Outlook for World Oil Markets: Prospects for Growing US Supply ...
Outlook for World Oil Markets: Prospects for Growing US Supply Contributions presented to:
Ohio Oil and Gas Association presented by:
E. Harry Vidas [email protected] (703) 218-2745
March 11, 2011
Outline of Presentation International Supply Trends International Demand Trends Oil Supply/Demand and Price Outlook US Supply Trends and Major Liquids-prone Plays Outlook for US Oil-directed Activity and Production
2
World Oil Supply and Price: 1994-present Supply includes crude, NGLs, other liquids, refinery processing gains in million bpd. Price is US dollars per barrel. Sources: EIA and Bloomberg
3
Crude Oil and Lease Condensate Supply: 1994-present (1,000 bpd)
4
Crude Oil and Lease Condensate Supply in OECD Countries: 1994-present (1,000 bpd)
5
Crude Oil and Lease Condensate Supply in Canada: 1994-present (1,000 bpd)
6
Crude Oil and Lease Condensate Supply in US On/Offshore: 1994-present (1,000 bpd)
7
Crude Oil & Lease Condensate Supply Outside OECD & OPEC: 1994-present (1,000 bpd)
8
Natural Gas Plant Liquids Supply: 1994-present (1,000 bpd)
9
Natural Gas Plant Liquids Supply in US: 1994-present (1,000 bpd)
10
Spot Plant Liquid Prices at Mont Belvieu: Btu Ratio to WTI Crude Oil Source: Bloomberg
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (J/F)
Ethane 127% 117% 108% 85% 110% 106% 94% 85% 94% 78% 68% 66% 61%
Propane 112% 122% 115% 100% 118% 113% 103% 97% 106% 90% 87% 93% 99%
N-Butane Iso-Butane 120% 124% 126% 129% 117% 125% 107% 118% 122% 126% 121% 121% 110% 115% 105% 107% 111% 118% 96% 98% 100% 110% 108% 113% 109% 118%
Natural Gasoline 116% 126% 119% 116% 123% 126% 116% 114% 123% 111% 112% 122% 129% 11
World Oil and Liquids Supply:
Change Over Last 5 Years (1,000 bpd)
US Canada Mexico Other OECD Subtotal OECD OPEC China Former USSR Other Non-OECD Subtotal Non-OECD Total World
Crude & Condensate 322 331 (758) (1,420) (1,525) (584) 463 1,409 153 1,441 (84)
Gas Plant Biofuels, Refinery Liquids etc. Gains 278 626 61 30 (2) (50) 6 (90) 38 21 169 664 86
Total 1,289 360 (802) (1,452) (605)
409 (22) 188 575
(58) 1 319 261
(16) 14 15 13 26
(248) 477 1,402 672 2,302
744
926
111
1,697 12
Oil Consumption in OECD Countries: 1994-present (1,000 bpd)
13
Oil Consumption Outside OECD: 1994present (1,000 bpd)
14
Oil Consumption Annual Growth Rates
US Canada Mexico Other OECD Subtotal OECD OPEC China Former USSR Other Non-OECD Subtotal Non-OECD World
% Change 1994 % Change 2004 to 2004 to 2010 1.58% -1.38% 2.69% -0.63% 0.86% 0.83% 0.58% -1.39% 1.09% -1.25% 2.93% 7.37% -1.80% 3.31% 3.05%
3.84% 5.63% 1.33% 2.93% 3.48%
1.82%
0.76% 15
World Oil Prices: last 24 months Source: Bloomberg
Mar 2009 - US Congress passes $787 billion stimulus package Sep 2009 - OPEC countries agree to maintain production level at 29 mil b/d Dec 2009 – Lack of investor confidence in the Greek economy Apr 2010 – OPEC ministers leave production levels unchanged. OPEC crude oil spare capacity reached more than 6 million barrels per day May 2010 – Announcement of rescue packages offered by the EU and IMF to Greece May 2010 – US drilling moratorium on offshore oil & gas exploration in waters deeper than 500 feet. Nov 2010 – US Federal Reserve engages in quantitative easing – to add $600 billion to the monetary system Dec 2010 – US Congress announces a two-year extension of all expiring tax cuts and other tax provisions Jan 14, 2011: President Zine El Abidine Ben Ali ousted from Tunisia. Feb 11, 2011: President Hosni Mubarak of Egypt resigns from office.
