Investment in unconventional and

conventional, oil and gas production

February 2018
DEMAND (1/3)

For all the talks of EVs, oil demand is soaring

Global PMI Global oil demand growth by region, y/y change

Index Mb/d

LatAm Other Asia China India

55 3.0
ME FSU OECD
2.5
54
2.0
53
1.5

52 1.0

0.5
51
0.0
50
(0.5)

49 (1.0)
15 16 17 18 Q1 15 Q1 16 Q1 17 Q1 18

The global macroeconomic backdrop remains extremely We forecast 2018 global oil demand growth at 1.7 mb/d y/y,
supportive and should be able to absorb higher oil prices coming on top of 1.7 mb/d in 2017 and 1.8 mb/d y/y in 2016

Source: Government agencies, JODI, Bloomberg, Energy Aspects analysis

2 February 2018
DEMAND (2/3)

We have fast forwarded oil demand by 7-8 years

Global oil demand Global oil demand growth by region, y/y change
Mb/d Mb/d

102 3.5
100 3.0
98 2.5
96
2.0
94
1.5
92
1.0
90
0.5
88
0.0
86
84 (0.5)

82 (1.0)
10 11 12 13 14 15 16 17 18 19 2007 2009 2011 2013 2015 2017

Consensus expectations were for oil demand to hit 100 mb/d Since 2015, global oil demand growth has been soaring
in 2025-2027, yet we hit 100 mb/d end of 2017 backed by low prices and a buoyant economy

Source: Government agencies, JODI, Bloomberg, Energy Aspects analysis

3 February 2018
DEMAND (3/3)

But the focus remains on electric cars and long term demand

Global gasoline demand Global road diesel demand

Mb/d Mb/d

40 North America Latin America Europe 30 North America Latin America Europe

35 FSU Middle East Africa FSU Middle East Africa

25
30 Asia
Asia
20
25

20 15

15
10
10
5
5

0 0
2010 2015 2020 2025 2030 2035 2040 2010 2015 2020 2025 2030 2035 2040

EV demand displacement amounts to 1.4 mb/d by 2030— Relatively robust freight markets continue to support road-
the majority (1.0 mb/d) affecting gasoline diesel demand, which sees a more modest 0.4 mb/d hit

Source: Energy Aspects

4 February 2018
SUPPLY (1/2)

Non-OPEC supplies are increasingly biased towards North America

Non-OPEC supply, y/y change US crude production by basin and forecasts

Mb/d Mb/d

NAM LatAm ME Asia Permian Eagle Ford Williston

3 4.5
FSU Europe Africa DJ GoM Other
4.0
2 3.5

3.0
1 2.5

2.0
0
1.5

1.0
(1)
0.5

0.0
(2)
14 15 16 17 18 19 20
15Q1 16Q1 17Q1 18Q1

2018 non-OPEC supply set to grow strongly, led by the US, US production has picked up markedly since September
Canada and Brazil 2017 and we expect the momentum to continue in 2018

Source: Company reports, EIA, Energy Aspects analysis

5 February 2018
SUPPLY (2/2)

Supplies elsewhere are underperforming

Brazilian crude and NGLs production, y/y change Asian crude output, y/y change
Mb/d Mb/d

0.45 0.3

0.2
0.35
0.1
0.25
0.0
0.15 (0.1)

0.05 (0.2)

(0.3)
(0.05)
(0.4)
(0.15) (0.5)

(0.25) (0.6)
14 15 16 17 18 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 18

Brazilian crude production has underperformed relative to Asian crude production continues to fall sharply as oil
expectations amid high declines in the Campos basin majors divert money towards short cycle projects

Source: ANP, Government data, Energy Aspects analysis

6 February 2018
LONG TERM SUPPLY (1/3)

Declines stepping up while IOCs move towards short-cycle projects…

IOC liquids production Angolan depletion rates

Mb/d %

15 12%

14
8%

13

4%
12

11 0%
Q1 07 Q1 09 Q1 11 Q1 13 Q1 15 Q1 17 04 06 08 10 12 14 16

A significant backlog of projects has allowed IOCs to grow Angolan depletion rates have been rising steadily since
output despite a drop in exploration activity 2014 and reached a record high 12% last year

Source: Company reports, Energy Aspects analysis

7 February 2018
LONG TERM SUPPLY (2/3)

…and focus on gas

IOC Q3 17 hydrocarbon production trends

Liquids production - mb/d Gas production, mboe/d

Q3 17 Q3 16 y/y chg. Q3 17 Q3 16 y/y chg.

Exxon 2.28 2.21 3.1% 1.60 1.60 (0.1%)

BP 2.24 1.95 14.8% 1.34 1.19 12.2%
Shell 1.85 1.87 (1.0%) 1.81 1.73 4.6%
Chevron 1.72 1.66 3.5% 1.00 0.85 17.1%
Total 1.39 1.29 7.9% 1.19 1.15 3.1%
Statoil 1.13 1.12 0.8% 0.91 0.68 33.9%
Conoco 0.74 0.93 (20.2%) 0.49 0.63 (22.8%)
ENI 0.89 0.94 (5.9%) 0.92 0.77 19.3%

Total 12.24 11.98 2.2% 9.25 8.60 7.5%

Liquids output for the group rose y/y by 0.27 mb/d (2.2%) in Q3 17, but this was primarily driven by the acquisition of assets.
Meanwhile, gas production growth was pegged at 7.5% y/y, reflecting a rapid increase in output from LNG projects.

Source: Company reports, Energy Aspects analysis

8 February 2018
LONG TERM SUPPLY (3/3)

Drop in investment shows up from 2019 onwards

New upstream capacity additions (OPEC + non-OPEC) Refining capacity additions

Mb/d Mb/d

Asia
3 3.0
North America
Europe
Latin America 2.5
Middle East
2 FSU 2.0
Africa
1.5

1 1.0

0.5

0 0.0
2015 2017 2019 2021 2023 2014 2015 2016 2017 2018 2019 2020

2019 project additions are the lowest this decade, just when 2019 sees nearly 3 mb/d of new refinery capacity additions,
underlying declines have doubled just when upstream capacity additions dwindle

Note: Capacity additions excludes US shale

Source: Company reports, Energy Aspects analysis

9 February 2018
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10 February 2018