Covid-19 Report 08—Rystad Energy

COVID-19 REPORT 8TH EDITION GLOBAL OUTBREAK OVERVIEW AND ITS IMPACT ON THE ENERGY SECTOR

29 APRIL 2020 PUBLIC VERSION Table of Contents

Executive summary Outbreak status and outlook Impact on oil demand Impact on the oil and gas industry

2 Executive summary Herd immunity unlikely as storage woes threaten global oil outlook

In this week’s edition, we have taken a closer look at true fatality rates in various countries versus reported fatality rates from Covid-19. Based on research from the New York Times, figures from 11 regions indicate that the true number of Covid-19 fatalities could be 60% higher than reported figures. Applying this to our model shows that New York City will probably achieve herd immunity soon, as half of the population is likely already infected. For most other countries, a maximum of 13% of the population is likely infected, while in most places less than 1% is likely infected. Thus, there is no indication that global herd immunity will be achieved over the next 12 months. This means the operant strategy going forward will be the continued isolation of recovered regions, while local activities within a region slowly resume. We therefore must continue to wait for a vaccination, a new miracle drug, or an efficient anti-virus technology, which will hopefully arrive quicker than herd immunity. Recent traffic data confirms that flight and car traffic reached a floor one or two weeks ago and are now slowly trending upwards. However, with 28 million barrels per day in demand destruction and still less than 2 million barrels of supply shut-ins, we are approaching a storage crisis where all available storage will be filled and the global oil market will “hit the wall”, as WTI did last week. Global sanctioning of new oil field developments in 2020 will probably be at the lowest level seen since the 1950’s, unless governments are successful at incentivizing companies to sanction new projects.

NYC herd immunity Global oil demand US fuel demand analysis, page 8 outlook, page 16 analysis, page 22

3 Table of Contents

Executive summary Outbreak status and outlook • Global overview • Key country focus Impact on oil demand Impact on the oil and gas industry

4 Global overview The true number of people infected globally today is likely 54 million

Number of true and reported cases Cases (log scale) As of 27 April, 54 million people have likely been infected with Covid-19, according to our updated model. 100,000,000 Estimated true cases Reported cases were alomst 3 million as of 27 April, a number which our analysis suggests represents just 5% to 10,000,000 6% of true cases. Reported cases are now growing at around 3% per day (7-day trailing average), down from 4% last week and 5% the preceding week. This is an 1,000,000 indication that quarantine measures are working. Growth is no longer exponential, but now appears linear, with Fatalities 80,000 new reported cases per day on average over the 100,000 last three weeks

Registered fatalities globally were 207,000 as of 27 April, 10,000 a number which grew by 3% over the last week versus the 5%, 6% and 10% growth seen respectively over the previous three weeks (trailing seven-day average). 1,000 In this edition we present one scenario, wherein current strict measures are maintained in the forecast period to 100 Week 18 end of May. In this scenario, 74 million people will be Week 17 infected across the globe by the end of May. 10 Forecast 1

Source: Rystad Energy Covid-19 research and analysis; Worldometer

5 Global overview Most European countries have past the (first) peak

Number of new reported covid-19 fatalities per day Per 100 000 people for 14 days rolling average Historical Future 10 New York City This plot shows the date Belgium and level of peak daily fatalities. As seen, most Spain France Peru Netherlands Italy UK Mexico European countries Normal death rates have passed the peak, 1 Switzerland Canada Sweden Africa USA while, for example, the peak is yet to come for North America Germany Denm. Mexico and Peru . South America Austria Brazil Asia Norway Turkey Normal death rates are 0.1 Australia 1.0 to 2.5 per day per Poland Russia Europe 100,000 people. Thus, Middle East Covid-19 deaths at this Russia level means a doubling South of the death rate, which Korea Size = Population Malay. is significant. 0.01 Indonesia These figures are based India on trends in reported fatalities so far, and do not take into account the underreporting of 0.001 Taiwan fatalities (see the next page) or a potential comeback of the virus China after quarantine measures are loosened. 0.0001 30-Jan-20 13-Feb-20 27-Feb-20 12-Mar-20 26-Mar-20 9-Apr-20 23-Apr-20 7-May-20 21-May-20 Date of peak daily fatalities (14 day average)