16
Future Outlook for World Oil Market Consumption growth to be lead by developing countries, accompanied by continued rebound in demand in OECD countries. Growth in non-OPEC supplies will be limited as production generally outstrips new oil field discoveries in most countries. Growth in OPEC will largely come from development and enhancement of older oil fields. There is few near-term geologic limits, but political factors will limit OPEC supplies. Price outlook is unpredictable. Marginal resource cost outside of OPEC suggest minimum near-term prices in range $60$70/barrel, but S/D factors are overwhelmed by politics and market uncertainties. 17
US Gas and Oil Prices (1995- Feb. 2011)
18
US Gas and Oil Rigs (2007- Feb. 2011) Source: Baker Hughes
19
North America’s Active and Emerging Oil/NGL Hz Plays
North American Horizontal Oil/NGL Plays Play Appalachia 1 Marcellus Shale wet gas 2 Utica Shale wet gas
Status Very active Initial stages
Michigan Basin 3 Collingwood Shale wet gas
Initial stages
Williston Basin, ND and MT 4 Bakken Shale oil play - MT and ND 5 Three Forks Shale oil play - MT and ND 6 Heath Shale oil play - MT
Very active Initial stages Initial stages
Fort Worth Basin, TX 7 Oil portion of Barnett Shale
Active
Mid-Continent 8 Arkoma Woodford Shale wet gas 9 Granite Wash Sand wet gas 10 Anadarko Woodford Shale wet gas 11 Anadarko Mississippian Carbonate oil 12 Anadarko Cleveland Sand wet gas 13 Anadarko Tonkawa Sand wet gas
Active Very active Very active Active Initial stages Initial stages
Permian/ Delaware Basin, TX and NM 14 Avalon - Bone Spring Shale oil 15 Wolfberry Permian Carbonate/Shale oil 16 Abo Shale oil - SE NM
Initial stages Initial stages Initial stages
Play
Status
Denver and Powder River Basins, CO and WY 17 Denver Basin Niobrara Shale oil 18 Powder River Basin Niobrara oil 19 Powder River Basin Frontier oil 20 Denver Basin Codell oil
Very active Initial stages Initial stages Initial stages
San Joaquin Basin , CA 21 Monterey Shale oil play
Initial stages
Gulf Coast of TX 22 Eagle Ford Shale wet gas 23 Austin Chalk oil
Very active Active
Western Canada 24 Bakken Shale oil in Sask. and Manitoba 25 Cardium Sands wet gas in Alberta 26 Duvernay Shale wet gas in Alberta 27 Horn River Basin Bakken Exshaw oil 28 Alberta Bakken shale oil 29 Alberta Exshaw Shale oil 30 Alberta Muskwa Shale oil
Initial stages Initial stages Initial stages Initial stages Initial stages Initial stages Initial stages
21
Williston Bakken Oil Major horizontal oil play; 140 rigs
Activity includes underlying Three Forks Fm. Recovery of 500 mboe per well Production 325 mbo/d and 250 mmcf/d; increasing 100+ mbo/d per year Upper and lower members
Resource estimates range from 4 to 24 billion barrels, including Three Forks at high end. 22
Bakken Shale Oil and Gas Production (annual 2002 to 2010)
23
Barnett Shale Oil Play Oil and associated gas development exists north and west of gas shale play.
Well recovery of 325 mboe. 16 active rigs Well cost $2.8 mm; 9,000 feet.
