Oil and gas producers in a period of low oil prices© OECD/IEA 2016

Oil and gas is still the largest field of investment
Global Energy Investment, 2015
USD 1.8 trillion
ThermalEnergy Power
Efficiency 7%
Power
12%
Generation
Renewables
Electricity
23%
17%
Networks
14%
Coal 4%

Biofuels and Solar
Heat1%

Oil & Gas
46%

An 8% reduction in 2015 global energy investment results from a $200 billion decline
in fossil fuels, while the share of renewables, networks and efficiency expands© OECD/IEA 2016

Energy efficiency and low fossil fuel prices
The three best selling vehicles in North America in 2015

Appliance standards lock in efficiency improvements despite
declining electricity prices© OECD/IEA 2016

New technologies have an asymmetric impact
on oil and gas producers

Electric cars generate consumer excitement, but displaced only 0.01% of oil
Current wind and solar production
investmentlast
is equivalent
to over 1% of global gasyear
production not burned in CCGTs© OECD/IEA 2016

The balance of oil markets tilting towards lowcost regions

USD (2015) billion

Upstream investment in key regions, 2000-2016
900

Other800

Asia700Latin America

600
500

Russia400Middle East300

North America

200100
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

0

North America covers almost half of the world’s decline in upstream investment,
while the Middle East and Russia emerge as the most resilient regions.
© OECD/IEA 2016

Upstream costs back to levels of 10 years ago,
serving as key contributor to investment plunge

15012014011013010012090110

USD per barrel

Index (2005 = 100)

Investment Cost Indexes, 2005-2016

80

100

70906080

US Shale Investment Cost Index

Upstream Investment Cost Index

2016

2015

2014

2013

2012

2011

2010

30
2009

50
2008

40
2007

60
2006

50

2005

70

Oil Price (RHS)

Lower costs accounted for just less than two-thirds of the total fall in upstream
investment between 2014 and 2016
© OECD/IEA 2016

Rig count in the Middle East remain close torecord levels

Jan 2015 = 100

Total rig count index, 2015-2016Middle East120

Europe100

Asia Pacific80

Latin America

60Africa
North America

40
20JanFebMar
AprMayJunJulAug
Sep
Oct
Nov
Dec
JanFebMarAprMayJunJulAug
Sep
Oct02015

2016

Recent uptick in the oil price has raised the economic case for an increase in rig
counts in North America and recovery in activity is tangible since June© OECD/IEA 2016

US shale leveraged business model increases
investment volatility
1 800

120

1 600

1001 400
1 20080

1 000

USD per bbl

bps

Bond spreads vs. Oil prices, Jun 2014 – Aug 2016

60800600

40400

202000High yield US energy bond spreads

Jun/2016

Apr/2016

Feb/2016

Dec/2015

Oct/2015

Aug/2015

Jun/2015

Apr/2015

Feb/2015

Dec/2014

Oct/2014

Aug/2014

Jun/2014

0WTI (right axis)

Debt costs soared for leveraged US shale companies as oil prices fell, resulting inbankruptcies; more resilient operators, with the majority of production, now remain© OECD/IEA 2016

Russian oil upstream keeps defying
expectations
11000

IEA OMR monthly projections for Russian oil production

10800

10600

2015
10400

10200

10000

© OECD/IEA 2016

2016
2017

Russia: large and dispersed resource base

Legacy infrastructure was built up to supply the Western regions and European exports© OECD/IEA 2016

West Siberia remains dominant with artic
offshore as a frontier resource
240

4018030120

2060

1000-60-10-120

Caspian Volga Timan Barents Western Eastern Other Sakhalin Others
Urals Pechora Sea Siberia Siberia offshore
Arctic-20

trillion cubic metres

billion barrels

Conventional oil and gas resources in various Russian regions
Oil (left axis)
Remainingrecoverable
resources
Cumulative
production
Gas (right axis)
Remainingrecoverable
resources
Cumulativeproduction

The bulk of Russia’s resources are in the core producing region of Western Siberia, artic
offshore is on hold due to sanctions and oil prices© OECD/IEA 2016

Arctic offshore: What a difference threeyears make• Sanctions constrain investment
and technology transfer• But similar projects became
unviable in Alaska and Canada
as well• And the IOCs are cutting capex
anyway© OECD/IEA 2016

Arctic offshore developments are likely to be on hold in the foreseeable futureLight tight oil in the Bazhenov
Horizontal drilling andfracking is routinely usedfor EOR
Decent field service
industryNo anti fracking lobby
Legacy infrastructure Lack of mid size
independents
 Access to geological data High end service
capabilities (pressurepumping, 3D seismic)
LTO development might start but will remain under its geological potential© OECD/IEA 2016

Investment cuts, what investment cuts?

RUB (2015) Billion

Russian oil and gas upstream investment, in Roubles 2010-2016
3,000
2,500
2,000
1,500
1,000500-2010

2011

2012

2013

2014

2015

2016

80-90% of capital spending is Rouble based due to a large domestic service industry
and focus on conventional brownfield development© OECD/IEA 2016

East Siberia: the manifest destiny?

SKV pipeline• 1830 km between SakhalinKhabarovsk-Vladivostok• Full design capacity: 30 bcm• Current capacity: about 7 bcm

Altai pipeline (Western)• 2600 km from West Siberia toChina• Initial capacity: 30 bcm

Source: Gazprom and IEA (forthcoming)© OECD/IEA 2016

Power of Siberia pipeline (Estern)• 4000 km from Kovykta to Vladivostok• Construction commenced in Sept 2014
• Initial capacity: 38 bcm

Yamal LNG: overcoming the odds
 Equity stake by Total andEPC contract with Technip
maintained CNPC + Silk Road Fund
equity stakes
 Multibillion Euro/RMB
Chinese project financing
secured© OECD/IEA 2016

LNG investment about to fall from historical peak050bcm per year125

Australia
AfricaMiddle EastNorth AmericaRussia
EuropeOthers
Right axis:Capacity

2020

52019

200

2018

102017275

2016152015350

2014

202013

425

2012

25

2011

500

2010

30

20095752008

352007

650

2006

40

2005

USD (2015) billion

LNG terminals investment

Given the sharp fall of investment and increasing reluctance for new long term
contracts LNG might be heading towards a new boom and bust cycle© OECD/IEA 2016

New North American shale plays drove pipeline
investment

USD (2015) billion

North America oil & gas infrastructure capital spending 2010-2016
60
50
40
30
20
1002010

2011

2012

2013

2014

20152016

Less well-connected states and regions that concentrated boom in production
led investment in new infrastructure© OECD/IEA 2016

CCS good news depend on oil market developments

Boundary Dam
Petra Nova
KemperGorgon
QuestSleipner

EOR oil pays forclean coal

Large oil and gas projects withan integrated CCS component

For every single CCS project that has succeeded in real life hydrocarbon
revenues played an important role
© OECD/IEA 2016

Oil prices and methane leakage
NorthAmerican
flaring

LTO slowdown
enables midstream
to catch up© OECD/IEA 2016

Russia,Nigeria, Iraq

Investmentcapability,geopolitics, andother priorities...

Distribution

Investment
capability of utilitiesBackup© OECD/IEA 2016