The Norwegian Ministry of
Petroleum and Energy
Oslo, 17 February 2015
© OECD/IEA 2015
© OECD/IEA 2015
Oil price plunge triggers market reset
Historical Brent crude oil prices
160
120
140
110
108
100
100
USD/bbl
USD/bbl
120
100
80
•
•
•
102
98
95
93
91
67
70
71
90
87
80
70
60
60
40
50
20
40
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Brent
•
IEA import price assumptions
55
2014
2015
62
2016
MT February 2015
2017
2018
2019
73
2020
MT June 2014
60% drop in crude oil prices June 2014 - early January 2015
Partial rebound since then, but market does not expect full recovery
From backwardation to contango
Is the age of triple-digit oil prices over?
© OECD/IEA 2015
IMF backpedals on economic recovery
4.2%
4.0%
3.8%
3.6%
3.4%
3.2%
3.0%
2014
2015
2016
2017
MTOMR 2015
IMF Jan-15
2018
IMF Oct-14
2019
2020
IMF Jul-14
2015 economic growth revised from 4% to 3.8% and again to 3.5%
over a six-month period
© OECD/IEA 2015
Business as unusual
7
6
Implied OPEC spare
capacity
mb/d
5
4
World demand growth
3
2
1
World supply capacity
growth
0
-1
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
The market response to lower prices is asymmetrical
Supply has become more price-elastic, demand less so
© OECD/IEA 2015
Supply
© OECD/IEA 2015
Slowing supply growth
2.5
2.0
mb/d
1.5
1.0
0.5
0.0
-0.5
2014 2015 2016
OPEC crude capacity
Non-OPEC
2017
2018 2019
OPEC NGLs
World
2020
Global capacity growth cut to annual average 860 kb/d through 2020,
down from 1.4 mb/d in 2008-14
© OECD/IEA 2015
Non-OPEC growth drops from
record high
Annual non-OPEC supply growth
2500
PG and biofuels
2000
Other Asia
China
kb/d
1500
Middle East
1000
Africa
500
Latin America
0
Other Europe
FSU
-500
OECD Pacific
-1000
OECD Europe
-1500
OECD Americas
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total

Non-OPEC supply grows by 3.4 mb/d to 60 mb/d by 2020
 Annual growth slows to average 560 kb/d vs 1.9 mb/d in 2014
© OECD/IEA 2015
US, Brazil and Canada top sources of
growth
Not shown: US supply to grow 2.2 mb/d
kb/d
1 000
800
600
400
200
0
- 200
- 400
- 600
Main growth sources remain the same as before the price drop
© OECD/IEA 2015
Low price cuts mid-term non-OPEC
growth expectations by 2.8 mb/d
Change in 6-year growth outlook (kb/d)
Russia
US
Canada
Non-OPEC Africa
Norway
Colombia
Non-OPEC Middle East
China
Other FSU
-800
-600
-400
-200
0
© OECD/IEA 2015
Diverging supply paths
Change in US liquids production
0.30
2.0
0.20
mb/d
1.5
mb/d
Change in Russian liquids production
0.10
1.0
0.00
0.5
-0.10
0.0
-0.20
2009 2011 2013 2015 2017 2019
Feb 2015
3Q2014
2009 2011 2013 2015 2017 2019
Feb 2015
3Q2014

US production growth slows in 2015-17, then rebounds
 Russian output contracts by 560 kb/d by 2020
© OECD/IEA 2015
North America remains backbone of
non-OPEC growth
US total oil production
14
12
5
mb/d
mb/d
10
8
4
3
6
4
2
2
1
0
LTO
Canada total oil production
6
2008
2010
Gulf of Mexico
2012
2014
2016
NGLs
Other liquids
2018
2020
Other crude and cond.
0
2013 2014 2015 2016 2017 2018 2019 2020
NGLs
Alberta L&M
Bitumen
Synthetics
Other

US production nears 14 mb/d, Canada 5.0 mb/d by 2020
 Most of US output is LTO and NGL by the start of next decade
 Bitumen, synthetics make up 60% of Canada’s production by 2020
© OECD/IEA 2015
US LTO and shale-play condensate
breakevens rise
USD/b
below 40
100%
80%
USD/b
40-60
60%
USD/b
60-80
40%
USD/b
80-100
20%
USD/b
above
100
0%
2014
2015
2016
2017
2018
2019
2020
Source: Rystad Energy

