1
Conference on Non-Conventional Oil Prospects for Increased Production
Hyatt Regency Hotel, Calgary, Alberta, Canada 25th - 26th November 2002
The Impact of Non-Conventional Oil Developments on Conventional Crude Oil Markets
Rachid Bencherif Energy Models Analyst OPEC Secretariat
2
Conventional and non-conventional oil reserves
Non-conventional oil
Billion bbl
Non conv. oil Non-OPEC OPEC Conv. oil Non-OPEC OPEC Total oil Non-OPEC OPEC
Source:IEA,OPEC.
580 310 270 1075 229 845 1655 539 1115
OPEC 47%
NonOPEC 53%
Total oil
Non-conv. 36%
Conv. 64%
Total oil
OPEC 67%
NonOPEC 33%
3
Conventional and non-conventional oil production
Oil Production 2001
Million bbl/day 1.08 0.66 0.42 75.34 44.30 31.04 76.42 44.95 31.46 % 1.4 0.9 0.6 98.6 58.0 40.6 100 59 41
2010
Million bbl/day 3.00 2.00 1.00 86.60 50.10 36.50 89.60 52.10 37.50 % 3.3 2.2 1.1 96.7 55.9 40.7 100 58 42
Non-conventional oil Non-OPEC OPEC Conventional oil* Non-OPEC OPEC Total oil* Non-OPEC OPEC * Including NGLs
Source: IEA,OPEC
4
Factors impacting non-conventional developments
• • • Factors favouring strong expansion of non-conventional oil relatively high number of on-going projects lack of interesting prospects for conventional oil in North America (USA and Canada) recent technology advances: cost reductions, reduction of GHG emissions per unit, techniques such as SAGD (steamassisted gravity drainage) are performing well low geological risk, with stable production rate fiscal regime with specific incentives suitable oil and gas price levels
• • •
5
Factors impacting non-conventional developments (cont.)
Factors hampering expansion of non-conventional oil SAGD technology has not reached its full maturity few opportunities for further cost reductions in mining based projects necessary investments in transportation and in refining processes should be co-ordinated absolute GHG emissions will very likely go up as the production will increase fourfold
• • • •
6
Impact on global market supply
• • • • • Expansion of non-conventional oil would: help in diversifying global oil supply have only a moderate impact on import dependency of North America only have a limited impact upon global oil markets in the next decade, despite the huge resource base replace falling non-OPEC conventional output rather than endanger OPEC market share likely to be a major contributor to market stability
7
OPEC production management system 1/2
34 31 In US$/bbl 28 25 22 19 16
Oct00 Apr00 Apr01 Oct01 Apr02 WTI Jul00 Jul01 Jan00 Jan01 Jan02 Jul02
montly average quarterly average OPEC Reference Basket
8
OPEC production management system 2/2
• price band mechanism • Venezuelan synthetic crude is part of OPEC production management system whereas Orimulsion® is not:
– niche markets (Japan, Italy, Denmark and Canada) – more in competition with gas rather than fuel oil – will also be competing with coal
9
Impacts on refining, price differentials, security of supply
Refining • refiners will have to adapt to cope with crude with unusual properties beyond the usual “capacity creep” to accommodate non-conventional oil Price differentials • price differentials are impacted by many different factors. The main one is the balance between the quantities available on the market of synthetic crude and diluted bitumen on the one hand and the refining capacities and configuration on the other hand; resulting in a circular effect Security of supply • different from oil dependency • the inevitability of a rise in the OPEC market share should not be regarded as a dilemma for consuming countries • co-operation between OPEC and non-OPEC producers and dialogue between producers and consumers to minimize oil price volatility
10
Conclusion
• Although non-conventional oil developments have a high growth rate, their overall impact on the market is more of a long-term issue • Technological advances or breakthroughs will definitively impact the pace at which nonconventional oil is developed • OPEC will increasingly be called upon to deliver the incremental barrel • Price stability and cooperation with non-OPEC producers