global oil and gas industry primer - deutsche bank (2008)

Euro p e United Kin g dom Oil & Gas Inte g rated Oils 7 January 2008 Oil & Gas for Beginners A guide to the oil & gas industry Lucas Herrmann, ACA Research Analyst (44) 20 754 73636 lucas.herrmann@db.com Jonathan Copus Research Analyst (44) 20 754 51202 jonathan.copus@db.com James Hubbard, CFA Research Analyst (44) 20 754 57905 james.hubbard@db.com Deutsche Bank AG/London All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access this IR at http://gm.db.com, or call 1-877-208-6300 to request that a copy of the IR be sent to them. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1 Primer Fill 'er up, please Deutsche Bank's overview of the global oil & gas industry. Structured in three parts, this layperson's guide includes details on the workings of the oil & gas industry, key oil producing countries and a summary of the assets and portfolios of the leading European and US oil & gas companies. Company Global Markets Research Euro p e United Kin g dom Oil & Gas Inte g rated Oils 7 January 2008 Oil & Gas for Beginners A guide to the oil & gas industry Lucas Herrmann, ACA Research Analyst (44) 20 754 73636 lucas.herrmann@db.com Jonathan Copus Research Analyst ( 44) 20 754 51202 jonathan.copus@db.com James Hubbard, CFA Research Analyst (44) 20 754 57905 james.hubbard@db.com Fill 'er up, please Deutsche Bank's overview of the global oil & gas industry. Structured in three parts, this layperson's guide includes details on the workings of the oil & gas industry, key oil producing countries and a summary of the assets and portfolios of the leading European and US oil & gas companies. Deutsche Bank AG/London All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access this IR at http://gm.db.com, or call 1-877-208-6300 to request that a copy of the IR be sent to them. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1 Primer European Oil & Gas Research Lucas Herrmann (44) 20 754 73636 lucas.herrmann@db.com James Hubbard (44) 20 754 57905 james.hubbard@db.com Jonathan Copus (44) 20 754 51202 jonathan.copus@db.com Christyan Malek (44) 20 754 58429 christyan.malek@db.com Elaine Dunphy (44) 20 754 59138 elaine.dunphy@db.com US Oil & Gas Research Paul Sankey (1) 212 250 6137 paul.sankey@db.com Ryan Todd (1) 212 250 8529 ryan.todd@db.com Richard Voliva (1) 212 250 5696 richard.voliva@db.com Shannon Nome (1) 713 409 4367 shannon.nome@db.com Mike Urban (1) 212 250 3113 michael.urban@db.com Chief Energy Economist Adam Sieminski (1) 212 250 2928 adam.sieminski@db.com The strategic commodity As the dominant source of our energy needs for the better part of the last sixty years, crude oil has held influence over the politics and economic strategies of nations more than any other commodity, frequently proving the source of instability, dispute and war. From the birth of Standard Oil through the expropriation of Yukos, the oil industry has similarly found itself the subject of frequent controversy, with the companies involved often achieving profits and wielding power greater than the nations in which they are based. For an industry that, at its most basic involves little more than drilling a hole in the ground in the hope of finding the ‘black stuff’, the modern day oil industry is a remarkable amalgam of politics, economics, science and technology. Huge and diverse, it is also one that can at times prove bewildering, and not just for the uninitiated. The industry, the countries and the companies – all in one With this in mind, the global oils team at Deutsche Bank has sought to create a product that might prove of use for beginners and old hands alike. Oil & Gas for Beginners is not intended to be read from cover to cover but is meant to be kept on your shelf as an easy to use reference guide. Structured in three parts it contains contributions from Deutsche Bank’s global team of oil & gas analysts, many with backgrounds in the industry as well as drawing on Deutsche Bank’s longstanding relationship with Wood Mackenzie, one of the industry’s leading research