Sirine Tajer March 2011 Investment in Oil & Gas Industry in the MENA region

Transcription

1 Sirine Tajer March 2011 Investment in Oil & Gas Industry in the MENA region Sustainable Development is development which meets the needs of the present without compromising the ability of future generations to meet their own needs. Brundtland Report, Our Common Future, United Nations, 1987

2 CURRENT SNAPSHOT DATED BRENT PRICE (USD / B) ALL TIME HIGH : USD /b Economic boom Demand-led High liquidity 24/02-30-MONTH HIGH : USD /b Fragile economic recovery Supply-led Apparent tight liquidity JASMINE REVOLUTION LEADING TO A MENA POLITICAL TSUNAMI Revolutions, consequential disruptions and medium term recovery in Tunisia, Egypt and Libya Egypt - Resumed Gas and LNG exports Libya Mbpd oil exports & of Gas exports stopped Domino Effect : Bahrain, Oman, Yemen, Iraq, Syria, Algeria Iraq - Baiji refinery explosion (not uncommon) Yemen Damaged oil pipeline and potential for disruption for Total, DNO & Calvalley Source: Platt s DEMAND: China Oil demand hits all time high at 10 Mbpd According to IEA, world crude Oil supply rose to an all time high of 89 Mbpd in Feb SUPPLY: FUNDAMENTAL PARAMETERS OPEC crude oil output at c. 30 Mbdp with Gulf States mainly offsetting the Libyan effect OPEC effective space capacity, excluding Libya, is now near 4 Mbpd, its lowest since end-2008 JAPAN NATURAL TSUNAMI 25 years after Chernobyl Highlighted the danger of nuclear power (17% of world s electricity) Announced Review of Nuclear Plans, Policies and Security by: Japan, Europe (Germany, UK ) China GCC (UAE, Saudi Arabia ) EXPECTATIONS : Difficulties for financing & public approval for any new plants Potential Impact on the energy mix (gas, renewables and coal ) on the medium term 2

3 INTERESTING CORRELATIONS INTERNATIONAL FINANCIAL LACK OF LIQUIDITY? Oil & Commodities as a Refuge asset Class Source: Datastream, Erste Group International moderate rates environment with Fed increased expansion in Money supply Correlation of 86% between the Fed balance sheet and the S&P 500 since 2 years Strong correlation between S&P500 and the Oil Price General current increase in commodities prices According to Erste Group Research : Since 1991, correlation between the oil price and Food Index of 0.91 Currently, the speculative net exposure on the CBOT has doubled on the Oil and Wheat, increased by 90% on copper and 40% on soy Source: Platt s FOOD FOR THOUGHT In 2009, just after the financial crisis, when RasGas II / III and Mubadala approached the Equity Capital Markets to raise their respective USD 2.3 B and USD 1.25 B Project Bonds, they received a total of USD 33 B orderbook Source: Datastream, Erste Group 3

4 HISTORICAL AND FUNDAMENTAL PERSPECTIVE OIL PRODUCTION FORECAST BY TYPE IN MBPD OIL DISCOVERIES SINCE 1960S IN MBL Source: EIA World Energy Outlook 2010 Source: EIA, Oil & Gas Journal, Erste Group, OPEC Source: BP Statistical Review 2009 including Canadian Oil Sands 4

5 HISTORICAL AND FUNDAMENTAL PERSPECTIVE Conventional Oil Heavy Oil Bitumen THE END OF CHEAP OIL? Expectations : Enhanced Oil Recovery (EOR) Multidirectional and horizontal wells Moving down the Resources Triangle Offshore & Deeper horizons (Pre-Salt) Efficiency technologies Seismic R & D Increasing technological requirement Increasing production costs Oil Shales REAL OIL PRICE: FROM 1861 TO PRESENT CHART OF THE MONTH Table shows the oil price in real terms the past 150 years If Brent crude remains at its year to date average, 2011 would become the strongest year for oil price since 1864 Consequences : Relevant time for investments GDP burden and consumers impact Incentives for alternative energies Source: BP Statistical Review 2010, Datastream, Bloomberg, JP Asset Management FOOD FOR THOUGHT The Stone age came to an end not by a lack of stones 5

6 MIDDLE EAST & NORTH AFRICA: OIL & GAS POSITION STRATEGIC GEOGRAPHIC LOCATION MENA OIL FLOWS (in Mbpd) Country Crude Products Suez Canal Egypt SUMED Pipeline Egypt Bab El-Mandab Yemen Strait of Hormuz GCC / Iran Source: BP Statistical Review, Barclays Capital, Wells Fargo RESOURCES STRATEGIC IMPORTANCE MENA Oil & Gas proven reserves : With c. 820 Bbl Oil reserves: 61% of world conventional oil reserves and 56 % of world total oil reserves With c. 83 Tcm in Gas reserves: 44% of world gas reserves MENA Oil & Gas exports : More than 45% of world oil exports Around 20% of world gas exports Saudi Arabia: 1 st oil reserves in the world & 2 nd producer Qatar: 3 rd gas reserves & world s leading producer of LNG producer with 77 MT pa celebrated in Dec 2010 Iraq: 4 th oil reserves with strong upside potential According to WEF, MENA expected to provide up to 80% in world s growth in energy demand by 2030 Source: OPEC, EIA, BP Statistical Review, World Economic Forum 2030 HORIZON : SAUDI ARABIA & IRAQ BRIDGING ROLES Source: BP Energy Outlook