Crude production of 13,000 bo/d; Substantial increase expected in 2011. Considerable variation in productivity Oil declines very steep in some areas. 24
Liquid-to-Gas Ratio versus Thermal Maturity
25
Barnett Shale Gas and Oil Production (monthly 2001 to 2010)
26
Gulf Coast Eagle Ford Shale Gas, Condensate and Crude Major gas, condensate and crude shale play; 110 rigs Recovery of 250 to 450 mboe per well. Hydrocarbon windows related to Ro. Crude and condensate production of 16,000 bo/d. Gas 280 mmcf/d. Calcareous, brittle shale Very favorable declines and economics; Well cost $5.5 to $8.5 mm. 27
Eagle Ford Shale Crude & Condensate Production (monthly 2008 to 2010)
28
Eagle Ford Shale Gas Production (monthly 2008 to 2010)
29
Anadarko Basin Woodford Gas and Condensate Organic shale unit also productive in Eastern OK. Approx. 38 rigs as of December.
Recoveries of up to 8 bcfe per well. Liquids contribute to excellent economics, despite well costs of $7.5 mm. Current gas production approximately 300 mmcf/d.
30
Denver and Powder River Basin Niobrara Oil Chalk, limestone, organic shale; 300-400 mboe per well at 6-9,000 feet. Very large mature oil area Present across Rockies; Historical production in vertical wells in Denver Basin; present in Powder River as well. Fracture and matrix porosity play an important role. 20 rigs running. Horizontal production in early stages
Well costs of $4 mm. 31
What Makes a Liquids-Prone Shale Play Productive? Understanding is still in the early stages. The most successful plays have good organics, thermal history, adequate pressure, porosity, and brittleness.
Faulting may be good or bad. Shales broadly categorized as “siliceous” (silty, i.e. Barnett) or “calcareous” (marls, i.e. Eagle Ford, Haynesville)
The Niobrara is a mixed lithology package, with fractured chalk between organic shales. The Bakken has a permeable unit between organic shales. Future improvements expected in G&G, stimulation design, and for oil plays, solvents and thermal enhanced recovery methods. 32
Conclusions Price ratio favorable to oil versus natural gas likely to remain for next several years, albeit not as severe as now. Pricing of US crudes and NGLs to be set by world S/D factors, but regional aberrations can occur. US oil-directed rigs counts to remain high in key emerging liquids plays. Substantial increases in liquids production expected in nearly all major liquids-prone shale and tight gas Hz plays. Environmental concerns will slow but not stop onshore Hz activity.
Total US oil/NGL production growth to be moderated by slow recovery of deepwater GoM drilling. 33
Ohio Oil and Gas Association presented by:
E. Harry Vidas [email protected] (703) 218-2745
March 11, 2011
Outline of Presentation International Supply Trends International Demand Trends Oil Supply/Demand and Price Outlook US Supply Trends and Major Liquids-prone Plays Outlook for US Oil-directed Activity and Production
2
World Oil Supply and Price: 1994-present Supply includes crude, NGLs, other liquids, refinery processing gains in million bpd. Price is US dollars per barrel. Sources: EIA and Bloomberg
3
Crude Oil and Lease Condensate Supply: 1994-present (1,000 bpd)
4
Crude Oil and Lease Condensate Supply in OECD Countries: 1994-present (1,000 bpd)
5
Crude Oil and Lease Condensate Supply in Canada: 1994-present (1,000 bpd)
6
Crude Oil and Lease Condensate Supply in US On/Offshore: 1994-present (1,000 bpd)
7
Crude Oil & Lease Condensate Supply Outside OECD & OPEC: 1994-present (1,000 bpd)
8
Natural Gas Plant Liquids Supply: 1994-present (1,000 bpd)
9
Natural Gas Plant Liquids Supply in US: 1994-present (1,000 bpd)
10
Spot Plant Liquid Prices at Mont Belvieu: Btu Ratio to WTI Crude Oil Source: Bloomberg
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (J/F)
Ethane 127% 117% 108% 85% 110% 106% 94% 85% 94% 78% 68% 66% 61%
