This is a comprehensive presentation on the state of the oil markets that I had done.a few years ago. While 2009 might sound rusty, it is important to understand that trends in commodities dont change ona dime especially oil markets. This ppt clearly shows that oil demand supply gap is growing at 5% or 4 mn bpd every year. Put otherwise we would have to discover 1 Saudi Arabia of oil every alternate year just to maintain the gap at where it is. It is like running in a running train.
Oil prices even now are quite cheap and should be priced at the marginal cost of the next most expensive barrel of oil. Without Iran tensions oil shoul dprobably be $200 in about a year
2. i
I t -,. -
[VENTURA:
- .
V E N T U R A SEe U R I TIE S LTD.
World Oil Discoveries
World Oil Discovery vs. Oil Consumption
0
"-
III .Q
ell
"-
Q)
C
70
40 I
30
20
.Q
o
60 j~DU
10
50
~~~~~~~~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~~
years
Oil Discovery-Oil Discovery,5yr tvNA -Oil Consurrption,5yr tvNA
Source: www.energiekrise.de/e/aspo _news/aspo/Newsletter091
~ World Oil discoveries peaked in early 80's since then there has not been
significant oil finds.
~ 1990 marked the point in time, when world oil consumption first exceeded
the oil find and since then we have been eating into the reserves.
~ Today the annual consumption of oil is 30 billion barrels.
3. I VENTURA
V E N T U R A SEe U R I TI E S LTD.
World Oil Reserves
Oil Reserves Depletion Not Factoring Peak Oil
~
~
.a
•..
:B
1200.0
400.0
800.0
600.0 I Reserves at 950 bbl
Reserves at 630 bbl
Ul
1000.0
200.0 Vs
BP Reserves at 1250 bbl
0.0
~ &@~~~&~h~~~~~~~~~~~~~~
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~- ~ 0/ # # # # ~~~y
Source: Collin Cambel peak oil study
o Base Case Reserves De·pletion 0 Base Case Estimate 1 _J
Oil reserves actually peaked in 1980
As per our estimates the reserves of oil stand at 630 bbl, the British Petroluem Statistical
Energy Review (BPSER) estimates reserves at 1258 bbl. BPSER keeps increasing annual
reserves about stated discoveries. These figures are not audited by BP and taken at face
value as reported by the oil producing countries.
This large discrepancy in data is due to the overstating of oil reserves by OPEC countries in
the 80s.
4. I VENTURA
V E N T U R A SEe U R I TIE S LTD.
Spurious Reserves
Dhabi 25
41.00?
90.00?
92.85164.6
92.21?169
47.88165
57.5168.8
55.31
1.3517.87
93Venezuela
92.85?
30.40
30.6
48.5
48.8
5889.77
1.40
Kuwait
Dubai
29.7
1.44
314166
2864.23
29100
920
65.4
51162.4
65.9
417.95
63.9
11.3
1163.35
4.00?
Iran
4320.3
1.44
64.48
44.11
47.1
300
91.92
095
26.1
Amount
358.08
166.57
56.30?
169.97
166.98
30.51 59
92.21
258.00??
30.5
88.3
1.27
91.92
100.00?
5721.5
192.11
44.5
24.85
25.85
Arabia*
091.92
25.59
1 Saudi
Iraq Spurious -
Selected Reported Reserves (billion bbl) with Suspect Increases
Abu
Source: http://www.hubbertpeak.com/summary.htm
• The spurious reserves are so defined as the countries' upgraded oil reserves without any supporting evidence of
new finds or upgradation to the proven category.
• In the 1980's, OPEC embarked on oil production quotas which were based on the oil reserves of the producing
country. The OPEC countries in order to garner a larger production quota fudged their reserves.
• The extent of overstating the reserves corresponds to 10 years of oil supplies at the present rate of consumption
(approx 30 bb p.a.)
5. VENTURA
V E N T U R A SEe U R I TI E S LTD.
Typical Production Profile of an Oil well
6 0
(U a
>.
~ 400
L
:: 3 0
o
(I"j
-0 200
(U
en
::J 1 0
..c
.•....
a
a o 1 20 30
Y ars of production
~ The point of maximum production, after which there is a decline is
known as Peak Oil.
.
6. I VENTURA
V E N T U R A SEe U R I TI E S LTD.
Depletion Profile of major Oil fields
Prudhoe Bay Production Profile Samotlor production Forecast to 2011
700 since 1969
250 mn bbll year
.•.. 200
1 250 mln bbll year 150
~ 600
100
50
:8 500 o
c: 1000
1999 2003 2007 2011
,9
400
'E
750
g 300
'n
1980 • max, production '.189 bin bbl
-5 200 500
e
0.
100
(5 250
o
1975 1980 1985 1990 2005 2010 2015
o .•
Alaska's Prudhoe Bay Field displays the profile of constrained production: 1969 1974 1979 1984 1989 1994 1999 2004 2009
buildup, followed by plateau, followed by irreversible decline.
