... 19
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OIL and NATURAL GAS SECTOR VIEW IN THE WORLD As the first fossil fuel among the primary energy resources, oil is expected to sustain its strategic position through long ages. According to the projections of International Energy Agency, oil that stands for 34.6% of global energy demand in 2008 is expected to account for 31.8% of total energy consumption by 2030. According to the projections through 2030, contrary to fossil fuel consumption frontly coal and natural gas, oil consumption rate is expected to decrease. 2009 Projection Projeksiyon 250,0
200,0
Q BTU
150,0
100,0
50,0
0,0 1980
1985
1990
1995
Oil Petrol
2000
Natural Gas Doğalgaz
2005
2010
Coal Kömür
Nuclear Nükleer
2015
2020
2025
2030
Renewable Yenilenebilir
Figure 1. World Primary Energy Consumption in 2009, QBTU (Source: EIA)
Oil Sector Oil Consumption World oil consumption averaged 84.9 million b/d in 2009, recording a 1.5 % (420 thousand b/d) decline compared to the previous year. This is the worst decline rate since 1982. In line with the predictions of International Energy Agency, it is expected that crude oil consumption, representing an insignificant rise and will be 86.5 million b/d in 2010.
3
Global Crude Oil Demand 2007/2008/2009 Thousand b/d Europe FSU
North America
Middle East
Asia
Latin America
Africa World Oil Consumption mb/d
Figure 2. World Oil Consumption by years (Source: IEA-OMR Feb. 2009)
In 2010 the expected increase in world oil consumption is because of the optimistic economic expectations of International Monetary Fund, however if the economic growth is lower than the expectations for 2010, it can be presumed that there will be a decline with 400 b/d in oil demand. Oil Reserve In the first half of 2008 because of the trend of high prices of natural gas and oil, there was an increase in drilling activities, depending on this issue world oil reserve 1.26 trillion barrels in 2008, increased to 1.34 trillion barrels and at the end of 2009. Also world oil P/R ratio increased to 44 years average.
N.America
C. and S. America
Africa
Eurasia
Asia and Oceania
Figure 3. 2009 World Proved Oil Reserves, billion barels, (Source: IEA)
4
Europe
Oil Production In 2009 oil production declined 1.97% compared to 2008 and 84 million b/d was produced. OPEC produced 33.4 million b/d, with a decline of 6.4% (2.270 thousand b/d). The biggest decline was in North America and Former Soviet Union regions. Refinery In short term effects of the crisis are reduced in refinery sector. However despite the worldwide recovery of GDP, refinery sector could not reach to pre-crisis level. Refinery sector has undergone a reconstruction and consolidation process. In the years of 2008 and 2009 while crude oil refinery capacity increased to 2.1 million b/d, demand of oil stayed in 1.6 million b/d. In addition to that if world refinery capacity and oil demand are compared, it is foreseen that the gap between refinery capacity and oil demand will not be closed. Global Refinery Crude Throughput1 (million barrels per day)
Figure 4. Global Refinery Crude Throughput from September 2009 to May 2010
When the refinery sectors of OECD countries and important non-OECD countries like Russia, China and India are evaluated, important results are regarded. In comparison with the data of crude oil processing in OECD countries between 2004 – 2008 period and the year 2009; it is regarded that there is a trend of decline in crude oil processing. In 2009 non-OECD countries especially in Russia, China and India distillation amount is higher than 2004-2008 period. Thus in non-OECD developing countries trend of growth in refinery sector attracts attention. This development can also be evaluated as meeting the need of distillation rapidly in these countries.
5
Oil Prices
In oil markets, a fluctuating price course was observed during the last 12 months period. Oil prices, between 40$/b and 50$/b in the first three months of 2009 because of the effects of economic crisis, had an increasing trend in the second quarter with the taken economic measures, in August-September period they moved on 65$ - 75$ band and in the end of the year reached to 78.25$/b.
October, 06 74.91
June, 11 71.90
December, 01 78.93
October, 22 78.53
December,31 78.25
December, 11 70.31 September, 23 64.74 July 13 58.49
February 18 39.50
Jan.
Feb.
March.
April
May
June
July
August
Sep.
Oct.
Nov.
Dec.
Figure 5. 2009 Monthly WTI Oil Prices
It is expected oil prices 73.80 $/b in February 2010 will increase in the case of depreciation of U.S. Dollar, tension between USA and Iran, geopolitical tensions between Russia and Europe, increasing demand because of economic recovery policies, continuation of the growth of China, decline of speculative activities and stocks in commodity markets. However a second wave in the global crisis, appreciation of U.S. Dollar, an increase in the production of oil in Iraq, adoption of the law in USA which prevents speculative activities in oil market and OPEC countries not abide by the production quotas can cause a decrease in oil prices. Natural Gas Sector Natural Gas Consumption In OECD countries natural gas consumption reached 1.49 trillion m3 in 2009 recording 3% decline in comparison with 2008. In 2009 among the OECD countries USA was the most important natural gas consumer as it was in 2008; despite the 2% of decrease in its gas consumption, USA is still the biggest natural gas consumer. The countries following USA are Canada, Japan, Germany and England. In the region of former Soviet Union natural gas consumption counted as 632.8 billion m3 in 2009 is 3% lower than 2008. In the region biggest consumer, Russia consumed 460.6 m3 that is 6% less than 2008.
