Lymac Energy Fund-I, LLC
Today’s Energy Reality:
“We Are In A Deep Hole”
The information in this presentation is a generalized discussion of certain
features of the Lymac Energy Fund-I, LLC (“Fund”) and is intended only to
serve as an overview. No prospective investor should rely merely upon the
following information in determining whether or not to invest in the Fund.
This presentation is qualified in its entirety by the more detailed information
appearing in the Private Placement Memorandum for the Fund which is not
included herewith. The information relating to oil and gas supply and demand
and the predictions of an upcoming energy crisis are the opinion of Simmons
& Company International and not necessarily agreed upon by other experts in
the industry.
Economics 101
High Demand
+
Low Supply
=
High Prices
Our Wake-Up Call Is Here
• America (and the world) drifted
into a “benign energy war.”
– Demand was supposed to peak
– Oil supplies were to grow
cheaply
– Cost of energy would steadily fall
• It was simply a dream.
• The alarm clock is ringing.
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A 1935 Oil Prediction
(When Global Oil Usage Was 3.5 Million Barrels
Per Day)
“Oil has become more and more
necessary to everyone. At first it was
used for medicine, for lamps, and for
lubrication. Now, if the supply of oil
were cut off, our manner of living would
change completely until something to
take its place was found.”
(Written in 1935 by Maud and Miska Petersham
when the world used 3.5 million barrels of oil each day)
Spare Capacity Is Disappearing
• Wellhead oil and gas
• Processing oil and gas
• Pipelines and tankers
All are effectively at 100%
• Drilling rigs
• Refinery capacity
• People, people, people…
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The Bigger Picture Problem
• Global oil and gas demand set
to grow:
– 120 million barrels per day by
2020 from 80 million today
– Electricity and natural gas growth
far higher
• Supply was supposedly “No Problem.”
– “We have 3 trillion barrels? of usable oil left”
– “Saudi Arabia has another 200 billion of proven reserve soon to be
added”
• This is an energy fantasy.
Simmons & Co International
Oil Supply Is Peaking
• Peak oil means sustainable, safe production.
• Too many key areas of world have now passed peak
“conventional supply.”
– North America
– Russia
– North Sea
– Iran
– Venezuela
– Kuwait
– Indonesia
– Iraq
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2020 Is “Nearly Here”
• 13-years is not “years from now.”
• Most major projects take 5 – 7 years
to complete.
• Any new frontier takes 10 – 20 years.
• To meet 120 million barrels per day
by 2020:
– Saudi Arabia needs to produce 20 to 25
million barrels per day
– Rest of the world production needs to
grow from 72 million barrels per day to
between 95 and 100 million barrels per
day
Simmons & Co International
Rolling The Dice On Saudi Arabia’s Oil
Future
Saudi Oil
Output
Crude Oil
Neutral Zone Oil
Total
Condensate
Nat. Gas Liquids
Total
FUTURE (2020)
2004
8,100
260
8,360
140
8,500
1,111
9,611
20 – 25 MMB/Day
15.0
MMB/Day
12.0
MMB/Day
9.611
9.6
MMB/Day
4.5
MMB/Day*
*5% net decline per annum
Simmons & Co International
Shedding Light on Saudi Arabia’s
Oil
• 5 super giant oilfields made up
90% of oil output.
• 3 giant oilfields made up 8%.
• These oilfields are between 40
and 60 years old.
• All are reaching point of decline.
• Half of “proven reserves” are
“questionable.”
• Remaining oil is harder to
produce.
Simmons & Co International
Saudi Arabia’s Oil Faces Challenges
•
Concept that Saudi Arabia
could produce 20 million
barrels per day was false.
•
Achieving sustainable 12 million
barrels per day is not easy.
•
Current production not assured
to stay constant.
•
All key fields could begin rapid
declines.
•
Lack of transparency increases
risk of surprise.
BusinessWeek Online April 5, 2004
Simmons & Co International
Once Saudi Arabia Peaks…
• The world will pass sustained peak oil
when Saudi Arabia’s oil output peaks.
• Peaking might now be “past tense.”
• The higher an “oil system” produces, the
faster it peaks and declines.
• “Conservation production” is best
insurance policy.
Simmons & Co International
Natural Gas Is Next Big Surprise
• Too many key areas have passed peak supply:
– USA
– Canada
– Russia
65% of current production
– Netherlands
– Indonesia
• Most “stranded gas” has never been discovered.
• Gas depletes faster than oil.
Simmons & Co International
Even Coal Has Some Limits To Growth
•
High quality black coal
supplies are getting scarce.
•
Low quality brown coal is next
generation supply.
•
Proven coal reserves have no
“quality differential.”
•
Most reserve estimates are
“volumetric estimates.”
•
Using coal requires intensive
energy.
Simmons & Co International
We Dug A Deep Energy Hole
• Getting into this mess
took decades.
• The deeper we dig, the
higher the risk the hole
collapses.
• Grasping the magnitude
of the problem is urgent.
Simmons & Co International