Embed Size (px)
Citation preview
Oil Market in Transition: Implications and Outlook for Colombia II ACP Congress
Jason Bordoff
September 29, 2016
Bogota, Colombia
Colombia’s Oil Sector Turnaround a Success Story
2
• Oil production in steady decline before 2003
• Global oil and gas investment was drying up
• Worsening domestic security situation deterred investment
• Foreign direct investment declined from $1.4B in 2000 to $300M in 2003
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1999
20
00
2001
20
02
2003
20
04
2005
20
06
2007
20
08
2009
20
10
2011
20
12
2013
20
14
2015
Oil Production in Colombia Million barrels per day
Regulatory Reforms of 2003 Helped Turn Oil Outlook Around
3
• Ecopetrol’s transition from a state owned company to an independent integrated entity
• Creation of the an independent regulatory agency
• Shift from production sharing contracts to a concession-based regime
The results: • Production up from 530 kbpd in
2005 to 1 mbpd in 2015 • From 2009 to 2012, signed
contracts rose 50% • Exploration area rose 800%
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1999
20
00
2001
20
02
2003
20
04
2005
20
06
2007
20
08
2009
20
10
2011
20
12
2013
20
14
2015
Oil Production in Colombia Million barrels per day
Production Outlook Have Been Revised Down Since 2014
4
0,0
0,2
0,4
0,6
0,8
1,0
1,2
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
IEA (Jun 2014) IEA (Feb 2016) Wood MacKenzie (Aug 2016)
Source: EIA, Baker Hughes
Oil Production Outlook in Colombia Million barrels per day
US Shale Has Taken a Hit, But Still Been Resilient
5
Source: EIA, Baker Hughes
Source: EIA, Baker Hughes
• US output down 1.2M b/d from 2015 peak; on pace to decline ~1.3M b/d by the end of Q3 ’16 • How sustainable are productivity and efficiency gains? How will access to capital influence
production? What price does it take to turn shale back on?
0 200 400 600 800 1.000 1.200 1.400 1.600 1.800
0
2
4
6
8
10
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
US Crude Oil Production - LHS US Oil Rig Count - RHS
US Crude Oil Production and Oil-Directed Rig Count Million barrels per day, number of rotary rigs drilling
Projection
Shale Is No Longer High-Cost Production
6
Cost Curve for Incremental Oil Production Volumes Through 2025 Breakeven in $ per barrels, cumulative peak production in thousand barrels per day
Source: Goldman Sachs
• Average shale breakevens down from of $80 in 2014 to $55 in 2016
• Goldman Sachs expects shale productivity gains to continue at 3%-10% per year through 2020
• Shale breakevens can fall below $50 by 2020
• Flatter cost curve means production can be added at the bottom (i.e. by low-cost OPEC producers) without much downward pressure on prices
Material Shale Growth Requires Higher Oil Price Than Today’s
7
Cumulative North American Tight Liquids Production Growth in Various WTI Price Scenarios Million barrels per day
• Despite improving productivity, US shale needs $60+ oil price to grow materially
• Permian is an exceptional resource, but other major plays are declining (shale has steep base decline rates)
• Capital access will be key to future production scenarios (independents historically outspent cash-flow)
Source: Barclays Research
-0,15
-0,21
-0,26
-0,30
-0,35
-0,41
-0,43
-0,80
-1,2 -1,0 -0,8 -0,6 -0,4 -0,2 0,0
Colombia
Mexico
Kazakhstan
Venezuela
China
Libya
Nigeria
US
Large Production Declines In Some Producers....
