Wood Mackenzie Global Markets - Oil Gas Denmark · Coal Oil Gas Source: Wood Mackenzie -400-200 0...

Wood Mackenzie Global Markets

Paul McConnell

Principal Analyst, Global Trends

James Webb

Upstream Analyst, NW Europe

Oil and Gas Denmark

October 7th 2014

Copenhagen

Trusted commercial intelligence www.woodmac.com


2

1. Global summary

2. Demand trends

3. Macro trends and risks

Agenda

4. Attracting upstream investment to Denmark


3

90

95

100

105

110

115

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2007 2008 2009 2010 2011 2012 2013 2014 2015

USA

UK

Germany

Japan

The real GDP growth story is Asia and the USA

-10% 10% 30% 50% 70%

Italy

Spain

France

United Kingdom

Japan

Germany

Venezuela

Russia

Canada

United States

South Africa

Brazil

Turkey

Mexico

Poland

Australia

Taiwan

South Korea

Thailand

Colombia

Indonesia

India

China

Source: BEA, Thomson Reuters Datastream, Wood Mackenzie

Growth in Real GDP: 2008 peak to end-2015

Asian economies

Forecast

Real GDP Index (Q1 2008 = 100)


4

-200

-100

0

100

200

300

400

500

600

1990 1994 1998 2002 2006 2010 2014 2018

Co

nsta

nt

$U

S b

illio

n,

2005

Net exports

Government spending

Private consumption

Investment

Forecast

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

2000 2005 2010 2015

Co

nsta

nt

US

D B

illio

n,

2005

Incremental GDP

China: slower not lower

Forecast

Real GDP Level 2000 – 2018

Source: China NBS, Wood Mackenzie

Change in Real GDP by Sector 1990 – 2018

Annual growth rate approx.

7.5% in both years


5

Despite slowing growth, China’s energy demand overshadows other

markets

2,678

2,856

596

761

481

677

696

1,012

1,897

1,965

1,795

2,286

722

1,280

3,153

5,046

South America

Other Asia Pacific

Europe

North America

India

China

2014 Energy Demand 2030 Energy Demand

Africa

1,048

1,253

Middle East

Russia & Caspian

Global Energy Demand by Region 2014, 2030 (Mtoe)

Source: Wood Mackenzie


6

Now and in the future, it’s a hydrocarbon world

South America

Other Asia Pac

Europe

North America China

Africa

Middle East

Russia & Caspian

Global Energy Demand by Region & Fuel 2030 (Mtoe); 2014 – 2030 CAGR

Source: Wood Mackenzie OSF Renewables Hydro Nuclear Gas Oil Coal

0% 10% 20%

-5% 0% 5% 10% 15%

0% 10% 20%

0% 10% 20%

-10% 0% 10%

0% 10% 20% India

-10% 0% 10%

0% 10% 20%

0% 10% 20%


7

1. Global summary

2. Demand trends


Agenda



8

0

500

1.000

1.500

2.000

2.500

3.000

3.500

6,0 7,0 8,0 9,0 10,0 11,0

Tra

nsp

ort

dem

an

d p

er

cap

ita (

kto

e / m

illio

n p

eo

ple

)

US$ per capita per year (log scale)

Evolution of transport markets govern oil demand trends… ‘Peak Oil

Demand’ in Europe and North America

China (H) India (H) Asia Pac (H) Europe (H) Mid East (H) N Am (H)

China (F) India (F) Asia Pac (F) Europe (F) Mid East (F) N Am (F)

World oil demand by region 2014 – 2030 Transport demand, GDP per capita 2000 – 2030


North America – transport demand very

high relative to GDP… but falling fast

China / Asia Pacific

growing but slope

moderate…

…and demand well

below Europe in 2030

400 1,000 3,000 8,000 20,000 60,000 0 500 1.000 1.500 2.000

AP

N.Am

EUR

MidEast

S.Am

R&C

AFR

Mtoe

2014 2020 2025 2030

Oil demand is at or below

peak in North America,

Europe; growing elsewhere


9

Gas is displacing other fuels in both mature and growing power

generation markets

Environment, cost, and fuel substitution will benefit gas as a fuel for power generation

Total power vs. gas output growth 2014 – 2030


USA

China

Russia Japan

Iran

Saudi Arabia

Mexico

India

South Korea

Iraq

Turkey

UAE

Egypt Thailand

Italy

Canada

UK

Spain

Vietnam

Taiwan

0%

2%

4%

6%

8%

10%

12%

0% 1% 2% 3% 4% 5% 6% 7% 8%

Gas p

ow

er

ou

tpu

t C

AG

R 2

014

-30

Total power output CAGR 2014-30

Gas growing faster than total power

output = gas taking market share

Gas growing slower than total power

output = gas losing market share


10

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

2014 2020 2025 2030E

nd

-Use E

lectr

icit

y d

em

an

d (

TW

h)

0

100

200

300

400

500

600

700

800

900

1.000

6,0 7,0 8,0 9,0 10,0 11,0

Po

wer

inte

nsit

y (

GW

h / U

S$ G

DP

(2005 r

eal)

GDP per Capita (log scale)

