China and India’s Ravenous Appetite for Natural Resources― Their Potential Impact on Colorado

Vince Matthews

Director Colorado Geological Survey

YOUR YOUR Geological Survey !!!Geological Survey !!!

Understand the Geology of Groundwater ResourcesPromote Mineral and Mineral Fuel Resources

Colorado Avalanche Information Center

Reduce Impact of Geologic HazardsEducate the Citizens of Colorado

Assist State and Federal Agencies

Everything you need to know about Mineral and Energy in Colorado

Production of Natural Resources is an Important Part of Colorado’s Economy

$11.8 billion

Revenue comparison of Colorado’s Important Economic

Sectors11.8

8.2

6.4

0

2

4

6

8

10

12

2005

Minerals & Energy

Agriculture

$ Billion Tourism

Distribution of Colorado Mineral & Energy Value 2005 ($ Billions)

CO2 (0.200)

Natural Gas

8.1

Oil1.2Minerals1.5

Coal0.8

Uranium

0.007

ChinaIndia

U.S.

0

200

400

600

800

1000

1200

1400

China U.S. India

Population Comparison

China

U.S.

India

Land Area Comparison

0

1

2

3

4

5

6

7

8

9

10

China U.S. India

China U.S.

India

0

2000

4000

6000

8000

10000

12000

China U.S. India

GDP Comparison

China

U.S.

India

0

1

2

3

4

5

6

7

8

9

10

China U.S. India

GDP Growth Comparison

China

U.S.

India

Japan GDP

World Electrical Growth

World 6.3

China/India/U.S. 3.4

World Electrical Growth

India 0.4

U.S. 1.1 China

1.9

World Electrical Growth

Africa

Asia-Pacific

Europe-Eurasia

Middle East

South & Central America

North America

China’s Share of World Mineral Production in

2003

Commodity Percentage RankCoal 45 1Oil 4.7 6Cement 42 1Fluorspar 55 1Rare earths 85 1Aluminum 18 1Antimony 89 1Copper 12 2Gold 8 4Lead 18 2Magnesium 45 1Molybdenum 24 3Silver 12 3Steel, crude 23 1Tin 32 1Tungsten 83 1Zinc 22 1

Source: USGS, Kenzie, et al

China’s Production and Consumption of Copper

Productionsupplemented by imports43%

Importe

d!

Source: USGS, Kenzie, et al

China’s Share of World Mineral Production in

2003

Commodity Percentage RankCoal 45 1Oil 4.7 6Cement 42 1Fluorspar 55 1Rare earths 85 1Aluminum 18 1Antimony 89 1Copper 12 2Gold 8 4Lead 18 2Magnesium 45 1Molybdenum 24 3Silver 12 3Steel, crude 23 1Tin 32 1Tungsten 83 1Zinc 22 1

Source: USGS, Kenzie, et al

Leading Importers of Iron Ore—1980–2003

Sources: U.S. Geological Survey Minerals Yearbook; United Nations Conference on Trade and Development.

Trends in Demand for Steel

150

200

250

300

2001 2002 2003 2004

Year

Millio

n m

etr

ic t

on

s China

Other AsiaEuropeAmericas

150

200

250

300

2001 2002 2003 2004

Year

Millio

n m

etr

ic t

on

s China

Other AsiaEuropeAmericas

Source: International Iron and Steel Institute.

World Energy Consumption

Hydro

World Energy Consumption

Oil

OIL CONSUMPTION- China

Source: BP

49%

Imported!

OIL- CONSUMPTION India

Source: BP

69%

Imported!

OIL- U.S. Consumption

67% imported!

Mexico’s declining production at Cantarell field accelerating

Mexican state oil company Pemex said Wednesday that production at its Cantarell oil field, the world’s second-largest, will drop faster than expected. 08/03/06

54 of the world’s 65 oil producing countries are in decline!

