BP Statistical Review

of World Energy
An Update: The Long Term
and the Short Term
Christof Rühl
Chief Economist

Brussels, September, 2008

© BP 2008
Outline

Introduction
High Energy Prices
The Long Term and the Short Term
The Oil Market
Other Fuels
Conclusion

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 Energy Consumption and Energy Prices

Oil Gas Coal

y-o-y $/bbl $/Mmbtu $/t
8% 120 12 120

6% 100 10 100

4% 80 8 80

2% 60 6 60

0% 40 4 40

-2% 20 2 20

-4% 0 0 0
98 00 02 04 06 08 98 00 02 04 06 08 98 00 02 04 06 08

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Real Commodity Prices

Index: average 1970-2008 = 100 Oil Wheat Iron & Steel

400

350

300

250

200

150

100

50

0
1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

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GDP and Primary Energy Growth

1970s 2000s
Growth
7%
Primary energy GDP (PPP)
6%

5%

4%

3%

2%

1%

0%
1967 1969 1971 1973 2001 2003 2005 2007

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Contributions to Growth

GDP Primary energy

5-year moving average
4%
OECD Non-OECD OECD Non-OECD

3%

2%

1%

0%
1991 1995 1999 2003 2007 1991 1995 1999 2003 2007

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Power Generation and Primary Energy
Power generation 2007 global growth
Average growth p.a.
7% 7%
OECD Non-OECD 10-year average
6% 6%

5% 5%

4% 4%

3% 3%

2% 2%

1% 1%

0% 0%
1991-2000 2001-2007 Power Primary GDP
Generation Energy

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 Economic Growth and Oil Consumption
Growth
Average annual growth of oil production and consumption

Contribution to GDP growth Oil Consumption growth

Share of growth Mb/d

100% 1.4

Non-OECD 1.2
80%
Non-OECD
1.0
60% 0.8 Non-OECD
Non-OECD
40% 0.6
OECD OECD 0.4
20% OECD
0.2
OECD
0% 0.0
1990-2000 2000-2007 1990-2000 2000-2007
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Turn of the Commodity Price Cycle?

Index: Average for 2000-08 = 100

350
Baltic Dry Freight Rates
300 GSCI wheat index
Iron ore & steel scrap HWWI index
250 Brent

200

150

100 = average for 2000-08

100

50

0
2000 2003 2006 Dec Feb Apr Jun Aug
2008
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The Oil Market

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Real and Nominal Crude Oil Price

$/bbl Nominal price Real price

140

120
$ 106.74 per barrel in December 1979 $ 98.46 per barrel in Sep 2008
100

80

60

40

20

0
1973 1978 1983 1988 1993 1998 2003 2008

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Global Oil Demand Growth Has Slowed…

Exporters and importers Taxes and subsidies

Kb/d
1000
10-year average
800

600

400

200

-200

-400

-600
Oil Non-OECD OECD oil Heavy Moderate Moderate Heavy
exporters oil importers subsidies subsidies taxes taxes
importers

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… And Remains Price Sensitive

Kb/d US Gasoline Consumption Growth $/gallon

100 4.40

0 4.00

-100 3.60

-200 Pump price 3.20

-300 2.80

-400 2.40

-500 2.00
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08

Source: EIA
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Recap: Supply Management 2007…

Average annual change, 2003-2007 Change 2007

Mb/d Mb/d
2.0 2.0
ROW
1.5 1.5
FSU

1.0 Other 1.0 ROW

OPEC FSU
0.5 OPEC- 0.5
10 Other
OPEC
0.0 0.0
OECD
OECD
-0.5 -0.5 OPEC-
10
-1.0 -1.0

-1.5 -1.5
Growth Decline Growth Decline

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… And OECD Commercial Inventories 2007

Mbbls $/bbl
2002-2006 range Stocks in 2007 Brent oil price (rhs)
2800 100

2700 90

2600 80

2500 70

2400 60

2300 50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Sources: IEA, Platts

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2007 Oil Production: Largest Changes

Decrease Increase
Kb/d
-500 -400 -300 -200 -100 0 100 200 300 400

Angola
Non-OPEC Azerbaijan
FSU Russia
OPEC Iraq
Sudan
Canada
Nigeria
Venezuela
Mexico
Norway

Saudi Arabia

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 Production Increase in Saudi Arabia…

OPEC-10 Crude Production Call on OPEC-10 Crude

Y-o-Y Change, Mb/d Mb/d
2.5 Saudi Arabia Other OPEC-10 140 28

2.0 120
1.5 Oil price (rhs) 100
27
1.0
80
0.5
60
0.0
26
40
-0.5

-1.0 20

-1.5 0 25
Jan-05 Jan-06 Jan-07 Jan-08 2006 2007 2008 2009

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... And What a Difference a Year Makes

Mbbls Range 03-07 2007 2008 and forecast

2800

2700

2600

2500

2400

2300
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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 But Risk is to the Downside: Global Demand
Growth
GDP Oil consumption
y-o-y growth Kb/d
10% 600
Base case (2.1%)

Low-growth case (1.5%) 400

8%
200
6% 0

-200
4%
-400
2%
-600

0% -800
US Japan China S&C Am. US Japan China S&C Am.
Europe ME World Europe ME World

