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Wood Mackenzie Global Markets
Paul McConnell
Principal Analyst, Global Trends
James Webb
Upstream Analyst, NW Europe
Oil and Gas Denmark
October 7th 2014
Copenhagen
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1. Global summary
2. Demand trends
3. Macro trends and risks
Agenda
4. Attracting upstream investment to Denmark
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90
95
100
105
110
115
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2007 2008 2009 2010 2011 2012 2013 2014 2015
USA
UK
Germany
Japan
The real GDP growth story is Asia and the USA
-10% 10% 30% 50% 70%
Italy
Spain
France
United Kingdom
Japan
Germany
Venezuela
Russia
Canada
United States
South Africa
Brazil
Turkey
Mexico
Poland
Australia
Taiwan
South Korea
Thailand
Colombia
Indonesia
India
China
Source: BEA, Thomson Reuters Datastream, Wood Mackenzie
Growth in Real GDP: 2008 peak to end-2015
Asian economies
Forecast
Real GDP Index (Q1 2008 = 100)
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-200
-100
0
100
200
300
400
500
600
1990 1994 1998 2002 2006 2010 2014 2018
Co
nsta
nt
$U
S b
illio
n,
2005
Net exports
Government spending
Private consumption
Investment
Forecast
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
2000 2005 2010 2015
Co
nsta
nt
US
D B
illio
n,
2005
Incremental GDP
China: slower not lower
Forecast
Real GDP Level 2000 – 2018
Source: China NBS, Wood Mackenzie
Change in Real GDP by Sector 1990 – 2018
Annual growth rate approx.
7.5% in both years
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Despite slowing growth, China’s energy demand overshadows other
markets
2,678
2,856
596
761
481
677
696
1,012
1,897
1,965
1,795
2,286
722
1,280
3,153
5,046
South America
Other Asia Pacific
Europe
North America
India
China
2014 Energy Demand 2030 Energy Demand
Africa
1,048
1,253
Middle East
Russia & Caspian
Global Energy Demand by Region 2014, 2030 (Mtoe)
Source: Wood Mackenzie
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Now and in the future, it’s a hydrocarbon world
South America
Other Asia Pac
Europe
North America China
Africa
Middle East
Russia & Caspian
Global Energy Demand by Region & Fuel 2030 (Mtoe); 2014 – 2030 CAGR
Source: Wood Mackenzie OSF Renewables Hydro Nuclear Gas Oil Coal
0% 10% 20%
-5% 0% 5% 10% 15%
0% 10% 20%
0% 10% 20%
-10% 0% 10%
0% 10% 20% India
-10% 0% 10%
0% 10% 20%
0% 10% 20%
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1. Global summary
2. Demand trends
3. Macro trends and risks
Agenda
4. Attracting upstream investment to Denmark
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0
500
1.000
1.500
2.000
2.500
3.000
3.500
6,0 7,0 8,0 9,0 10,0 11,0
Tra
nsp
ort
dem
an
d p
er
cap
ita (
kto
e / m
illio
n p
eo
ple
)
US$ per capita per year (log scale)
Evolution of transport markets govern oil demand trends… ‘Peak Oil
Demand’ in Europe and North America
China (H) India (H) Asia Pac (H) Europe (H) Mid East (H) N Am (H)
China (F) India (F) Asia Pac (F) Europe (F) Mid East (F) N Am (F)
World oil demand by region 2014 – 2030 Transport demand, GDP per capita 2000 – 2030
Source: Wood Mackenzie
North America – transport demand very
high relative to GDP… but falling fast
China / Asia Pacific
growing but slope
moderate…
…and demand well
below Europe in 2030
400 1,000 3,000 8,000 20,000 60,000 0 500 1.000 1.500 2.000
AP
N.Am
EUR
MidEast
S.Am
R&C
AFR
Mtoe
2014 2020 2025 2030
Oil demand is at or below
peak in North America,
Europe; growing elsewhere
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Gas is displacing other fuels in both mature and growing power
generation markets
Environment, cost, and fuel substitution will benefit gas as a fuel for power generation
Total power vs. gas output growth 2014 – 2030
Source: Wood Mackenzie
USA
China
Russia Japan
Iran
Saudi Arabia
Mexico
India
South Korea
Iraq
Turkey
UAE
Egypt Thailand
Italy
Canada
UK
Spain
Vietnam
Taiwan
0%
2%
4%
6%
8%
10%
12%
0% 1% 2% 3% 4% 5% 6% 7% 8%
Gas p
ow
er
ou
tpu
t C
AG
R 2
014
-30
Total power output CAGR 2014-30
Gas growing faster than total power
output = gas taking market share
Gas growing slower than total power
output = gas losing market share
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0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
2014 2020 2025 2030E
nd
-Use E
lectr
icit
y d
em
an
d (
TW
h)
0
100
200
300
400
500
600
700
800
900
1.000
6,0 7,0 8,0 9,0 10,0 11,0
Po
wer
inte
nsit
y (
GW
h / U
S$ G
DP
(2005 r
eal)
GDP per Capita (log scale)
China’s power intensity will decline but remains much higher than
developed world in 2030
Regional power demand growth 2014 – 2030 Power intensity vs. GDP per capita 2000 – 2030
China (H) India (H) Asia Pac (H) Europe (H) Mid East (H) N Am (H)
China (F) India (F) Asia Pac (F) Europe (F) Mid East (F) N Am (F)
Source: Wood Mackenzie
Africa Russia & Caspian South America Middle East
India Europe Other Asia Pac North America China
Sustained economic expansion
plus high power intensity means
robust power demand growth
China: Rapid
industrialisation &
investment driven
economy have driven
up power intensity…
…and reaching ‘post-industrial’
status is a long way in the future
400 1,000 3,000 8,000 20,000 60,000
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China’s power needs are the key component in driving demand
growth for renewables, nuclear and coal
Source: Wood Mackenzie
Nuclear Renewables Coal
0
200
400
600
800
1.000
1.200
1.400
Ren
ew
ab
le C
ap
acit
y (
GW
)
Canada Spain UK Italy
France Japan India Germany
USA China
China
Russia
India
S Kor
USA
Turkey
UAE
S Africa
Vietnam
UK
ROW
Taiwan
France
Belgium
Japan
Ger.
