2. OIL PRICES In what has been defined as “The New Economy of oil”, oil prices in the past did not follow a steady trend, and the record shows a behavior of “episodes” guided either by a core cartel of exhaustible resources The New Economy of Oil The Royal Institute of International Affairs-2001.

3. The New Concept The new episode as defined by this concept will be driven by two other issues : Competition from other fuels, especially Natural Gas. Reduction of massive structural surpluses of oil production capacity creates inthe time of price shocks In 1973 and 1979, restraining competition when prices are at survival levels. The New Economy of Oil The Royal Institute of International Affairs-2001.

4. 1950 - 1970

5. 1970 – 1985: Arabian Light, 1986 – 2000: Dubai Source: Energy Information Administration - DOE 1970 - 2000

6. 06/67 - 08/67 22 Six Day War 10/73 - 03/74 62.6 October Arab -Israeli War, Arab Oil Embargo 11/78 - 04/79 63.5 Iranian revolution 10/80 - 12/80 33.3 Outbreak of Iran - Irak War 08/90 - 10/90 34.6 Iraqi invasion of Kuwait/Storm of Desert 04/99 - 03/00 123.3 OPEC cuts production Source: Energy Information Administration - DOE In the WORLD

7. Global Oil Supply Disruptions To avoid the potential impact of oil supply disruptions consumer countries have reacted in different way: Building up of oil stocks in order to mitigate price volatility Development of a commodity market that includes futures options Starting with heating oil futures in 1978, energy futures and options on the NYME have grown and profoundly changed energy marketing

8. World oil Stocks

9. World oil demand/supply balance Source: OPEC

10. Concluding remarks Price volatility in oil markets is driven by a wide range of factors. Political events Balance between OPEC decissions and importing countries Economic Crisis Because of these issues long term planning is almost difficult

11. TCF 19992000Growth Rate(%) TOTAL WORLD84.5 87.94.1 Source: CEDIGAZ World Natural Gas Consumption

12. Natural Gas Demand The largest increments are expected in Latin America and developing Asia, China and India Among the industrialized countries largest increases are expected in the US and Western Europe For industrialized countries Gas use is projected to grow by 2.4 % per year compared with 1.1 % per year for oil DOE estimates 2020 162 TCF 2000 87 TCF Average growth rate 3 %

13. GROWTH OF WORLD ENERGY CONSUMPTION BY FUEL Source: Global Energy With an average growth of 3.1% per annum, by 2015 the demand for Natural Gas will be greater than the oil demand 50 100 150 200 250 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Oil Coal RenewablesNuclearNatural Gas 10 15 BTU

14. Natural Gas will be the major driver of the energy development in the next 15 years Reserves/ProductionRatioOil Natural Gas R/P (years) 61 39.9 39.9 Source: BP 2001, Statistical Review of World Energy

15. Natural Gas use increasing Gas use is increasing, around the world, for a variety of reasons: Price Envinronmental concerns Fuel diversification and/or energy security issues Market deregulation (for both gas and electricity)

16. Natural Gas Future Consumption Future consumption will require bringing new gas resources to market with LNG LNG trade will grow in the future but it will depend on the development of a spot market

17. AlgeriaArzew U.S.A.Kenai LibyaMarsaElBrega BruneiLumut AlgeriaSkikda Abu Dhabi Das Island IndonesiaBontang IndonesiaArun MalaysiaBintulu AustraliaNorthWestShelf QatarBintulu NigeriaBonnyIsland QatarRasgas OmanOmanLNGTrinidadAtlanticLNG

18. World exports between 1990 – 2000 have grown at 5.99 % per annum Exports The largest growth was in the Middle East region, 19.84 % per annum Imports World imports between 1990 – 2000 have grown at 6 % per annum Asia is, by far, the largest importer of LNG accounting for 70 % of global imports in 2000.

19. LNG demand (million t/y) 1999200020052010 TOTAL68.573.593.9115.6 Asia - Pacific

20. $US/MMBtu Long Term US Price Projections, Henry Hub EEA EIA WEFA NPC CERA PIRA

21. LNG will create a spot market for natural gas Currently, markets for LNG are strongly influenced by oil and oil products markets. There is no spot market for natural gas. Gas price depends on long term contacts signed between supply and demand. As the use and trade of natural gas continues to grow, there is a challenge for developing price mechanisms that facilitate international trade Concluding remarks