Propane 112% 122% 115% 100% 118% 113% 103% 97% 106% 90% 87% 93% 99%
N-Butane Iso-Butane 120% 124% 126% 129% 117% 125% 107% 118% 122% 126% 121% 121% 110% 115% 105% 107% 111% 118% 96% 98% 100% 110% 108% 113% 109% 118%
Natural Gasoline 116% 126% 119% 116% 123% 126% 116% 114% 123% 111% 112% 122% 129% 11
World Oil and Liquids Supply:
Change Over Last 5 Years (1,000 bpd)
US Canada Mexico Other OECD Subtotal OECD OPEC China Former USSR Other Non-OECD Subtotal Non-OECD Total World
Crude & Condensate 322 331 (758) (1,420) (1,525) (584) 463 1,409 153 1,441 (84)
Gas Plant Biofuels, Refinery Liquids etc. Gains 278 626 61 30 (2) (50) 6 (90) 38 21 169 664 86
Total 1,289 360 (802) (1,452) (605)
409 (22) 188 575
(58) 1 319 261
(16) 14 15 13 26
(248) 477 1,402 672 2,302
744
926
111
1,697 12
Oil Consumption in OECD Countries: 1994-present (1,000 bpd)
13
Oil Consumption Outside OECD: 1994present (1,000 bpd)
14
Oil Consumption Annual Growth Rates
US Canada Mexico Other OECD Subtotal OECD OPEC China Former USSR Other Non-OECD Subtotal Non-OECD World
% Change 1994 % Change 2004 to 2004 to 2010 1.58% -1.38% 2.69% -0.63% 0.86% 0.83% 0.58% -1.39% 1.09% -1.25% 2.93% 7.37% -1.80% 3.31% 3.05%
3.84% 5.63% 1.33% 2.93% 3.48%
1.82%
0.76% 15
World Oil Prices: last 24 months Source: Bloomberg
Mar 2009 - US Congress passes $787 billion stimulus package Sep 2009 - OPEC countries agree to maintain production level at 29 mil b/d Dec 2009 – Lack of investor confidence in the Greek economy Apr 2010 – OPEC ministers leave production levels unchanged. OPEC crude oil spare capacity reached more than 6 million barrels per day May 2010 – Announcement of rescue packages offered by the EU and IMF to Greece May 2010 – US drilling moratorium on offshore oil & gas exploration in waters deeper than 500 feet. Nov 2010 – US Federal Reserve engages in quantitative easing – to add $600 billion to the monetary system Dec 2010 – US Congress announces a two-year extension of all expiring tax cuts and other tax provisions Jan 14, 2011: President Zine El Abidine Ben Ali ousted from Tunisia. Feb 11, 2011: President Hosni Mubarak of Egypt resigns from office.
16
Future Outlook for World Oil Market Consumption growth to be lead by developing countries, accompanied by continued rebound in demand in OECD countries. Growth in non-OPEC supplies will be limited as production generally outstrips new oil field discoveries in most countries. Growth in OPEC will largely come from development and enhancement of older oil fields. There is few near-term geologic limits, but political factors will limit OPEC supplies. Price outlook is unpredictable. Marginal resource cost outside of OPEC suggest minimum near-term prices in range $60$70/barrel, but S/D factors are overwhelmed by politics and market uncertainties. 17
US Gas and Oil Prices (1995- Feb. 2011)
18
US Gas and Oil Rigs (2007- Feb. 2011) Source: Baker Hughes
19
North America’s Active and Emerging Oil/NGL Hz Plays
North American Horizontal Oil/NGL Plays Play Appalachia 1 Marcellus Shale wet gas 2 Utica Shale wet gas
Status Very active Initial stages
Michigan Basin 3 Collingwood Shale wet gas
Initial stages
Williston Basin, ND and MT 4 Bakken Shale oil play - MT and ND 5 Three Forks Shale oil play - MT and ND 6 Heath Shale oil play - MT
Very active Initial stages Initial stages
Fort Worth Basin, TX 7 Oil portion of Barnett Shale
Active
Mid-Continent 8 Arkoma Woodford Shale wet gas 9 Granite Wash Sand wet gas 10 Anadarko Woodford Shale wet gas 11 Anadarko Mississippian Carbonate oil 12 Anadarko Cleveland Sand wet gas 13 Anadarko Tonkawa Sand wet gas
Active Very active Very active Active Initial stages Initial stages
Permian/ Delaware Basin, TX and NM 14 Avalon - Bone Spring Shale oil 15 Wolfberry Permian Carbonate/Shale oil 16 Abo Shale oil - SE NM
Initial stages Initial stages Initial stages
Play
Status
