2014 6
• Balances loosen up on paper but must be seen in perspective • The unconventional supply revolution enters a new stage - matures into an increasingly global  phenomenon, not just a US success story . Political and social change in the MENA raises OPEC supply risk, partly offsetting the impact of higher non-OPEC supply . The economic recovery buoys demand, but the dynamics of demand growth undergo a structural shift - efficiency gains and fuel switching increasingly balance income and population impacts . Asia is by far the largest magnet for global crude exports as North America grows into a net oil exporter • The refining industry faces a new round of restructuring and a potential glut of light products
& OECD/IEA 2014
Demand
■ Non-OECD Europe ■ Africa ■ FSU ■ Latin America ■ Middle East ■ Non-OECD Asia ■ OECD Asia Oceania ■ OECD Europe ■ OECD Americas ■ +1.3% per annum, 2013-19, as macroeconomic momentum builds 2014 6
Strong gains are also foreseen in Africa, the FSU and the Americas
■ Road transport accounting for 4 in every 10 barrels in 2014
Underpinned by relatively low-cost LPG (+ ethane) from the US
■  Power sector oil-use falls everywhere bar Middle East
Ongoing vehicle efficiency gains outweigh US population growth
Traditional OECD/non-OECD split will lose relevance Supply
■ Total oil supply capacity grows by 9 mb/d to 105 mb/d ■ Exceptionally strong non-OPEC growth, but slowing later in the forecast period
| Oil sands Tight oil Conventional share Source: IEA analysis of Rystad Energy data. *NB: That which excludes the other four non-conventional categories ■ Global capital expenditure (including exploration capex) is increasingly targeted at non-conventional/difficult resources
OPEC crude production capacity -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2    1.4 ■ Reaches 37.1 mb/d by 2019 with Iraq to supply 60% of growth ■ Worsening political stability and security issues add downside risk in Iraq as well as Libya Incremental OPEC crude production capacity 2013-19 (mb/d)
Iraq crude production capacity growth Iraq crude oil production by region ■ Iraq production capacity to rise by 1.28 mb/d to 4.54 mb/d by 2019 ■■ Weak institutions have lead to delays in contract awards for infrastructure plans that anchor projects 2014 6 Saudi Arabia maintains capacity around
■ Gross capacity increase of 1.45 mb/d offset natural decline rates and allows mature field capacity reductions ■ Could notionally increase capacity beyond target if needed, with plans on the back burner to add a further 1.9 mb/d Saudi Arabia crude oil production capacity
OPEC NGL production capacity ■ OPEC NGLS rise by 810 kb/d to 7.12 mb/d ■  Iran provides the majority of increase, with further gains from Saudi Arabia, the UAE and Qatar
■ Growth diversifies later in the period ■ Non-OPEC supply grows by 6.2 mb/d to 60.9 mb/d
■ LTO  ■■ Gulf of Mexico  ■ NGLs  ■■ Other liquids ■ Other crude  &  cond ■  By the end of the decade, the majority of US liquids output consists of LTO and NGLs, and total production exceeds 13 mb/d.
■  Bitumen and synthetics lead growth, while core Alberta light and medium production continues to decline.
Mexico total oil production ■ May 2013 ■ Current data ■ In a change from the last Report's forecast, production forecast to increase in 2018 ■ Some of this is long-planned Pemex projects, but the reform process is seen to affect production in 2019 and beyond
North Sea total oil production ■  Growth set to resume in 2015 for the first time since 2000, as numerous new fields are brought online, though declines marginally again in 2018-2019
Production by basin ■ Despite challenges, including an indebted and overstretched Petrobras and high decline rates on mature offshore Increases to average about 160 kb/d per year given major project start ups in the Santos basin
■ Russia is expected to maintain the highest crude oil production capacity in the world after Saudi Arabia.
