Changing World of Oil and Gas

March 23th, 2017

bp.com/statisticalreview

bp.com/energyoutlook

#Bpstats

Vladimir Drebentsov

Head of Russia and CIS Economics, BP plc

© BP p.l.c. 2017 2017 Energy Outlook

US new-well oil production per rig hasn’t peaked yet

0

100

200

300

400

500

600

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Boe/d per rig

Source: US EIA

2

© BP p.l.c. 2017 2017 Energy Outlook

US oil output has declined, yet has been demonstrating resilience since September 2015

Units Kbd

Source: US EIA, PIRA

3

© BP p.l.c. 2017 2017 Energy Outlook

PIRA’s estimate of the global production cost curve

Source: PIRA

4

© BP p.l.c. 2017 2017 Energy Outlook

Growth of electric cars

0.0

0.5

1.0

1.5

2.0

By region By type By region By type

2015 2035

Electric cars

Conventional cars

Non-OECD

OECD

Billions of vehicles $/kWh

The global car fleet: 2015-2035 Illustrative path for battery pack costs

*For a Battery Electric Vehicle with a 60 kWh pack. Cost projections depend heavily on the degree of EV uptake, which is uncertain, so ranges should be treated as illustrative only. Current estimates of battery costs also vary widely, but this uncertainty is not shown

0

50

100

150

200

250

2015 2020 2025 2030 2035

Range of estimates of cost parity between

electric and oil-powered

cars

Battery pack costs*

5

© BP p.l.c. 2017 2017 Energy Outlook 6

Abundance of oil resources Estimates of technically recoverable

resources and cumulative oil demand

40%

45%

50%

55%

60%

65%

0

10

20

30

40

50

60

70

1985 1995 2005 2015 2025 2035

US

Russia

Mb/d

Oil supply of lower-cost producers

Share

Low-cost producer’s share of global liquids production (right axis)

Middle East OPEC

0.0

0.4

0.8

1.2

1.6

2.0

2.4

2.8

Technicallyrecoverable resources

Middle East

CIS

N America

S&C America

Asia Africa

Europe

2015- 2035

2015- 2050

Trillion barrels

Cumulative demand

© BP p.l.c. 2017 2017 Energy Outlook 7

Bcf/d

Gas supply growth: 2015-2035

Bcf/d

Gas consumption by sector

0

20

40

60

80

100

120

140

Shale Conventionaldecline

Conventionalgrowth

Middle East

US

Other

China Africa

Russia

Australia

Other

0

100

200

300

400

500

1965 1975 1985 1995 2005 2015 2025 2035

Transport

Buildings

Power

Non-combusted

Industry

Natural gas

© BP p.l.c. 2017 2017 Energy Outlook

Gas demand projections to 2035

Source: Jonathan Gaventa, Manon Dufour, Luca Ergamaschi More Security, Lower Cost: A Smarter Approach To Gas Infrastructure In Europe, March 2016

The European

Commission EE30

scenario applies meets

30% energy efficiency

target, as well as a 27%

renewable energy

target and a 40%

greenhouse gas target.

In this scenario gas

demand is 23-35%

lower than in the

ENTSOG scenarios for

2035.

8

© BP p.l.c. 2017 2017 Energy Outlook

0%

30%

60%

90%

1965 2000 2035

Coal (Base)

The strength of natural gas demand could be challenged

Coal

Share of primary energy

Natural gas growth 2015-2035 China

Mtoe, annualised growth

0

5

10

15

20

Slower case Base case Fastertransition

Even fastertransition

Increasing climate and environmental policies

Key uncertainties: Risks to gas demand

9

© BP p.l.c. 2017 2017 Energy Outlook

US new-well production per rig and breakeven price

0

50

100

150

200

250

300

350

400

450

2007 2009 2011 2013 2015

Gas

Boe/d per rig

Source: US EIA

Tcf

Constant $2014

23 Tcm of gas is recoverable in North

America at breakeven price below

$3/mmBtu ($107/Mcm); 39.6 Tcm is

recoverable at less than $4/mmBtu

($143/Mcm)

10

© BP p.l.c. 2017 2017 Energy Outlook

LNG supplies grow strongly led by US and Australia Key issues: LNG and global gas markets

Bcf/d

LNG supply

0

10

20

30

40

50

60

70

80

1990 2005 2020 2035

RoWRussiaAfricaUnited StatesAustraliaQatar

LNG demand

0

10

20

30

40

50

60

70

80

1990 2005 2020 2035

RoWMiddle EastS&C AmericaAsiaEurope

Bcf/d

11

© BP p.l.c. 2017 2017 Energy Outlook

LNG’s share in traded gas increases sharply

North America

22

S & C America

2 7

Africa

9

Middle East

Europe

Australia

Other Asia

44

5

Russia

Net LNG exports/imports 2035 (Bcf/d)

17

17 ExportsImports

Key issues: LNG and global gas markets

12

© BP p.l.c. 2017 2017 Energy Outlook

Russian gas industry needs export markets to grow

St Bcm

Forecast

0

200

400

600

800

2015 2020 2025 2030 2035

Production

Export

Source: Gazprom, Ministry of Energy

13

© BP p.l.c. 2017 2017 Energy Outlook

Russian pipeline gas may remain competitive, yet pressure from LNG offered at variable cost is likely

Source: PIRA

14

© BP p.l.c. 2017 2017 Energy Outlook

The speed of transition has a significant impact

CO2

0%

10%

20%

30%

40%

50%

2015 Base FT EFT

Oil

Coal

Gas

Non-fossil*

% of primary energy

The changing fuel mix

-150

-100

-50

0

50

100

150

200

250

1995-2015

Base FT EFT

Non-fossil*

Coal

Gas

Oil

Total

Mtoe per annum

2015-35

Annual demand growth by fuel

2035 *Includes biofuels

Key uncertainties: Faster transition pathways

15