1. ASPO-2005 Lisbon, 19TH MAY 2005 1 PARTEX OIL AND GAS PARTEX OIL AND GAS PARTEX OIL AND GAS PARTEX OIL AND GAS PARTEX OIL AND GAS: A VISION OF THE WORLD MARKET AND THE ROLE OF GAS AS THE FUTURE OF OIL António Costa Silva and Fernando Barata Alves ASPO 2005 – Lisbon, May 19 2005

2. ASPO-2005 Lisbon, 19TH MAY 2005 2 PARTEX OIL AND GAS PARTEX OIL AND GAS INTRODUCTION WHY THE CURRENT CRISIS? HOW MUCH OIL IS LEFT? THE ROLE OF GAS WHEN WILL SUPPLY START DECLINING? THE PRODUCTION PEAK THE GEOPOLITICAL GREAT GAME PARTEX VISION CONCLUSIONS

3. ASPO-2005 Lisbon, 19TH MAY 2005 3 PARTEX OIL AND GAS PARTEX OIL AND GAS INTRODUCTION ● 2004 high oil prices ● Strong increase in the world demand ● Rapid economic growth of Asian countries - China and India ● Erosion of the spare capacity of OPEC countries ● Geopolitical factors

4. ASPO-2005 Lisbon, 19TH MAY 2005 4 PARTEX OIL AND GAS PARTEX OIL AND GAS Source: Oilnergy IPE BRENT CRUDE OIL PRICE

5. ASPO-2005 Lisbon, 19TH MAY 2005 5 PARTEX OIL AND GAS PARTEX OIL AND GAS CHINA crude oil domestic production and consumption

6. ASPO-2005 Lisbon, 19TH MAY 2005 6 PARTEX OIL AND GAS PARTEX OIL AND GAS U.S. Oil production and consumption 0 5 10 15 20 25 30 19501960197019801990200020102020 (Million barrels per Day) ProductionConsumption Source: US Dep. Energy, EIA – Energy Outlook (“Michael Klaré, Blod and Oil)

7. ASPO-2005 Lisbon, 19TH MAY 2005 7 PARTEX OIL AND GAS PARTEX OIL AND GAS USA and ALASKA Crude oil production and decline

8. ASPO-2005 Lisbon, 19TH MAY 2005 8 PARTEX OIL AND GAS PARTEX OIL AND GAS Tight Supply/Demand Balance Erosion of OPEC Extra-Capacity Lack of Flexibility in Terms of Production Alternatives Geopolitical Factor ● Decline in production in North Sea and Alaska. ● Instability in Iraq, Venezuela and Nigeria. ● Terrorist threats in Saudi Arabia, Qatar and Kuwait. ● Inability of OPEC to control the prices. ● Inability to respond to world demand. FACTORSEVIDENCE WHY CURRENT HIGH OIL PRICES Change in World Pattern Demand Lack of Investment in E&D Activities following 1998 Crisis ● No seasonal effects in 2004/2005 ● Fastest growth in demand in China/India ● High consumption in USA. ● Inability of producing countries to respond to growing demand. ● Continuous trend of high prices. ● OPEC’s abandonment of price range.

9. ASPO-2005 Lisbon, 19TH MAY 2005 9 PARTEX OIL AND GAS PARTEX OIL AND GAS 0 2 4 6 8 10 12 14 16 19852005 (M barrels per Day) Source: EIA 15 1 OPEC EXTRA-CAPACITY

10. ASPO-2005 Lisbon, 19TH MAY 2005 10 PARTEX OIL AND GAS PARTEX OIL AND GAS (billion US$) 0 2 4 6 8 10 12 19982003 10 largest quoted western oil companies Source: Wood Mackenzie 11 8 EXPLORATION EXPENDITURE

11. ASPO-2005 Lisbon, 19TH MAY 2005 11 PARTEX OIL AND GAS PARTEX OIL AND GAS Unbalanced Demand/Supply and Consequences ● Tight supply/demand balance ● Domestic production in the United States continues to decline ● Decline in production in the Alaska and North Sea is affecting developed economies ● Competition from China and India ● Lower than expected spare capacity from OPEC countries ● Drive for a more balanced energy mix with a continued growth of demand for natural gas. ● Reactivation of the consumption of other fuels like coal. ● Development of a Hybrid-Energy Model