About 41% of US LTO and shale condensate breakeven prices at
$50/bbl or lower in 2014
 Depletion of sweet spots to offset efficiency gains and lower costs
© OECD/IEA 2015
Brazil hit by project delays, low prices
400
kb/d
300
200
100
0
-100
-200
-300
2010
2012
Campos
Brazil total
2014
2016
Santos
2014 forecast
2018
2020
Other

Supply swung back into growth in 2H14
 Petrobras debt and legal problems raise hurdles
© OECD/IEA 2015
Russia biggest casualty of price fall
11.25
11.00
mb/d
10.75
10.50
10.25
10.00
9.75
9.50
2014
2015 2016
Current data
2017
2018 2019
June 2014
2020

Ruble collapse partially offsets drop in dollar prices
 Tax regime blunts impact on companies; government takes biggest hit
 Greenfield startups delayed
 Sanctions hit Arctic and LTO
© OECD/IEA 2015
mb/d
3.5
1.4
3.0
1.2
2.5
1.0
2.0
0.8
1.5
0.6
1.0
0.4
0.5
0.2
0.0
0.0
-0.5
-0.2
-1.0
-0.4
2012 2013 2014 2015 2016 2017 2018 2019 2020
UK
Norway
Other
Ann. Change (rhs)
Thousands
North Sea suffers setback
Price slump delays projects, production contracts through 2020
© OECD/IEA 2015
Low price delays impact of Mexican
reform
3.0
2.9
mb/d
2.8
2.7
2.6
2.5
2.4
2.3
2.2
2014
2015 2016
Current data
2017
2018 2019
June 2014
2020
Growth expected to kick in in 2018-20
© OECD/IEA 2015
Caspian growth elusive
2.0
Azerbaijan total oil production
Kazakhstan total oil production
900
850
kb/d
mb/d
1.8
1.6
800
750
1.4
700
1.2
650
1.0
600
2014
2015
2016
2017
2018
2019
2020
2014
2015
2016
2017
2018
2019
2020

Production gains post-2017 after Kashagan comes online
 Limited success in stemming rapid declines in Azerbaijan’s ACG fields
© OECD/IEA 2015
China’s production holds steady on EOR
5
mb/d
4
3
2
1
0
2007
2009
Daqing
2011
2013
Shengli
2015
2017
Changqinq
2019
Other
Legacy fields, especially Daqing and Changqing,
see EOR benefits through 2020
© OECD/IEA 2015
Biofuels production inches higher
Volumetric
3.0
2.0
mb/d of oil equivalent
mb/d
2.5
2.0
1.5
1.0
0.5
0.0
2013
2014
2015
United States biofuels
OECD Europe biofuels
2016
2017
2018
2019
2020
Brazil biofuels
Rest of the world biofuels
Adjusted for energy content
4%
1.5
3%
1.0
2%
0.5
1%
0.0
0%
2013 2014 2015 2016 2017 2018 2019 2020
World Biofuels, energy adjusted
As % of global road transport fuel demand
Biofuel consumption is mandate-driven
© OECD/IEA 2015
Price drop curbs OPEC crude capacity
growth
mb/d
37
36
35
34
2014
2015
2016
Current data
2017
2018
2019
2020
June 2014
Growth expectations reduced to 200 kb/d annually,
vs 350 kb/d prior to the price drop
© OECD/IEA 2015
OPEC wins back some market share
Share of total supply inches back up,
but not the share of global capacity
© OECD/IEA 2015
OPEC growth hinges on Iraq
0.6
mb/d
0.4
0.2
0.0
-0.2
-0.4
-0.6
-0.8
2014 2015
Iraq
2016 2017 2018
Rest of OPEC
2019
2020
OPEC

Price drop, ISIL add to Iraq institutional and infrastructure constraints
 Total Iraq growth estimated at 1.1 mb/d in 2014-2020; elevated risks
 Low prices can be double-edged
© OECD/IEA 2015
mb/d
UAE to post notable growth
80
3.2
60
3.1
40
kb/d
3.3
20
3.0
0
2.9
-20
2.8
2.7

-40
2014
2016
2017
2018
2019
2020
2014 2015
Offshore growth
2016
2017 2018
Onshore growth
2019
2020
Total
Abu Dhabi, IOCs press ahead with expansion plans


