docFinder alert PLS PLS
Week of July 16, 2012Volume 2, No. 27

Oil Price Long Term Fundamentals

OPEC Spare Capacity, Supply and Demand, Game Changers and More!


OPEC Spare Capacity

Little Change in 20 Years


June 4, 2012


Full Presentation



Annual Demand Growth

1 MMbbls+ per day


July 6, 2012


Full Presentation


 As of market close on July 19, oil prices increased for seven days attributable to rising Middle East tensions.  Near-month Nymex (August 2012 contract) closed at $92.66/bbl - up $2.79 on the day.  The forward Nymex strip stands at $93.90/bbl.  In the U.S., near-month Nymex gas (August 2012) also rose 2.6 cents to close at $2.999 per MMbtu.  The latest storage report shows gas inventories now stands at 2.654 Tcf - a level 19% over last year's with the gap narrowing consistently.  With this docFinder Alert, PLS provides you with key slides intended to provide perspective on longer-term global oil supply and demand dynamics.

The slide above left is courtesy of Weatherford International and sources Deutsche Bank. Vividly shown is that despite increased drilling, OPEC spare capacity has not increased meaningfully over the last 20 years.  Many trends on the graph draw attention.  First is that OPEC's spare capacity is tightening through 2015.  Second is the return of Iraqi oil to the markets.  Third is the growing role of NGLs being supplied in the OPEC liquids mix.  Fourth is the virtual full-production throttle of OPEC in 2003 and finally the clear large excess capacity that OPEC wielded in the mid-1980s.

The slide above right is courtesy of Valero Energy in which internal sources internal and consultants show world petroleum demand growth estimates segregated into U.S., OECD (excl. U.S.) and non-OECD (or emerging) countries. Notice particularly in 2004 where global oil demand expanded by nearly 3 MMbbls/day - which, as seen on the left slide, pushed OPEC spare capacity to virtually zero.  In 2012, the data suggests global oil demand will rise by roughly 1 MMbbls/d and clearly demonstrates the unabated growth in oil demand from emerging countries.  Also in this presentation is an excellent list of global refinery closures completed and planned to 2014.


More HOT slides and data below. 

PLS highlights other key slides regarding global oil dynamics.  Plains All American shows that the U.S. has regained leadership in oil production growth recently. Chesapeake presents an interesting slide demonstrating the cost to the U.S. for importing oil as well as the large need for new oil production to keep pace.  PEMEX presents Mexico's success in growing oil production compared to the rest of the world. Last, Noble Energy has opened up the Levant Basin in the Eastern Mediterranean, scoring a string of six discoveries with over 35 Tcf - certainly a game changer for Israel.

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    featured.slides from docFinder

    Slide Slide Slide Slide

    US plus Canada

    Equals Saudi or Russia

    June 25, 2012


    U.S. Oil Imports

    $1 MM per minute

    July 6, 2012


    Mexico Oil Growth

    A Leader : Ex-Cantarell

    June 25, 2012


    Eastern Mediterranean

    Game Changer

    June 12, 2012


    Slide above, from Plains All American, shows the U.S. ranks 3rd (5.7 MMbbl/d) among global producers.  When added with Canada (6th at 2.9 MMbbl/d), North America rivals the production of either Saudi Arabia or Russia. In terms of 3-year growth, the U.S. ranks 1st globally at 0.7 MMbbl/d and, again, when added with Canada (0.3 MMbbl/d), North America beat all the other Top 10 producers combined. North America is expected to add ~4.0 MMbbl/d in the next 5-7 years.  U.S. plays listed here.


    Slide above is from Chesapeake. U.S. imports are 11 MMbbls/d at a cost of $1 MM per minute.  The world must add 64 MMbbl/d of new production to keep pace with expected depletion and growth by 2020. This cost is $350 billion per year yet OPEC only spent $390 billion on new projects from 2000 to 2007. Chesapeake's further asks - Can America deal with $5 gasoline?  Domestic and international challenges expected to put upward pressure on oil prices.  Natural Gas Vehicles are an answer.


    A recent PEMEX presentation (sourcing Purvin & Gertz) provides some stats on Mexico's ranking among global oil producers.  Excluding the Gulf of Mexico giant Cantarell field, Mexico added 0.75 MMbbl/d of new production (2005-2011) at a CAGR of 7.9%.  This compares to Iraq (0.9 MMbbl/d), Russia (0.8 MMbbl/d) and Norway (down 0.7 MMbbl/d). Globally, Mexico ranks #4 as a producer and has 3P reserves of 43.8 Bboe and achieved its goal of >100% replacement rate a year early.


    Slide above shows a map of the countries around the Levant Basin, Eastern Mediterranean - Israel, Syria, Turkey, Cyprus and Egypt. Noble Energy has discovered over 35 Tcf of gas and another 3.5 Bboe gross unrisked resources in a deep oil play.  The opening of the Levant Basin for natural gas (and potentially oil) has certainly changed the economic landscape of the region - which despite being a perpetual hotbed of conflict is competitively positioned for LNG exports to European and Asian markets.


    Full Presentation

    Full Presentation

    Full Presentation

    Full Presentation

    featured.transactions from PLS global M&A database

    07/18/12Alliance Oil acquires Russian license in Timano-Pechora$30 MM
    07/17/12Penn Virginia sells Appalachian basin assets$100 MM
    07/12/12Premier Oil farms into Rockhopper's Falkland basin asses$1,001MM
    07/12/12Caza Petroleum sells Wolfberry asset in Midland County$6 MM

    Source: PLS M&A Database