12. ASPO-2005 Lisbon, 19TH MAY 2005 12 PARTEX OIL AND GAS PARTEX OIL AND GAS LONG TERM WORLD PRIMARY ENERGY SUPPLY 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000 6500 19712000201020202030 Mtoe Oil Coal Gas Nuclear Hydro Other Renewables Source: US Dep. Energy, EIA

13. ASPO-2005 Lisbon, 19TH MAY 2005 13 PARTEX OIL AND GAS PARTEX OIL AND GAS Source: BP Statistical Review of World Energy 2004 Distribution of proved oil reserves 2003 OIL RESERVES ISSUE

14. ASPO-2005 Lisbon, 19TH MAY 2005 14 PARTEX OIL AND GAS PARTEX OIL AND GAS 2 500 1 500 1 000 500 2 000 1925195019752000202520502075 Source: US Geological Survey Oil discovery in Gbbl Cumulative oil production in Gbbl Gas discovery in Gboe Cumulative gas production in Gboe Evolution of Oil and Gas World Production and Discovery

15. ASPO-2005 Lisbon, 19TH MAY 2005 15 PARTEX OIL AND GAS PARTEX OIL AND GAS Conventional Oil Gas WORLD OIL AND GAS RESERVES (in billion barrels) ESTIMATED REMAINING RESERVES 1147 1153 (*) ESTIMATED UNDISCOVERED RESERVES 470 850 (*) ( * ) barrels of oil equivalent (boe) Source: BP, TOTAL, USGS,CERA and IFP New Technologies20050 Heavy Oil430 70

16. ASPO-2005 Lisbon, 19TH MAY 2005 16 PARTEX OIL AND GAS PARTEX OIL AND GAS THE OIL RESERVES ISSUE ● Potential in the deep off-shore of the Gulf of Mexico, Brazil, Angola and Gulf of Guinea ● 75% of the world’s production come from fields that began producing over 25 years ago ● Additional potential to recover the probable and possible reserves of the conventional oil using Enhanced Recovery Methods (EOR) ● Current average ultimate recovery in a worldwide basis ranges from 30 to 35% ● Unconventional oil reserves like Canadian Tar Sands and Venezuela extra-heavy oil from the Orenoco Belt; ● Huge amount of gas reserves

17. ASPO-2005 Lisbon, 19TH MAY 2005 17 PARTEX OIL AND GAS PARTEX OIL AND GAS 2.5 2.0 1.5 1.0 0.5 0 10.0 8.0 6.0 4.0 2.0 0 197819801982198419861988199019921994199619982000 2002 2004 EOR production% of World production EOR production (MMbbl/d) % of World production Source: OGJ (Oil and Gas Journal) 2.5 2.0 1.5 1.0 0.5 0 10.0 8.0 6.0 4.0 2.0 0 197819801982198419861988199019921994199619982000 2002 2004 EOR production% of World production EOR production (MMbbl/d) % of World production Source: OGJ (Oil and Gas Journal) EOR vs WORLD PRODUCTION

18. ASPO-2005 Lisbon, 19TH MAY 2005 18 PARTEX OIL AND GAS PARTEX OIL AND GAS WORLD OIL RESERVES: A BALANCED APPROACH NEGATIVE TRENDS POSITIVE TRENDS ●Few Giant Discoveries since early 90’s ●Current Production from increasingly mature fields ●Declining discoveries: 1 bbl is found for every 3 bbls produced ●Production decline in the North Sea, Alaska, USA ●Reliability of Reserves Estimates: Poor reporting ●Majors declining Reserves Replenishment Ratios ●Untapped reserves in the Middle East (Iraq/Saudi Arabia) ●The “Omani” paradygm ●Deep-offshore, polar and arctic oil potential ●Unconventional oil reserves: Venezuela/Canada ●Technology Role: - Seabed Logging - Digital Field concept ●Average Ultimate Recovery is low (30/35%); room for enhancement

19. ASPO-2005 Lisbon, 19TH MAY 2005 19 PARTEX OIL AND GAS PARTEX OIL AND GAS HOW MUCH OIL IS LEFT? ● Upward trend of remaining reserves over the past few decades ● Forecasts have remained relatively constant ● Better knowledge of the oil and gas basins of the world combined with the stronger technology supporting exploration and production ● Reserves growth has basically followed demand ● Replacement of production with new reserves ● 2004 year end indicators put the majors below 100% RRR

20. ASPO-2005 Lisbon, 19TH MAY 2005 20 PARTEX OIL AND GAS PARTEX OIL AND GAS WORLD RESERVES and WORLD CUMULATIVE PRODUCTION