2015
Upper Zakum due to add 250 kb/d by 2017
Stakes in giant onshore Adco concession being awarded
© OECD/IEA 2015
Nigerian capacity to contract

Low oil price further delays costly deep-water projects
 Investment already set back by long-running deadlock over Petroleum
Industry Bill
© OECD/IEA 2015
Libya: OPEC’s wildcard
2.0
mb/d
1.5
1.0
0.5
0.0

2010
2012
2014
2016
2018
2020
Militants target energy industry
© OECD/IEA 2015
Battle for market share just starting

How will OPEC make room for expanding Iraq and an Iran freed from
sanctions?
© OECD/IEA 2015
Demand
© OECD/IEA 2015
Mixed demand response
Revised demand growth prospects 2014-2019
FSU
Middle East
Africa
Latin America
India
US
-600 -400 -200
0
200
kb/d
400
600
800 1000

Low price dampens outlook for oil exporters
 Oil importers enjoy benefits but …
 … weak economic recovery, subsidy cuts, forex, fuel-switching
provide offset
© OECD/IEA 2015
Currency weakness dampens price
effect in many countries
Domestically-priced Brent crude indices, 2008-14
180
160
140
120
100
80
60
40
US
Europe
Russia
China
20
0
Jan2008 Jul2008 Jan2009 Jul2009 Jan2010 Jul2010 Jan2011 Jul2011 Jan2012 Jul2012 Jan2013 Jul2013 Jan2014 Jul2014
© OECD/IEA 2015
mb/d
Modest demand growth still foreseen
3.5
3.5%
2.5
2.5%
1.5
1.5%
0.5
0.5%
-0.5
-0.5%
-1.5
-1.5%
-2.5
-2.5%
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
Other NonOECD
NonOECD Asia
OECD
World Growth Rate
2020

+1.2% per annum, 2014-20
 Below pre-Great Recession trend (1.9%, 2001-07)
 Net gain of 6.6mb/d, nearly 1 mb/d above supply capacity growth
© OECD/IEA 2015
Eastward pull unabated
1998-06
2006-14
2014-20
Europe
36
FSU
-296
34
-79
103
23
Asia/Pacific
680
Americas
Middle East
345
180
158
-1
255
672
633
227
Africa
76
121
142
Average global demand growth
(kb/d)
1998-06
1 352
1.7%
2006-14
853
1.0%
2014-20
1 104
1.2%
© OECD/IEA, 2015
This map is w ithout prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
© OECD/IEA 2015
mb/d
OECD share of demand continues to
decline
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
Other non-OECD
60%
55%
50%
Middle East
Former Soviet Union
Other Asia
China
45%
40%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
OECD
OECD share
2020

Non-OECD demand overtook OECD in 2014
 OECD declines further overall
 Non-OECD continues to grow, but at slower rate
© OECD/IEA 2015
Middle Eastern demand growth
expectations reduced by turmoil, price
Change to prior demand forecast





Still key growth area at 2.6% gains per annum, or 1.4 mb/d total
over 2014-20
War and unrest take toll
Lower price cuts exporter-country GDP
Countries with low buffers harder hit
Subsidy reductions
© OECD/IEA 2015
China shifting gears
1,2
LPG
1,0
Naphtha
mb/d
0,8
0,6
Motor gasoline
0,4
Jet and kerosene
0,2
Gasoil/diesel
0,0
Residual fuel
-0,2
Other products
-0,4
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

+2.6% per annum, 2014-20
 Slower stage of economic growth, IMF foresees sub-7% GDP trend
 Focus shifts from oil-intensive exports to consumer sector
 Diesel less dominant
© OECD/IEA 2015
Indian demand seen gaining momentum
mb/d
0.4
Other products
0.3
Residual fuel
0.2
Gasoil/diesel
Jet and kerosene
0.1
Motor gasoline
0.0
Naphtha
-0.1
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
LPG

+3.4% per annum, 2014-20
 Growing confidence in economy
 ‘Worst’ of subsidy cuts has passed
© OECD/IEA 2015
OECD Asian demand contracts further
0.50
Other products
0.40
Residual fuel
mb/d
0.30
Gasoil/diesel
0.20
0.10
Jet and kerosene
0.00
Motor gasoline
-0.10
Naphtha
-0.20
LPG
-0.30
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