Denver and Powder River Basins, CO and WY 17 Denver Basin Niobrara Shale oil 18 Powder River Basin Niobrara oil 19 Powder River Basin Frontier oil 20 Denver Basin Codell oil
Very active Initial stages Initial stages Initial stages
San Joaquin Basin , CA 21 Monterey Shale oil play
Initial stages
Gulf Coast of TX 22 Eagle Ford Shale wet gas 23 Austin Chalk oil
Very active Active
Western Canada 24 Bakken Shale oil in Sask. and Manitoba 25 Cardium Sands wet gas in Alberta 26 Duvernay Shale wet gas in Alberta 27 Horn River Basin Bakken Exshaw oil 28 Alberta Bakken shale oil 29 Alberta Exshaw Shale oil 30 Alberta Muskwa Shale oil
Initial stages Initial stages Initial stages Initial stages Initial stages Initial stages Initial stages
21
Williston Bakken Oil Major horizontal oil play; 140 rigs
Activity includes underlying Three Forks Fm. Recovery of 500 mboe per well Production 325 mbo/d and 250 mmcf/d; increasing 100+ mbo/d per year Upper and lower members
Resource estimates range from 4 to 24 billion barrels, including Three Forks at high end. 22
Bakken Shale Oil and Gas Production (annual 2002 to 2010)
23
Barnett Shale Oil Play Oil and associated gas development exists north and west of gas shale play.
Well recovery of 325 mboe. 16 active rigs Well cost $2.8 mm; 9,000 feet.
Crude production of 13,000 bo/d; Substantial increase expected in 2011. Considerable variation in productivity Oil declines very steep in some areas. 24
Liquid-to-Gas Ratio versus Thermal Maturity
25
Barnett Shale Gas and Oil Production (monthly 2001 to 2010)
26
Gulf Coast Eagle Ford Shale Gas, Condensate and Crude Major gas, condensate and crude shale play; 110 rigs Recovery of 250 to 450 mboe per well. Hydrocarbon windows related to Ro. Crude and condensate production of 16,000 bo/d. Gas 280 mmcf/d. Calcareous, brittle shale Very favorable declines and economics; Well cost $5.5 to $8.5 mm. 27
Eagle Ford Shale Crude & Condensate Production (monthly 2008 to 2010)
28
Eagle Ford Shale Gas Production (monthly 2008 to 2010)
29
Anadarko Basin Woodford Gas and Condensate Organic shale unit also productive in Eastern OK. Approx. 38 rigs as of December.
Recoveries of up to 8 bcfe per well. Liquids contribute to excellent economics, despite well costs of $7.5 mm. Current gas production approximately 300 mmcf/d.
30
Denver and Powder River Basin Niobrara Oil Chalk, limestone, organic shale; 300-400 mboe per well at 6-9,000 feet. Very large mature oil area Present across Rockies; Historical production in vertical wells in Denver Basin; present in Powder River as well. Fracture and matrix porosity play an important role. 20 rigs running. Horizontal production in early stages
Well costs of $4 mm. 31
What Makes a Liquids-Prone Shale Play Productive? Understanding is still in the early stages. The most successful plays have good organics, thermal history, adequate pressure, porosity, and brittleness.
Faulting may be good or bad. Shales broadly categorized as “siliceous” (silty, i.e. Barnett) or “calcareous” (marls, i.e. Eagle Ford, Haynesville)
The Niobrara is a mixed lithology package, with fractured chalk between organic shales. The Bakken has a permeable unit between organic shales. Future improvements expected in G&G, stimulation design, and for oil plays, solvents and thermal enhanced recovery methods. 32
Conclusions Price ratio favorable to oil versus natural gas likely to remain for next several years, albeit not as severe as now. Pricing of US crudes and NGLs to be set by world S/D factors, but regional aberrations can occur. US oil-directed rigs counts to remain high in key emerging liquids plays. Substantial increases in liquids production expected in nearly all major liquids-prone shale and tight gas Hz plays. Environmental concerns will slow but not stop onshore Hz activity.
Total US oil/NGL production growth to be moderated by slow recovery of deepwater GoM drilling. 33