-25 0 25 50 75 100 125 150 175
1
Net nuclear capacity change (GW) 2014-2030
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
5.000
Co
al
dem
an
d (
Mto
e)
RCA ROW RCA China
Industry ROW Industry China
Power ROW Power ChinaRest of world
China installed
capacity 420 GW
(33% of world total)
China power and
industry account for
64% of world coal
demand growth
China
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1. Global summary
2. Demand trends
3. Macro trends and risks
Agenda
4. Attracting upstream investment to Denmark
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13
0
100
200
300
400
500
600
bcm
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
Pro
du
cti
on
('0
00 b
/d)
Demand trends and new supply will alter global energy balances
E
Gas Oil Coal
Source: Wood Mackenzie
-400
-200
0
200
400
600
800
1.000
Pro
du
cti
on
/ N
et
Tra
de (
Mto
e)
UNITED STATES: Robust
oil and gas supply growth
in an era of weak demand
I
EUROPE: increasing gas
demand and declining
domestic production
OIL SUPPLY: Emergence of
Iraq as a supply province is
a key long-term trend
US becomes net exporter; Europe competes for imports; Mid East supply growth continues
Saudi Arabia US Russia
Iraq Canada Brazil
Norway UK Denmark
0%
5%
10%
15%
20%
25%
30%
35%
40%
Domestic production
Russia exports to Europe
Total Europe Gas Demand
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Risks to the outlook are ever-present…
Supply Demand
Islamic State – is Iraq long-term supply
under threat?
North America – upside risk to
unconventional oil and gas production?
Unconventionals – can the world mimic
the United States?
Europe – is energy supply at risk of
disruption?
Accelerated renewables and energy
storage technology – can the
intermittency problem be solved?
China – is a sharp downturn still
possible?
India – upside growth surprise?
Consumption trends – how will the
developing world use energy?
Subsidies – can reform be achieved?
Energy efficiency – can the link
between economic growth and demand
be broken?
Environment – will environmental
concerns limit the use of fossil fuels?
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1. Global summary
2. Demand trends
3. Macro trends and risks
Agenda
4. Attracting upstream investment to Denmark
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16
1H 2014: M&A has been buoyant, with big value in Europe
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The North Sea
Norway
UK
Denmark
Key benchmarking metrics
Exploration Production 2015
4%
Development Spend
2015
4%
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0
2
4
6
8
10
12
14
16
18
20
0%
20%
40%
60%
80%
100%
Norway Netherlands UK Denmark
Ave
rag
e m
mb
oe
pe
r w
ell
Su
cc
es
s r
ate
Commercial Technical Average mmboe per well
The rest of the North Sea is a mixed bag, with Norway at the top
Exploration performance over three years*
*Up to late September 2014
Source Wood Mackenzie
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Comparison of North Sea developments
Greenfield
*future fields up to mid-September 2014
Metrics
Weighted average IRR 19.4% 19.2% 15.2%
Avg Rec Reserves (mmboe) 166 74 57
% of challenging reserves 30% 56% 70%
Avg Capex per boe (US$ real) 22.2 23.1 16.8
Brownfield
Åsgard
Hod Valhall
Heidrun
Ormen Lange
South Arne
0
5
10
15
20
0% 10% 20% 30% 40%
IRR (%)
PV US$ 2.0 bn
PV US$ 1.0 bn
PV US$ 0.5 bn
PV
/bo
e
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The challenges ahead
Attract new investment 1
Boost exploration 3
Increase oil recovery 2
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Disclaimer
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and databases. The opinions expressed in this report are those of Wood Mackenzie.
They have been arrived at following careful consideration and enquiry but we do not
guarantee their fairness, completeness or accuracy. The opinions, as of this date, are
subject to change. We do not accept any liability for your reliance upon them.
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