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Upstream Oil & Gas: An Overview of the Industry

Upstream Oil & Gas: An Overview of the Industry. Session ID: INUP John M Gilmore Jr. Director, Upstream Oil & Gas Global Industry Solutions Invensys Operations Management. A Tumultuous Year An Uncertain Future. Some Definitions Long Term Trends – World & North America Key Recent Events

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Upstream Oil & Gas: An Overview of the Industry

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  1. Upstream Oil & Gas:An Overview of the Industry Session ID: INUP John M Gilmore Jr. Director, Upstream Oil & Gas Global Industry Solutions Invensys Operations Management Invensys proprietary & confidential

  2. A Tumultuous YearAn Uncertain Future • Some Definitions • Long Term Trends – World & North America • Key Recent Events • What comes next? Opinions expressed are strictly my own and do not necessarily represent Invensys opinion or policy

  3. IPS Confidential Refining/ Petrochemical Gas Distribution Regas GTL Processing LNG CTL & Tar Sands Gas Processing GOSP Platform Production Well FPSO Upstream Oil & Gas Pipelines

  4. Long-Term Energy Demand • Significant Decrease over 2008-09 • Fossil Fuels growth returning to historical trend • Coal & Renewables grow as Oil & Gas prices rise • $133/bbl by 2035 (2008$$) EIA 2010

  5. Major Demand Growth • In the Long Term • Non-OECD country growth dominates • In the Short Term • China & India have returned to historic growth • Europe growing slowly • USA lagging • Somewhat less transportation demand • Much less manufacturing demand EIA 2010

  6. Petroleum Liquids Growth • Total Liquids growth • 86 million BBL/day in 2007 • 110 million BBL/day in 2035 • Unconventional sources • 3.4 million BBL/day in 2007 • 12.9 million BBL/day (12%) in 2035 • Major growth from • Canada Oil Sands • US/Brazil biofuels EIA 2010

  7. Natural Gas is Booming! • World growth by 44% • 108 Tcf in 2007 • 156 Tcf in 2035 • LNG grows by 240% • 8 Tcf in 2007 • 19 Tcf in 2035 • Major uses • Industrial 39% • Electricity 36% EIA 2010

  8. From non-sandstone formations like shale, coal beds & carbonates = Unconventional Gas • US boom in Unconventional Gas • Shale gas up from 6% to 24% of production over 2008 - 2035 • Shale gas now 50% of US reserves • World potential • Major investments in US Unconventional Gas producers • Major projects underway • Australia, India, China, Eastern Europe • Risk  Fracking Regulation EIA 2010 45% of world reserves are “Unconventional Gas” -- IEA

  9. Macondo Well Blowout • Severe Consequences • 12 deaths/8 severe injuries • ~4.9 Million BBl discharged • Economic chaos • In Perspective • Total spill <6% of daily production • Half the Lakeview Gusher (CA) • <3% of Kuwaiti sabotage • Long-Term Effects?? • Gulf drilling ban “lifted” • Tighter restrictions/costs?

  10. A Recent Non-Event: Cap & Trade • A bill to reduce carbon emission by trading carbon credits • Companies trade credits to stay in business • In the Short Term • Major “tax” on energy use • Favors renewables, natural gas • Punishes coal-derived energy • In the Long Term • Government cuts available credits • Significant economic dislocations Washington Post

  11. 3G* Messages • Energy Prices will rise • If US economy continues weak, $ inflation and world growth will drive higher $-priced energy • If US economy strengthens, demand will drive higher prices. • Upstream Industry is extraordinarily dependent on Regulatory Actions • Offshore drilling regulation, leasing activity • Unconventional gas and fracking regulation • “Cap & Trade” and other carbon control schemes * 3G = Gilmore’s Gutsy Guesses

  12. Some light reading…

  13. Looking Forward “In the Long Run, we are all Dead!” John Maynard Keynes

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