Energy Perspectives 2014Long-term macro and market outlook

Eirik Wærness, Chief economist

2

30-year macro and market outlook – www.statoil.com/energyperspectives

• The global economy

– Growth close to historic average (3%)

– Two speeds – non-OECD catching up

• Overall energy market outlook

– 1.3% annual growth (oil 0.6%, coal: 1.1%)

– Moderate greening of energy mix

• Global oil and gas markets

– Oil demand peaks around 2030

– Gas demand increasing (1.4% per year)

• Strong growth in new renewables (8%)

– … but CO2 emissions grow until around 2030…

Energy Perspectives 2014

3

Sustainability, politics and technological progress are drivers of uncertaintyLong-term forecasts are uncertain

4

Sources: The Economist, blog.enerdynamics.com, guanming.online, Gettyimages.com, Øyvind Hagen (Statoil), Paris Diplomatie, IEA, Greenenergybricks.com, BBC

Two alternative states of the world have been established

Source: Statoil

There is more than one possible future

5

0

20

40

60

80

100

120

2010 2020 2030 2040

ReferenceLow CarbonPolicy Paralysis

Energy intensity in different scenariosIndex, 2010=100

0

20

40

60

80

100

120

2010 2020 2030 2040

ReferenceLow CarbonPolicy Paralysis

CO2 emissions/TPED Index, 2010=100

Source: Reddit, IEA, Statoil (projections)

A strong trend affecting economics and energy

6

Economic gravity moves (back) to the east, and so does energy demand

Shifting energy demandShare of total energy demand (TPED)

The global centre of population

0 %

20 %

40 %

60 %

80 %

100 %

2000 2010 2020 2030 2040

Rest of world OECD North AmericaOECD Europe OECD PacificIndia China

Non-OECD driving growth, energy efficiency to improve by almost 40%

Global energy demandTPED, bn toe

Growth and energy intensityGrowth (%) and toe/million 2010-USD

Source: IHS Global Insight and International Energy Agency (history), Statoil (projections)

Growth, efficiency and energy demand

Economic growthAnnual change in GDP (%)

7

0

2

4

6

8

10

Other non-OECD

OECD Non-OECDAsia

91-00 01-10 11-2021-30 31-40

0

100

200

300

-4

-2

0

2

4

6

8

1990 2000 2010 2020 2030 2040

GDPTPEDEnergy intensity (rhs)

0

2

4

6

8

10

12

14

16

18

20

1990 2000 2010 2020 2030 2040

International bunkersOther non-OECDNon-OECD AsiaOECD

World GDP growth rates 5-year annual growth average, %

Source: IEA (history), Statoil (projections)

Growth is a key driver for energy demand…

8

0

2

4

'11-15 '16-20 '21-25 '26-30 '31-35 '36-40

Reference

Low Carbon

… and is different in alternative scenarios

World GDP growth rates 5-year annual growth average, %

0

2

4

'11-15 '16-20 '21-25 '26-30 '31-35 '36-40

Reference

Political Paralysis

Source: IEA (history), Statoil (projections)

… depending on growth, efficiency, technology and policiesEnergy demand and energy mix differ

9

World energy mixShare of total energy demand in 2040 (TPED), %

World energy demand per fuelBn toe

0

4

8

12

16

20

Ref LC PP Ref LC PP

New renewables Biomass and wasteHydro NuclearGas OilCoal

2020 20402010

28%

25%23%

5%3%

10%6%

Ref

32%

27%

20%

4%3%

10%4%

PP

19%

24%

24%

8%4%

12%9%

LC

Coal

Oil

Gas

Nuclear

Hydro

Biomass and waste

New renewables

Source: IEA (history), Statoil (projections)