6 Global overview True number of Covid-19 deaths probably 60% above reported in selected regions

Number of fatalities per day per 100 000 population in March- mid April 2020* The global population is growing, as there are 2.1 deaths and 5.3 births Normal per day per 100,000 in population. Belgium 2.8 0.8 3.8 Covid-19 reported Regions with an aging population, Unexplained such as Europe, see 2.5 deaths per Netherlands 2.6 0.5 3.7 day per 100,000 people. In young, growing populations like Jakarta, there is around 1 death per day per Sweden 2.5 0.4 3.0 100,000 people. England and Comparing actual reported deaths 2.5 0.5 3.3 in March and April 2020 with 2019, Wales the death rate is significantly higher in 2020. Even when including France 2.5 0.6 3.5 Covid-19 reported deaths, actual deaths figures are higher, indicating an underreporting of Covid-19 Spain 2.5 1.1 4.1 fatalities. The weighted average of fatalites Switzerland 2.2 0.3 2.7 for 11 regions is shows here. We find that it is likely that actual Covid- 19 deaths are 60% higher than New York City 1.8 4.4 7.3 reported. In some countries, deaths at 1.5 hospitals are primarily those Istanbul 0.2 1.9 registered as Covid-19 deaths, which does not account for those Ecuador 1.2 0.1 2.1 who have died at home or at nursing homes. This partly explains the underreporting. Jakarta 0.9 0.0 1.4

Source: New York Times Update on Covid-19 as of April 27th. *Reporting time details, see here: https://www.nytimes.com/interactive/2020/04/21/world/coronavirus-missing-deaths.html?referringSource=articleShare; Country/regional health authorities. Rystad Energy Covid-19 model; Note, our core model has not yet been updated to include likely non-reported fatalities as shown above

7 Global overview Herd immunity to be achieved in New York soon, but not in most other regions

Share of population infected as of 28 April 2020

Based on the true number of 0% 5% 10% 15% 20% 25% 30% 35% 40% fatalities, as presented on the previous page, our modelis able Belgium 13% to estimate the true number of infected people. This can be calculated as the Netherlands 12% number of true fatalities divided by the fatality rate, multuplied by growth over last 18 days. E.g. Sweden 6% for Belgium it is 13%. For New York City, with a England and Wales 10% shocking 16,936 deaths,we have used a theoretical Infection Fatality Rate (IFR) of 0.58 and a France 7% growth rate of 3% per day. Given these parameters, the actual number of infected Spain 10% people per day is likely almost 55% of the population. Switzerland 4% However, IFR is probably higher in NYC due to the insufficient intensive care capacity, NYC >40% meaning that the total figures for infected people will be lower. Still, NYC is close to achieving Istanbul 3% herd immunity. The same may be true for Ecuador >40% Ecuador, although other regions are still far away from achieving herd immunity. Jakarta 3%

Source: Rystad Energy Covid-19 model; For Belgium: 63 deaths per 100 000 28 april; True deaths: 1/0.8*63 = 79; IFR: 0.8%; Infected 18 days ago: 79/0.8%=9875; Growth: 1.5% per day=1.32 for 18 days. Current number fo infected = 9875 * 1.32 = 13 035 = 13% of 100 000.

