Energy Inc. Upstream

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Energy Inc. Upstream
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Worldwide Industry Organization
Critical relationships
U.S.
Foreign
Oil and Gas Resource Development
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Typical NOC Structure

• Single Shareholder -- state
• Link to national budget
• Direct reporting to ministry level
• Vertical integration
• Exploration and production to refining and
  marketing
• Large employment base
• Non-energy responsibilities

NOC national oil company
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Typical, Non-NOC Structure

• Many shareholders -- concept of publicly-held
  private companies
• No link to national budgets
• No direct reporting to ministry-level
• Shift away from vertical integration
• Joint ventures for value chain participation
• Relatively small employment base
• Focus on core business

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Typical Non-NOC Stock Ownership
Individuals

• Employee stock plans to build incentives
• Institutions are major investors (insurance
  companies, pension funds, etc.)
• Individual ownership is both individual stocks
  and mutual funds
• All publicly-held companies tend to have similar
  ownership structures

Employees
Institutions
Based on a major U.S. oil company
100 percent total equity
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Putting the Recent Oil Price Cycle in Perspective
U.S. domestic first purchase price (real )
What kind of business are we in?
Cheap Oil
With OPEC
Without OPEC
Oil Crisis
Source U.S. EIA.
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OPEC Share of World Oil Production
The larger its share, the greater is OPECs
impact on oil markets.
Source U.S. EIA (crude oil, natural gas plant
liquids, other liquids, refinery gain) and BP
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OPECs Share,Short-Term
Source U.S. EIA, 2001 (crude oil, NGLs)
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Do Cartels Succeedin the Long Run?
Nominal cartel commodity prices, U.S., indexed
Sources Industry trade publications and U.S. EIA.
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Stalking OPEC
Source BP
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Price Means Change Over Time
WTI in 1996
Spot
21.94
21.20
25.98
20.18
Source U.S. EIA.
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Oil Prices Revert to the Mean
We must be rational beings after all.
Source U.S. EIA.
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U.S. Wellhead Natural Gas Prices
/mcf, real
Source U.S. EIA.
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Industry Spending and Employment
Nominal U.S., EP expenditures per barrel
reserve additions, 3-year weighted average
Employment, millions
Do we need more people, or different skills?
Source U.S. EIA, 1997.
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Technology mustcontinue to makea difference
Cumulative U.S. oil production since initial
records, mb

• Offshore
• below
• 10,000ft

• 4-d seismic, offshore below 5,000ft

• 3-d seismic, horizontal drilling, measurement
• while drilling, offshore below 1,000ft

Oil Gas Technology Pathway

• Directional drilling, offshore below 250ft water
  depth

• Long-line pipeline transmission

• Advances in drilling, early seismic, shallow
  offshore EP

• Oil discovered at Spindletop, 1901

• Oil discovered in Titusville, 1859 natural gas
  replaces town gas, 1870s

Mainframes Minis
Micros Work Stations ?
1850
1900
1930
1940
1950
1960
1970
1980
1990
2000
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U.S. Wells Drilled
Source U.S. EIA.
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U.S. Well Costs (/foot)
Source U.S. EIA.
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U.S. Oil Well Productivity (bl/well)
Source U.S. EIA.
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U.S. Natural Gas Well Productivity(Mmcf/well)
Source U.S. EIA.
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U.S. Onshore Gas is Stillthe Main Resource Base
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Deep Potential?