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Conference on Non-Conventional Oil
Prospects for Increased Production
Hyatt Regency Hotel, Calgary, Alberta, Canada
25th - 26th November 2002
The Impact of Non-Conventional Oil Developments
on Conventional Crude Oil Markets
Rachid Bencherif
Energy Models Analyst
OPEC Secretariat
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Conventional and non-conventional
oil reserves
Non-conventional oil
Billion bbl Non-
OPEC
Non conv. oil 580 47% OPEC
53%
Non-OPEC 310
Total oil
OPEC 270
Conv. oil 1075 Non-conv.
Conv.
36%
Non-OPEC 229 64%
OPEC 845
Total oil
Total oil 1655 Non-
OPEC
Non-OPEC 539 OPEC 33%
OPEC 1115 67%
Source:IEA,OPEC.
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Conventional and non-conventional
oil production
Oil Production
2001 2010
Million % Million %
bbl/day bbl/day
Non-conventional oil 1.08 1.4 3.00 3.3
Non-OPEC 0.66 0.9 2.00 2.2
OPEC 0.42 0.6 1.00 1.1
Conventional oil* 75.34 98.6 86.60 96.7
Non-OPEC 44.30 58.0 50.10 55.9
OPEC 31.04 40.6 36.50 40.7
Total oil* 76.42 100 89.60 100
Non-OPEC 44.95 59 52.10 58
OPEC 31.46 41 37.50 42
* Including NGLs Source: IEA,OPEC
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Factors impacting non-conventional
developments
Factors favouring strong expansion of non-conventional oil
• relatively high number of on-going projects
• lack of interesting prospects for conventional oil in North
America (USA and Canada)
• recent technology advances: cost reductions, reduction of
GHG emissions per unit, techniques such as SAGD (steam-
assisted gravity drainage) are performing well
• low geological risk, with stable production rate
• fiscal regime with specific incentives
• suitable oil and gas price levels
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Factors impacting non-conventional
developments (cont.)
Factors hampering expansion of non-conventional oil
• SAGD technology has not reached its full maturity
• few opportunities for further cost reductions in mining
based projects
• necessary investments in transportation and in refining
processes should be co-ordinated
• absolute GHG emissions will very likely go up as the
production will increase fourfold
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Impact on global market supply
Expansion of non-conventional oil would:
• help in diversifying global oil supply
• have only a moderate impact on import dependency of
North America
• only have a limited impact upon global oil markets in the
next decade, despite the huge resource base
• replace falling non-OPEC conventional output rather
than endanger OPEC market share
• likely to be a major contributor to market stability
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OPEC production management system 1/2
34
31
28
In US$/bbl
25
22
19
16
Apr00
Jul00
Oct00
Apr01
Jul01
Oct01
Apr02
Jul02
Jan00
Jan01
Jan02
montly average
OPEC Reference Basket WTI
quarterly average
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OPEC production management system 2/2
• price band mechanism
• Venezuelan synthetic crude is part of OPEC
production management system whereas
Orimulsion® is not:
– niche markets (Japan, Italy, Denmark and Canada)
– more in competition with gas rather than fuel oil
– will also be competing with coal
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Impacts on refining, price differentials,
security of supply
Refining
• refiners will have to adapt to cope with crude with unusual properties
beyond the usual “capacity creep” to accommodate non-conventional oil
Price differentials
• price differentials are impacted by many different factors. The main one is
the balance between the quantities available on the market of synthetic crude
and diluted bitumen on the one hand and the refining capacities and
configuration on the other hand; resulting in a circular effect
Security of supply
• different from oil dependency
• the inevitability of a rise in the OPEC market share should not be regarded
as a dilemma for consuming countries
• co-operation between OPEC and non-OPEC producers and dialogue
between producers and consumers to minimize oil price volatility
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Conclusion
• Although non-conventional oil developments have a
high growth rate, their overall impact on the market is
more of a long-term issue
• Technological advances or breakthroughs will
definitively impact the pace at which non-
conventional oil is developed
• OPEC will increasingly be called upon to deliver the
incremental barrel
• Price stability and cooperation with non-OPEC
producers