China’s power intensity will decline but remains much higher than

developed world in 2030

Regional power demand growth 2014 – 2030 Power intensity vs. GDP per capita 2000 – 2030

China (H) India (H) Asia Pac (H) Europe (H) Mid East (H) N Am (H)

China (F) India (F) Asia Pac (F) Europe (F) Mid East (F) N Am (F)


Africa Russia & Caspian South America Middle East

India Europe Other Asia Pac North America China

Sustained economic expansion

plus high power intensity means

robust power demand growth

China: Rapid

industrialisation &

investment driven

economy have driven

up power intensity…

…and reaching ‘post-industrial’

status is a long way in the future

400 1,000 3,000 8,000 20,000 60,000


11

China’s power needs are the key component in driving demand

growth for renewables, nuclear and coal


Nuclear Renewables Coal

0

200

400

600

800

1.000

1.200

1.400

Ren

ew

ab

le C

ap

acit

y (

GW

)

Canada Spain UK Italy

France Japan India Germany

USA China

China

Russia

India

S Kor

USA

Turkey

UAE

S Africa

Vietnam

UK

ROW

Taiwan

France

Belgium

Japan

Ger.

-25 0 25 50 75 100 125 150 175

1

Net nuclear capacity change (GW) 2014-2030

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

Co

al

dem

an

d (

Mto

e)

RCA ROW RCA China

Industry ROW Industry China

Power ROW Power ChinaRest of world

China installed

capacity 420 GW

(33% of world total)

China power and

industry account for

64% of world coal

demand growth

China


12

1. Global summary

2. Demand trends


Agenda



13

0

100

200

300

400

500

600

bcm

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

Pro

du

cti

on

('0

00 b

/d)

Demand trends and new supply will alter global energy balances

E

Gas Oil Coal


-400

-200

0

200

400

600

800

1.000

Pro

du

cti

on

/ N

et

Tra

de (

Mto

e)

UNITED STATES: Robust

oil and gas supply growth

in an era of weak demand

I

EUROPE: increasing gas

demand and declining

domestic production

OIL SUPPLY: Emergence of

Iraq as a supply province is

a key long-term trend

US becomes net exporter; Europe competes for imports; Mid East supply growth continues

Saudi Arabia US Russia

Iraq Canada Brazil

Norway UK Denmark

0%

5%

10%

15%

20%

25%

30%

35%

40%

Domestic production

Russia exports to Europe

Total Europe Gas Demand


14

Risks to the outlook are ever-present…

Supply Demand

Islamic State – is Iraq long-term supply

under threat?

North America – upside risk to

unconventional oil and gas production?

Unconventionals – can the world mimic

the United States?

Europe – is energy supply at risk of

disruption?

Accelerated renewables and energy

storage technology – can the

intermittency problem be solved?

China – is a sharp downturn still

possible?

India – upside growth surprise?

Consumption trends – how will the

developing world use energy?

Subsidies – can reform be achieved?

Energy efficiency – can the link

between economic growth and demand

be broken?

Environment – will environmental

concerns limit the use of fossil fuels?


15

1. Global summary

2. Demand trends


Agenda



16

1H 2014: M&A has been buoyant, with big value in Europe


17

The North Sea

Norway

UK

Denmark

Key benchmarking metrics

Exploration Production 2015

4%

Development Spend

2015

4%


18

0

2

4

6

8

10

12

14

16

18

20

0%

20%

40%

60%

80%

100%

Norway Netherlands UK Denmark

Ave

rag

e m

mb

oe

pe

r w

ell

Su

cc

es

s r

ate

Commercial Technical Average mmboe per well

The rest of the North Sea is a mixed bag, with Norway at the top

Exploration performance over three years*

*Up to late September 2014

Source Wood Mackenzie


19

Comparison of North Sea developments

Greenfield

*future fields up to mid-September 2014

Metrics

Weighted average IRR 19.4% 19.2% 15.2%

Avg Rec Reserves (mmboe) 166 74 57

% of challenging reserves 30% 56% 70%

Avg Capex per boe (US$ real) 22.2 23.1 16.8

Brownfield

Åsgard

Hod Valhall

Heidrun

Ormen Lange

South Arne

0

5

10

15

20

0% 10% 20% 30% 40%

IRR (%)

PV US$ 2.0 bn

PV US$ 1.0 bn

PV US$ 0.5 bn

PV

/bo

e


20

The challenges ahead

Attract new investment 1

Boost exploration 3

Increase oil recovery 2


21

Disclaimer

This report has been prepared for by Wood Mackenzie Limited. The report is intended

solely for the benefit our clients and its contents and conclusions are confidential and

may not be disclosed to any other persons or companies without Wood Mackenzie’s

prior written permission.

The information upon which this report comes from our own experience, knowledge

and databases. The opinions expressed in this report are those of Wood Mackenzie.

They have been arrived at following careful consideration and enquiry but we do not

guarantee their fairness, completeness or accuracy. The opinions, as of this date, are

subject to change. We do not accept any liability for your reliance upon them.

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Wood Mackenzie Global Markets - Oil Gas Denmark · Coal Oil Gas Source: Wood Mackenzie -400-200 0...

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