houses. In the initial Industry section we look at what shaped today’s industry, the geology of oil, and its applications together with how it’s found, how it’s extracted & refined and how it’s taxed. In the second Countries Section we review the oil & gas production outlook and histories for the leading OPEC and non-OPEC producers including details of the major fields, their tax systems, energy infrastructure and, of course, the status of their reserves. Finally, in the Companies section we review the portfolios of thirteen of the leading international oil companies that comprise the bulk of the oil & gas sector’s stock market capitalisation, providing asset value breakdowns and an overview of their major business activities and growth projects. For the uninitiated and more learned reader alike Although Oil & Gas for Beginners is intended as a beginners guide we hope that it will also find favour with the more experienced reader. Overall, we trust that our audience will find it a useful document and entrust it with a permanent slot on an already overcrowded desk. So for those of you who want to know more about the life cycle of a basin, the Earth’s geologic clock or any number of industry relevant themes read on. We hope that what you find will prove both interesting and informative. 7 January 2008 Integrated Oils Oil & Gas for Beginners Page 2 Deutsche Bank AG/London Table of Contents A Brief History of Oil 7 From biblical times…… 7 Setting the scene 8 IOCs and NOCs 12 The IOC Sisters – 100 years in the making 13 The International Oil Companies 14 The IOCs Compared 17 The major NOCs 20 OPEC 23 A brief history 23 How does OPEC work? 24 Why is OPEC able to influence prices? 25 What price does OPEC want? 26 The OPEC basket 27 What is the western IOCs’ exposure to OPEC? 27 In the beginning … 28 A brief summary 28 Geologic time and rock record 29 Basic geology 30 Hunting for sand… 32 Working hydrocarbon system 34 Source rocks 36 Migration 38 Reservoir quality 39 The trap and seal 41 Reservoir volumetrics 43 Getting it out 44 The Life Cycle of a Basin 44 Field Operations 49 Land Seismic 49 Offshore seismic 51 Assessing risk and reward 53 Field Operations - Drilling 54 Directional wells 58 Land and offshore rigs 58 Drilling day rates 60 Field Operations - Evaluation 62 Field Operations - Development 66 Onshore – oil is usually straight-forward… 66 Offshore – as usual, deeper is tougher 67 Extending the field life 69 Recovery factors 70 Primary recovery 70 Depositional controls on recovery factor 71 Secondary recovery… waterflood 72 Tertiary recovery techniques 72 Oil Services – What are they and where do they fit? 73 Oil & Gas reserves 76 A cautionary tale 76 A company’s lifeblood 76 SEC Reserves – Proven developed and proven undeveloped. 77 SPE definitions - Proven, probable and possible 80 7 January 2008 Integrated Oils Oil & Gas for Beginners Deutsche Bank AG/London Page 3 Reserve revisions 82 Reserves: What do they actually tell us? 83 Reserves Accounting– FAS 69 85 Disclosure of proved oil and gas reserves 85 Disclosure of capitalised cost relating to oil and gas producing activities 85 Disclosure of costs incurred in oil and gas property acquisition 85 Disclosure of operational results 86 Disclosure of discounted future net cash flows 86 Disclosure of current cost information 86 So how do analysts use FAS 69 information? 87 Reserves - Where and what? 90 So how much oil has been extracted? 90 What is Peak Oil? 92 A critical weakness - simple economics ignored 93 So when will a peak occur and does it matter? 94 Oil & Gas Taxation 95 Concessions & contracts – An overview 95 Tax & Royalty Concessions 97 Production Sharing Contracts (PSCs) 98 Working through an IRR based PSC 104 Buy Backs 107 Oil & Gas Taxation – Some Key Terms 109 World Oil Markets 110 The oil price 110 Oil Demand 111 Oil Supply 115 Inventories 116 The forward curve 116 World Gas Markets 117 Gas Pricing 117 Gas demand 118 Gas Supply 120 Oil & Gas Products 124 What is crude oil? 124 Definitions 124 Trends in crude oil 126 Key Global Blends 127 Refining Overview 128 The Black Sheep of the family 128 The curse of the investment cycle 131 What is Refining? 