8 Key country focus Italy, Spain, France flat curves - UK, US and Japan almost there – Brazil slowing down

Number of reported cases, key countries Cases (log scale)

1,000,000

UK 100,000 Iran China Brazil

Japan – finally deviating from path South Korea of doubling every 8 days 10,000

1,000

100 0 7 14 21 28 35 42 49 56 63 70 77 84 91 98 For further details please see our Covid-19 dashboard at rystadenergy.com. Source: Rystad Energy Covid-19 research and analysis; Worldometer

9 Key country focus UK has likely peaked in active cases after more than a month of lockdown

United Kingdom, estimated total and active true cases Number of cases; Current measures scenario* Forecast Total true cases may pass 5,000,000 Total true cases today 4.5 million by end of May 4,500,000 likely around 4 million 4,000,000 3,500,000 3,000,000 Active true cases 2,500,000 estimated to have 2,000,000 peaked 1,500,000 1,000,000 500,000 Reported cases 152,840 0 03-Apr 06-Apr 09-Apr 12-Apr 15-Apr 18-Apr 21-Apr 24-Apr 27-Apr 30-Apr 01-Mar 04-Mar 07-Mar 10-Mar 13-Mar 16-Mar 19-Mar 22-Mar 25-Mar 28-Mar 31-Mar 03-May 06-May 09-May 12-May 15-May 18-May 21-May 24-May 27-May 30-May

Daily new cases and deaths

10,000 1,200 9,000 Reported new cases New fatalities 8,000 Reported new deaths (RHS) trending down 1,000 7,000 800 6,000 5,000 Strong measures 600 4,000 implemented 3,000 New cases 400 stabilized 2,000 200 1,000 0 - For further details please see our 02-Apr 04-Apr 06-Apr 08-Apr 10-Apr 12-Apr 14-Apr 16-Apr 18-Apr 20-Apr 22-Apr 24-Apr 26-Apr

01-Mar 03-Mar 05-Mar 07-Mar 09-Mar 11-Mar 13-Mar 15-Mar 17-Mar 19-Mar 21-Mar 23-Mar 25-Mar 27-Mar 29-Mar 31-Mar Covid-19 dashboard *Assumes current measures remain in place during forecasting interval at rystadenergy.com. Source: Rystad Energy research and analysis; Worldometer

10 Table of Contents

Executive summary Outbreak status and outlook Impact on oil demand • Global overview • Aviation and jet fuels • Ground transportation and road fuels Impact on the oil and gas industry

11 Global overview Demand bottoms out at 71.8 million bpd in April, will rebound to 98.9 million bpd in 2021

Global oil demand impact analysis Covid-19, levels and changes vs. pre-virus estimates

100,000 Remaining barrels We see a V-shaped route in oil demand, 80,000 reaching a low point in April 2020 and with significant downside risks remaining into 2021. 60,000 Average demand for 2020 is expected at 88.8 million bpd, a drop of 10.8% from 40,000 2019. Europe is the worst hit, with demand down 20,000 33.5% year-over-year in April, and on track for a 12.4% demand decline for 2020 as a whole. 0

0 Lost barrels -5,000 About 4 billon barrels will be removed from global oil demand during 2020. -10,000 More than half of this decline comes from areas outside the main demand pools of -15,000 East Asia, Europe and North America. In our downside scenario, we see global -20,000 demand impact remains down by 10.5 East Asia Europe North America Rest of World million bpd in December 2020 and 4.8 million bpd in December 2021. -25,000 2019 Pre-virus Mitigation Previous -30,000

Source: Rystad Energy research and analysis

12 Aviation and jet fuels Global aviation activity is stabilizing at 21,000 daily flights vs 100,000 flights a year ago

Number of departures the past 30 days (domestic and international combined)

35000 (Average flights per day in April 2019 was close to 100,000 ) 30000

Week-over-week growth in the past 25000 three weeks has progressed from - 14% to -7% and is now set to stabilize at -2% growth. 20000 Over 50% of global aviation activity is derived from North American 15000 departures. East Asia has 23% of global departures. 10000 Europe and the Rest of World have shown the largest number of cancellations, which is reflected by the low portion of total departures. 5000