Non-OECD Asia Oceania -0.6% per annum, 2014-20
 Ongoing power-sector switching, out-of-oil
 Weak macroeconomic momentum and heady efficiency gains
© OECD/IEA 2015
European demand outlook weak on slow
rebound
16
Other products
14
Residual fuel
mb/d
12
Gasoil/diesel
10
8
Jet and kerosene
6
Motor gasoline
4
Naphtha
2
LPG
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

-0.7% per annum, 2014-20
 Persistent macroeconomic weakness curbs demand
 Deflation concerns
 Efficiency gains
© OECD/IEA 2015
US bucks the OECD demand trend
mb/d
0.6
Other products
0.4
Residual fuel
0.2
Gasoil/diesel
0.0
Jet and kerosene
-0.2
Motor gasoline
Naphtha
-0.4
LPG
-0.6
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

+0.3% per annum, 2014-20
 Supported by robust macroeconomic backdrop
 Efficiency gains trim gasoline and jet/kerosene
© OECD/IEA 2015
Lower prices at the pump lift US
gasoline demand outlook
Efficiency gains still cuts use
© OECD/IEA 2015
Marine Bunkers
© OECD/IEA 2015
Emission rules catch up with marine sector

0.1% sulphur-content cap in ECAs effective 1 January 2015
 Elsewhere 3.5% cap since 2012, to be cut to 0.5% in 2020 or 2025
 Uncertainty on timing
© OECD/IEA 2015
Bunker fuel mix to undergo step change
Oil-based marine fuel consumption in international navigation
4.50
4.00
mb/d
3.50
Gasoil
3.00
2.50
2.00
1.50
1.00
Residual Fuel Oil
0.50
0.00
2000

2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
As the global cap is implemented, 3 options available to ship owners: gasoil,
scrubbers, LNG
 Up to 2.2 mb/d could switch from fuel oil to marine gasoil:


Marine gasoil notionally set to rise to 3.1 mb/d
Residual fuel oil set to decrease to 1 mb/d
© OECD/IEA 2015
Oil Trade and Refining
© OECD/IEA 2015
Crude trade has peaked
Inter-regional crude trade
36.0
35.5
mb/d
35.0
34.5
34.0
33.5
33.0
2006
2008
2010
2012
2014
2016
2018
2020

Crude trade peaked at 36 mb in 2012 and declined swiftly over 2012-2014
on lower US import needs, higher Middle East runs
 Declines expected to moderate and partially reverse in the medium term
© OECD/IEA 2015
World crude markets fragmenting
Crude Exports in 2020 and Growth in 2014-20 for Key Trade Routes 1
(million barrels per day)
0.5 (-0.1)
OECD
Europe
0.2
3.6
(+0.1)
(-0.5)
OECD
Asia
Oceania 3
0.4
(+0.1)
OECD
Americas2
2.0
(-0.5)
1.4
0.5
(-0.1)
(+0.1)
0.2
(+0.2)
1.1 (+0.3)
4.2
(-0.6)
China
3.8
Other Asia
1.5
1.4
(+0.6)
(+0.1)
-0.2
1.5
1.7
(+0.5)
5.5
(+0.1)
(-0.3)
0.6
(+0.4)
Red number in brackets denotes growth in period 2014-20
1
Excludes Intra-Regional Trade
2
Includes Chile
3
Includes Israel
0.7
(+0.1)
Crude trade will continue to shift eastwards
© OECD/IEA 2015
Non-OECD crude imports expected to
overtake the OECD in 2020
1 500
1 000
1 000
500
500
0
0
- 500
- 500
-1 000
-1 000
-1 500
-1 500
-2 000
Africa

Regional crude imports, yearly change
kb/d
kb/d
Regional crude exports, yearly change
2014 2015 2016
FSU Latin America
2017 2018 2019 2020
Middle East OECD Europe OECD Americas
2014 2015 2016 2017
OECD Asia Oceania Other Asia
2018 2019
Other Europe
2020
China
Later than previously expected following:
 Impact of low prices on North American and North Sea production
 Slowing non-OECD demand growth
© OECD/IEA 2015
Middle Eastern producers compete for
market share in Asia
Middle East export growth, 2014-20
China
Oth Asia
OECD Eur
Africa
FSU
Oth Eur
L. America
OECD Am
OECD AO
-0.60
-0.40
-0.20
0.00 0.20
mb/d
0.40
0.60
0.80
End in sight for the “Asian premium”?
© OECD/IEA 2015
Russia’s “pivot to Asia”
FSU export growth, 2014-20
China
Oth Asia
Oth Eur
Mid East
L. America
OECD Am
Africa
OECD AO
OECD Eur
-0.60
-0.40
-0.20
mb/d
0.00
0.20
0.40
 Rosneft supply deals with CNPC, Sinopec, Essar, PetroVietnam
 European crude demand attrition
© OECD/IEA 2015
Refining surplus lingers despite scaling
back
Global crude distillation capacity additions
kb/d
2 000
OECD Americas
1 500
OECD Europe
1 000
OECD Asia Oceania
China
500
Other Asia
0
Middle East
- 500
Other non-OECD
Total Net
-1 000
2014
2015
2016
2017
2018
2019
2020