132 What do refineries make? 132 The stream of oil products 133 How does a refinery work? 134 Key variables impacting refinery performance 138 Configuration and complexity 138 Choice of Crude – Heavy, sour, sweet and light 141 Location 143 Other factors 143 Regional balances and market structure 145 Measuring Refining Profitability 147 7 January 2008 Integrated Oils Oil & Gas for Beginners Page 4 Deutsche Bank AG/London US margins ($/bbl) 148 NWE margins ($/bbl) 148 Asian margins ($/bbl) 148 Gasoline/fuel oil crack spreads US/Europe 149 What drives refining margins? 149 Refining Industry Structure 151 Petroleum Administration for Defence Districts (PADDS) 151 Marketing 153 Stability in a cyclical world 153 The wholesale/retail chain 155 Removing capital, containing costs 156 What’s in a litre of fuel? European Retail Data 157 What’s in a litre of fuel? US Retail Data 157 Biofuels 158 What are biofuels? 158 Why use biofuels? 158 Where are biofuels produced and used? 159 The regulatory framework 160 Key legislative measures 160 Bioethanol 162 Biodiesel 164 Criticisms of biofuels 165 Long-term developments in biofuel 166 Petrochemicals 167 Part of the integrated chain 167 The olefin plant (cracker) 168 Petrochemical Industry profitability 170 Olefin and Aromatic Building Blocks and their Chains 172 Ethylene – C2 Olefin 172 Propylene – C3 Olefin 172 Butadiene – C4 Olefin 173 Benzene – C6 Aromatic 173 Paraxylene – C8 Aromatic 174 The Major Plastics or Polymers 175 Polyethylene (PE) 177 Polypropylene 177 Purified Terephthalic Acid (PTA) 177 Conventionals & Unconventionals 179 Conventionals 179 Unconventionals 179 Liquefied Natural Gas (LNG) 180 Overview 180 LNG - The process and the chain 182 LNG – returns across the chain 183 Pricing of LNG 185 Costs of LNG Production 187 Shipping of LNG 188 Re-gasification of LNG 189 Existing LNG facilities and facilities planned 2006-12 191 LNG - The IOCs Portfolios and Positions 193 The IOC majors compared 195 7 January 2008 Integrated Oils Oil & Gas for Beginners Deutsche Bank AG/London Page 5 Deepwater 196 Peering into deepwater 196 NGLs and condensates 198 A valuable by-product 198 Canada’s Oil Sands 199 A huge unconventional resource 199 Methods of Extraction – Mining 201 Methods of Extraction – In-situ 201 Upgrading 203 Costs – The highest marginal cost barrel on the globe 204 Gas to Liquids (GTL) 206 An expensive alternative to LNG 206 Background 206 Commercial GTL plants are limited 207 There are positives 209 An uncertain future at this time 209 Coal Bed Methane 210 Exactly what it says on the label 210 Tight Gas 211 Huge potential resource 211 Economic at current prices 212 Section II: The Countries 213 Major non-OPEC producers 214 Norway 215 United Kingdom 221 US Deepwater Gulf of Mexico 227 US Alaska 233 Canada – Oil Sands 239 Azerbaijan 245 Kazakhstan 251 Russia 259 Argentina 267 Brazil 273 Major OPEC Producers 279 Angola 281 Iran 287 Iraq 295 Kuwait 303 7 January 2008 Integrated Oils Oil & Gas for Beginners Page 6 Deutsche Bank AG/London Libya 311 Nigeria 319 Saudi Arabia 327 United Arab Emirates 335 Venezuela 341 Section III: The Companies 349 BP 351 Royal Dutch Shell plc 355 Total SA 359 ENI 363 Repsol 367 StatoilHydro 371 BG Group 375 ExxonMobil 379 Chevron 383 ConocoPhillips 387 Occidental Petroleum 391 Marathon Oil 395 Hess Corporation 399 Glossary 403 Industry Investment thesis 413 7 January 2008 Integrated Oils Oil & Gas for Beginners Deutsche Bank AG/London Page 7 A Brief History of Oil From biblical times……. Crude oil has been known and used since ancient times with reference to it made by most historians since records of world history began. Noah is said to have used it to caulk his Ark; the bible refers to its application as a roofing material in Babylon; the Egyptians used it to help preserve mummies whilst Alexander the Great was known for his use of oil to create flaming torches to frighten his enemies. Beyond its obvious application as a source of