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Natural Gas Reserve Historically growing global natural gas reserve also grew in 2009 with the increasing demand and increasing focus of producers to this issue. Natural gas reserve numbered as 6.2 trillion ft3 in 2008, reached 6.3 trillion ft3 in 2009.
Europe
C. and S. .America
N.America
Asia
Africa
Middle East
Eurasia
A huge increase in natural gas reserve was in Iran with of 43 trillion ft3 addition and in USA with 27 trillion ft3.
Figure 6. World Proved Natural Gas Reserve in 2009, trillion ft3 (resource: EIA)
Natural Gas Production In comparison with 2008, among OECD countries a small decline was regarded in gas production in 2009 and recorded as 1.2 trillion m3 in 2009. In comparison with 2008 there was a decline in natural gas production of Europe and an increase in North America and Pacific Regions. In the region of former Soviet Union natural gas production was lower than 2008 with 6%. Russia is still leader in natural gas production with 630.6 billion m3 in the region, however this production level is still 5% lower than the amount of 2008.
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Global production is 6.2% also lower than production of 2008.
Figure 7. 2009 Global Natural Gas, Production (billion m3) (Resource: CEDIGAZ)
Natural Gas Trade There was 907.5 billion m3 trade volume in 2008 and 885.6 billion m3 in 2009, estimated for only OECD countries. That means there was a 3% of decline in trade volume within a year. Natural Gas Storage The volume of the underground natural gas storage of the world is expected to be 684 billion m3 in 2030, which is now about 328 m3. Almost 80% of this increase will be achieved by North America, Europe and developing countries. It is expected to be an increase in terms of natural gas trade and storage capacities with liberalization of the natural gas market in short time period. Being aware of this situation countries like China, of which natural gas consumption is high, and Iran, of which natural gas exportation is high, are started to build up new natural gas storage facilities.
8
Natural Gas Prices Henry Hub natural gas prices at the beginning of March 2009 approximately 4.5$ in NYMEX, had a fluctuating price trend in 2009; in summer 2009, natural gas prices declined till 2$ the lowest prices in 2009. Natural gas prices that reached to 7.5$ in January 2010, decreased again in February 2010. In comparison with prices of March 2009, prices in March 2010 are 0.25$ lower.
Figure 8. Henry Hub Naturall Gas Prices from March 2009 to March 2010(Source:WTRG Economics 2010)
EXPECTED ISSUES IN OIL AND NATURAL GAS SECTORS IN 2010 A recovery trend in oil and natural gas sectors is expected because of the foreseeable end of the economic crisis. Despite the apparent effects of economic crisis during last years, it is obvious that 2010 will be brighter than 2009 for oil and natural gas sectors. In this respect it is expected that trade of natural gas will increase in 2010 and in 2015 natural gas will be most used energy resource in the world. Especially an increase in industrial products will trigger demands of natural gas and oil. There is not a foreseeable risk for oil and natural gas sectors in 2010. In addition to these sectors oil and natural gas markets will recover increasingly. Oil and natural gas sectors are affected by general economic trends and in current economic structure economic crises and volatility are quiet often. In this respect the most serious risk for oil
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and natural gas sectors are: while believing a permanent expansion of economy and ignoring the long term risks, to invest for long term by using long term credits and to rely on markets too much. This means that companies should have a useable “Plan B”. According to statistics American economy undergoes recession in each 6 years period. This means expansion of economy comes to a halt very often. In this process having a “Plan B” is quiet vital. As a result oil and natural gas sectors will recover with the recovery of global economy. There is not a serious risk for 2010, but the most serious problem will appear if it is forgotten that one day expansion of economy comes to a halt.
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OIL and NATURAL GAS SECTOR VIEW IN TURKEY In accordance with the exploration, discovery, appraisal and the production activities of hydrocarbon potential of our country in 2009, 30,10 man/month geological field survey, 84,46 crew/month geophysical field survey were conducted; in total 143 wells being as 51 exploration wells, 50 appraisal wells and 42 production wells were drilled and 243.255 meters drilling activities were conducted. In 2009 2.4 million tons of oil and 729.4 million m³ natural gas were produced and until today 132.5 million tons of oil and 11.3 billion m³ natural gas were produced. In the latest 10 years, there has been a decline by 12.6% in oil production. Although the production decline in recent years is expected to continue due to the old production fields, decline rate is becoming smooth with new discoveries. Million tons
Figure 9. Crude Oil Production in Turkey (Source: PIGM)
On the other hand, natural gas production of our country shows an upward trend by the years. In 1999, high flow gas production was provided from both fields on the purpose of making the plans of Underground Natural Gas Storage Facilities Project in Kuzey Marmara and Değirmenköy fields. Furthermore, through new production wells drilled in old fields and the new natural gas explorations conducted by TPAO-Amity oil partnership in Thrace since 2002; gas production that declined in 2001 started to increase again and reached the peak level in 2008. However this increase lost its impetus and production in 2009 declined 27% in comparison with 2008 and recorded as 729.4 million m³.
