Jean-Pierre Favennec jpfavennec@yahoo.fr Washington, September 24, 2018 USAEE Conference Towards a new oil shock ? Jean-Pierre Favennec jpfavennec@yahoo.fr

Worldwide energy flows (Mtoe)

The parameters of oil price Demand Production Reserves Investments Climate change

The demand for Oil Oil demand 2010 : 88.5 Mbd (Source BP Statistical Review) Demand more than 100 Mbd now

World reserves (Gtoe) R/P = 93 Possible 2800 Proven Enhanced recovery (1) Quantities which can be recovered for less than 130 $/kg (2) Quantities which can be recovered for less than 260 $/kg (3) Present technology (Pressurized Water Reactor) (4) R/P: Proven Reserves/Production ratio 2800 Including Non-conventional Proven Enhanced recovery R/P = 153 R/P = 51y. (4) Yet to be discovered 360 460 163 R/P = 52 659 R/P = 93 140 Yet to be discovered Proven All existing recoverable gas resources are estimated to 920 trillion m3 – about 300 times more than the current annual global consumption (source: IEA) http://www.eia.gov/todayinenergy/detail.cfm?id=11611 Proven 189 15 (2) 50 (1) 240 166 Liquid Hydrocarbons Including Non Conventional, Oil Sands, Extra-heavy Oil Natural Gas Coal & Lignite Uranium (3) Source : BP Statistical Review 2018 , CEA, FP/DEE, EIA

Investments Investments in the Oil and Gas industry 2014 683 Billion US dollars 2015 514 Billion US dollars 2016 374 Billion US dollars 2017 389 Billion US dollars 2018 400 Billion US dollars (estimate) Investments in renewables : 350 Billion US Dollars (of which China 40 %)

Oil companies investment decline Source: WoodMackenzie, Annual reports

Oil majors oil production Source: Annual reports

Oil discoveries decline Source: Rystad

Global investment in E&P Middle East Europe CIS Asia Pacific Latin America Africa United States + Canada Source: IFPEN - Investment in exploration-production and refining in 2016.

Crude oil price (WTI) Speculation Arab Springs Katrina Rita hurricanes Eco crisis Staff attacks in S. Arabia disturbances in Iraq, Nigeria OPEC quotas Iran/Iraq war Iraq events Kuwait crisis Nationalization of oil fields Netback contracts OPEC Quotas Asian crisis OPEC Quotas Sept 11th OPEC domination 3rd OIL SHOCK 2nd OIL SHOCK Agreement Mexico, Venezuela, Saudi Arabia Iranian revolution 1st OIL SHOCK Yom Kippur war 1970 1975 1980 1985 1990 1995 2000 2005 2010 2016 Source: IMF

Crude oil price (Brent) Source: EIA

The market situation Fair demand because of low prices recently (2014 – 2016) Oil production limited or decreasing in several countries : Venezuela – political and economical situation – lack of investment Libya : decrease of production from 1.8 to 0-0.8 Mbd depending upon political situation Nigeria : production less than 2 Mbd compared to 2.4 in 2012 Angola : decreasing production, lack of investment Sudan : decreasing production Etc… And the coming of US sanctions on Iran (November 5)

Situation in Iran Production in Iran was close to 4.4 Mbd US (and European) sanctions in 2012 : decrease in Iran production by 0.6 – 0.8 Mbd After the nuclear agreement (5+1 and Iran) production back to nearly 5 Mbd recently Iranian exports : around 2 Mbd. US strategy : reduce these exports to zero Iranian threats on the Hormuz Straits (around 18 Mbd – near 20 % of oil supplies go through the Strait)

What will happen on November 5 ? Thank you for your attention Conclusion What will happen on November 5 ? Thank you for your attention