THE OIL PLATEAU
Ray Leonard
President and CEO
Hyperdynamics Corporation
New York, June 2012
The Oil Plateau: Definition
• “The Oil Plateau” represents the period from
2005-2030 with relatively flat non-renewable oil
production of 84-88 Million BOPD
• The period is characterized by declining
conventional production, having peaked in
2005, with the gap filled by deepwater and nonconventional production of significantly higher
lifting costs
Oil Production categories
•
Conventional Oil: Oil (including condensate) with API gravity lighter than
15 degrees produced onshore or offshore in less than 400 MWD
• Deepwater Oil: Oil produced in water depths greater than 400 M
• NGL’s(Natural Gas Liquids): Liquids extracted from production of natural
gas
• Heavy Oil: Oil found in conventional reservoirs with API gravity equal to
or heavier than 15 degrees induced to flow by various artificial means
• Shale Oil: Oil produced from rocks considered non-reservoir (or source
rocks) by means of artificial fracturing
Data sources: BP Statistical Review of World Energy, Survey of
Energy Resources World Energy Council-Natural Bitumen and Heavy
Oil, World Oil Annual Forecasts, US Energy Information Agency,
International Energy Agency
Problem #1: Conventional Oil
Production passed Discovery in the 1980’s
Problem #2: Imbalance between
reserves and production (2010)
OPEC holds 73% of
reserves but only
produces 40%
Rest of world (non-FSU)
holds only 14% of
reserves but also
produces 40%
OPEC
OPEC
FSU
FSU
ROW
ROW
CONVENTIONAL
PRODUCTION
•
•
•
•
•
•
•
Peak production reached in
2005
Production divided into OPEC,
Former Soviet Union (FSU)
and Rest of World (ROW)
ROW production peak in
2000, declining at 2% per year
FSU plateau of conventional
production from 2010-2020
before decline of 1.2%/year
Gulf contribution to OPEC
conventional production
increasingly dominant
ROW share of conventional
production drops from 49% to
33% during period
Totals do not include 2.6%
processing gain
Total Conventional
OPEC Conventional
70000
ROW Conventional
FSU Conventional
60000
50000
40000
30000
20000
10000
0
2000
2005
2010
2015
2020
2025
2030
DEEPWATER
PRODUCTION
• 85% of reserves and
production along Atlantic
Margin
• Total reserves 115 BBO
• 55 BBO to be discovered post
2012
• 50% of discovered oil in 20062010 found in deepwater
• About one third of reserves and
production of deepwater in
OPEC
• Peak production of 11 MMBOD
2020-2022
• Production rates do not include
2.6% processing gains
12000
GOM Deepwater
Brazil Deepwater
OPEC Deepwater
10000
Other Non OPEC DW
Total Deepwater
8000
6000
4000
2000
0
2000
2005
2010
2015
2020
2025
2030
DEEPWATER
PRODUCTION
Atlantic Margin
Special set of circumstances
needed for major deep water oil
accumulations
•Narrow Seaway, Good Deep Water
Source Rocks
•Passive tectonic environment,
subsidence
•Major River Systems, Deep
Burial, Good Reservoirs
•Only one era and continental
configuration fits
Production characteristics of
deepwater fields
• Rapid decline rates due to
expense of reworking wells
• High production abandonment
threshhold due to costs
UNCONVENTIONAL
PRODUCTION 2000-2030
•
•
•
•
•
•
•
•
Production level largely independent of
reserves
Unconventionals (except NGL’s) have
heaviest environmental footprint
NGL increase due to increased gas
production and restrictions on flaring, use of
gas as power source in ME
Significant increase in NGL’s in FSU in
2020-2030 as Arctic gas/condensate fields
come on stream
63% of NGL’s produced by OPEC and 25%
by USA in 2010
Heavy oil increase from 1.2 in 2010 to 2.4
MMBO/D in 2030 mainly in Venezuela
Canadian tar sands increase of 0.1
MMBD/year from 1.6 MMBO/D in 2010 to
3.6 MMBO/D in 2030
Totals do not include 2.6% processing gain
25000
Shale oil
Tar sands and Heavy oil
20000
NGL's
Total
15000
10000
5000
0
2000
2005
2010
2015
2020
2025
2030
•
•
•
•
•
Play emerged first in USA due to
fiscal terms, database, service
industry, competition and
legal/regulatory framework in
many states
Significant international
production probably 10 years
delayed
Rapid decline in individual wells
(approx. 75% in first year)
followed by slow decline at low
rate
Wide range of costs due to
variation in thickness, depth,
reservoir pressure and richness
of shale
Rapid production increase to
2.25 MMBOD in 2015 (currently
1 MMBOD) with slower growth
afterwards
SHALE OIL
PRODUCTION
COST
•
•
•
•
•
•
OPEC low cost becomes higher portion
of conventional over time
Secondary and tertiary recovery is
higher cost and becomes higher
proportion of conventional over time
NGL netbacks reduced due to lower
price of product
Shale Oil cost dependent upon
individual reservoirs with multiple factors
Deepwater shifting to greater water
depth and higher cost over time
Arctic offshore costs likely to be
comparable to deepwater >5000’ water
depth
Heavy oil/tar sands cost range likely to
be constant, however lower price of
product reduces netback
Barnett
7500'+
Water Depth
90
80
Syncrude
Unconventional and Deep Water Associated
70
Operator Cost ($/bbl)
•
100
60
Bakken
50
40
Rest of World
Cold Heavy Oil
30
20
Marcellus
10
OPEC 0
Conventional Associated
1500'‐4000'
Water Depth
Changing proportions of conventional
(low cost) production 2000-2030
Conventional portion of
OPEC production stabilizes
at 65% due to Gulf reserves
Conventional portion of ROW
production drops to 50% by
2030 and will continue to drop
100%
100%
90%
90%
80%
80%
70%
70%
NGL's
60%
NGL's
60%
50%
Heavy Oil
50%
Deepwater
40%
Deepwater
30%
Conventional
40%
Conventional
30%
20%
20%
10%
10%
0%
0%
2000 2005 2010 2015 2020 2025 2030
Tar Sand
Oil Shale
WORLDWIDE NONRENEWABLE
PRODUCTION
2000-2030
• Production plateau of 8488 MMDO/D from 20052030
• Conventional Oil Peak in
2005 followed by
1.2%/year decline
• Deep water peak in 2020
• Unconventional (tar sands,
heavy oil, oil shale and
NGL’s) average increase
of 3%/year
• Total production includes
2.6% processing gain
Conventional
Deepwater
Unconventional
Total
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
2000
2005
2010
2015
2020
2025
2030
Implications of Oil Plateau
•
•
•
•
•
•
Reaching of Oil Plateau in 2005 coincided with start of major price rise
as increasing demand eliminated excess capacity
With strong contributions from deepwater GOM, shale oil and NGL’s,
US non-renewable oil production peaks in 2015-2020 period at 11
MMBOD, reducing import level to half of 2005
OPEC share of world non-renewable liquids production constant at 42%
through 2020, then increasing to 44% by 2030
FSU production flat through 2030 with larger share of unconventional
(NGL and possibly shale oil) coming after 2020
Increasing share of liquids coming from high cost production (heavy oil,
tar sands, deepwater) puts effective floor on oil price near current level
Inability to raise non-renewable oil production above current level
coupled with continued demand increase will result in consistent
upward pressure on oil prices
Two of the most foolish statements
of the past 100 years
“Cheap Oil Forever” Newsweek,
May, 2009
•
“Peace in Our Time” Neville
Chamberlin, August, 1938