Download - ASG Strasbourg Jul06 - OPEC€¦ · Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene Leaded (ppm) (wt%) (wt%) % of Pool (ppm) (wt%) (wt%) % of Pool North America 70 28 0.9 0

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Page 1: ASG Strasbourg Jul06 - OPEC€¦ · Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene Leaded (ppm) (wt%) (wt%) % of Pool (ppm) (wt%) (wt%) % of Pool North America 70 28 0.9 0

1

Opening address for dinner-debate

Mohammed BarkindoActing for the OPEC Secretary General

European ParliamentStrasbourg, France

4 July 2006

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2

Outline

• Importance of EU-OPEC Energy Dialogue

• Current oil market developments

• Longer-term outlook

• Energy security

• EU Green Paper

• Cleaner oil and gas technologies

• Poverty eradication

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3

OPEC Reference Basket price (nominal and real) and non-energy commodity prices

The real price is still well below historical highs

Non-energy commodity prices have also risen

Jan 2001 = 10050

100

150

200

250

300

350

400

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

OPEC Basket Aluminium CopperLead Nickel Gold

0102030405060708090

100

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Nominal ($/b)

Real ($/b base May 2006)

Page 4: ASG Strasbourg Jul06 - OPEC€¦ · Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene Leaded (ppm) (wt%) (wt%) % of Pool (ppm) (wt%) (wt%) % of Pool North America 70 28 0.9 0

4

High volatility in oil prices, US $/b

Strong global economic and, in turn, oil demand growth (’03-’05 increase: 5.4 mb/d)High capacity utilization in the supply chain, tightness in the refining sectorHeightened geopolitical concerns –fears of supply disruptionsIncreasing activity in futures market (new wave of capital movement by funds)

53

74

59

67

50

56

62

68

74

80

Dec

-05

Jan-

06

Feb-

06

Mar

-06

Apr

-06

May

-06

Jun-

06

Jul-0

6

WTI OPEC R. Basket (ORB)

60.8

73.8

52.9

67.1

1-Dec

21-Dec

10-Jan

30-Jan

19-Feb

11-Mar

31-Mar

20-Apr

10-May

30-May

19-Jun

9-Jul

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5

Recent oil market developments:high demand growth

1.5

2.9

1.0

1.4

5.2

3.9

4.7 4.7

0

1

2

3

4

5

6

2003 2004 2005 20060

1

2

3

4

North America ChinaMiddle East Other AsiaOthers World GDP

% mb/d

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6

Supply chain tightness: downstream bottlenecksRefinery capacity utilization rates

75

80

85

90

95

100

Jan04

May04

Sep04

Jan05

May05

Sep05

Jan06

May06

%

EU** USA Asia*

*/ Asia = Japan, South Korea, China, India and Singapore

EU**/ Data reflects only sixteen countries due to availability.

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7

Increasing activity in futures marketOpen interest surpassed 1 million contracts recently, reflecting sustained high interest by funds in oil futures!EU-OPEC Workshop on financial markets (Dec 06)

25

35

45

55

65

75

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

Jun-05

Oct-05

Feb-06

Jun-06

300

450

600

750

900

1050

1200OPEN InterestPrice

(US$

/bbl

)('000 contracts)