7. I VENTURA
V E N T U R A SEe U R I TIE S LTD.
Peak Oil
Peak Oil
600
900
t
c::
500 "
400
300 35.0
.0 ~ Of, '
:0 800
200
700
100 World Oil Forecast
:a 30.0
25.0
:a
20.0 .0
c::
15.0 ~
:0
l 10.0
5.0
_ Base Case Reserves -5.6% Depletion -7% Depletion Rate -9% Depletion Rate
---- - ---
Source: BP Yearly Statistical Analysis 2008 & Zorbaquants estimates
• World Oil production plateaud in 2004-5 as the oil producing countries used EaR (e hanced oil recovery) techniques
to extract oil before the depletion profile sets in.
• The peak of oil production, we believe, should occur no latter than 2010-11. It may have already set in, but cannot be
pinpointed accurately due to lack of credible data. Recently Dr. Fatih Sirol, Chief Economist at lEA, remarked in an
interview that the Peak Oil would be hit in year 2010.
• We have assumed 5.6% as the base case of depletion of World Oil Production, keeping in mind the present
economic recession. Incase of moderate growth the depletion should happen at an accelerated rate of 7% and a full
blown recovery in economic conditions would lead to a 9% depletion rate.
8. I ,VENTURA
V E NT U R A SEe U R IT I E S LTD.
World Production Profile
World Oil Production
35
2.0%
4.0%
10.0% Cl
0
•..
0
~3:
-
0.0%
.s::.
30 8.0%
6.0%
-2.0%
-4.0%
•.• 25
III
Gl
~ 20
:c
.c
c: 15
.2
:c 10
5
o
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
year
-World Production, 5 yr MVA, LHS -% Growth, 5 year MVA, RHS
Source: BP Statistical Review of World Energy, 2009
• Oil production growth crashed since the early 1970s during the economic recession until the
mid 80s. After 1985, the production rate picked up until it peaked at 2% in 1991 (marked by
arrow)
• This point in time (1991-92) coincides with the peaking of oil discoveries. It is clearly noticeable
that despite increased production since then, the production rate was unable to ramp up above
2%. This flat rate of growth, we believe, is due to the EaR techniques used by producing
nations to sustain the oil production.
9. ,
VENTURA
V E N T U R A SEe U R I TIE S LTD.
Crude Supply
World Oil Supply
30.0
~ 20.0
"-
co
.0
c:
o
.0 10.0-0 • ~
0.0 ~ r
(:..::) (:..~ (:..1:>.(:..X:J (:..fQ ~::) ~~ ~I:>. ~X:J ~fQ R,::) R,~ R,I:>. R,X:J R,fQ ~::) ~~ ~I:>. ~X:J ~fQ
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
- Peak Oil Countries, 5 yr rvrv A - World Production, 5 yr rvrv A
- Non Peak Oil Countries, 5 yr rvrv A
-, ~~~ ===---
Source : BP Statistical Review of World Energy, 2009
• The major oil producing countries peaked as early as 2001-02. However the Middle east countries were yet to peak.
• Infact the production in these countries was ramped up to replace the diminishing supply from the "peaked" countries.
Saudi Arabia with its prolific reserves emerged as the "swing producer."
10. I I VENTURA
V E N T U R A SEe U R I TIE S LTD.
Peak Oil Countries
..
0.1
Country Year 1993
Peak6.09% 2004 (billion bbl) 14.0
Decline1.2
0.29%
4.34%
4.38% 2001
0.89%
0.10%
5.54% 0.3
0.2
0.1
4.1
0.9
1.4
1.1
0.4
1.15% 2000
1.46% 1991
1.45% 1999
1970
0.6
1.2
1.07% 1998
4.99%
5.02%
0.53% 2005
0.76%
0.56% Rate 2008 Production
0.9
0.6
1.2
0.8
0.0
0.2
0.3
1995
1978
2.5
0.3
0.1
0.7
0.4
Production9.3
Source : BP Statistical Review of World Energy, 2009
11. VENTURA
V E N T U R A SEe U R IT I E S LTD.
Mexican Reserves
60
• The Mexican case is a striking
50
example of how the production
:c
.c
40 ••••••••••
".
Rate of Decline
-3.7 profile declines sharply post
~
c: 30
.......... peaking.
ii5 20
...............
10
o I- • Application of EOR techniques
OJ'Or::, OJ'O'l,, Oj~
~ ~ ~ OJ'Oro OJ'O'O OjOjr::, OjOj'l" Ojet
~ ~ ~ ~ ~ OjOjro OjOj'O ~r::,r::, r::,r::,'l" r::,cl" r:;,r::,ro r:;,r::,'O
~ ~ ~ ~ ~ ~ ~ enhances production but kills the
year
_~_~ __ J
ultimate oil recovery in the decline
Source : BP Statistical Review of World Energy, 2009 stage of production.
