Third OPEC International Seminar OPEC in a New Energy Era: Challenges and Opportunities 12-13 September 2006,Vienna, Austria Oil Production Capacity Expansion HE Dr Chakib KHELIL, Minister of Energy and Mines, Algeria Outline I. Prospects for Oil Demand & Supply II. OPEC Upstream Capacity Expansion Plans III. NOC/IOC Co-operation IV. Concluding Remarks 1 I. Oil Demand & Supply World Primary Energy Demand Million toe Source: OPEC 2 I. Oil Demand & Supply Conventional & Non-Conventional Oil Resource Conventional oil: Non-Conventional Oil: ~6-8 Trillion barrels of oil in place ~7 Trillion barrels of oil in place Remaining Tar Sands Recoverable Tar Sands Produced OilOil ShalesShales && BitumenBitumen 38%38% 39%39% Enhanced ExtraExtra Oil Recovery Heavy Oil Target Heavy Oil 23%23% Challenge : Challenge : Improved recovery technologies Cost-effective extraction technologies needed needed Source: IEA World Energy Outlook 2004 3 I. Oil Demand & Supply Proved Reserves vs. Non-OPEC Supply Growth Proved (Oil) Reserves Non-OPEC Supply Growth Billion barrels Year on Year Changes (mb/d) 1200 2,000 1,500 900 1,000 500 600 0 OPEC 300 -500 FSU FSU Non-OPEC Ex FSU -1,000 Non-OPEC 0 -1,500 1980 1984 1988 1992 1996 2000 2004 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Est Est Source: BP 4 I. Oil Demand & Supply Increase in Demand Met by OPEC 1,000 b/d 2500 2300 1900 2000 1500 1400 1500 1100 1100 1000 800 800 500 400 500 300 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 -500 -500 -1000 -1500 -1400 -1600 -2000 NB: Figures include crude oil, condensates and NGL’s Source: IEA 5 II. OPEC Upstream Capacity Expansion Plans Erosion in OPEC Spare Capacity : How long ? 85 20% 80 18% Global Production Capacity 16% 75 14% 70 12% 65 10% 60 Total World Oil Output Millions bpd 8% 55 6% 50 1985: Spare Capapcity of around 4% 10 million bpd 45 2% 40 0% 4 74 976 78 80 84 90 96 00 002 1970 1972 19 1 19 19 1982 19 1986 1988 19 1992 199 19 1998 20 2 2004 Source: IMF & BP 6 II. OPEC Upstream Capacity Expansion Plans E & P Expenditure 120 240 110 World 220 Capacity 100 World 200 90 Demand 180 80 160 70 140 60 120 50 E&P Expenditure 100 Oil Price $/bbl Oil Rate MMbd 40 80 Oil Price $/B 30 60 20 40 E&P Expenditures $ Billion 10 20 0 0 1970 1975 1980 1985 1990 1995 2000 2005 Source: IHS, BP, IEA, OPEC & Salomon Smith Barney. 7 II. OPEC Upstream Capacity Expansion Plans OPEC Crude Capacity Expansion Plans Mb/d 40 OPEC Crude Oil Capacity Forcast Est. Demand for OPEC Crude 35 30 25 20 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source : OPEC 8 II. OPEC Upstream Capacity Expansion Plans Cumulative OPEC investment requirements vs. Demand estimations 500 Higher Growth DAU 400 Lower Growth 300 $ 80 - 130 billion 200 $(2004) billion $ 230 - 470 billion 100 $ 150 - 290 billion 0 2004 2010 2015 2020 Call on OPEC Oil (*) : Lower Growth 34 37 41 DAU 35 40 46 Higher Growth 36 42 49 (*) Including NGL’s Source : OPEC 9 III. Producers - Consumers Dialogue : The Challenges • High prices contribute to record cash flows for E&P companies but intensify competition for opportunities; • High service costs and declining size of discoveries are increasing risk capital exposure and putting pressure on returns; • New efforts are required to overcome the challenges in today environment : They may force energy companies (IOCs, NOCs and Independents) to Join efforts to capitalize on competitive advantages ( expertise, operating experience and technology). 10 III. Producers - Consumers Dialogue : OPEC efforts 1 – International Energy Forum (IEF) with Secretariat in Riyadh; 2 - Joint Oil Data Initiative (JODI); 3 – OPEC Bilateral dialogues ( IEA; EU; China; India; Russia…); 4 - OPEC Seminar. 11 IV. Concluding remarks: - The resource base is sufficient to meet expected world oil demand growth, However, - Medium-term supply outlook presents real energy policy challenges, Hence, Without reserve additions, Non-OPEC countries will face increasing challenges to expand conventional oil production, OPEC will face the challenge of timely expanding its production capacity in order to both meet demand growth and to contribute to oil market stability. 12.