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Figure 10. Natural Gas Production in Turkey, million m3 (Sorce: PIGM)
By the end of 2009, recoverable domestic total oil reserve reached 299.8 million barrels (44.37 million tons) and in case of no new exploration; estimated life of total domestic crude oil reserves is 18.47 years with the current production level. By the end of 2009, remaining total recoverable domestic natural gas reserves were 6.2 billion m3. In case of no new discovery and with the current production level, estimated life of domestic natural gas reserves is 8.53 years. COMPANIES TPAO N.V. Turkse Perenco Petroleum E.M.I & Dorchester TPAO & Tiway TPAO & N.V. Turkse Perenco Aladdin & GYP Aladdin&GYP & Tiway Aladdin & GYP &EOT TPAO & Amity Oil Extreme-Petrako TPIC Other TOTAL
Original Oil in Place
Recoverable Oil
5.406,11 571,18 539,00 49,61 105,27 57,25 24,30 25,00 0,14 8,39 0,06 0,03 6.786,34
868,35 200,84 94,00 19,60 30,81 9,10 6,19 7,50 0,14 1,68 0,06 0,03 1.238,30
Remaining Recoverable Oil 226,52 31,11 9,96 1,78 15,72 1,53 4,09 7,43 0,01 1,68 0,001 299,82
Figure 11. Crude Oil Reserves in Turkey by the end of 2009, million barrels, (Source: PIGM)
COMPANIES
Original Gas in Place
TPAO N.V. Turkse Perenco Amity Oil Int. & TPAO Thrace Basin Thrace Basin & Pinnacle Turkey TPAO & Petrol Ofis & Stratic & Tiway Amity Oil Int. TOTAL
Recoverable Gas
11.567 4.654 1.922 1.948 1.298 1.740
8.690 3.258 1.504 1.798 1.169 1.094
Remaining Recoverable Gas 1.143 2.989 306 595 482 695
11 23.140
11 17.524
11 6.221
Figure 12. Natural Gas Reserves in Turkey by the end of 2009, million m3 (Source: PIGM)
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POSITION of TPAO IN THE SECTOR In the forthcoming years, TPAO, in accordance with her vision “To become a regionally effective world-class energy company meeting Turkey’s oil and natural gas demand and to be the most desired company to work with.”, will be an important player in the international arena accomplishing important projects and big successes with her advanced technology in addition to her qualified manpower and strong organizational structure. For this purpose, TPAO needs to be restructured as an effective oil company to have such a dynamic, energetic and strong form of being to be able to compete with international oil companies. TPAO in the International Market In the Caspian Region, that attracts attention with its rich hydrocarbon reserves and investment opportunities TPAO is aparticipant a consortium consisting 3 big projects; ACG, Shah Deniz and Alov, where exploration and production activities are continue. Besides, production of TPAO are still being conducted in Kazakhstan fields. International production of TPAO in 2007 exceeded the domestic production amount. The great portion of the Company’s international production comes from Azeri-Chirag-Guneshli Project in Azerbaijan. With the help of BTC Crude Oil Pipeline project, running since 2006, production from Azerbaijan is expected to reach to the peak level in around 2010-2011. TPAO, as a partner of Shah Deniz project, produced natural gas for the first time in international fields in addition to this production TPAO has met some national gas demand from international sources. TPAO started to deliver natural gas of Shah Deniz Project continuously via using Southern Caucasus Pipeline (SCP). The main target of the project is transmitting regional natural gas to the Europe via Turkey in the second stage. There is a mutual understanding between Turkey and Iran to develop and produce natural gas in phases of 22, 23, 24 of Southern Pars gas-condensate field in Persian Gulf. Negotiations and efforts on possible cooperation between two sides still continue. In Iraq the consortium whose 10% of shares belong to TPAO won the tender in Badra field. It is planned that in the second quarter of 2010 activities in this field will start. Moreover on October 20, 2008 a memorandum of understanding was signed between TPAO, BOTAŞ and SHELL on exploration, operation, delivery, marketing of natural gas. With this memorandum of understanding it is aimed produced natural gas in Iraq will be exported to the global markets through Turkey. In 2009 the first exploration drilling was completed and oil was discovered in Libya; it is planned to complete drilling activities in the fields where high possibility of oil was recorded in the light of license until the end of this year.
13
The position of TPAO among the first 100 company operating in world crude oil and natural gas sectors (with the data of 2007);
Figure 13. Daily Crude Oil Production in 2007 (Source: Energy Intelligence, 2009)
Figure 14. Daily Natural Gas Production in 2007 (Source: Energy Intelligence, 2009)
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Figure 15. Crude Oil Reserves of First 10 Companies & TPAO in 2007 (Source: Energy Intelligence, 2009)
Figure 16. Natural Gas Reserves of First 10 Companies & TPAO in 2007 (Source: Energy Intelligence, 2009)
TPAO in the National Market When it is estimated that oil and gas imports will cost Turkey over 475 billion $ within the period leading up to 2020, in order to meet that costs TPAO pays special attention to the domestic and foreign hydrocarbon exploration and productions. Hydrocarbon resources that have great importance in formation of international strategies and embodiment of politics are also the indispensible of national security. As a result of the activities of exploration, drilling, well completion, production; oil production of our corporation increased to 28% (approximately from 29.000 b/d to 37.000 b/d ). It is aimed that this increase will continue with planned activities of exploration, production and drilling. In 2009 oil-equivalent-production of our corporation reached to 72.000 barrels per day.
