Denver World Oil Denver World Oil ConferenceConference

The Peak Oil ContextThe Peak Oil Context

PETRIEPETRIE PARKMAN & Co.PARKMAN & Co.

Thomas A. Petrie, CFAThomas A. Petrie, CFAChairman & CEOChairman & CEO

Petrie Parkman & Co. Petrie Parkman & Co.

November 11, 2005November 11, 2005

The challenge of Peak Oil

• To meet a challenge

• You first have to recognise you face a challenge

• I aim to show you that:

• ‘Peak Oil’ is real and imminent

• That time is short

• That adaptation will not be easy

84.782.6

80.578.5

76.574.6

84.7

80.5

76.4

72.6

69.0

65.5

84.7

77.9

71.7

66.0

60.7

55.855

60

65

70

75

80

85

2005 2006 2007 2008 2009 2010

8% Decline 5% Decline 2.5% Decline

Current World Production in Serious Decline Current World Production in Serious Decline

(Millions b/d)

-19.2

-28.9

-10.1

Conclusion: Depletion Matters

Reality and Illusion

0

500

1000

1500

2000

2500

1930 1950 1970 1990 2010 2030

Cu

mu

lati

ve D

isco

very

, Gb

Inflexion due tofalling Discovery

Illusion

As ReportedActual

Reality

2

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.

Reality

4

0

1

2

3

4

5

6

7

8

9

10

1945 1955 1965 1975 1985 1995 2005 2015

Mexico

Canada

Norway& UK

United States

ForecastActual

China

NON-OPEC CRUDE OIL PRODUCTIONMillion Barrels Per Day

(Excluding Eastern Europe)

3

0

10

20

30

40

50

60

70

1945 1955 1965 1975 1985 1995 2005 2015

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Arabian Light Price(Right Scale)

Million BarrelsPer Day $/Barrel

Production(Left Scale)

WORLD CRUDE OIL PRODUCTION

Actual Forecast

0

10

20

30

40

50

Million BarrelsPer Day

WORLD OIL USE BY SECTOR

Transportation

Industrial & Power

Residential & Commercial

51%

10%

39%

9

Rotary Table

Tongs

Draw works

Rotary Chain

Slips

The fundamentals of rotary drilling are the same as 100 years ago.

Shedding Light on Saudi Arabia’s Oil

• 5 super giant oilfields made up 90% of oil output.

• 3 giant oilfields made up 8%.

• These oilfields are between 40 and 60 years old.

• All are reaching point of decline.

• Half of “proven reserves” are “questionable.”

• Remaining oil is harder to produce.

0

50

100

150

200

250

300

SaudiArabia

Canada Iran Iraq Kuwait Abu Dhabi Venezuela Russia

Billions of barrels of oil

Source: Oil & Gas Journal

Global Crude Reserves

Projected Oil Sands ProductionMillions of barrels per day

Source:CAPP, RIWG, Alberta Chamber of Resources

0

1

2

3

4

5

2004 2006 2010 2015 2020 2030

5 million +

Reserves:(2)

Oil

Natural Gas

Coal

Oil Demand 2025(1)

0

10

20

30

40

50

60

70

% o

f W

orl

d

North America Middle East Emerging Asia

(1) EIA/IEA Outlook 2005, Table A.4(2) BP Statistical Review & World Energy, June 2005

The Growing Gap

0

10

20

30

40

50

60

1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

bil

lio

n b

arre

ls

Past Discovery

Future Discovery

Production

The Real Discovery Trend

Past discovery according to ExxonMobil

Denver World Oil Denver World Oil ConferenceConference

The Peak Oil ContextThe Peak Oil Context

PETRIEPETRIE PARKMAN & Co.PARKMAN & Co.

Thomas A. Petrie, CFAThomas A. Petrie, CFAChairman & CEOChairman & CEO

Petrie Parkman & Co. Petrie Parkman & Co.

November 11, 2005November 11, 2005