21. ASPO-2005 Lisbon, 19TH MAY 2005 21 PARTEX OIL AND GAS PARTEX OIL AND GAS WORLD OIL RESERVES ESTIMATES of the ORIGINAL VOLUMES

22. ASPO-2005 Lisbon, 19TH MAY 2005 22 PARTEX OIL AND GAS PARTEX OIL AND GAS WORLD PROVEN RESERVES HISTORY

23. ASPO-2005 Lisbon, 19TH MAY 2005 23 PARTEX OIL AND GAS PARTEX OIL AND GAS Evolution of Gas Reserves: 1982, 1992 and 2002 Middle East FSU Rest of the World 2003 2532 1991 1682 Total World 6205 1993 1568 2040 1372 Total World 4980 1983 931 1271 1070 Total World 3272 Evolution of Gas Reserves (in Tcf) Source: BP Statistical Review of World Energy 2004

24. ASPO-2005 Lisbon, 19TH MAY 2005 24 PARTEX OIL AND GAS PARTEX OIL AND GAS

25. ASPO-2005 Lisbon, 19TH MAY 2005 25 PARTEX OIL AND GAS PARTEX OIL AND GAS Expansion of gas utilization: Substitution for power generators Use in transportation Gas to liquids (GTL) technology improvements Environmental pressures

26. ASPO-2005 Lisbon, 19TH MAY 2005 26 PARTEX OIL AND GAS PARTEX OIL AND GAS

27. ASPO-2005 Lisbon, 19TH MAY 2005 27 PARTEX OIL AND GAS PARTEX OIL AND GAS WHEN WILL SUPPLY START DECLINING? THE PRODUCTION PEAK Estimate future production profiles, the growth rate, the time for peak production and the start of decline Factors involved: - Reserves - Costs - Technology - Strategies Technology and expertise will definitively play a fundamental role in turning uneconomical reserves into real barrels

28. ASPO-2005 Lisbon, 19TH MAY 2005 28 PARTEX OIL AND GAS PARTEX OIL AND GAS ● Based on Campbell and Laherrère previous work ● The exact decline point will be dependent on: – Price driven demands – Conservation policies – Ability to produce non-conventional reserves ●There are no absolute certainties regarding the timing of the peak production and the best approach is to define a range of possibilities supported by meaningful assumptions. ●Production increase is not solely dependent on reserves, but also on the cost to develop them ●Less critical in the Middle East, where large volumes are easily available, when compared to the rest of the world PARTEX MODEL: BASIC ASSUMPTIONS

29. ASPO-2005 Lisbon, 19TH MAY 2005 29 PARTEX OIL AND GAS PARTEX OIL AND GAS Reserves World Demand ● Equilibrium demand/supply will control growth ● Economic growth “cooling” effects. ● Annual oil demand growth at minimum 1 to 3%. ● In the long-run look to both oil and gas peaks. ● Gas will be the future of oil. ● Political will to prepare the future Hybrid Energy Model. Technology Non-Conventional Oil ● Canadian Tar Sands ● Orenoco Belt in Venezuela (heavy oil) ● Ability to produce. PARTEX MODEL FOR WORLD OIL AND GAS PEAK PRODUCTION ● Exploration technology emerging from Seabed Logging. ● Integration of technologies ● Deep water/Arctic/Middle-East-Irak Hydrocarbon- Model ● Not restricted to proven reserves ● Amount of ultimate oil recovery 2,500 bill. barrels ● Amount of ultimate gas reserves 2,500 boe

30. ASPO-2005 Lisbon, 19TH MAY 2005 30 PARTEX OIL AND GAS PARTEX OIL AND GAS THE ROLE OF TECHNOLOGY AREASTOOLSOBJECTIVES ExplorationSeabed Logging (SBL) ●Based on electro-magnetic methods ●Integration with 3D Seismic ●Better Resolution Development/Production (new approaches in gathering and processing data) ●Detects what is happening in the reservoir ●Better placement of wells ●Steer and complete wells through different zones of the reservoir ● Remote gathering of well and field data ●Optimised decision process Digital Field Concept I.Remote Sensing: combination of seismic and sensors II.Visualization: 3D imaging and modelling III.Intelligent Drilling and Completions: control of production from each reservoir zone IV.Automation V.Data Integration: various sources

31. ASPO-2005 Lisbon, 19TH MAY 2005 31 PARTEX OIL AND GAS PARTEX OIL AND GAS FORECAST OF WORLD OIL AND GAS PRODUCTION - LOWER GROWTH SCENARIO