June 30, 2006NYMEX WTI open interest & price

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8

OPEC crude oil supply has risen by 4.5 mb/d since 2002

25

26

27

28

29

30

31

2003 2004 2005

mb/

d

Call on OPEC crude

OPEC crude production

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9

2004

2005

Avg.01-05

2300

2350

2400

2450

2500

2550

2600

2650

2700

2750

Jan

Feb

Mar Apr

May Jun

Jul

Aug

Sep Oct

Nov

Dec

2001-2005 Max/Min

2006

OECD commercial oil stocks

million barrels

2004

2005

Avg.01-05

48

49

50

51

52

53

54

55

56

57

58

Jan

Feb

Mar Apr

May Jun

Jul

Aug

Sep

Oct

Nov

Dec

2001-2005 Max/Min

2006

days of forward cover

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10

Commercial oil stock levels in the USAweek-ending, mb

2004

2005

Avg.01-05

250

270

290

310

330

350

370

1 5 9 13 17 21 25 29 33 37 41 45 49

2001-2005 Max/Min

2006

2004

2005Avg.01-05

580

600

620

640

660

680

700

720

740

1 5 9 13 17 21 25 29 33 37 41 45 49

2001-2005 Max/Min

2006

Crude oil Total Products

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11

OPEC crude capacity continues to expand

20

22

24

26

28

30

32

34

36

38

40

2006 2007 2008 2009 2010

mb/

d

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12

3D seismic costs have doubled in the last 24 monthsDeepwater drilling day rigs up at least 50% in 12 months. Contracts at $500k/d for 2008. Wage pressure is escalating with growing shortage of skilled labor (~15% rise in 2005)Steel is a major component of infrastructure & facilities, with prices up 40% since 2004.

35 35

4540

15

30

0

10

20

30

40

50

Exploration Infrastructure Drilling SURF Personnel Facilities

(%)

Source: Goldman Sachs, OPEC Secretariat

Rising project costs: indicative cost rises

Page 13: ASG Strasbourg Jul06 - OPEC€¦ · Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene Leaded (ppm) (wt%) (wt%) % of Pool (ppm) (wt%) (wt%) % of Pool North America 70 28 0.9 0

13

Long-term oil demand outlook, mb/d

• Reference case sees oil demand rise by 30 mb/d by 2025• Four-fifths of increase in demand in developing countries • However, OECD remains dominant consumer• Developing countries will consume, on average, five times

less oil per person, compared with OECD countries

2005 2010 2015 2020 2025OECD 49.8 51.5 52.8 53.8 54.6DCs 28.7 34.2 40.0 46.3 52.9Transition economies 4.7 5.0 5.3 5.5 5.7

World 83.2 90.7 98.0 105.6 113.1

Page 14: ASG Strasbourg Jul06 - OPEC€¦ · Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene Leaded (ppm) (wt%) (wt%) % of Pool (ppm) (wt%) (wt%) % of Pool North America 70 28 0.9 0

14

Conventional liquid resource base is sufficient

Date of assessment release

0

500

1000

1500

2000

2500

3000

3500

1984 1987 1991 1994 2000

billi

on b

arre

ls

USGS estimates ofremaining resources

Cumulative production

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15

Long-term oil supply outlook, mb/d

Non-OPEC increases: Latin America, Africa, Russia, Caspian

2005 2010 2015 2020 2025OECD 20.5 20.6 20.7 20.5 19.5DCs, excl. OPEC 16.1 18.6 19.7 20.0 19.9Transition economies 11.7 14.4 15.5 16.1 16.5

Total non-OPEC 50.1 55.8 58.3 59.4 58.9OPEC (incl. NGLs) 33.1 34.9 39.7 46.2 54.3

World 83.2 90.7 98.0 105.6 113.1

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16

Energy security• OPEC recognises consuming countries concerns over energy supply security, and attaches great seriousness to this

• Security of demand and security of supply are mutually supportive

• Uncertainty over future demand translates into a broad range of potential levels of demand for OPEC oil

• Investment requirements are large, subject to long lead-times and pay-back periods

• More transparency in evolution and implementation of policies

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17

Cumulative investment in OPEC: three scenarios

0

50

100

150

200

250

300

350

400

450

500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$(20

05) b

illio

n

Uncertain future demand translates into a broad range of possible OPEC investment needs

Page 18: ASG Strasbourg Jul06 - OPEC€¦ · Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene Leaded (ppm) (wt%) (wt%) % of Pool (ppm) (wt%) (wt%) % of Pool North America 70 28 0.9 0

18

EU Green Paper

• Excellent platform for sharing views, ideas and visions

• Should address interests of non-European countries

• Interdependence rather than dependence

• Should recognise importance of security of demand

• Downstream investment issue should be addressed

• Emphasis on carbon capture and storage welcomed

Page 19: ASG Strasbourg Jul06 - OPEC€¦ · Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene Leaded (ppm) (wt%) (wt%) % of Pool (ppm) (wt%) (wt%) % of Pool North America 70 28 0.9 0