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In this context, investments for exploration, appraising and production of possible hydrocarbon potential of the attractive and huge structures under the deep waters of Black Sea will gain intensity with the strong partnerships established for minimizing the risks. In the scope of farm-out activity that started in 2005, Common Operation Agreement was signed between PetroBras and TPAO in 2006. PetroBras made an agreement with Ocean Rig Company about Leiv Eriksson platform, following this agreement Rig Farmout Agreement (RFAO) between PetroBras and TPAO that gave TPAO the right to use this platform in deep water drilling, was signed. within the framework of this agreement in the deep water fields of Black Sea drilling activities continue. For the aim of implementation of oil and natural gas exploration in deep water of Black Sea, cooperation agreement was signed between TPAO and EXXONMOBIL in 2008.Within the framework of Common Operation Agreement which is including Samsun block 2D and 3D seismic data were collected and these data are still evaluated.
Other
Figure 17. Company Based Crude Oil Production of Turkey in 2009 (Source: PIGM)
By the end of 2009, 70.2% of national cumulative crude oil production and 73.9% of national cumulative natural gas production were performed by TPAO. 2009 Yılı Dünya Birincil Enerji Tüketimi, QBTU (Kaynak: EIA)
Other
Figure 18. Company Based Natural Gas Production of Turkey in 2009 (Source: PIGM)
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Natural Gas Storage As in the countries where natural gas is commonly used, Turkey’s natural gas demand is also depend on the seasons; winter demand can be twice as summer. For this reason, natural gas storages where gas surplus in summer season can be stored and then can be brought into use to meet the increasing demand in winter has been needed for so long. On the other hand, according to the Natural Gas Market Law No.4646 dated 18.04.2001 natural gas importing companies should have contract with the storage companies to store an amount corresponding to 10% of the natural gas to be imported every year, in the national territory. Moreover, it is an obligation for wholesale companies to take measures for adequate storage in line with the same law. In order to increase the capacity of Silivri-Değirmenköy Natural Gas Storage Facilities the first natural gas storage project to our country’s oil industry with the capacity of 1.6 billion m3 and to construct new storage fields enviroment, feasibility and technical studies continues. These studies increase the current capacity by 77 % untill the end of 2014 are being carried on. REFINERY SECTOR Overview In Turkey there are four refineries owned by Turkish Petroleum Refineries Corporation (TUPRAŞ) in Izmit, Izmir, Kırıkkale and Batman, ATAŞ refinery which had operated since 1962 put an end to refinery activities and has operated in the field of storage since July 2004. Total refinery capacity of Turkey declined from 32 million tons to 28.1 million tons/year when ATAŞ refinery put an end to refinery activities. Refinery
Processing * Capacity ve CRU (mton/year and %)
İzmit İzmir Kırıkkale Batman TOTAL
Years
2007
2008
2009
Capacity
11
11
11
CUR
100
94
75
Capacity
11
11
11
CUR
97
93
67
Capacity
5
5
5
CUR
63
58
62
Capacity
1,1
1,1
1,1
CUR
71
72
58
Capacity
28,1
28,1
28,1
CUR
91,1
86
69
CUR*:Capacity Utilization Rate Şekil 18. Processing Capacities and Capacity Utilization Rates of Refinery Sector (Source: TUPRAŞ Annual Report)
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Processed Crude Oil in Refineries In 2009 16.98 million tons of crude oil was processed in Turkey, 0.5 million tons of it was processed from storage. . In February 2009 because of the lack of demand during the economic depression Izmir Refinery stopped its activities within a plan. Million tons
Figure 19. Oil Products Produced in Refineries in 2009 (million tons)
Oil Products Produced in Refineries In 2009 amount oil products declined to 29.9% in comparison with 2008 and total production was 15.97 million tons in 2009.
LPG Gasoline & Naphta FUEL OIL Asphalt Jet Fuel / Kerosene Diesel Fuel Rural Diesel Fuel Other
Figure 20. Portion of Oil Products in Turkey in 2009
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Competitive Power of the Sector In addition to four refineries of TUPRAŞ; Besides accepted license application of companies and send license applications of companies to Energy Market Regulatory Authority, it is planned to invest to Ceyhan for a new refinery costs 15 billion $. In this respect it is expected that Ceyhan will be an energy hub with the capacity to process 35 million tons of crude oil. As a national oil company one of the components to strengthen TPAO is playing an active role in the projects of Ceyhan Energy Hub. In this respect TPAO has a land with 3.4 km2 which can be used for projects of the Energy Hub and this land-mass will be granted by TPAO for these projects.