8
Change of Crude Oil Production in Selected Producers Aug 2016 vs. Nov 2014, million barrels per day
Source: EIA
0
20
40
60
80
100
120
140
Jan-
14
May-1
4
Sep-
14
Jan-
15
May-1
5
Sep-
15
Jan-
16
May-1
6
Sep-
16
Brent Spot Price $ per barrel
Source: IEA
... But Large Production Gains in Others
9
Change of Crude Oil Production in Selected Producers Aug 2016 vs. Nov 2014, million barrels per day
Source: EIA
0
20
40
60
80
100
120
140
Jan-
14
May-1
4
Sep-
14
Jan-
15
May-1
5
Sep-
15
Jan-
16
May-1
6
Sep-
16
Brent Spot Price $ per barrel
0,09
0,16
0,25
0,26
0,33
0,83
0,97
1,09
0,0 0,2 0,4 0,6 0,8 1,0 1,2
Canada
Azerbaijan
Brazil
Kuwait*
UAE
Iran
Iraq
Saudi Arabia*
* Kuwait and Saudi Arabia exclude Neutral Zone production
Source: IEA
Economies of Major Oil Producers Hit Hard By Oil Price Fall
10
• OPEC: oil export revenues dropped from $1.2 trillion in 2012 to $500B in 2015, projected to drop to $320B in 2016 (IEA)
• Nigeria: GDP outlook pulled down by nearly 5 p.p. by oil price collapse
• Venezuela: GDP drop of 6% in ‘15 and at least 8% in ‘16
• Russia: GDP dropped 3.8% in ’15 due to sanctions and oil price
• Saudi Arabia: GDP growth slowing, reserves down by $182B in Jul ‘16 vs. Aug ‘14 peak
-10,0 -8,0 -6,0 -4,0 -2,0 0,0 2,0 4,0 6,0 8,0
10,0
Ango
la
Braz
il
Cana
da
Colom
bia
Kaza
khsta
n
Mexic
o
Nige
ria
Norw
ay
Russ
ia
Saud
i Ara
bia
UAE
Vene
zuela
IMF Forecast for 2015 (Oct 2014) IMF Forecast for 2016 (Oct 2014) IMF Estimate for 2015 (Latest - Apr 2016) IMF Forecast for 2016 (Latest - Apr 2016)
Real GDP Growth in Selected Oil Producing Countries Oct 2014 vs. Latest (Apr 2016) IMF Forecast, % change
-20 -10
0 10 20 30 40
2010 2011 2012 2013 2014 2015 2016 2017
Algeria Angola Azerbaijan Iraq Kazakhstan Nigeria Qatar Saudi Arabia UAE Venezuela
Current Account Balance in Selected Oil Producing Countries % of GDP
Source: IMF
New Ways to Grow Colombia’s Oil and Gas Sector
11
Technically Recoverable Shale Oil Resources in South America (million barrels) Argentina 27,000 Venezuela 13,400 Colombia 6,800 Brazil 5,300 Paraguay 3,700 Chile 2,300 Bolivia 600 Uruguay 600
Source: EIA, Advanced Resources International
Turnaround in US Natural Gas Outlook
12
AEO 2005 US Net Natural Gas Imports Trillion cubic feet
AEO 2016 US Net Natural Gas Imports Trillion cubic feet
0
1
2
3
4
5
6
7
8
9
10
2002
20
04
2006
20
08
2010
20
12
2014
20
16
2018
20
20
2022
20
24
Net Pipeline Imports Net LNG Imports
-8,00
-7,00
-6,00
-5,00
-4,00
-3,00
-2,00
-1,00
0,00
1,00
2,00
2014
20
16
2018
20
20
2022
20
24
2026
20
28
2030
20
32
2034
20
36
2038
20
40
Net LNG Imports Net Pipeline Imports
Source: EIA Annual Energy Outlook 2005 and 2016
Oil Import Dependence Dropped From 60% to 25%
13
0%
10%
20%
30%
40%
50%
60%
70%
80%
ene-
1990
en
e-19
91
ene-
1992
en
e-19
93
ene-
1994
en
e-19
95
ene-
1996
en
e-19
97
ene-
1998
en
e-19
99
ene-
2000
en
e-20
01
ene-
2002
en
e-20
03
ene-
2004
en
e-20
05
ene-
2006
en
e-20
07
ene-
2008
en
e-20
09
ene-
2010
en
e-20
11
ene-
2012
en
e-20
13
ene-
2014
en
e-20
15
ene-
2016
Jun 2016: 25%
2005-2006 average: 60%
US Net Oil Import Dependence Net import of crude oil and petroleum products divided by total consumption of crude oil and petroleum products
Source: EIA
US Crude Exports Rose Sharply After Export Ban Lifting
14
Source: EIA
US Crude Oil Exports Thousand barrels per day
0
100
200
300
400
500
600
700
ene-
12
mar-1
2 ma
y-12
jul-1
2 se
p-12
no
v-12
ene-
13
mar-1
3 ma
y-13
jul-1
3 se
p-13
no
v-13
ene-
14
mar-1
4 ma
y-14
jul-1
4 se
p-14
no
v-14
ene-
15
mar-1
5 ma
y-15
jul-1
5 se
p-15
no
v-15
ene-
16
mar-1
6 ma
y-16
Low Oil Prices Not as Much of Boon to US as Previously
15
Estimated Cumulative Effect of a 10% Oil Price Shock on GDP Percent change in GDP; quarters after shock • Some boost to consumer spending
from lower fuel prices, but higher savings muted GDP impact
• Net benefit is smaller because the US is now a major oil producer—sharp drop in energy sector investment and employment proved a significant drag on GDP
• Lower net imports means less benefit from oil price falls—more consumer benefit comes at the expense of domestic producer revenue
• IMF: lower oil prices not as big stimulus if interest rates are in the zero bound
Source: White House Council of Economic Advisers
-0,7
-0,6
-0,5
-0,4
-0,3
-0,2
-0,1
0 0 1 2 3 4 5 6 7 8
1% Net Import Share 2% Net Import Share
Shale Production Is Controversial
16
For more information contact Jason Bordoff Professor of Professional Practice in International and Public Affairs Founding Director, Center on Global Energy Policy Columbia University [email protected] (212) 851-0193
Thank you!