fire, the substance was also highly valued by several civilizations for its medicinal properties; for the Chinese it served as a skin balm; for Native Americans a treatment for frostbite. A small town in Pennsylvania Yet the modern oil era almost certainly commenced in 1859 in Titusville, Pennsylvania, when Colonel Edwin Drake struck oil some 69 feet underground. The commercial objective being pursued was to extract ‘rock’ oil, which, it had been discovered, could be refined to produce kerosene for illumination. At 15 barrels-a-day Drake’s discovery prompted a mad rush to drill for ‘the black stuff’. Within a year Pennsylvania was producing almost 500kb/d; two years later over 3mb/d was oozing out of the Pennsylvanian hills. The modern oil industry had been born. The mother of today’s industry … This explosion in production, however, brought with it its own problems. Although demand for kerosene also surged as copious supplies made it ever more affordable, the absolute lack of discipline that surrounded both the supply of oil and its refining meant that the newly found kerosene industry was extremely volatile. Into this arena emerged one particular businessman who was intent on bringing structure, order and profit to the kerosene refining industry. Through the Standard Oil Company, John D Rockefeller set about establishing a business that was to have absolute influence over the US refining and oil producing industries. By 1890, using business practices that invariably sought to eliminate competition, Standard Oil controlled almost 90% of the refined oil flows in the United States. It determined the price at which its products would be sold on the open market and it told the producers the price that they would receive for their oil. In effect it was, to all extents and purposes, the US oil industry, a position it largely retained until its dissolution under anti-trust legislation by the US Supreme Court courts in 1911 into 34 independent companies. … through the daughters that she spawned Yet Standard Oil’s dissolution was as much the beginning of an era as it was the end. For the companies which were born as a result by and large proved those which would go on to shape the industry as we know it today. Exxon, Chevron, Texaco, Conoco and much of BP, amongst others, can all trace their roots back to Standard Oil. And in their desperate pursuit through much of the twentieth century to secure new sources of oil from across the globe, not least the Middle East, they gave birth to the national oil companies that dominate today’s production. Saudi Aramco, the National Iranian Oil Company, the Iraqi National Oil Company, the Kuwait Oil Company, ADNOC and PDVSA were all established in large part by the ‘sisters’ that emerged from the break-up of Standard Oil. More sustainable than your average state Indeed, it is perhaps an irony that an industry whose sustainability is constantly in question should be comprised of companies that have a history that is longer than that of several modern day countries. Governments may come and go and wars may pass. Yet in pursuit of that life-giving incremental barrel of reserves, the major oil companies have evolved into the industrial behemoths that stand today and will, almost certainly, still stand tomorrow. Crude oil has been known and used since ancient times Standard Oil’s dissolution was as much the beginning of an era 7 January 2008 Integrated Oils Oil & Gas for Beginners Page 8 Deutsche Bank AG/London Setting the scene The oil industry has a long and colourful history and before discussing the major players we need to set the scene; we do this starting with the summary timeline below: Figure 1: A brief history of oil Time Oil price, $/bbl (2006) World oil prod. mil bbl/d What happened 1849-57 End of whale oil Kerosene distilled from crude and kerosene lamp invented - forces whale oil from market. 1846 Baku percussion drilling First successful percussion well drilled in Baku. 1859 Drake's US well First oil well is drilled in U.S. at Titusville, Pennsylvania, by Colonel Edwin Drake (69 feet). 