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Sustainability vs. Volatility:The New Paradigm in the Petroleum Industry

Dr. Fereidun FesharakiFGE

The 33rd JCCP International SymposiumTokyo, Japan

January 21-22, 2015

This presentation material contains confidential and privileged information.The dissemination, distribution, or copying by any means whatsoever without FGE’s prior written consent is strictly prohibited.

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US$/bbl Brent (2005-2020)

Long-Term Oil Price: A Range to Consider

22005 to December 2014 are actuals, forecasts in $2014 thereafter

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US$/bbl Brent (Jan 2014-Dec 2015)

www.FGEnergy.com

Limited Short-Term Price Impact on US Tight Oil

Total US Tight Oil Output 2013 2014 2015 2016 2017 2018 2019 2020

High Case 2,595 3,394 4,350 4,878 5,213 5,378 5,502 5,594

WTI Prices at $70/bbl (18m Hedging) 2,595 3,381 4,108 4,324 4,456 4,461 4,452 4,431

FGE Forecast of WTI Price (18m Hedge) 2,595 3,381 4,128 4,520 4,713 4,924 5,041 5,069

• US tight oil growth protected in 2015 by inertia of current drilling activity• 2016 output growth at risk however, as weaker prices expectations start feeding in

• Prices at US$70/bbl (Brent) seen as low enough to cut growth

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3.50

4.50

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6.50

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10.50

11.50mmb/d

$80-100/bbl

$70-80/bbl

$50-70/bbl

$30-50/bbl

$0-30/bbl

Tight Oil Base

GOM

Conventional

FGE ForecastPrice Range

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2010 2012 2014 2016 2018 2020

mm

b/d

Rumaila West Qurna 1 Majnoon Halfaya

West Qurna 2 Other SOC NOC KRG

Iraq Crude Outlook—More Potential Volume

Federal Iraq

Kurdistan Region of Iraq

Iran

Turkey

Syria

Taq Taq650 mmbCurrent - 2015115-220 kb/d

Kirkuk1700 mmb200-250 kb/d

KhurmalaCurrent - 201580-250 kb/d

Tawke750 mmbCurrent-2015120-150 kb/d

Shaikan2700 mmbCurrent-201523-150 kb/d

Atrush650mmbCurrent-201510-50 kb/d

Bijeel2400 mmbCurrent-20155-50 kb/d

Bina Bawi500 mmbCurrent-201510-50 kb/d

Dohuk

Fishkabur

Kirkukconnected toKRG pipeline

KRG pipelinereaching 400kb/d by yearend and 700kb/d in 2015

• Some 400 kb/d of supply due to hit the Med early next year, rising to 700 kb/d

• Southern Iraq output growth moving on, but at a slower pace than Iraq Oil Ministryexpectations

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Russian Production Expected to Decline by up to 150 kb/d

• Previous expectations saw tight oil accounting for over 1 mmb/d by 2025

• Some 300 kb/d of production at risk from horizontal multi-stage frack wells

• About 3% of Russia’s current production exposed to sanctions

• Decline of 50-150 kb/d in 2015 expected

Five Key Oil Demand Growth Centers(Year-on-year Oil Demand Growth, kb/d)

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1

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0100200300400500

2013 2014 2015

China

6

0100200300400500

2013 2014 2015

India

0100200300400500

2013 2014 2015

Middle East

0100200300400500

2013 2014 2015

Latin America

0100200300400500

2013 2014 2015

Africa

Major Refining Projects in the Middle East

Jizan: 372 kb/cd - 2019Saudi AramcoDomestic + Exports

Yanbu: 372 kb/cd - 2015Saudi Aramco/SinopecDomestic + Exports

Ruwais: 388 kb/cd - 2015ADNOCDomestic + Exports

Ras Laffan II: 136 kb/cd - 2016QP (84%), Total (10%), plus othersDomestic + Exports

Sohar: 56 kb/cd - 2017ORPICDomestic + Exports

Duqm: 214 kb/cd - 2021OOC (50%) and IPIC (50%)Domestic + Exports

Al-Zour: 572 kb/cd - 2021KPCDomestic + Exports

Karbala: 130 kb/cd - 2021Iraq NOCDomestic

Persian Gulf Star Phases II & III:223 kb/cd - 2017NIORDCDomestic + Exports

Persian Gulf Star Phase I: 112kb/cd - 2016NIORDCDomestic

Sitra: 93 kb/cd - 2020BAPCODomestic + Exports

Nasiriyah: 279 kb/cd - 2025Iraq NOCDomestic + Exports

Fujairah: 186 kb/cd - 2022IPICDomestic + Exports

Jubail: 372 kb/cd - 2013Saudi Aramco/TotalDomestic + Exports

Key: Firm and likely projects by 2020 Likely/possible projects post-2020 Ongoing upgrade projects

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Mina Al-Ahmadi & Mina AlAbdullah Upgrade:Combined 744 kb/cd - 2018KPCDomestic + Exports

Condensate Park (SIRAF): 56kb/cd each - post-2020NIOC and Private sectorDomestic + Exports

China Capacity Expansion Slows…But Still a Wild Card

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China CDU Capacity vs Demand Growth

Incremental CDU Capacity Incremental Refined Products Demand

Note: Data for 2014-2020 is based on probability-adjusted additions

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Refinery Closures: Potential Realized?Japan Leads Refinery Closures in Asia Over 2009-2020

Potential Closures

Confirmed Closures

0100200300400500600700800900

1,0001,1001,200

Japan

kb/d

0100200300400500600700800900

1,0001,1001,200

Australia

kb/d

0100200300400500600700800900

1,0001,1001,200

Others

kb/d

Closures (2009-2014)

Naphtha Gasoline Kero/jet Gasoil Fuel Oil

East of Suez Net Surplus to Rise

Net Imports/Exports (kb/d)

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-1,500

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2014 2017 2020

Asia Pacific

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2014 2017 2020

East of Suez

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Past and Projected Refining Margins for Dubai CrudeSingapore Market

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US$/bbl

Hydroskimming Residual catalytic cracking Hydrocracking

Actual prices for 2013. Forecasts in $2014 thereafter.

Thank You

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