Middle East Energy May 2013

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Middle East Energy Outlook

SP Jain

Dubai, May 2013

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Outline

1. Global and Middle East oil & gas export patterns

2. The regions internal demand

3. Fiscal challenges

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Key messages

Each MENA country faces different, though related, challenges

MENA will remain the key oil & gas exporting region, but, with sub-Saharan Africa,

oriented ever more towards Asia

Asia a secondary but growing investor in MENA and a massive player in sub-

Saharan Africa, mostly by China

Oil & gas will continue to be the bedrock of the MENA economy, but cannot drivegrowth as it did over the last decade

Sub-Saharan Africa is differentoil/gas export-led growth remains vital

For the first time, MENAs internal demand is increasingly important and challenging

Political unrest means investment risks but also new pressures for reform &

economic growth

The confluence of these factors means new fiscal challenges

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Middle East energy sector : Oil R/P ratio

Source: BP Statistical Review 2012

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World proved oil reserves reached 1652.6 billion barrels at the end of 2011, sufficient to meet 54.2 years of global production.

The Middle East region holds 48.1% of global proved reserves

but the large increase in its production reduced the regions R/P ratio despite an increase in reserves.


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Middle East energy sector : Gas R/P ratio

Source: BP Statistical Review 2012

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World proved natural gas reserves at end-2011 were sufficient to meet 63.6 years of production.

The Middle East still holds the largest reserves (38.4% of the world total, compared with 37.8% for Europe & Eurasia)

with an R/P ratio of over 150 years.


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Middle East to play a key role in future oil demand

Source: BP Energy Outlook 2030Dated Jan. 2012 6

Source: APICORP as of Jan. 2012

Dated Jan. 2012

2030 ENERGY OUTLOOK


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Middle East/Africa oil exports orient towards Asia

In aggregate, Russia/Central Asia supplies

Europe, Middle East/Africa supplies Asia,Americas self-sufficient

But Middle Eastern oil exports rise little

OPEC restraint

domestic consumption

OPEC itself forecasts slowly-falling market

share from 34% today to 32% by 2015-35 5.7 Mbpd increment from 2010 to 2035,

compared to:

Iraq +6.5 Mbpd by 2020?

Kuwait +1 Mbpd by 2020

UAE +0.7 Mbpd by 2017

Libya +0.5 Mbpd by 2017

Revival in Iran?

Venezuela?

Africa exports fairly flat but sub-

Saharan Africa grows largely at expense of

North Africa (Algeria, Egypt decline)

-35.0

-25.0

-15.0

-5.0

5.0

15.0

25.0

1990 2000 2010 2020 2030

Oilexports(millionbbl/day)

North America S & C America

Europe & Eurasia Middle East

Africa Asia Pacific


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US oil imports declining; Gulf not yet hit

US oil imports have fallensteadily since their August-2006

peak

The burden has been taken up

by OPEC and Africa

US imports from the Gulf have

not yet fallen much, if at all

Shale oil replacing African

light, sweet crudes

Saudi objective to

maintain US market share

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

Jan-2006 May-2007 Oct-2008 Feb-2010 Jul-2011 Nov-2012

USimports(kbbk/month)

Total imports

Gulf

OPEC

Africa


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Shale gas can reshape gas trade flows

White: satellite imagery of lights = energy demand

Purple Red: global gas basins, in increasing size of resources (USGS)

Yellow: main current and future export routes for Middle East gas

Significant shale gas potential

Less LNG demand inEurope?

North African

shale gas toEurope

Australian shale-to-

LNG

Lower Chinese (andIndian?) LNG imports

North American

shale-to-LNG

v

New conventional gas

More intra-MENA gastrade?


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Only modest growth in gas exports

Middle East and Africa are

the two major exportingregions

Asia is the major importing

region

Russia supplies Europe

Big change is the emergenceof North American gas exports

after 2015

However, total Middle East

gas exports do not grow much

-35.0

-25.0

-15.0

-5.0

5.0

15.0

1990 1995 2000 2005 2010 2015 2020 2025 2030

Gasexports(Bcf/day)

North America S & C America

Europe & Eurasia Middle East

Africa Asia Pacific


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Africa a tale of three regions

North similar

challenges to Middle

East

West some new

producers. Nigeria & Angola

heavyweights; some growth

potential. Growing Chineseinvolvement.