1863-70 62 Standard Oil born John D. Rockefeller starts his first refinery in Cleveland and founds Standard Oil. 1872 Baku oil boom 1878 25 Oil recession Thomas Edison invented the electric light bulb, eliminating demand for kerosene. 1886 16 The car arrives Gasoline powered automobiles introduced to Europe by Karl Benz and William Daimler 1901 23 Texas oil boom Spindletop blow-out heralds birth of Texaco, Gulf and the Texas oil industry Baku: 50% world oil Baku supplies just over 50% of the worlds oil, and 95% of Russian oil 1907 16 RD/Shell born Shell and Royal Dutch combined. 1908 16 Iran oil and BP born Anglo-Persian (BP) finds oil in Iran. 1910 13 Mexico oil found Oil discovered in Mexico by Mexican Eagle (later bought by RD/Shell) 1911 13 Death of Standard Oil U.S. Supreme court orders the dismantling of Standard Oil on antitrust violation grounds. 1914-18 20 WW I WW I - cavalry gives way to mechanised warfare. 1917 25 Russian revolution RD/Shell, Nobel and Exxon all lose assets 1922 20 Venezuela oil found Oil discovered in Venezuela by RD/Shell 1928 14 Iraq oil found Oil discovered by IPC (BP, RD/Shell, Total, Exxon, Mobil, Gulbenkian) in Iraq 1930 15 East Texas oil found East Texas oilfield discovered (largest in U.S. at the time) and over-produced 1931 9 4 Oversupply, price crash World oil glut; Great depression starts. U.S. oil prices fall from 96 to 10 cents/bbl 1931-1938 14 US starts prodn quota Texas Railroad Commission enforces production quota and shutins to stabilise crude prices 1932 13 5 Iran nationalisation Shah Reza of Iran cancels Anglo-Persian concession, but quickly backtracks 1933 11 5 Saudi entered Socal (Chevron) win a large oil concession from King Ibn Saud of Saudi Arabia 1938 16 6 Ghawar discovered Oil found in Saudi Arabia ('the single greatest prize in all history') Mexico nationalisation Mexico nationalises U.S. and U.K. oil company assets Kuwait oil found Oil discovered in Kuwait 1939-1945 14 WW II WW II – all governments realise control of oil is vital for security 1943 14 6 Venezuela 50/50 deal Venezuelan contracts renegotiated to give a 50/50 profit split - a landmark event. 1947 17 9 Offshore born Kerr-McGee drills first successful offshore well in the GoM 1950 14 10 Saudi state share raised Aramco 50/50 deal agreed 1951 13 12 Iran nationalisation. Iran nationalised assets of Anglo-Iranian (renamed from Anglo-Persian, later BP) 1956 14 Suez crises Suez canal closed, disrupting world oil transport; US surge capacity and NOCs cope well 1959 15 19 Oversupply Late 1950s oil oversupply 'glut' Libyan oil found Oil found in Libya 1960 13 21 OPEC created OPEC formed in Baghdad (initially Saudi Arabia, Iran, Iraq, Venezuela, Kuwait) Indonesia nationalisation Indonesia oil industry nationalisation 1967 11 37 The 'Six day war' The 3rd Arab-Israeli war; Israel pre-emptively attacks Egyptian-led forces near its borders Arab oil embargo Arab oil embargo (Saudi Arabia, Kuwait, Iraq, Libya, Algeria) against nations friendly to Israel Nigeria civil war Nigerian civil war breaks out – 500kb/d oil exports blockaded 10bn bbls field in Alaska 10bn oilfield discovered in Alaska by ARCO 1969 10 44 North Sea oil discovered 1970 9 48 End of the buyers markets World demand closed gap with supply, power shifts to the Middle East producers US oil peak US peak oil production year - no more US surge capacity Source: Deutsche Bank 7 January 2008 Integrated Oils Oil & Gas for Beginners Deutsche Bank AG/London Page 9 Figure 1 contd: A brief history of oil Libya state share raised Libya raises profit share from 50% to 55% and forces through a 30% oil price hike Iran state share raised Iran forces profit share up to 55% from 50% Venezuela share raised Venezuela unilaterally raises state profit share to 60% 1973 15 58 Oil embargo Yom Kippur war: Arab oil embargo in response to U.S. support for Israel Oil prices up c.4x. Prices rise from $2.9 to $11.6/bbl (money of the day) 1974 48 59 Iraq nationalisation Iraq nationalisation (BP, Shell, Exxon lost assets in Iraq Petroleum Co.) Saudi partial