Cantarell Oil Production
2.5 • The Cantarell oil fields in which
>-
'"
2
nitrogen injection technique was
::!2
:c 1.5
.c utilized used to produce over
c:
~ 1 2mbd per day. Today it barely
E 0.5
produces 0.7 mbd
o
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
years
Source: BP Statistical Review of World Energy, 2009
12. I VENTURAj
V E N T U R A SEe U R I TIE S LTD.
Oil Consumption of Oil Producers .
Oil countries Consumption as % of Production
50%
45% • The 2 billion population of the
l: 40%
o
'u 35%
:l i middle east is growing at an
~
C.
30%
25% average of 2.67% (twice that of
~
~
20%
15%
World Population Growth)
'if!. 10%
50/0
0%
• Saudi Arabia and Iran, the
year
J largest oil producers are growing
Oil countries Consumption as % of Production
at 3.67% and 2.75% respectively.
~
(J)
<0 0
~
.2
::>
l:
c;;
~
"
U
c..
'"
LO
<030.0%
~ •....
(J)
100.0%
<0
80.0%
20.0%
60.0%
70.0%
•....
50.0%
;:::.
40.0%
10.0% LO -
150.0% +
90.0%
• This explains the increasing
consumption of the oil producing
countries as their energy
require'ments increase.
••••• (J) m 0 (f') 0 0
T""'"
0 U') f'-..
ro ~ ~
m ~ m ~ ~ ~
~ 0'>
•....
(J)
•....
(J) m m m T""" T""" ,..... ,...... .,..... ..,... moo CI 0 0
m m m m m T""" N CI N
year
-Saudi Arabia S-Mexico -Venezuela -Iran
S
Source: BP Statistical Review of World Energy, 2009
13. I VENTURA
I
V E N T U R A SEe U R I TIE S LTD.
World Oil Demand
World Oil Demand Growth
4.50%
4.00%
~ 3.50%
~ 3.00%
[ 2.50%
i
in
e
C)
2.00%
1.50%
1.00%
0.50% ~
~
0.00% -
-0.50% ~ RJ' RJ~ RJO:> s:t RJ0 RJ(() ~ RJCO RJC?> ~:P ~, ~~ ~O:> ~ ~0 ~(() ~
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
years
- BRIG - Developed Countries - World.. - Oil Producing
Source : BP Statistical Review of World Energy, 2009
• World oil consumption has closely tracked the population growth of 1.5%
• The growth in the BRIG nations is the highest 3%, in line with high GDP growth.
• The demand growth in the developed world has been stagnant since 2002
14. I VENTURA I
V E N T U R A S EC U R I TIE S LTD.
Other Asia Year -1990 o North America exUS Other Asia Year· 2007
5%
• US50 8%
o Europe exGermany
o Germany
• Pacific ex Japan
o Japan
• China
o India
• Brazil
• Russia
o Iran
• Saudi Arabia
• Restof Widdle East
• Venezuela
• Africa Europe ex
Europe ex • S. & C. America Germany
18%
Germany • Other Asia
23%
Source : BP Statistical Review of World Energy, 2009
•.
• Comparison of Oil consumption in 1990 and 2007 reveals the following
• USA has mainatined its share. Currently it consumes 18.5 mbd of which the US military consumes almost 40%
• Declines are observed in Japan, Europe (ex Germany) and Russia.
• China has increased 3 fold and current consumption stands at 7 mbd.
15. I VENTURA
V E N T U R A SEe U R I TI E S LTD.
World Demand Projections
World Demand Projections
-00.0
.- -- 79.8 --
- - I: ---•• 90.7 __ 87.2 -
- ••
-85.093.4 --
•• • 84.5 •• •• --
--
96.1 ••
1
-
94.6
97.3
-
-- -
III
J:l
~
:::P
75.0 ~
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
years
-Optimistic +28D - Pessimistic -28D - Base Case
• R-value of World oil consumption to GDP is .925 while that to World Population it is .0.979.
• We have assumed a weighted average correlation of GDP and population for demand forecasting.
• Based on our Demand Projection Model, world oil consumption should climb to 97.3 mbd with a 2 standard deviation
for best case (1.0.0 mbd) and worst case (94.6 mbd) scenarios.
• In full bloom economies the World per capita consumtion of oil has been .0..013 bpd (or 2 ..06 Ii) and in recessionary
times it has never fallen below .0..012 bdp ( or 1.98 Ii). This clearly explains the inelastic nature of demand, non
correlation of oil prices and consumption and how central oil is to human life.
16. I VENTURA
V E N T U R A SEe U R I TIE S LTD.
Demand & Supply
Price
World Oil Demand vs. Supply
trajectory
l:
0'0 C.
E
-,
.0 140.0 ~
80.0
60.0
40.0
~ T
20.0
0.0
100.0
120.0 t-
years
-Production BaseCase-Demand Bas Case
The assumption that oil demand will be satiated by ever increasing oil supplies
is wishful thinking. Till peak oil, World GDP was driving oil production, post peak
oil, oil availability will govern World growth until the world embraces alternative
sources of energy.
17. I VENTURA
v EN T U RA SEe U R I TIE S LTD.
Thank You