19

Cleaner oil and gas technology

• Increased fossil fuel use can be consistent with the protection of the environment

• Carbon capture and storage is a promising technology to address climate change concerns

• Developed countries should take lead in providing cleaner oil and gas technologies

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20

Poverty eradication

• Access to modern energy services must be improved upon

• Poverty eradication: first UN Millennium Development Goal

• Comprehensive and balanced approach to the three pillars of sustainable development: economic growth, social progress and protection of the environment

• Energy security applies to all nations

Page 21: ASG Strasbourg Jul06 - OPEC€¦ · Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene Leaded (ppm) (wt%) (wt%) % of Pool (ppm) (wt%) (wt%) % of Pool North America 70 28 0.9 0

21

www.opec.org

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22

Taxation of oil productsDiesel prices & taxes, December 2005

60%

44%

50%

48%

34%

25%

19%

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40

UK

Italy

Germany

France

Japan

Canada

USA

US$/litre

Crude CIF PriceIndustry MarginTax

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23

US gasoline stocks and demand cover

2004

2005

Avg.01-05

180

190

200

210

220

230

240

1 5 9 13 17 21 25 29 33 37 41 45 49

2001-2005 Max/Min

2006

2004

2005

Avg.01-05

19

21

23

25

27

1 5 9 13 17 21 25 29 33 37 41 45 49

2001-2005 Max/Min

2006

Gasoline Stocks. Week ending (mb) Days of gasoline demand cover

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24

-100 200 500 800 1100 1400 1700 2000

Venezuela

UAE

Saudi Arabia

Qatar

Nigeria

Libya

Kuwait

Iran

Indonesia

Algeria

2006

2007

2008

2009

2010

OPEC 10 capacity expansion plans, (tb/d)

Source: based on projects and other assumptions including secondary sources

Over 100 projects with cumulative investments of more than $100 billion!50% of these projects are in partnership with IOC’sOPEC-10 cumulative capacity increase > 4 mb/d by 2010, with Iraq: 5-6 mb/d

Page 25: ASG Strasbourg Jul06 - OPEC€¦ · Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene Leaded (ppm) (wt%) (wt%) % of Pool (ppm) (wt%) (wt%) % of Pool North America 70 28 0.9 0

25

OPEC Downstream expansion plans: 2005-2011

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Algeria

Indones

ia

IR. Ir

an

Iraq

Kuwait

Libya

Nigeria

Qatar

Saudi A

rabia UAE

Venez

uela

mb/d

0

2

4

6

8

10

12

14

16

18

20

$billion

Condensate Conversion+treatingDistillationInvestment $billion

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26

Regional gasoline quality specification (2005-2010)

2005 2010 Sulfur Aromatic Benzene Leaded Sulfur Aromatic Benzene Leaded (ppm) (wt%) (wt%) % of Pool (ppm) (wt%) (wt%) % of PoolNorth America 70 28 0.9 0 30 28 0.8 0 Latin America 500 36 3 5 220 34 2.4 0 Western Europe 30 34 0.8 0 10 34 0.8 0 Eastern Europe 200 38 1.5 4 80 37 1 0 Asia Pacific 220 35 2 0 180 35 1.9 0 Middle East 500 37 2 15 350 37 1.5 0 Africa 500 36 1.9 35 260 36 1.8 0 Sources: Hart forecast and analysis database

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27

Regional diesel fuel quality specification (2005-2010)

2005 2010 Diesel

Sulfur* Centane Diesel Sulfur* Centane

(ppm) Index (ppm) Index North America 330 45 15 46

Latin America 2,000 45

2,000 45 Western Europe 40 51 10 52 Eastern Europe 280 51 140 51 Asia Pacific 1,400 47 930 47 Middle East 1,800 48 250 50 Africa 1,500 49 170 51 *On-road diesel Sources: Hart forecast and analysis database