OIL Price$70.85Late- August

$75.12 This Spring

Colorado Impact

Oil prices increased 186% since 2002

Colorado’s production decline reversed in the last 5 years

Wattenburg is the largest oil field west of the Mississippi (outside of CA and TX).Rangely still has large reserves (57R/65P).

Commerce City refinery will be processing Canadian oil sands.

0

5

10

15

20

25

30

35

40

45

50

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Mill

ion

Bar

rels

Colorado Oil Production

Oil shale is being seriously re-appraised.

World Energy Consumption

Natural Gas

NATURAL GAS CONSUMPTION - China

NATURAL GAS CONSUMPTION - India

NATURAL GAS CONSUMPTION - U.S.

82%

Natural Gas- U.S. (Production)

NATURAL GAS- U.S.

$9.98Mid- August

NATURAL GAS- U.S. Price

Colorado has all, or parts, of seven of the top 50 natural gas fields in the nation!

0

1000

2000

3000

4000

5000

6000

7000

2001 2002 2003 2004 2005 2006

93% Increase!

Colorado Drilling Permits

13 1318

32

28

39

64

74

0

10

20

30

40

50

60

70

80

90

100

1998 1999 2000 2001 2002 2003 2004 2005 Today

Colorado Drilling Rigs

0

200

400

600

800

1,000

1,200

1,400

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

BC

F

Colorado has the fifth largest gas reserves in the nation.

Colorado has the largest reserves of coalbed methane in the nation.

Gas prices increased 186% since 2002

Colorado is the sixth largest gas producer in the nation.

Colorado Natural Gas Productionincreased 21% in 2005

Colorado Impact

Colorado Natural Gas Production

World Energy Consumption

Coal

COAL- China

COAL- India

7%

imported!

COAL U.S.

Colorado has the seventh largest bituminous coal reserves in the nation.

Colorado has the largest reserves of compliance coal in the nation.

Spot prices increased 76% since 2003

Colorado is the sixth largest coal producer in the nation.

Colorado Impact

0

5

10

15

20

25

30

35

40

45

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Mill

ion

Tons

Colorado Coal Production

World Energy Consumption

Nuclear

NUCLEAR- China

NUCLEAR- India

NUCLEAR- U.S.

Last nuclear power plant came online.

The world’s existing 435 nuclear reactors currently need 180 million pounds of uranium each year.

0

20

40

60

80

100

120

140

160

180

Million Pounds

Needed Produced

80 million pound gap

Uranium prices more than quadrupled since 2003

$41.50

Colorado Impact

~ $2.00/lb in 2002

$40/lb in July!

MOLYBDENUM Price

Colorado MOLYBDENUM Production

0

20

40

60

80

100

120

1970 1975 1980 1985 1990 1995 2000 2005

Mil

lio

n P

ou

nd

s

Precious Metal Increases Silver207%

Platinum 250%

Gold 140%

Base Metal Increases Zinc 385%

Copper 390%

Lead 222%Aluminum

142%

Nickel 408%

Antimony

Titanium

Cadmium Chromium

Cobalt

Indium Magnesium Selenium

Tungsten Vanadium

Percent Price Increase 01/2001 – 06/0501/2004 – 06/05

150%

633%

48% 100%

966%

920%

60% 1733%

400%

428%

22% Imported

Cement producers

1. China

2. India

3. U.S.

China Consumes ½ of all the concrete in the world

20032004

U.S. cement manufacturing is 81% foreign owned

“Chinese companies and their rivals are scouring the globe from Australia to Africa for access to the raw materials needed to sustain the Asian nation’s growth as commodity prices surge.”

--June 23, 2006 (Bloomberg)

China2005 – Opened 70,000 new supermarkets

2006 – Will become #3 car manufacturer

– 42% increase in capital investment

11th Five-year plan

- Plan to build the equivalent of three Manhattan Islands

Overall ImpactsColoradans will suffer from effects of inflation

Coloradans may see increasing shortages of critical raw materials

Conflicts may arise with multi-national corporations operating in Colorado

Pressures will mount to develop more of Colorado’s natural resources

The End!

Of the talk, that is.