Transcript No Slide Title

GROPPE, LONG & LITTELL
OIL AND GAS ANALYSTS AND FORECASTERS
HENRY GROPPE
E.W. LONG, JR.
1111 BAGBY, SUITE 2330
HOUSTON, TEXAS 77002
GEORGE S. LITTELL
PHONE (713) 658-1193
FAX
(713) 658-1196
WEBSITE www.groppelong.com
EMAIL
[email protected]
PEAK OIL: MYTH VS. REALITY
Presentation to
DENVER WORLD OIL CONFERENCE
November 10, 2005
By
Henry Groppe
1
PEAK OIL: MYTH VS. REALITY
Major Myths and Misperceptions
 There can be meaningful discussion of future oil supply
and demand unrelated to its price.
 The future of oil can be forecast as a straight line
extrapolation of trends most recently experienced.
 Reliable oil production forecasts can be derived from
reserve data.
 Geologists’, companies’ and governments’ forecasts of the
timing, cost and volume of oil production from major new
resource discoveries and developments are reliable.
 Exploitation of lower grade oil resources, i.e. – Canadian oil
sands and heavy oil, Venezuela Orinoco heavy oil, Western
U.S. oil shale, will replace depletion of conventional oil and
grow world oil production.

World oil production is on the verge of precipitous decline
signaling the end of the economic world as we know it.
 World oil production will grow fifty percent during the next
twenty-five years at a reasonable price through the
application of continually improving technology and
support continuing growth in world oil consumption.
2
Reality
 World crude oil production is peaking.
 Depletion is real.
 Exploration is a rational process.
 Production will decline irreversibly.
 Liquids from the growing international natural gas industry
will supplement crude oil supplies.
 High prices are required to constrain consumption. There
is no such thing as scarcity and no such thing as surplus.
There is only price.
 Transportation is the dominant growing use for oil.
 High cost oil will be replaced with cheaper natural gas and
other substitutes in stationary fuel use in developing
economies as occurred in OECD countries in the last oil
crisis.
 The world oil industry will continue to operate essentially at
capacity with permanent major price volatility.
3
WORLD CRUDE OIL PRODUCTION
Million Barrels
Per Day
$/Barrel
Actual
70
Forecast
$100
$90
60
$80
50
$70
$60
40
Production
(Left Scale)
$50
30
$40
$30
20
$20
10
$10
Arabian Light Price
(Right Scale)
0
1945
$0
1955
1965
1975
1985
1995
2005
2015
4
NON-OPEC CRUDE OIL PRODUCTION
Million Barrels Per Day
(Excluding Eastern Europe)
10
Actual Forecast
9
8
7
6
5
United States
Norway
& UK
4
Canada
3
Mexico
China
2
1
0
1945
1955
1965
1975
1985
1995
2005
2015
5
EASTERN EUROPE PETROLEUM PRODUCTION,
CONSUMPTION & EXPORTS
Million Barrels Per Day
14
Actual
Production
Forecast
13
12
11
10
Expectation with
no collapse of
Soviet Union
Deliveries
9
8
7
6.3
6.1
6
5
4
3
Net Exports
2
1
0
1975
1980
1985
1990
1995
2000
2005
2010
2015
6
OPEC CRUDE OIL PRODUCTION
Million Barrels
Per Day
Actual Forecast
30
Iraq
25
Saudi Arabia
20
Kuwait
15
UAE
10
Other OPEC*
5
0
1985
1990
1995
2000
* Excludes Ecuador & Gabon who withdrew from
OPEC in 1993 & 1996 respectively and Indonesia
which will soon be a net importer.
2005
2010
2015
7
WORLD PETROLEUM PRODUCTION
Actual
Million Barrels Per Day
Forecast
110
EIA
100
90
79.0
80
78.5
Other *
76.1
70
67.9
65.8
NGL **
62.7
60
50
55.9
OPEC Crude Oil
40.4
40
30
36.0
Eastern Europe Crude Oil
29.8
25.5
20
Other Non-OPEC Crude Oil
10
0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
* alcohols, coal liquefaction, and gas to liquids
** condensate, natural gasoline, butanes, propane, and ethane
8
WORLD PETROLEUM DELIVERIES
Million Barrels Per Day
Actual
90
Forecast
81.7
82.5
80
70
65.9
57.5
60
50
Rest of
World
40
37.6
30
United States
20
10
0
20.4
18.9
15.2
15.1
8.9
Western Europe 8.6
6.2
Japan, Canada,
Australia & New Zealand
1975
1980
1985
1990
1995
2000
Includes crude oil, other liquids and processing gain
2005
2010
2015
9
WORLD OIL USE BY SECTOR
Million Barrels
Per Day
50
Transportation
40
51%
Industrial &
Power
30
39%
20
10
Residential &
Commercial
10%
0
10
MUNICIPAL POLICIES FOR A HIGH OIL PRICE ENVIRONMENT
Improve transportation efficiency and mobility.
In particular, improve options and costs for low income
employees
who
are
automobile
dependent
for
transportation to places of work.
Continue enhancing the environment for inner city and close
in living.