Petrocapita is an energy investment trust and is the second in a family of hard asset funds co-founded by the investment team. We believe that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil production directly to their portfolios. Petrocapita provides investors 10.25% interest and 10% profit participation.

1. Petrocapita Energy Update
November 2009
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2. Summary
It would seem virtually axiomatic that if individual oil wells peak, fields
peak and regions peak, global production should also peak. The
more pertinent issue then becomes the timing of the peak and the
rate of post peak decline. The research presents a wide range of
answers to these questions. A recent survey paper from the UKERC
found that:
– The global average decline rate of post-peak fields is at least
6.5%/year and the corresponding decline rate of all currently
producing fields is at least 4%/year. This implies that
approximately 3 mb/day of capacity must be added each
year just to maintain production at current levels – equivalent
to a new Saudi Arabia coming on-stream every 3 years.
An additional 1 mb/day must be added to meet demand
growth. CONTENTS
– More than two thirds of existing capacity must be replaced
by 2030 solely to prevent production from falling. 2 Peak Oil Price Modeling
– A peak in conventional oil production before 2030 appears
3 IEA – Peak Oil is Here?
likely and there is a significant risk of a peak before 2020.
For example, a 2008 report by The UK Industry Taskforce on
Peak Oil and Energy Security warned that a “peak in cheap,
easily available oil production” was likely by 2013.
As a thought experiment, Agcapita has produced a model based on
known country by country oil demand, emerging versus developed
market oil demand growth profiles, demand elasticity profiles
and known pre and post peak production growth/decline rates.
The purpose of this exercise was not to make highly accurate oil
price predictions but rather to gain some insight into the potential
magnitude of price changes given fairly conservative production,
demand and decline assumptions.
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3. Energy Update
PEAK OIL PRICE MODELING CHART 1: SAMPLE PRICE TREND (PEAK OIL
Peak oil price models attempt to reflect an 2012, INFLATION ADJUSTED IN USD/BBL)
enormously complex system like oil supply/demand
and pricing. Even a simplified model will be highly 300
sensitive to post peak decline rates, reserve
replacement rates, elasticity of demand and total 250
reserves remaining amongst other variables. In
the spirit of education rather than prediction, we 200
have produced a simple peak oil-pricing model. If
you manipulate the core assumptions you should 150
begin to see how modest changes in the underlying
assumptions can have dramatic effects on derived 100
post peak prices – even in a highly simplified model
like ours. 50
Click Here for Link to the Login Page for the 0
Peak Oil Model 2010 2011 2012 2013 2014 2015
What Petrocapita found was that given the highly Source: Petrocapita estimates
inelastic nature of demand for oil, coupled with
resilient demand growth in the emerging economies,
global peak oil can be expected to cause large
sustained real price increases.
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4. Energy Update (continued)
IEA – PEAK OIL IS HERE?
The International Energy Agency (“IEA”) has rejected Even so, the IEA’s 2009 World Energy Outlook
allegations from an anonymous internal source that is explicit in its warnings about the impact of a
world oil reserves have been exaggerated even “business as usual” approach to energy over the
though in its own words “We’re the ones that are next 20 years. “The scale and the breath of the
out there warning that the oil and gas is running energy challenge is enormous -- far greater than
out in the most authoritative manner. But we don’t many people realize. But it can and must be met,” the
see it happening as quickly as some of the peak oil report said. The chief economist of the IEA recently
theorists,” Richard Jones, deputy executive director stated that the public and many governments
of the IEA. In its recent annual outlook, the IEA appeared to be oblivious to the fact that oil is running
repeated its prediction that oil supplies would rise to out far faster than previously predicted and that
105 million barrels by 2030. “Generally, we’re viewed global production is likely to peak in about 10 years
as more pessimistic than we should be by the (oil) – at least a decade earlier than earlier IEA estimates
industry,” Jones added. based on the finding that production from existing
oil fields is dropping much faster than previously
The anonymous internal source reported that the measured. The IEA now estimates that the decline in
IEA is more pessimistic than its public disclosures oil production in existing fields is now running at 6.7
indicate…”Many inside the organization believe that per cent a year compared to the 3.7 per cent decline
maintaining oil supplies at even 90 million to 95 million it had estimated in 2007. The IEA updated forecasts
barrels a day would be impossible, but there are fears assume that gas, coal and oil prices will rise along
that panic could spread on the financial markets if the with demand and that crude oil will rise to US$115
figures were brought down further. We have already per barrel in nominal terms by 2030. Superficially
entered the ‘peak oil’ zone. I think that the situation this represents a large increase but in reality it is a
is really bad.” Another anonymous IEA source stated somewhat mild prediction in light of the IEA view on
that it was deemed “imperative not to anger the peak production given that this price would represent
Americans” who were said to play an influential role in a reduction in real (inflation adjusted) terms.
encouraging the body to underplay potential supply
shortfalls.
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5. DISCLAIMER:
The information, opinions, estimates, projections and other materials
contained herein are provided as of the date hereof and are subject to
change without notice. Some of the information, opinions, estimates,
projections and other materials contained herein have been obtained from
numerous sources and Petrocapita Income Trust (“PETROCAPITA”) and
its affiliates make every effort to ensure that the contents hereof have been
compiled or derived from sources believed to be reliable and to contain
information and opinions which are accurate and complete. However, neither
PETROCAPITA nor its affiliates have independently verified or make any
representation or warranty, express or implied, in respect thereof, take no
responsibility for any errors and omissions which maybe contained herein or
accept any liability whatsoever for any loss arising from any use of or reliance
on the information, opinions, estimates, projections and other materials
contained herein whether relied upon by the recipient or user or any other
third party (including, without limitation, any customer of the recipient or
user). Information may be available to PETROCAPITA and/or its affiliates that
is not reflected herein. The information, opinions, estimates, projections and
other materials contained herein are not to be construed as an offer to sell, a
solicitation for or an offer to buy, any products or services referenced herein
(including, without limitation, any commodities, securities or other financial
instruments), nor shall such information, opinions, estimates, projections and
other materials be considered as investment advice or as a recommendation
to enter into any transaction. Additional information is available by contacting
PETROCAPITA or its relevant affiliate directly.
#400, 2424 4th Street SW Tel: +1.403.218.6506 www.petrocapita.com
Calgary, Alberta T2S 2T4 Fax: +1.403.266.1541
Canada