New capacity of 6.4 mb/d by 2020, led by non-OECD Asia, Middle East
 Brief margin respite in 2014 on shutdowns
© OECD/IEA 2015
Non-OECD accounts for 90% of growth
Others
14%
OECD
10%
Latin America
8%
China
24%
Middle East
26%
Other Asia
18%

Non-OECD Asia adds 42% of total, or 2.7 mb/d of crude distillation capacity
 Middle East expands capacity by a further 1.7 mb/d, taking total capacity to
10.3 mb/d at the end of the decade
© OECD/IEA 2015
Non-OECD expansions front-loaded
Non- OECD refinery capacity additions
1.8
China
1.6
mb/d
1.4
Other Asia
1.2
Middle East
1.0
0.8
FSU
0.6
0.4
Latin America
0.2
Africa
0.0
2014
2015
2016
2017
2018
2019
2020

Projects planned during boom years are now being completed –
strong growth in 2014 despite weak product demand
 Expansions slow at the end of the forecast period, but many projects
could be revived if conditions allow
© OECD/IEA 2015
Lower surplus capacity props up margins
Simple refining margins
7.0
8
6.0
6
4
5.0
$/bbl
mb/d
Global surplus refinery capacity
4.0
2
0
3.0
-2
2.0
-4
1.0
-6
0.0
-8
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
2006
2008
2010
2012
2014
2016
2018
2020
Med Urals
NWE Brent
NWE Urals
Singapore Dubai

Surplus global refining capacity hit 6-year low ~3 mb in 2014 as
OECD refinery closures offset new non-OECD capacity
 Refinery margins gets significant boost from mid-year
 New capacity puts system under renewed pressure from 2015
onward
© OECD/IEA 2015
More OECD closures in the cards
OECD refinery closures
OECD refinery utilisation rates
1 400
100%
mb/d
1 200
90%
1 000
800
80%
600
70%
400
60%
200
0
50%
2008
2010
Americas
2012
Europe
2014
Asia Oceania
2016
2007
2009
Americas
2011
2013
Europe
2015
2017
2019
Asia Oceania

Total of 4.8 mb/d of capacity shut in OECD since 2008
 Additional 450 kb/d announced in Asia Oceania through 2017
 More shutdowns likely to be announced
© OECD/IEA 2015
Light distillate surplus emerge
Product supply balances: naphtha / gasoline
Regional balances in 2014 and 2020 (kb/d)

OECD Americas turning naphtha/gasoline net exporter
 European excess persist despite refinery shutdowns
© OECD/IEA 2015
Looming diesel wall
Fuel oil supply/demand balance
40.0
10.0
38.0
9.0
mb/d
mb/d
Middle distillate supply/demand balance
36.0
8.0
34.0
7.0
32.0
6.0
30.0
5.0
2012
2020
Refinery Supply
Demand
2012
2020
Refinery Supply
Demand

Further refinery investments are required to produce the necessary gasoil
 Higher middle distillate demand will increase distillate cracks and shipping costs
 Adjustments in midstream infrastructure required
© OECD/IEA 2015
Europe’s middle distillate import
dependence
Product supply balances: gasoil / kerosene
Regional balances in 2014 and 2020 (kb/d)

Asia set to become a middle distillate net-importer
 China to become a gasoil exporter?
© OECD/IEA 2015
Fuel oil challenges
Product supply balances: fuel oil
Regional balances in 2014 and 2020 (kb/d)

Fuel oil tightens ahead of 2020, as refiners upgrade
but then become massively oversupplied on marine shift
 Global fuel oil demand remains remarkably stable through 2019
© OECD/IEA 2015
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