Global Energy Outlook 2010-2030

Emerging Markets, Challenges, Opportunities & Winning Strategies for Energy Companies and GE

By Shahzad ParachaBy Shahzad Paracha

2009 Review

Primary Energy Consumption Growth

Global oil consumption Growth • First Decline since 1993

• Global Oil Production Growth +0.4%

• Oil production outside OPEC -1.4% or 610K b/d, the largest decline since 1992

Global Refining Capacity Additions• Led by Asia Pacific (China)

Refining Capacity Utilization • Consistent Decline since 2003

2

+7.2%China

-2.8%USA

-0.6%

+2.8%

85%

Global Natural Gas Consumption

• Below 10 years Historical Average

• Middle East led Above Average 3.1% growth BUT China led..............

Global Gas Production above 10 years Average (3%)

• Output Led by USA

• 10 times than 10 year Average

Natural Gas

• Highest Share of energy consumption

• LNG & LPG share 15%

• 2020 LNG & LPG Demand/Share 30%

Other Fuels:

Global Coal consumption growth

• Worlds fastest growing fuel

• China with 43% consumption share led with 7% growth equivalent to 85% global growth

Renewable Energy Stronger Growth

• Wind & Solar Capacity rise of 30% & 70%

• Driven by 50% rise in USA Wind Capacity surpassing Germany3

+2.5%

+16%

+3.5%

+7.5%

+24.1%

+3.1%

World Primary Fuel Mix 2009

4EIA – September’09

5

6

Total Proved Oil Reserves & Segmentation

Total Proved Oil Reserves Distribution of Proved Oil Reserves (%)

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Total Proved Gas Reserves & Segmentation

Total Proved Gas Reserves Distribution of Proved Gas Reserves (%)

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Reserves to Production Ratios (R/P)

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Global Coal Demand & Supply

ProductionMillion Tonnes Oil Equivalent

ConsumptionMillion Tonnes Oil Equivalent

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Opportunities & Challenges

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Global Supply & Demand Challenges

Surplus Reserves in Middle East, Russia & Africa.

Cost US$ 15 Trillion in Infrastructure: Exploration,

Production & Transportation

Oil Reserves

1. S. Arabia (20% of Global Oil Reserves)

2. Canada

3. Iraq

4. Iran

Gas Reserves & Producers

1. Russia

2. Iran

3. Qatar

4. S. Arabia

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• Major Oil Exporters:

S. Arabia (15% of Total Exports & 2. Russia

• Gas Reserves & Producers (GR&P):

Top 4 constitutes 60% of Total GR&P.

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50 % Global Energy Demand Growth by 2030• Met by 80% Fossil Fuel & 20% Alternatives with

Total Global Investments of 52%, 24% & 21% in Power, Oil & Gas sectors

LPG & LNG Demand Share 40% including UK & EU

• Developing Countries Growth Twice Vs Developed Ones

• 5Bln New Energy Consumers & New development

Escalating demand, rising oil & gas prices, tight refining capacity inducing:

• Cost reductions

• Improvement in Production

• Investment in New Technology for

Improved Margins & Revenue Growth

Global & Regional

Power & Gas

• Efficient technology installation in Power generation

- 52% of Total investments

• Future gas supply assessment, Storage Capacities &

role of LNG & Gas to liquid (GTL)

1. W. Europe supplier, Norway with 45% EU gas reserves

2. Investments in EU (UK focus) Gas Storage Capacities

3. 30% Global & EU LNG Supply Growth by 2020

Upstream (E&P)• High % of Total Oil & Gas Investments

• Increase volume from existing reserves

• Reduce cost of producing reserves

• Partnering & role of NOC’s

• Cost effective technological solutions from suppliers

Refining (Including Petrochemicals)• Environmental compliance investments

• Capex upgrade investment decisions

• Constantly changing global markets

• Cost reduction programs to Improve NIAT due to potential declining margins.