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2009 Oil and Natural Gas Sector Report
March 2010
CONTENTS
OIL and NATURAL GAS SECTOR VIEW IN THE WORLD ......................................................... 3
Oil Sector............................................................................................................................................... 3 Oil Consumption .............................................................................................................................. 3 Oil Reserve....................................................................................................................................... 4 Oil Production .................................................................................................................................. 5 Refinery…………………………………………………………………………………................ 5 Oil Prices .......................................................................................................................................... 6 Natural Gas Sector ................................................................................................................................ 6 Natural Gas Consumption …………................................................................................................ 6 Natural Gas Reserve.……………………………………………………………………................ 7 Natural Gas Production..................................................................................................................... 7 Natural Gas Trade ……….…............................................................................................................ 8 Natural Gas Storage……....…........................................................................................................... 8 Natural Gas Prices..………..….......................................................................................................... 9 EXPECTED ISSUES in OIL and NATURAL GAS SECTORS in 2010…….................................... 9 OIL and NATURAL GAS SECTOR VIEW IN TURKEY................................................................ 11 POSITION of TPAO in SECTOR ....................................................................................................... 13 TPAO in the International Market .................................................................................................... 13 TPAO in the National Market ......................................................................................................... 15 Natural Gas Storage ......................................................................................................................... 17
REFINERY SECTOR..........…………………………………………………………………................. 17 Overview …………….…………………………………………………………………………... 17 Processed Crude Oil in Refineries……………………………………………………………….. 18
Oil Products Produced in Refineries……............………………………………………. 18 Competitive Power of the Sector………………………………………………………... 19
2
OIL and NATURAL GAS SECTOR VIEW IN THE WORLD As the first fossil fuel among the primary energy resources, oil is expected to sustain its strategic position through long ages. According to the projections of International Energy Agency, oil that stands for 34.6% of global energy demand in 2008 is expected to account for 31.8% of total energy consumption by 2030. According to the projections through 2030, contrary to fossil fuel consumption frontly coal and natural gas, oil consumption rate is expected to decrease. 2009 Projection Projeksiyon 250,0
200,0
Q BTU
150,0
100,0
50,0
0,0 1980
1985
1990
1995
Oil Petrol
2000
Natural Gas Doğalgaz
2005
2010
Coal Kömür
Nuclear Nükleer
2015
2020
2025
2030
Renewable Yenilenebilir
Figure 1. World Primary Energy Consumption in 2009, QBTU (Source: EIA)
Oil Sector Oil Consumption World oil consumption averaged 84.9 million b/d in 2009, recording a 1.5 % (420 thousand b/d) decline compared to the previous year. This is the worst decline rate since 1982. In line with the predictions of International Energy Agency, it is expected that crude oil consumption, representing an insignificant rise and will be 86.5 million b/d in 2010.
3
Global Crude Oil Demand 2007/2008/2009 Thousand b/d Europe FSU
North America
Middle East
Asia
Latin America
Africa World Oil Consumption mb/d
Figure 2. World Oil Consumption by years (Source: IEA-OMR Feb. 2009)
In 2010 the expected increase in world oil consumption is because of the optimistic economic expectations of International Monetary Fund, however if the economic growth is lower than the expectations for 2010, it can be presumed that there will be a decline with 400 b/d in oil demand. Oil Reserve In the first half of 2008 because of the trend of high prices of natural gas and oil, there was an increase in drilling activities, depending on this issue world oil reserve 1.26 trillion barrels in 2008, increased to 1.34 trillion barrels and at the end of 2009. Also world oil P/R ratio increased to 44 years average.
N.America
C. and S. America
Africa
Eurasia
Asia and Oceania
Figure 3. 2009 World Proved Oil Reserves, billion barels, (Source: IEA)
4
Europe
Oil Production In 2009 oil production declined 1.97% compared to 2008 and 84 million b/d was produced. OPEC produced 33.4 million b/d, with a decline of 6.4% (2.270 thousand b/d). The biggest decline was in North America and Former Soviet Union regions. Refinery In short term effects of the crisis are reduced in refinery sector. However despite the worldwide recovery of GDP, refinery sector could not reach to pre-crisis level. Refinery sector has undergone a reconstruction and consolidation process. In the years of 2008 and 2009 while crude oil refinery capacity increased to 2.1 million b/d, demand of oil stayed in 1.6 million b/d. In addition to that if world refinery capacity and oil demand are compared, it is foreseen that the gap between refinery capacity and oil demand will not be closed. Global Refinery Crude Throughput1 (million barrels per day)
Figure 4. Global Refinery Crude Throughput from September 2009 to May 2010
When the refinery sectors of OECD countries and important non-OECD countries like Russia, China and India are evaluated, important results are regarded. In comparison with the data of crude oil processing in OECD countries between 2004 – 2008 period and the year 2009; it is regarded that there is a trend of decline in crude oil processing. In 2009 non-OECD countries especially in Russia, China and India distillation amount is higher than 2004-2008 period. Thus in non-OECD developing countries trend of growth in refinery sector attracts attention. This development can also be evaluated as meeting the need of distillation rapidly in these countries.
5
Oil Prices
In oil markets, a fluctuating price course was observed during the last 12 months period. Oil prices, between 40$/b and 50$/b in the first three months of 2009 because of the effects of economic crisis, had an increasing trend in the second quarter with the taken economic measures, in August-September period they moved on 65$ - 75$ band and in the end of the year reached to 78.25$/b.
October, 06 74.91
June, 11 71.90
December, 01 78.93
October, 22 78.53
December,31 78.25
December, 11 70.31 September, 23 64.74 July 13 58.49
February 18 39.50
Jan.
Feb.
March.
April
May
June
July
August
Sep.
Oct.
Nov.
Dec.