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 Project Delays Continue to Mount

Mb/d Mb/d
14 3.0
Production with Original 2006 Assessment
Start Dates
12
Currently Expected 2.5 2007 Assessment
Production 2008 Assessment
10
2.0
8
1.5
6
1.0
4

2 0.5

0 0.0
2003 2006 2009 2012 2007 2008 2009 2010 2011 2012

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Russian Oil Production

y-o-y growth Mb/d

12% 10.0

10%
9.8
8%

6% 9.6

4%
9.4
2%

0% 9.2
2001 2003 2005 2007 2005 2006 2007 2008

Source: Russian Ministry of Industry and Energy

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2007 Refining Capacity Additions

Kb/d
0 200 400 600 800 1000 1200 1400

Asia Pacific ex China

China

Africa

Middle East

Europe & Eurasia

S. & Cent. America

N.America

World 2007

World Av. 2002-2005

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Financial Investment in Energy

Energy prices Non-commercial net length Open interest

$/boe ‘000 contracts Million contracts
180 150 3.0
WTI

Heating Oil 75 2.5

150
Henry Hub
0 2.0
120

-75 1.5
90
-150 1.0

60
-225 0.5

30 -300 0.0
Jan-07 Sep-07 May-08 Jan-07 Sep-07 May-08 Jan-07 Sep-07 May-08

Sources: CFTC, Platts

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Other Fossil Fuels

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2007 Natural Gas: Largest Changes

Production Consumption
Billion m3 Billion m3
-10 0 10 20 30 40 -10 0 10 20 30 40

US
US
China
China
Qatar
Russia
Nigeria

Turkmenistan Japan

Azerbaijan
Turkey
Russia
Chile
Canada
Germany
UK

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 2007 LNG Market Diversification

Number of export markets Number of suppliers

0 2 4 6 8 10 12 0 2 4 6 8 10 12
Algeria Japan
Trinidad South Korea
Egypt Taiwan
Nigeria Spain
Qatar India
Oman US
Australia France
Malaysia Turkey
UAE UK
Eq. Guinea China
Indonesia Mexico
Atlantic Basin
Norway Belgium
Middle East
Brunei Pacific Basin Greece

Source: Cedigaz
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Fuel Switching in Power Generation 2005-07

Gas Share
UK gas vs. coal US gas vs. oil
70% 100%

60% 95%

50% 90%

40% 85%

30% 80%
Gas is Gas is
Gas is not competitive Gas is not competitive
competitive competitive
20% 75%
-60 -40 -20 0 20 -6 -3 0 3 6

Gas competitiveness vs. coal (€/MWh) Gas competitiveness vs. resid ($/Mmbtu)

Sources: EIA, BERR, Platts, McCloskey, ECX

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2007 Coal Production and Consumption

Production Consumption

Asia Pacific North America Asia Pacific North America

20% 19%
S & Cent. S & Cent.
America 1% America
2%

59% 14% Europe 17%

60% Europe
& Eurasia
& Eurasia
5% 3%

Africa Africa

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Coal Production Outside China

Biggest coal producers Largest production growth, 1998-2007

Mtoe Mtoe
600 80
12.3% Average annual growth
70 3.8%
500
60
3.7%
400
50

40 3.1%
300

30 2%
8.3%
200
20
100
10

0 0
US tralia India frica ssia esia e sia tralia India ssia frica bia
u s h A Ru don d on Aus Ru th A olom
A ut In In u C
So So
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GDP and Power Generation

Growth in China, 2003-2007 Global breakdown

Average growth p.a. Share
20% 100%
GDP Power
Primary energy Coal
16% 80%
OECD

12% 60%

8% 40% Other
non-
OECD
4% 20% India

China
0% 0%
GDP Power Coal

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Other Fuels

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Global Oil Reserves

Billion bbls
1600
Middle East S. & Cent. America
Europe & Eurasia Africa
North America Asia Pacific
Other oil sands
1200

800

400

0
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007

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2007 Carbon Emissions Growth

y-o-y growth 10-year average

6%

5%

4%

3%

2%

1%

0%

-1%

-2%
World Europe FSU North Middle S. & Africa Asia
America East Cent. Pacific
America

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Changes in Nuclear and Hydroelectric Output

Nuclear Hydro
y-o-y growth
6%

5%

4%

3%
10-year average
2%

1%

0%

-1%

-2%
2004 2005 2006 2007 2004 2005 2006 2007

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Contribution to Electricity Generation Growth
from Renewables*
Share of electricity generation growth, 3-year moving average
16%

World OECD

12%

8%

4%

0%
2004 2005 2006 2007
* Wind, photovoltaics and geothermal

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Renewables

Electricity generation in Germany Volume of ethanol in US gasoline

TWh Share Kb/d

70 5% 500
Hydro
Other renewables Share (lhs)
60
4% 400
50 Ethanol
consumption (rhs)
3% 300
40

30 2% 200

20
1% 100
10

0 0% 0
2001 2003 2005 2007 2001 2003 2005 2007
Sources: BDEW, EIA
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Conclusion

High economic growth and improvements in

energy intensity
The long tern: Importance of developing
world
Oil market constrained, gas market
integrating, global coal market emerging
Volatility will increase - prices are effective,
where allowed to work

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