nationalisation Aramco 60% nationalised (Chevron, Texaco, Exxon, Mobil impacted) 1975 43 56 Kuwait nationalisation Kuwait nationalises oil industry Venezuela nationalisation Venezuela nationalises oil industry 1979 88 66 Iranian revolution Shah deposed in Iranian revolution, oil prices touch $40/bbl despite no shortage of oil Oil price shock By 1981 oil prices has risen to $34 from $13/bbl, post the Iranian revolution 1980 91 63 Saudi nationalisation Aramco 100% nationalised 1982 69 57 OPEC introduces quotas Quotas used by OPEC for fist time to prevent oversupply 1986 27 60 Oversupply - price collapse OPEC fails to prevent oversupply - oil prices fall from $29/bbl to $10/bbl 1991 30 65 Gulf war I Iraq invades Kuwait and is swiftly defeated by the Americans; Oil briefly touched $40/bbl 1998-2001 Super mergers BP-Amoco-Arco, Exxon-Mobil, Chevron-Texaco, Conoco-Philips, Total-Elf-Fina 1998 Oil price collapse Asian crisis recession drives oil price collapse 2003 32 77 Gulf war II Second Iraq war 2003-08 Oil price shock Iraq on verge of civil war, heightened Iran nuclear tensions, strong oil demand growth from emerging markets, surprisingly inelastic world demand and dwindling capacity cushion help drive prices to almost $100/bbl; Various host nations raise taxes and state share Source: Deutsche Bank Key points to note are:  Standard Oil – the mother of all grandmothers, founded by John D. Rockefeller in 1870 was the largest and best run company of its, and perhaps any age. Its pursuit of efficiency included relentless price wars and other methods to destroy competition and in 1911 the Supreme Court decided various antitrust laws had been violated. The ensuing enforced break-up of the company gave birth to 34 new companies, including the ancestors of Exxon, Mobil, Chevron, Texaco, Arco and others.  The key companies have been around a long, long time. ExxonMobil, BP, ConocoPhilips and Shell can all trace their past back over 100 years. Total can look back on 80 years and Eni on over 50 years.  Nationalisation is not new. In fact the first attempt was by the Shah of Iran in 1932, who was unhappy with the terms that Anglo-Persian (from which BP was born) had convinced Iran to sign up to back in 1903. However the Shah rapidly backed down for an insignificant improvement in terms. Mexico nationalised in 1938 but this proved self destructive, as there existed a wealth of alternative supplies.  The Texas Railroad Commission – the forerunner to OPEC. The late 1920s glut caused by the start of the great depression and the over production of the huge East Texas discovery prompted the Texas Railroad Commission (the state regulator for oil production) to impose production quotas. Whilst these were initially resisted, laws were passed that gave the Commission more power and it successfully took the lead in regulating US production until 1970, when excess capacity finally disappeared. In a sense OPEC took over the role that the Commission had previously played, and which was fulfilled by Rockefeller before that.  The Middle East carve up. Until the 1970s the IOCs had a huge influence on Middle East oil development and production. American and British/Dutch companies made all the major discoveries in Iran, Iraq, Kuwait and Saudi Arabia, and controlled everything from wellhead to car gas tank, with little disclosure. The perceived IOC exploitation (for ‘unfair’ returns) is a fundamental factor behind the current characteristics of the Middle East oil industry. [...]... China 0% 1% 1% - 2% 0% - 0% - - - - Indonesia 2% 1% - 7% 7% 4% 2% - - - - - 5% Malaysia - - - - - - - 12% 1% 1% - - - - - - - 3% - 4% Myanmar - - - New Zealand - - 1% - - - - - - 0% 0% 0% - - - - - - - - - - - - 1% 1% - - - - - - - - 0% - - 9% 2% - - - - 4% - 4% - Papua New Guinea Phillipines Thailand Timor - Total Australasia 8% - - - 2% 1% - - - - - 0% Vietnam - - 1% - - - - - - - 4% 15% 10% 9% 4% 0%... - 1% 0% 1% 18% - - 14% Venezuela 1% 1% 4% 3% 1% 6% 2% - - 1% 14% 2% 9% 8% 3% 96% 2% 14% 15% Austria - - - - - - - - - Denmark - - 6% - - - - - France - - - 1% - - - - 3% - 2% - - - - - - 1% - 13% - - 8% 0% 9% 0% 2% 1% - - 11% 2% 5% 0% 16% 12% 8% Romania - - - - Spain - - - - 17% Total South America & Caribbean Germany Italy Netherlands Norway UK 2% 0% 0% 0% - - 5% - - - - - - - - - - - - - 82% 0% -. .. 