Energy mix and energy demand: OECD North AmericaAlternative scenarios

10

OECD North America energy mixShare of total energy demand (TPED), %

0

20

40

60

80

100

Ref LC PP Ref LC PP

New renewables Biomass and wasteHydro NuclearGas OilCoal

OECD North America energy demand per fuelBn toe

0

1

2

3

Ref LC PP Ref LC PP

New renewables Biomass and wasteHydro NuclearGas OilCoal

2020 20402010 2020 20402010

* Excl. Bio-fuelsSource: IEA (history), Statoil (projections)

Global gas demand Bcm

Fossil fuels are here to stay

11

Global oil demand* Mbd

Considerable need for investments, irrespective of scenario

0

20

40

60

80

100

120

2000 2010 2020 2030 2040

International bunkers Other non-OECDNon-OECD Asia OECDLow Carbon Policy Paralysis

0

1000

2000

3000

4000

5000

6000

2000 2010 2020 2030 2040

International bunkers Other non-OECDNon-OECD Asia OECDLow Carbon Policy Paralysis

Source: IEA (history), Statoil (projections)

Opec oil production Mbd

Non-Opec growing over the medium-term, Opec comeback long termGlobal oil supplies in the reference scenario

12

Non-Opec oil production Mbd

0

10

20

30

40

50

60

70

2000 2010 2020 2030 2040

Oil sands Non-Opec tight oilNon-Opec NGL Other sources*Non-Opec conv. Crude

0

10

20

30

40

50

2000 2010 2020 2030 2040

Opec NGL/condensate Saudi ArabiaIraq IranOther Opec

* Bio-fuels, GTL, processing gains

… driven by energy intensity, fuel mix and CCS

Source: Statoil, IEA WEO 2013

Energy related CO2 emissions vary considerably

13

0

10

20

30

40

50

2010 2020 2030 2040

ReferenceLow CarbonPolicy ParalysisIEA NPIEA 450

World CO2 emissionsBn tons

0

2

4

6

8

2010 2020 2030 2040

ReferenceLow CarbonPolicy ParalysisIEA NPIEA 450

OECD North America CO2 emissions Bn tons

Development in China and other emerging economies is key

Source: Statoil, IEA WEO 2013

Energy related CO2 emissions, cont.

14

0

1

2

3

4

5

2010 2020 2030 2040

ReferenceLow CarbonPolicy ParalysisIEA NPIEA 450

OECD Europe CO2 emissionsBn tons

0

5

10

15

2010 2020 2030 2040

ReferenceLow CarbonPolicy ParalysisIEA NPIEA 450

China CO2 emissions Bn tons

15

Regional growth in energy demand 2012-2040CAGR, %

16

Thank you!

Key messages

• Global oil demand peaks around 2030

– 0.6% average growth 2011-2040

– Non-Opec production rising medium term, Opec regaining importance long term

– Unconventional supply gaining importance

• Global gas demand grows 1.4% on average

– Share of fuel mix up from 21% to about 23%

– Demand increasing in several regions

– LNG gaining importance

– Unconventional gas supply key uncertainty

• Globalisation and integration continue

• Divergent growth and catch-up

– OECD 1.9%, non-OECD 4.5%

– Long-term moderation in China

• Energy intensity improves by 1.5%

• Energy demand (TPED) grows by 1.3%

• Gradual greening of energy mix

– New renewables grow by 8%

– Coal and oil grows by 1.1% and 0.6%, respectively

• Special chapters on different scenarios

17

What if the world develops differently?

Deviating assumptions Low Carbon scenario Policy Paralysis scenario

Preconditions Pollution and mounting evidence of global warming Geopolitical tensions

GDP growth Higher, lower, higher Lower Wholesale oil, gas and coal prices Lower Volatile Climate policies Radical at all levels Limited international cooperation Efficiency improvement Faster SlowerPenetration of new renewables in the power sector Faster, and more nuclear Slower

Removal of fuel subsidies Quicker Slower

CO2 prices Higher Lower in Europe, zero everywhere else

CCS Takes off Almost no progress

OtherFaster penetration of electricity, gas and biofuels in the transport sector

Emphasis on energy self-sufficiency favouring coal, in some places gas

1

Two alternative states of the world have been established