Figure 5. 2009 Monthly WTI Oil Prices
It is expected oil prices 73.80 $/b in February 2010 will increase in the case of depreciation of U.S. Dollar, tension between USA and Iran, geopolitical tensions between Russia and Europe, increasing demand because of economic recovery policies, continuation of the growth of China, decline of speculative activities and stocks in commodity markets. However a second wave in the global crisis, appreciation of U.S. Dollar, an increase in the production of oil in Iraq, adoption of the law in USA which prevents speculative activities in oil market and OPEC countries not abide by the production quotas can cause a decrease in oil prices. Natural Gas Sector Natural Gas Consumption In OECD countries natural gas consumption reached 1.49 trillion m3 in 2009 recording 3% decline in comparison with 2008. In 2009 among the OECD countries USA was the most important natural gas consumer as it was in 2008; despite the 2% of decrease in its gas consumption, USA is still the biggest natural gas consumer. The countries following USA are Canada, Japan, Germany and England. In the region of former Soviet Union natural gas consumption counted as 632.8 billion m3 in 2009 is 3% lower than 2008. In the region biggest consumer, Russia consumed 460.6 m3 that is 6% less than 2008.
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Natural Gas Reserve Historically growing global natural gas reserve also grew in 2009 with the increasing demand and increasing focus of producers to this issue. Natural gas reserve numbered as 6.2 trillion ft3 in 2008, reached 6.3 trillion ft3 in 2009.
Europe
C. and S. .America
N.America
Asia
Africa
Middle East
Eurasia
A huge increase in natural gas reserve was in Iran with of 43 trillion ft3 addition and in USA with 27 trillion ft3.
Figure 6. World Proved Natural Gas Reserve in 2009, trillion ft3 (resource: EIA)
Natural Gas Production In comparison with 2008, among OECD countries a small decline was regarded in gas production in 2009 and recorded as 1.2 trillion m3 in 2009. In comparison with 2008 there was a decline in natural gas production of Europe and an increase in North America and Pacific Regions. In the region of former Soviet Union natural gas production was lower than 2008 with 6%. Russia is still leader in natural gas production with 630.6 billion m3 in the region, however this production level is still 5% lower than the amount of 2008.
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Global production is 6.2% also lower than production of 2008.
Figure 7. 2009 Global Natural Gas, Production (billion m3) (Resource: CEDIGAZ)
Natural Gas Trade There was 907.5 billion m3 trade volume in 2008 and 885.6 billion m3 in 2009, estimated for only OECD countries. That means there was a 3% of decline in trade volume within a year. Natural Gas Storage The volume of the underground natural gas storage of the world is expected to be 684 billion m3 in 2030, which is now about 328 m3. Almost 80% of this increase will be achieved by North America, Europe and developing countries. It is expected to be an increase in terms of natural gas trade and storage capacities with liberalization of the natural gas market in short time period. Being aware of this situation countries like China, of which natural gas consumption is high, and Iran, of which natural gas exportation is high, are started to build up new natural gas storage facilities.
8
Natural Gas Prices Henry Hub natural gas prices at the beginning of March 2009 approximately 4.5$ in NYMEX, had a fluctuating price trend in 2009; in summer 2009, natural gas prices declined till 2$ the lowest prices in 2009. Natural gas prices that reached to 7.5$ in January 2010, decreased again in February 2010. In comparison with prices of March 2009, prices in March 2010 are 0.25$ lower.
Figure 8. Henry Hub Naturall Gas Prices from March 2009 to March 2010(Source:WTRG Economics 2010)
EXPECTED ISSUES IN OIL AND NATURAL GAS SECTORS IN 2010 A recovery trend in oil and natural gas sectors is expected because of the foreseeable end of the economic crisis. Despite the apparent effects of economic crisis during last years, it is obvious that 2010 will be brighter than 2009 for oil and natural gas sectors. In this respect it is expected that trade of natural gas will increase in 2010 and in 2015 natural gas will be most used energy resource in the world. Especially an increase in industrial products will trigger demands of natural gas and oil. There is not a foreseeable risk for oil and natural gas sectors in 2010. In addition to these sectors oil and natural gas markets will recover increasingly. Oil and natural gas sectors are affected by general economic trends and in current economic structure economic crises and volatility are quiet often. In this respect the most serious risk for oil
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and natural gas sectors are: while believing a permanent expansion of economy and ignoring the long term risks, to invest for long term by using long term credits and to rely on markets too much. This means that companies should have a useable “Plan B”. According to statistics American economy undergoes recession in each 6 years period. This means expansion of economy comes to a halt very often. In this process having a “Plan B” is quiet vital. As a result oil and natural gas sectors will recover with the recovery of global economy. There is not a serious risk for 2010, but the most serious problem will appear if it is forgotten that one day expansion of economy comes to a halt.
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OIL and NATURAL GAS SECTOR VIEW IN TURKEY In accordance with the exploration, discovery, appraisal and the production activities of hydrocarbon potential of our country in 2009, 30,10 man/month geological field survey, 84,46 crew/month geophysical field survey were conducted; in total 143 wells being as 51 exploration wells, 50 appraisal wells and 42 production wells were drilled and 243.255 meters drilling activities were conducted. In 2009 2.4 million tons of oil and 729.4 million m³ natural gas were produced and until today 132.5 million tons of oil and 11.3 billion m³ natural gas were produced. In the latest 10 years, there has been a decline by 12.6% in oil production. Although the production decline in recent years is expected to continue due to the old production fields, decline rate is becoming smooth with new discoveries. Million tons
Figure 9. Crude Oil Production in Turkey (Source: PIGM)
On the other hand, natural gas production of our country shows an upward trend by the years. In 1999, high flow gas production was provided from both fields on the purpose of making the plans of Underground Natural Gas Storage Facilities Project in Kuzey Marmara and Değirmenköy fields. Furthermore, through new production wells drilled in old fields and the new natural gas explorations conducted by TPAO-Amity oil partnership in Thrace since 2002; gas production that declined in 2001 started to increase again and reached the peak level in 2008. However this increase lost its impetus and production in 2009 declined 27% in comparison with 2008 and recorded as 729.4 million m³.