0 01-Apr 02-Apr 03-Apr 04-Apr 05-Apr 06-Apr 07-Apr 08-Apr 09-Apr 10-Apr 11-Apr 12-Apr 13-Apr 14-Apr 15-Apr 16-Apr 17-Apr 18-Apr 19-Apr 20-Apr 21-Apr 22-Apr 23-Apr 24-Apr 25-Apr 26-Apr 28-Mar 29-Mar 30-Mar 31-Mar North America Rest of world Europe East Asia

Source: Rystad Energy research and analysis

13 Ground transportation and road fuels Rystad Energy Global City Traffic Database Looser measures in Europe have led to increasing traffic covers road traffic in 1,200+ cities and 150+ countries Traffic levels for the last 7 days versus normal Percent difference, year-on-year, all days Africa Americas Asia & Australia Europe & Middle East

-90% -60% -30% 0% 30% -90% -60% -30% 0% -90% -60% -30% 0% -90% -60% -30% 0% 30% Rwanda Bolivia Bangladesh Iraq Uganda Peru Afghanistan Andorra Mauritius Colombia Sri Lanka Cyprus Nigeria Dominican Republic Turkmenistan Ireland Botswana Bahamas Myanmar Albania Congo Haiti Philippines France DR Congo El Salvador Georgia United Kingdom Angola Panama Singapore Greece Zimbabwe Ecuador Pakistan Israel Liberia Costa Rica New Zealand Serbia Tunisia Puerto Rico India Bahrain Malawi Venezuela Kyrgyzstan Lebanon Lesotho Paraguay Thailand Russia Libya Guinea Malaysia Italy Mauritania Brazil Indonesia Romania Cameroon Jamaica Uzbekistan UAE Morocco United States Kazakhstan Jordan Burkina Faso Guatemala Tajikistan Portugal Burundi Canada Cambodia Kuwait Kenya Mexico Armenia San Marino Niger Chile Vietnam Montenegro Namibia Honduras Australia Moldova Gambia Argentina Azerbaijan Iran Mali Nicaragua Japan Spain Benin Uruguay China Belgium Ghana Mongolia Luxembourg Algeria Laos Turkey Senegal Papua New Guinea Qatar Sierra Leone China, Hong Kong… Ukraine Cote d'Ivoire Oman Ethiopia Estonia Tanzania Palestine Gabon Saudi Arabia Mozambique Switzerland Togo Bosnia and… Madagascar Norway Egypt Poland South Africa Croatia Zambia Belarus Guinea-Bissau Finland Netherlands Lithuania Previous week Hungary Current week Iceland Slovenia Austria Germany Slovakia Sweden Bulgaria Latvia Denmark Liechtenstein Czech Republic Source: Rystad Energy Global City Traffic Database; TomTom Traffic Index; Google Maps; Rystad Energy research and analysis

14 Global overview Road fuel demand in April is down 33%, jet fuel down 70%, all other fuels down 14%

Global oil demand impact analysis Covid-19, levels and changes vs. pre-virus estimates

100,000

80,000

60,000 Global demand for road fuel was 40,000 31.7 million bpd in April, jet fuel demand was 2.1 million bpd, and demand for all other fuels stood at 20,000 37.9 million bpd.

About 16.1 million bpd was 00 removed from road fuel demand in April, while the decline was 5.2 -5,000-5,000 million bpd for jet fuel and 7 million bpd for all other fuels. -10,000-10,000 -15,000-15,000 Road fuels Jet fuels Other fuels -20,000-20,000 2019 Mitigation Previous -25,000-25,000 Pre-virus -30,000-30,000

Source: Rystad Energy research and analysis

15 Table of Contents

Executive summary Outbreak status and outlook Impact on oil demand Impact on the oil and gas industry • Global market outlook • Market segment focus