East exciting new

exploration frontier

(mostly gas). Exports

oriented to Asia


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Abu Dhabi Energy Issues


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UAE: Oil & Gas Infrastructure

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OIL INFRASTRUCTUREMAP


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Worlds 9th largest crude producer and 5th largest net

exporter

Abu Dhabi accounts for over 90% ofUAEs upstream sector

Major capacity expansion program underway from 2.5m bpd

(2011) to 3.5m bpd (2017); 40% increase

Over US$50 billion of investments required in upstream in

the UAE alone during this 5-year plan

APICORP (January 2012) ranks UAE as second highest

investor in the MENA region with US$ 76 billion of energyinvestments expected in 2012-2016 across the full value

chain

UAE Energy - Overview

2.5

3.5OIL PRODUCTION TARGET

MBPD

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0

2

4

6

8

10

12

2009 2010 2011 2012 2013 2014 2015

ADCO ZADCO Upper Zakum ADMA Shah Gas Other Fields

CapitalExpenditure

(US$

Billion)

PROJECTED

7.8

6

9.7

10.5

9.1

7.3

UAE Historical & Projected Capex in Upstream (2009-2015)______________________________________________________________________________________

HISTORICAL

5.9

2014: Expiration of ADCO current

Concession Expected Additional Capex

notably in EOR

Abu Dhabi Vision 2030 - Upstream Objective: Oil production capacity ramp up from 2.5 Mbpd in 2011 to 3.5 Mbpd

by 2017

15Source: WoodMackenzie, MEED


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Fiscal Challenges


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GCC Economic growth generally strong

0

1

2

3

4

5

6

7

2012 2013 2014 2015 2016

EconomicGrowth

Rate

(%

)

ECONOMIC GROWTH

UAE

Saudi Arabia

Qatar

Oman

Kuwait

Bahrain


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Fiscal challenges varies across OPEC least in the GCC

Source: APICORP Research

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MENA (esp GCC) highly energy-intensive

0.0

5.0

10.0

15.0

20.0

Primaryenergy

consumption(toe/cap

ita)

GCC energy intensity is high in general

Qatar, Bahrain and UAE are particularly high

High income levels

Air-conditioning and desalination

Energy-intensive industry (aluminium, petrochemicals, LNG, etc)

Subsidised prices, hence waste and inefficiency

Focus turns to serving domestic market rather than export, especially in gas

But GCC, Iraq, Libya remain major oil exporters07/06/2013 19


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Attention turning to unconventional gas

Gulf unconventional plays

varied, potentially large Sour and contaminated gas

(CO2, H2S, nitrogen)

Tight gas (sands & carbonates)

Shale gas, condensate and oil

Deep and ultra-deep

Mixed resources (e.g. deep,tight and sour)

Source: PacWest; Manaar research


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Alternative energy becoming competitive

0 2 4 6 8 10 12 14 16 18 20

Gas, $1

Gas, $8

Gas, $15

Oil, $20

Nuclear

Coal CCS

Solar PV ($2.50/W)

Solar PV ($2/W)

ELECTRICITYGENERATIONCOST ($C/KWH)

Alternative generation (solar, nuclear, coal CCS) is cheaper than LNG or oil

However, high-cost domestic gas (e.g. unconventional) at ~$8/MMBtu is still

competitive against alternatives

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Source: Manaar research


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Responses to these new challenges

Future energy sector themes

1. Mature field management (enhanced oil recovery)

2. Domestic gas including unconventionals

3. Alternative energy mostly nuclear and solar, plus efficiency

Economic responses

1. Restructuring the NOCs & SOEs for greater efficiency

2. Greater international & private-sector E&P investment (as in late 1990s)

3. Privatisation (at least of non-core assets)?

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Robin Mills,

Head of Consulting,Manaar Energy Consulting,

Dubai, UAE

[email protected]

+971 4 326 6300+971 50 293 4668

www.manaarco.com

Contact Details
mailto:[email protected]://www.manaarco.com/http://www.manaarco.com/mailto:[email protected]

Middle East Energy May 2013

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