Retail

• Eroding margins in mature markets (later stage of market development)

• BRICS : 135% demand growth by 2030

• Early Stage Markets

India, China, Russia

• Transitional Markets

Brazil

Opportunities

Urbanization

High population & demand growth

Double Digit Fuels market development

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NOC’s Control 80% of global oil reserves

50% in Top 100 companies

High margins & prices inducing:

• Fund growth strategy

• Investment in new technology from service firms like General Electric

Access to Reserves Strategy

• Transition from PSA’s to PSC’s for high ROI and control on reserves

Opportunities & Challenges

• Acquisition of downstream assets

1. Maximize value/barrel

2. Economic diversification

3. Drive domestic industry growth

Raised training & recruitment budges to improve talent pipeline by 2030

• Saudi Aramco allocated $50M pear year

15* IOC’s: International Oil Companies

NOC’s: National Oil Companies

Moving Forward

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Upstream Strategy

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Regional fit for purpose strategy development

• Minimize over–investment in capacity utilization

• Practice for high ROI:

1. Stringent fuel specifications

2. Degradation of crude oil quality

3. High capacity utilization (>90%)

• Appropriate Investments in Projects with Positive NPV on right - Oil prices in range $70-95 in 2010-2012.

• Weighted Average Cost stands $45/boe

• High Payback Investments costing $65/boe

• Capacity additions by building green-field refineries

• Expansion in attractive alternative energy

• US$ 1 Trillion investment by 2030

• Penetration in LNG emerging markets

• US$250 Bln investment to fuel 100% growth by 2020

Downstream Strategy

Regional market entry strategy development.

BRIC emerging economies market development.

Fuel & Non-Fuel Opportunities (Mature Markets): Low Fuel Margins, Efficiency Index & 30% network rationalization 1998-2008

Current Forecourt CR penetration 17% of CR industry.

Target high margin CR & capitalize projected £30 Billion industry by 2020.

Customer centric retailing with RCVP development & implementation:

• BSP, VFM, customer loyalty/penetration, Sales density (£/sqm), Avg transaction value, shopper marketing

• Desired Customer Experience Offer:• Store concepts, formats, branding, channel management

• Site & network operations, CRM, Supply chain management

• Card Payment & terminals, huge gap in demand vs actual

• Locations : Store footprints on consumer insight not property deals

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30% Global & Regional LNG Demand Growth by 2020

EU: 10% & BRIC’s: 50%

IOC’s focus on Global & Regional LNG acquisitions

Gas Supplier Qatar meets 30% of EU, US & Russia demand.

Will meet 20% of UK Gas demand from 2011

UK - 2nd Largest Gas Markets in EU

1999 – 2009 Average demand growth 6%

Gas Fired Power Generation to drive Gas demand till 2020

UK Gas Supply 2016 Proportion:

Domestic production 20%, Imports 80% (Norway 35%, LNG 35%, Continent 10%)

Current Gas Imports 40%

UK Supply Cover Storage

15 days Vs 100 in France & SC/AC only 4%

Investments In Gas Storage :

From 2010-2020 : 14 bcm (SC/AC - 11%)

• Will lead Supply Cover Storage – 45 days

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Regional & UK Gas Demand & Storage

AnnualConsumption (bcm)

Storage Capacity (bcm)

Storage capacity/ Annual consumption (%)

UK 99 4 4

Germany 101 9 19

Italy 86 13 15

France 46 11 25

Few Other Opportunities for Oil, Gas Utilities & Service Companies

Investments by Oil & Gas companies in Upstream generating Order Intake for Vetco Business

Predominantly Surface (On-shore) AND Subsea (Off-shore) Drilling & Production

Gas Fired Plants Roll-out for Electricity Generation using Combined Cycle Turbines

Coal Fuelled Carbon Capture Storage (CCS) Plants Roll-out from 2030 *

• Current Efficiency 35% to rise to 55%

• Potential to Meet 25% of UK Gas / Energy Demand

Oil Refineries :

IOC’s divestments of EU Assets (Less Margins & 1% Growth) and investments in BRIC’s

Alternative Energy:

Huge UK Government Stimulus Packages for 34% CERT by 2020* (Slide 19)

Concentrated Solar Panel (CSP) Market:

$20 Bln Global Industry

Double digit growth in ALL Markets 2010-2030

Wind Farms (On and Off-Shore) –More Potential as costs cheaper

Solar Plants (Farms)

20* In US Coal accounts for 50% Power Generation but Generates 80% Emissions

* CERT-Carbon Emission Reduction Target