7 MENA CHALLENGES & INVESTMENT REQUIREMENTS DISCREPANCIES & ENERGY GAPS Combined population of 320 M & Combined GDP of USD 2 T with strong GDP growth expectations GENERAL REGIONAL OIL & GAS DEPENDENCY : in 2009, oil alone : 21% of combined GDP 60% of total exports REGIONAL DISCREPANCIES : GDP p.c : from Qatar (USD 69754) to Yemen (USD 1118) Net Oil-importers (Bahrain, Egypt, Jordan, Lebanon, Morocco and Tunisia) Oil-exporters (most of GCC, Algeria, Libya, Iraq, and Iran) Dependency on light refined products (Saudi Arabia & UAE vis a vis) Gas regional shortage (Dolphin, first LNG imports by Kuwait) OIL & GAS INVESTMENTS REQUIREMENTS IN THE FULL VALUE CHAIN : Oil new production, EOR & transportation Oil horizontal integration (refineries with higher complexity factor and petrochemicals) Gas new production (non associated & Sour, e.g. Shah field in U.A.E ) & transportation, Gas-based horizontal integration (petrochemicals & fertilizers) Storage capabilities KEY CHALLENGES: SUSTAINABLE DEVELOPMENT ECONOMIC & SOCIAL REFORMS : Young population (median age <30 years), high level of unemployment & strong growth Private sector development & Economic diversification INFRASTRUCTURES UNDERINVESTMENT : World Bank: 20% shortfall in installed electricity capacity General gap : transportation, education, hospitals CRITICAL INVESTMENTS IN ENERGY EFFICIENCY: Growth in Total primary energy demand at 3% p.a. and Electricity demand doubling by % more energy intensive than OECD Countries Study on 11 MENA Countries: 17.9 GW or 13.3% of total capacity lost in transmission a 10% reduction would save USD 5.5 B for new infrastructure investments WATER SCARCITY: Water available p.c to be halved by 2050 FOOD FOR THOUGHT Interdependent dynamics of Oil & Gas, Power, Infrastructures, Water & Energy efficiencies Saudi Case : Capacity increased from 21 MW in 2000 to 41 MW in 2010 Nearly 1 Mbpd for power generation Potential cost of 3 Mbl by 2028 with danger for international energy balance 7

8 MENA STRATEGIC INVESTMENTS ENERGY INVESTMENTS (APICORP Research Feb. 2011) USD 530 B potential but 20% projects shelved (vs 29% in 2010) USD 430 B of actual capital requirements GEOGRAPHICAL PATTERN OF ENERGY INVESTMENTS SECTOR DISTRIBUTION : USD 180 B in Oil & related USD 154 B in Gas & related USD 155 B in USD 95 B in Power generation COUNTRIES DISTRIBUTION : 70% in 5 countries (KSA, U.A.E, Qatar, Algeria & Egypt) USD 130 B in Saudi Arabia USD 74 B in UAE USD 70 B in Qatar (maintained North Field moratorium) USD 57 B in Algeria and USD 42 B in Egypt SELECTED OFFICIAL FIGURES Source: Apicorp Rsearch Feb-March 2011 MENA Energy Investments according to OPEC : USD 167 B in natural gas investments (expanded capacity, production & transportation) up to 2015 Expected 39 Tcm of gas reserves to be discovered Qatar MOF: USD 170 B in Oil & Gas and Infrastructures in the next 10 years WEF 2010: MENA Minimal required Energy & Infrastructure investments : USD 100 B p.a. (5% of annual GDP) Half assessed to be currently mobilized 8

9 A SIMPLE FINANCIAL CALCULATION ENERGY REVENUES Oil & Gas Investments Capex Opex Financing Costs Social & Economic Reforms Infrastructure Investments & Energy efficiency Renewables REQUIRED DISCIPLINED & SUSTAINABLE INVESTMENTS Equity & Debt Optimization Cost Minimization 9

10 FINANCIAL FOOD FOR THOUGHT INTERNATIONAL INVESTORS / LENDERS REGIONAL INVESTORS / LENDERS Risk of shrinkage of traditional foreign financers with risk premium & D/E ratio reduction Geographical diversification of contractual relationships & associated ECAs financing Rediscovering the Silk Route : PetroChina / Fujairah Oil Storage projects ; Saudi Aramco in Fujian and potentially Qingdao refineries in China while Sinopec to take a stake in the RSRC in Yanbu ; KPC interest in Zhanjiang Refinery ) Potential for Co-investment between Government & private players: e.g. Mostorod refinery in Egypt.. Relatively solid regional banks (e.g. SATORP / Jubail) Strengthening (Credit bureaus in UAE & Qatar) Higher degree of pioneering & selective regional diversification Deeper contribution of Islamic financiers required (e.g. Sukuk market vis a vis SATORP / Jubail) Financing diversification : Structured Financing, Asset Securitizations, Project Bonds PPP Development for Infrastructure investments Marshall Plan TRANSVERSAL ACTIONS Governmental global sustainable investment (IFC Study) Rigorous projects profiling & management Hedging & Barter potentials Regulatory & Legal framework maturity Geographical diversification, Technology, R&D Investments National employment development & know-how transfer 10