16 Global market outlook Even with a “monster cut” by OPEC+ from 1 May, storage capacity will be filled in May

The oil market could run out of physical Crude and condensate balancing scenario (Day 0 = 31 March 2020) onshore crude storage capacity by the end Storage or capacity (Million barrels) Runs or crude supply (Million barrels per day) of May if we assume that all remaining onshore storage capacity can be filled to the 400 90 maximum. Practical onshore Theoretical onshore storage exhausted storage exhausted end- However, in a more realistic scenario, where May only 95% of capacity can be filled, the early-May? market could actually run out of onshore 200 crude storage in early-May instead, barring 80 additional production shut-ins on the upstream side. The OPEC+ cuts due to commence on 1 0 May will not be large enough to prevent the market from hitting physical storage 70 constraints, even when including floating storage crude stock builds of 2 million bpd each day in this model. -200 Taking into account practical constraints such as lack of accessibility to all market 60 participants and other logistical issues, remaining crude storage capacity was only Remaining crude storage capacity (inversed) ~400 million barrels as of 10 April. Given the -400 market oversupply since then, as of 21 April, Remaining crude storage 95% max utilization (inversed) the market may only have around 10 days left of practical onshore storage capacity for Remaining gasoline storage capacity 50 crude oil. -600 On 20 April, the WTI futures contract for May Remaining gasoline storage 95% max utilization 2020 delivery defied gravity and settled for the first time in negative territory at minus Floating storage (crude) $37.63 a barrel, signalling that the market is 40 quickly realizing it is running out of practical -800 Crude runs (demand) storage capacity. Crude supply (with required shut-ins to balance) The bottleneck for refineries is motor gasoline, where remaining storage capacity 0 = 31 March 2020 Days is expected to run out around end-April. -1000 30 Pre 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 virus April 29th

Source: Oil Market Weekly by Rystad Energy

17 Global market outlook Global investments by supply segment, Billion USD

March forecast Current forecast Supply Segment 2020/ 2020/ 900 Group 2019 2019 OffshoreOffshore deepwater deepwater - 2.4 % - 11.8 % 800 OffshoreOffshore shelf shelf -7.9 % -16.7 % -25% Oil Shale/tightsands oil -31.5 % -42.4 % Shale/TightOil sands oil -27.6 % -41.6 % 700 OtherOther Onshore onshore -16.7 % -18.5 %

600 -24% Pre-drop capex estimation

500 -24%

400

300

200

100

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Forecast Source: Rystad Energy UCube

18 Global market outlook Global E&P announced capex revision, Billion USD

250 Announced CAPEX revision plans 17.1

15.3 12.5 200 8 4.8 6.5

150

243

100 179

0 2020 investments Majors NOC/INOC Shale-focused Global Canada focused Others 2020 investments before oil crash independent updated

* Logos represent only some of the companies, included in to peer group

Source: Rystad Energy UCube, company reporting, Rystad Energy research and analysis

19 Global market outlook Global new projects E&P investments by sanctioning year, Billion USD (real terms)

800 Other Onshore Oil Sands Shale/Tight oil Offshore shelf Offshore deepwater

700

600

500

400

300

200

100

0 1954 1956 1958 1960 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Source: Rystad Energy UCube

20 Global market outlook Even post corona, total revenues for the oil and gas service sector 2020 is $515 billion

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22 OIL MARKET WEEKLY – Demand report, a weekly report with: • An overview of global oil demand • Oil demand impact in two COVID-19 mitigation scenarios • Impact of oil demand in aviation, ground transportation and road fuels

OIL MARKET WEEKLY – Balances report: • A weekly Commentary with the latest oil market observations • A weekly Executive Summary on the oil market balances, oil supply and demand, and the overall oil market view

OIL MARKET DASHBOARDS and Excel data on: • Oil demand analysis dashboard: split by country, transport type, aviation • COVID-19 dashboard: oil demand impacting two COVID-19 mitigation scenarios

23 Rystad Energy is an independent energy consulting services and business intelligence data firm offering global databases, strategy advisory and research products for energy companies and suppliers, investors, investment banks, organizations, and governments. Rystad Energy’s headquarters are located in Oslo, Norway.

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