The Peak Oil Context Tom Petrie

Denver World Oil ConferenceThe Peak Oil Context: 

Denver World Oil Conference The Peak Oil Context PETRIE PARKMAN & Co. Thomas A. Petrie, CFA Chairman & CEO Petrie Parkman & Co. November 10, 2005

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World daily production: 84 million barrels/day World excess capacity: 1-1.5 mmb/d (Refining capacity a determinant of “relevant capacity”) US daily consumption: 21 mmb/day Global annual decline rate: 4% - 6% / year? Net Non-OPEC production likely to peak around 2010 OPEC nations may not reach governmental projections Reasonable world peak oil date: 2010-2015? Initial Perspectives and Assertions:

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Current World Production in Serious Decline (Millions b/d) -19.2 -28.9 -10.1 Conclusion: Depletion Matters

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End of Decade “Potential” New Production Sources Conclusion: Project Timing will be Critical

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Morphing Toward Peak Oil? Conclusion: Ex the Optimistic Case, There Remains Limited Supply to Accommodate Economic Growth (millions b/d)

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Source: International Energy Agency OPEC Excess Crude Production Capacity ? Conclusion: Absent a Global Recession, the Margin for Error is Small 56 63 60 67 70 77 84 Global Demand (MMb/d)

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Maturing of Non-OPEC Production In Decline: United States United Kingdom Egypt Pakistan Congo Norway Australia Oman Columbia Argentina Gabon New Zealand Syria Peru Tunisia At Plateau: Mexico Brunei Malaysia China India (?) Denmark Yemen Canada (conventional and non-Arctic only) Conclusion: Ex Caspian Sea, West Africa, and Unconventional and Arctic North American Sources, Non-OPEC Production Probably is Close to Irreversible Decline

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Discoveries precede extraction; a peaking in discoveries precedes a peaking in production World oil discoveries peaked in 1964 In fields, basins, “provinces,” and the world: we tend to find the biggest oil structures early on Today, we find 1 barrel for every 3-4 consumed This concept is not disputed Technology hasn’t changed this reality

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We found the most oil during the 1960s; production follows discoveries; technology hasn’t helped much 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 - 10 20 30 40 50 60 Billion bbl/year

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Global Natural Gas: Where are we headed? Source: China Newsphoto/Reuters/Corbis.

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Oil to Gas Convertibility per Futures Strip Conclusion: Fear of LNG, Unconventional Gas, Demand Destruction Lives! Nov-05 Oil to Gas - 5:1 Jan-08 Oil to Gas - 6:1 Dec-10 Oil to Gas - 8:1

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Conclusion: Dynamic Market Shifts in the Offing

World oil peak: range is broad by well-informed estimators; most by 2015: 

World oil peak: range is broad by well-informed estimators; most by 2015 Since 2000: BP – 2010-2015 Hirsch et al: 2016 Matt Simmons: 2006 – 2008 (Bush team advisor/insider) Campbell: 2007 – 2010 Deffeyes: Thanksgiving day 2005 Walter Youngquist: 2007 – 08

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2005 Lower 48 Alaska Deepwater U.S. Oil Production Big, New Discoveries & New ‘Technology’ ...only shift the curve Lower 48 AK DW Why would U.S. Production Peak? What about new discoveries like Alaska? What about new technologies and investments? My Young Analyst Perceptions Source: rao-D cityworks