1

Olve TorvangerEinar H. BandlienSvein E. Johansen

2

Oil reserves

3

Development in world oil consumption

1950 1975 2000

10

20

30

40

50

60

70

80

Mil

lio

n b

arre

ls p

er d

ay

4

World proved reserves

5 %66 %

7 %

9 %

9 %

4 %

Source: BP Statistical review of world energy

5

Reporting of reserves can not always be trusted

Genuine revisions not back dated !

0

200

400

600

800

1000

1200

1970 1975 1980 1985 1990 1995

Gb

Middle East

Rest of the world

Source: BP Statistical review of world energy

6

Projecting future discoveries

0

500

1000

1500

2000

2500

1930 1950 1970 1990 2010 2030

Cu

mu

lati

ve D

isco

very

, Gb

Reality

Illusion

Inflexion due tofalling Discovery

OPEC “quota war”

“Back dated” reserves Reserves as reported

7

Real discovery trend and production

1930 1950 1970 1990 2010 2030 2050

10

20

30

40

50

60

Gb

Past discoveries

Future discoveries

Production

Past discoveries by ExxonMobil

8

“Peak oil”

Timing of peak oil is a guessing game

Its occurrence is not

Peaking does not mean “we run out”

9

Discoveries and production USA “Lower 48”

0

5

10

15

20

25

30

1930 1950 1970 1990 2010 2030 2050

Dis

cov

ery

Gb

0

2000

4000

6000

8000

10000

Pro

du

cti

on

kb

/d

10

Discoveries and production Norway

0

1

2

3

4

5

6

1930 1950 1970 1990 2010 2030 2050

Dis

cove

ry G

b

0

500

1000

1500

2000

2500

3000

3500

Pro

du

ctio

n k

b/d

2005

11

Norway and UK creaming curves

12

Discoveries and production Saudi Arabia

0

20

40

60

80

100

120

140

1930 1950 1970 1990 2010 2030 2050

Dis

cov

ery

Gb

0

2000

4000

6000

8000

10000

12000

Pro

du

cti

on

kb

/d

2005

13

Remaining in place

17 billion bbls

25%

Produced; 27 billion bbls

40%

Saudi Arabia: Ghawar ‘Ain Dar/Shedgum Area / Arab D resource depletion state 2004

Probable (incremental); 3,5 billion bbls

5%Possible; 7 billion bbls

10%

OIIP: 68.1 billion barrelsProved reserves: 41 billion barrels ( 60% of OIIP)Estimated ultimate recovery: 51 billion barrels (75% of OIIP)

Source: Saudi Aramco, 2004

Remaining proved; 14 billion bbls

20%

14

Ghawar and the world

Ghawar has produced about 60% of all Saudi Arabian oil from 1951-2004 and still accounts for some 50% of the Saudi production

When Ghawar output declines, Saudi production will most likely have peaked

After peak in Saudi Arabia it is difficult to envisage a global increase in conventional oil production

15

16

Russian production and growth rate

17

Oil production outside OPEC and FSU

Historic peak

Austria 1955

Germany 1967

Texas 1971

USA Low. 48 1971

Canada (conventional)

1974

Romania 1976

Indonesia 1977

Alaska 1989

Egypt 1993

India 1995

Syria 1995

Gabon 1997

Malaysia 1997

Argentina 1998 1998

Colombia 1999

Equador 1999

UK 1999

Australia 2000

Oman 2001

Norway 2001

18

Oil discoveries and production world total

0

20

40

60

80

100

120

140

160

1930 1950 1970 1990 2010 2030 2050

Dis

cov

ery

Gb

0

10000

20000

30000

40000

50000

60000

70000

Pro

du

cti

on

kb

/d

2005

19

All petroleum

(Note that the boundaries are fuzzy)

0

10

20

30

40

50

1930 1950 1970 1990 2010 2030 2050

Pro

du

ctio

n, G

bo

e/a

Non-con gas

Gas

NGLs

Polar oil

Deep water

Heavy oil

Regular

20

Total conventional oil production

Heavy oil

Tar sands

1960 1970 1980 1990 2000 2010

3

2

1

Mbpd

Hibernia, Terra Nova

Synthetic crude oil

Bitumen

Heavy oil

NGL

Unconventional oil in Canada

Source: National Energy Board, CDA and US-DoE-Energy Info. Administration

21

22

IEA demand growth prediction

1971 2000 2030

10,000

6,000

2,000

14,000

18,000

Mtoe

Energy demand gro

wth

Oil

Non-hydro renewables

Hydro

Gas

Oil

Coal

Nuclear

Gas

2005

This is more a demand projection than a resource projection

23

New production to satisfy demand

1980 1990 2000 2010 20200

40

80

120

160

200

MBDOE

Required newproduction

Existingproduction

Industry field decline

4 - 6 % per year

Source: Exxon 2004

24

Composition of energy demand

Source: M. Simmons 2004 (Exxon 2004)

With 20% growth in wind and solar energy, these would make up around 1% of total energy demand by 2020

25

Monthly production of cars in China

94 96 98 00 02 04 93 95 97 99 01 03

Source: CEIK Data Company

(ThroughApr 04)

50,000

100,000

150,000

200,000

250,000

China experiences an energy demand growth , which is about twice the economic growth

26

What if China continues its rapid development

What if India copies China

What if 5 billion people stop using wood fuel and switch to modern energy

What if

27

Developing countries’ consumption in perspective

3,000 kg

1,500 kg

500 kg

USA> 3,000

Western Europe~ 1,600

World average~ 600

Ugandaand other

~20

Kg per capita per year

28

Summary

• 90% of world oil reserves are not audited

• Consumption has exceeded new discoveries since 1980

• Today 25% of the consumption is replaced by discoveries

• Modern seismic was developed after 1960

• Peak discovery world wide happened in the 1960s

29

Summary contn.

• US (Lower 48) production peaked in 1971; predicted by King Hubbert in 1954

• Norway production peaked in 2001; 2005 production below NPD estimate

• Oil production outside OPEC and FSU seems to have peaked

• Creaming curve for back dated reserves for regular oil indicated total global reserves of 2 trillion barrels

• Approximately 1 trillion barrels is consumed to date

30

Summary contn.

• IEA is a demand focussed agency, with limited emphasis on resources

• BP is not auditing the reserves reported in their annual statistical reports

• USGS reported resources in the Arctic has uncertainties equal to the estimates for undrilled basins

• With the exception of the Arctic and the Antarctic and a few politically closed areas, the oil and gas potential is understood

31

Summary contn.

• The Ghawar field found in 1948 has produced 60% + of Saudi oil, is now producing approx. 5 million bopd and is approaching its tail.

• When Ghawar peaks, Saudi will have peaked and so will the world.

• Indications are that the OPEC “swing production is about to be exhausted

32

Summary contn.

• Peak means that production can no longer be increased; we have then produced about half of the oil

• After peak the price of oil will be market driven