32. ASPO-2005 Lisbon, 19TH MAY 2005 32 PARTEX OIL AND GAS PARTEX OIL AND GAS FORECAST OF WORLD OIL AND GAS PRODUCTION - HIGHER GROWTH SCENARIO

33. ASPO-2005 Lisbon, 19TH MAY 2005 33 PARTEX OIL AND GAS PARTEX OIL AND GAS FORECAST OF WORLD OIL PRODUCTION (HIGHER GROWTH SCENARIO) - THE EFFECT OF TECHNOLOGY

34. ASPO-2005 Lisbon, 19TH MAY 2005 34 PARTEX OIL AND GAS PARTEX OIL AND GAS FORECAST OF OIL PRODUCTION (HIGHER GROWTH SCENARIO) - MIDDLE EAST AND REST OF THE WORLD

35. ASPO-2005 Lisbon, 19TH MAY 2005 35 PARTEX OIL AND GAS PARTEX OIL AND GAS INVESTMENT FORECAST (HIGHER OIL GROWTH SCENARIO)

36. ASPO-2005 Lisbon, 19TH MAY 2005 36 PARTEX OIL AND GAS PARTEX OIL AND GAS GEOPOLITICAL GREAT GAME

37. ASPO-2005 Lisbon, 19TH MAY 2005 37 PARTEX OIL AND GAS PARTEX OIL AND GAS THE DEMOGRAPHIC FACTOR

38. ASPO-2005 Lisbon, 19TH MAY 2005 38 PARTEX OIL AND GAS PARTEX OIL AND GAS China India Rest of Word WORLD POPULATION: China and India China India Rest of Word Source: us Department of Energy

39. ASPO-2005 Lisbon, 19TH MAY 2005 39 PARTEX OIL AND GAS PARTEX OIL AND GAS PROVED OIL RESERVES: China and India China India Rest of Word Source: us Department of Energy PROVED OIL RESERVES: China and India China India Rest of Word Source: us Department of Energy

40. ASPO-2005 Lisbon, 19TH MAY 2005 40 PARTEX OIL AND GAS PARTEX OIL AND GAS Renew the Portfolio of Oil Reserves Diversification of Assets Production Growth Prudent Financial Strategy ● Consolidate/Extend existing partnerships. ● Reinforce strategic positions. ● Access to competitive new reserves. ● Balance exploration risk with assets already in production. ● Ability to prospect identification and evaluation. ● Improve the Internal Rate of Return. ● Efficient use of capital to support revenues, growth and profitability. ● Global portfolio management to reach an equilibrium among risk, profitability and growth. ● Good Cost Control. ● Broader presence in gas. ● Special attention to LPG, LNG, GTL. ● Promote renewable energies. ● Geographical diversification. THE VISIONTHE FUTURE PARTEX VISION: A MULTI-ENERGY COMPANY

41. ASPO-2005 Lisbon, 19TH MAY 2005 41 PARTEX OIL AND GAS PARTEX OIL AND GAS ●The current oil price spike is explained by structural changes in the oil and gas industry ●These structural changes will remain in the near-future ● Oil and gas reserves are finite and with the current levels of demand and production it must be stressed that this century will witness the peak of oil production ●There are no absolute certainties regarding the timing of the peak and the best approach is to define a range of possibilities supported by meaningful assumptions. ●PARTEX lower production scenario shows an expected production peak for oil by 2040 and for gas by 2060; assuming a stronger oil production growth in line with EIA forecasts, oil peak is expected by 2025 and the gas peak delayed until 2055. CONCLUSIONS

42. ASPO-2005 Lisbon, 19TH MAY 2005 42 PARTEX OIL AND GAS PARTEX OIL AND GAS ●Production increase is not solely dependent on reserves, but also on the cost to develop them ●Overall investment should clearly impact oil production increase expectations since it will be the trigger to the implementation of other energy alternatives. ●High oil prices has been the drive for a more balanced energy mix with a continued growth of demand for natural gas. ●High oil prices created also conditions for the reactivation of the consumption of other fuels like coal, nuclear and renewables. A new Hybrid-Energy Model will emerge. ●Geopolitical factors may play a significant role in the world energy market ●The demographic factor is also a key variable to shape the evolution trend of the energy market ● A possible trend is the conversion of the oil-based companies to multi-energy companies. CONCLUSIONS (Cont.)