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Figure 10. Natural Gas Production in Turkey, million m3 (Sorce: PIGM)
By the end of 2009, recoverable domestic total oil reserve reached 299.8 million barrels (44.37 million tons) and in case of no new exploration; estimated life of total domestic crude oil reserves is 18.47 years with the current production level. By the end of 2009, remaining total recoverable domestic natural gas reserves were 6.2 billion m3. In case of no new discovery and with the current production level, estimated life of domestic natural gas reserves is 8.53 years. COMPANIES TPAO N.V. Turkse Perenco Petroleum E.M.I & Dorchester TPAO & Tiway TPAO & N.V. Turkse Perenco Aladdin & GYP Aladdin&GYP & Tiway Aladdin & GYP &EOT TPAO & Amity Oil Extreme-Petrako TPIC Other TOTAL
Original Oil in Place
Recoverable Oil
5.406,11 571,18 539,00 49,61 105,27 57,25 24,30 25,00 0,14 8,39 0,06 0,03 6.786,34
868,35 200,84 94,00 19,60 30,81 9,10 6,19 7,50 0,14 1,68 0,06 0,03 1.238,30
Remaining Recoverable Oil 226,52 31,11 9,96 1,78 15,72 1,53 4,09 7,43 0,01 1,68 0,001 299,82
Figure 11. Crude Oil Reserves in Turkey by the end of 2009, million barrels, (Source: PIGM)
COMPANIES
Original Gas in Place
TPAO N.V. Turkse Perenco Amity Oil Int. & TPAO Thrace Basin Thrace Basin & Pinnacle Turkey TPAO & Petrol Ofis & Stratic & Tiway Amity Oil Int. TOTAL
Recoverable Gas
11.567 4.654 1.922 1.948 1.298 1.740
8.690 3.258 1.504 1.798 1.169 1.094
Remaining Recoverable Gas 1.143 2.989 306 595 482 695
11 23.140
11 17.524
11 6.221
Figure 12. Natural Gas Reserves in Turkey by the end of 2009, million m3 (Source: PIGM)
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POSITION of TPAO IN THE SECTOR In the forthcoming years, TPAO, in accordance with her vision “To become a regionally effective world-class energy company meeting Turkey’s oil and natural gas demand and to be the most desired company to work with.”, will be an important player in the international arena accomplishing important projects and big successes with her advanced technology in addition to her qualified manpower and strong organizational structure. For this purpose, TPAO needs to be restructured as an effective oil company to have such a dynamic, energetic and strong form of being to be able to compete with international oil companies. TPAO in the International Market In the Caspian Region, that attracts attention with its rich hydrocarbon reserves and investment opportunities TPAO is aparticipant a consortium consisting 3 big projects; ACG, Shah Deniz and Alov, where exploration and production activities are continue. Besides, production of TPAO are still being conducted in Kazakhstan fields. International production of TPAO in 2007 exceeded the domestic production amount. The great portion of the Company’s international production comes from Azeri-Chirag-Guneshli Project in Azerbaijan. With the help of BTC Crude Oil Pipeline project, running since 2006, production from Azerbaijan is expected to reach to the peak level in around 2010-2011. TPAO, as a partner of Shah Deniz project, produced natural gas for the first time in international fields in addition to this production TPAO has met some national gas demand from international sources. TPAO started to deliver natural gas of Shah Deniz Project continuously via using Southern Caucasus Pipeline (SCP). The main target of the project is transmitting regional natural gas to the Europe via Turkey in the second stage. There is a mutual understanding between Turkey and Iran to develop and produce natural gas in phases of 22, 23, 24 of Southern Pars gas-condensate field in Persian Gulf. Negotiations and efforts on possible cooperation between two sides still continue. In Iraq the consortium whose 10% of shares belong to TPAO won the tender in Badra field. It is planned that in the second quarter of 2010 activities in this field will start. Moreover on October 20, 2008 a memorandum of understanding was signed between TPAO, BOTAŞ and SHELL on exploration, operation, delivery, marketing of natural gas. With this memorandum of understanding it is aimed produced natural gas in Iraq will be exported to the global markets through Turkey. In 2009 the first exploration drilling was completed and oil was discovered in Libya; it is planned to complete drilling activities in the fields where high possibility of oil was recorded in the light of license until the end of this year.