World NGLs production ■ NGL capacity grows by 1.6 mb/d to 10.7 mb/d in 2019; ■ NGLs, field condensate grow to 17% of global supply, from 16%
■  Driven by liquids-rich plays in North America, tempered by dry gas increases in Asia later in the period
World biofuel production   World biofuel production adj. for energy content as a % of global oil demand Policy support is waning in OECD countries, while their demand growth is already weak. Gasoline subsidies and a weak sugar market are impacting Brazil ■ Can be advantageous in countries with large product import bills and extant subsidies Crude trade
Crude Exports in 2019 and Growth in 2013-19 for Key Trade Routes 1 ■ Asia imports increase by 2.6 mb/d to 22.1 mb, or 65% of the international crude market
■ Increased North American and Middle Eastern crude seen being refined close to the wellhead and subsequently exported as products
Middle East export growth 2013-19 ■  BUT its exports are forecast to decline to 16.1 mb/d (-900 kb/d) as regional producers refine more oil close to the wellhead ● Regional refinery capacity growth set to outstrip production growth ● Decrease in crude shipments will be offset by an anticipated increase in product exports ■ Exports projected to be redirected eastwards to non-OECD Asia ● ● ● ●
■ Shipments to Asia will hit 2.6 mb/d by 2019 ■ Exports to Europe to fall by over 500 kb/d to 3.9 mb/d by 2019 ●  Europe will remain the region's largest customer, but its share of FSU exports will fall to 54% in 2019 from 65% in 2013
OECD American crude imports, 2013 OECD American crude imports, 2019 ■ In response to soaring supplies from US, Canada and Brazil ● Which will outstrip regional refinery capacity growth ■■ OECD Americas still to import 3.1 mb/d of mainly heavy sour crudes in 2019, 2.2 mb/d lower than in 2013 ■ Middle East will account for 57% of regional imports ● But absolute volumes will drop by 600 kb/d
■ China to import 7.1 mb/d in 2019 ■ China to continue diversifying its crude imports ●  Imports from the FSU to reach 1.3 mb/d ■ Most of the growth will be long-haul trade Refining
Crude Distillation Expansions ■■ OECD North America　■■ OECD Europe　■■ OECD Pacific　■ FSU　■■ China　■■ Other Asia　■■ Latin America　■■ Midde East　■ Alrica ■  95% of new capacity comes from the non-OECD, of which Asia accounts for half
2018 2014 2016 2012 2013 2015 2017 ■ China ■ OECD  Americas    ■ Other  OECD ■ Other Asia ■ Middle  East ■ Other non-OECD ■ Latin  America Revisions to capacity expansion plans since 2013 MTOMR Chinese CDU expansions vs . previous ■ Projects slip in Latin America; China stalls new projects on looming surplus capacity, corruption scandals, pollution concerns
Chinese total refinery output vs demand Chinese gasoil refinery output vs demand ■ Apparent slowdown in gasoil demand growth sees product surpluses emerging. Indeed, China turned net gasoil exporter in 2013
■ 4.5 mb/d of OECD crude distillation capacity shut since 2008 ■ Surging US LTO, condensate supplies lead to 750 kb/d expansion in US in 2015-2017
Product Supply Balances - Gasoil/Kerosene trade and differences in product classifications. 1. Positive number indicates net-export potential, negative number net-import requirement ■ Increased supplies are coming from Middle East, North America and Russia
Product Supply Balances - Gasoline/Naphtha Refinery Production and supplies from other sources vs. end-user demand. regional total do not add to zero due to feedstock trade and differences in product classifications. Positive number indicates net-export potential, negative number indicate net-import requirement ■ North America faces excess light distillate supply of 1.3 mb/d in 2019, in search of export outlets
■ European middle distillate deficit balloons to 1.6 mb/d by 2019,but region struggle to rid itself of surplus gasoline supplies ■■ US refinery industry renaissance, coinciding with sharp drop in demand, takes US to top global naphtha/gasoline supplier
FSU key product exports Global fuel oil demand ■ Equalization of Russian fuel oil export duties with crude oil from Jan 2015, has led to refinery upgrading investments ■ New duties make simple refiners, with high fuel oil yield, uneconomical to run ■ Fuel oil demand stays unchanged through 2019,as non-OECD offset improvement in OECD
■ Russian export duty reform, refinery investments curb output while global demand stays flat – unless marine bunker markets shift away from fuel oil ahead of new IMO sulphur standards
Middle Eastern  product balances Middle East refinery output vs demand ■ New refinery projects coming on stream in the Middle East exceed regional demand growth, resulting in increased product exports – in particular of middle distillates 2014 6
Africa refinery output vs total oil demand Latin American refinery output vs total oil demand ■  Difficulties in bringing new refinery projects on stream, leaves Africa and Latin America with large product import requirements ■ Heavy financial burden on governments subsidising fuels
■ To bring utilisation rates up to 2006-2008 levels (when margins were healthy), another 4.8 mb/d of capacity would have to be cut, whether through plant closures, projects delays or cancellations Summary
■ Nominal spare OPEC capacity to rise from 2013 ■ But high risk remains Thank you Further questions: OilMarketReport@iea.org