7% 1% 1% 2% - 4% 9% 12% 12% 6% 21% - 27% 2% 0% - 55% - 25% 8% Canada 9% 2% 7% 3% 1% 15% - - 1% 0% 7% Mexico - - - - - - - - - - - - 26% 29% 25% 28% 2% 59% 9% 1% 2% 57% 0% 40% 1% 3% 0% 2% 3% - 63% - 9% - - 0% - 1% - 4% - 1% 1% - - 1% - - 2% - - - - 1% - 1% - 0% - 4% - - 1% 2% - 0% - - - - - US Lower 48 Total N America Argentina Bolivia Brazil - Colombia 2% Ecuador - - - - 0% Peru - - - - - 1% Trinidad... 30% 12% 10% - - - - - 7% - - 0% 2% - 0% - - - - 1% - - - 4% - - - 0% - 4% - - 3% - 0% 0% 4% - - - 15% - - - - 1% 0% - - - - - - 7% 6% 4% - 0% - - - - - - - - - - - - 5% - - - 15% 7% 12% 6% 16% 0% 6% 0% 0% 27% 7% 0% 0% 4,250 3,900 3,300 2,800 2,450 2,200 1,845 1,000 1,750 615 635 475 415 0% 6% 3% 4% 7% 2% 4% Yemen Total Middle East & India sub-continent - 4% Saudi Arabia United Arab Emirates - 11% Bangladesh... 18% - - - - - - 0% - - - - 8% 8% 10% 10% 5% 13% 11% 8% - 1% - 29% 11% 21% 30% 11% 33% 7% 32% 23% 29% 0% 83% 0% 29% 29% 34% Azerbaijan 1% 4% - 1% 1% - - 3% - - - 3% Kazakhstan 3% 0% 0% 10% - 6% - - - 14% - - Russia 2% 21% 2% 0% 1% 2% 0% - - 0% - - - Total FSU 6% 25% 2% 12% 2% 2% 6% 0% 3% 0% 14% 0% 3% Australia 2% 2% 2% 3% - 1% - - - - 0% - - 6% 0% - - - - - - - Total Europe Brunei China 0% 1% 1% - 2%... - Chad 2% - - 2% - Nigeria 9% - 10% 8% 12% 3% 15% 6% 10% 18% 25% 3% Algeria 0% 1% - 3% 1% Egypt 0% 3% 1% - Libya - - 3% Tunisia - - - - 0% 4% 1% India - - - Iran - - 0% Oman - - 6% Pakistan 0% 1% Qatar 8% Total W Africa Total N Africa 0% Group Production ’08E (kboe/d) - - - 1% 2% 9% - - - 0% - - - 1% - - - - 22% 0% 7% 0% 0% 19% 16% 3% 1% 2% - - - - - - 24% - 6% 2% - 3% - 12% 1% - - - 6% 0% 22% 3% 2%... Deutsche Bank estimates Page 18 Deutsche Bank AG/London 7 January 2008 Integrated Oils Oil & Gas for Beginners Figure16: Western Majors - Production by Geography 2008E (cont) Country Angola Exxon BP Shell CVX 7% 6% - - - Congo - - - 1% Repsol Statoil OXY BG MRA Hess 8% 9% - 6% 0% - - - 0% 0% Eni - - - - - - - 3% 4% - - - - - - 18% 4% Cameroon TOTAL Conoco 14% Equatorial Guinea Gabon - - Chad 2% - -. .. BG Repsol OXY Statoil Eni Total Conoco Chevron RDS BP XOM Source: Deutsche Bank Co n o co 0 0 Source: Deutsche Bank Page 17 7 January 2008 Integrated Oils Oil & Gas for Beginners Figure 15: Western Majors - Production by Geography 2008E (0% implies a production presence) Country Exxon BP Shell CVX TOTAL Conoco Eni Repsol Statoil OXY BG MRA Hess 4% US Alaska 3% 6% - 1% - 15% 0% - - - - US Deepwater GOM... Integrated Oils Oil & Gas for Beginners OPEC OPEC stands as the single most important supply-side influence in global oil and energy markets Through co-ordination of production, the Organisation of Petroleum Exporting Countries (OPEC) stands as the single most important supply-side influence in global oil and energy markets Accounting for around 42% of world oil production but over 55% of the oil traded... 8: The major IOCs family tree Royal Dutch Shell Texaco 1900 Standard Oil New York (Socony) Vacuum Oil Co Standard Oil New Jersey (Esso) Anglo American Oil Co Standard Oil California (Socal) Standard Oil Kentucky 1920 Mobil Standard Oil Indiana (Amoco) AngloPersian (BP) Royal Dutch Shell Atlantic Refining Continental Oil (Conoco) Marland Oil Norsk Hydro Phillips Petroleum Compagnie Francais des Petroles . - - - - - 0% 0% Papua New Guinea 0% - - - - - - - - - - Phillipines - - 1% 1% - - - - - - - - Thailand 0% - - 9% 2% - - - - 4% - 4% Timor - - - - 2% 1% - - - - - - Vietnam 0% - - 1% - - - - -. - Brunei - 6% 0% - - - - - - - China 0% 1% 1% - 2% 0% - 0% - - - - Indonesia 2% 1% - 7% 7% 4% 2% - - - - - 5% Malaysia 3% - 4% - - - - - - - 12% Myanmar - - - 1% 1% - - - - - - - New Zealand - - 1% -. - - - - - - - - 7% - - Iran - - 0% 0% 2% - 0% - - - - Oman - - 6% 1% - - - 4% - - - Pakistan 0% 1% 0% - 4% - - 3% - Qatar 8% 0% 0% 4% - - - 15% - Saudi Arabia 4% - - Syria - - 1% 0% - - - -