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The position of TPAO among the first 100 company operating in world crude oil and natural gas sectors (with the data of 2007);
Figure 13. Daily Crude Oil Production in 2007 (Source: Energy Intelligence, 2009)
Figure 14. Daily Natural Gas Production in 2007 (Source: Energy Intelligence, 2009)
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Figure 15. Crude Oil Reserves of First 10 Companies & TPAO in 2007 (Source: Energy Intelligence, 2009)
Figure 16. Natural Gas Reserves of First 10 Companies & TPAO in 2007 (Source: Energy Intelligence, 2009)
TPAO in the National Market When it is estimated that oil and gas imports will cost Turkey over 475 billion $ within the period leading up to 2020, in order to meet that costs TPAO pays special attention to the domestic and foreign hydrocarbon exploration and productions. Hydrocarbon resources that have great importance in formation of international strategies and embodiment of politics are also the indispensible of national security. As a result of the activities of exploration, drilling, well completion, production; oil production of our corporation increased to 28% (approximately from 29.000 b/d to 37.000 b/d ). It is aimed that this increase will continue with planned activities of exploration, production and drilling. In 2009 oil-equivalent-production of our corporation reached to 72.000 barrels per day.
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In this context, investments for exploration, appraising and production of possible hydrocarbon potential of the attractive and huge structures under the deep waters of Black Sea will gain intensity with the strong partnerships established for minimizing the risks. In the scope of farm-out activity that started in 2005, Common Operation Agreement was signed between PetroBras and TPAO in 2006. PetroBras made an agreement with Ocean Rig Company about Leiv Eriksson platform, following this agreement Rig Farmout Agreement (RFAO) between PetroBras and TPAO that gave TPAO the right to use this platform in deep water drilling, was signed. within the framework of this agreement in the deep water fields of Black Sea drilling activities continue. For the aim of implementation of oil and natural gas exploration in deep water of Black Sea, cooperation agreement was signed between TPAO and EXXONMOBIL in 2008.Within the framework of Common Operation Agreement which is including Samsun block 2D and 3D seismic data were collected and these data are still evaluated.
Other
Figure 17. Company Based Crude Oil Production of Turkey in 2009 (Source: PIGM)
By the end of 2009, 70.2% of national cumulative crude oil production and 73.9% of national cumulative natural gas production were performed by TPAO. 2009 Yılı Dünya Birincil Enerji Tüketimi, QBTU (Kaynak: EIA)
Other
Figure 18. Company Based Natural Gas Production of Turkey in 2009 (Source: PIGM)
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Natural Gas Storage As in the countries where natural gas is commonly used, Turkey’s natural gas demand is also depend on the seasons; winter demand can be twice as summer. For this reason, natural gas storages where gas surplus in summer season can be stored and then can be brought into use to meet the increasing demand in winter has been needed for so long. On the other hand, according to the Natural Gas Market Law No.4646 dated 18.04.2001 natural gas importing companies should have contract with the storage companies to store an amount corresponding to 10% of the natural gas to be imported every year, in the national territory. Moreover, it is an obligation for wholesale companies to take measures for adequate storage in line with the same law. In order to increase the capacity of Silivri-Değirmenköy Natural Gas Storage Facilities the first natural gas storage project to our country’s oil industry with the capacity of 1.6 billion m3 and to construct new storage fields enviroment, feasibility and technical studies continues. These studies increase the current capacity by 77 % untill the end of 2014 are being carried on. REFINERY SECTOR Overview In Turkey there are four refineries owned by Turkish Petroleum Refineries Corporation (TUPRAŞ) in Izmit, Izmir, Kırıkkale and Batman, ATAŞ refinery which had operated since 1962 put an end to refinery activities and has operated in the field of storage since July 2004. Total refinery capacity of Turkey declined from 32 million tons to 28.1 million tons/year when ATAŞ refinery put an end to refinery activities. Refinery
Processing * Capacity ve CRU (mton/year and %)
İzmit İzmir Kırıkkale Batman TOTAL
Years
2007
2008
2009
Capacity
11
11
11
CUR
100
94
75
Capacity
11
11
11
CUR
97
93
67
Capacity
5
5
5
CUR
63
58
62
Capacity
1,1
1,1
1,1
CUR
71
72
58
Capacity
28,1
28,1
28,1
CUR
91,1
86
69
CUR*:Capacity Utilization Rate Şekil 18. Processing Capacities and Capacity Utilization Rates of Refinery Sector (Source: TUPRAŞ Annual Report)
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Processed Crude Oil in Refineries In 2009 16.98 million tons of crude oil was processed in Turkey, 0.5 million tons of it was processed from storage. . In February 2009 because of the lack of demand during the economic depression Izmir Refinery stopped its activities within a plan. Million tons
Figure 19. Oil Products Produced in Refineries in 2009 (million tons)
Oil Products Produced in Refineries In 2009 amount oil products declined to 29.9% in comparison with 2008 and total production was 15.97 million tons in 2009.
LPG Gasoline & Naphta FUEL OIL Asphalt Jet Fuel / Kerosene Diesel Fuel Rural Diesel Fuel Other
Figure 20. Portion of Oil Products in Turkey in 2009
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Competitive Power of the Sector In addition to four refineries of TUPRAŞ; Besides accepted license application of companies and send license applications of companies to Energy Market Regulatory Authority, it is planned to invest to Ceyhan for a new refinery costs 15 billion $. In this respect it is expected that Ceyhan will be an energy hub with the capacity to process 35 million tons of crude oil. As a national oil company one of the components to strengthen TPAO is playing an active role in the projects of Ceyhan Energy Hub. In this respect TPAO has a land with 3.4 km2 which can be used for projects of the Energy Hub and this land-mass will be granted by TPAO for these projects.
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