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The latest Saudi Arabia Oil & Gas Report forecasts that the country will account for 20.83% of Middle Eastern (ME) regional oil demand by 2013, while providing a dominant 39.45% of supply.
Regional oil use of 8.24mn barrels per day (b/d) in 2001 rose to 11.25mn b/d in 2008. It should average 11.30mn b/d in 2009 and then rise to around 12.17mn b/d by 2013. Regional oil production was 22.87mn b/d in 2001, and in 2008 averaged 26.29mn b/d. It is set to rise to 28.01mn b/d by 2013. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 14.63mn b/d. This total had risen to 15.04mn b/d in 2008 and is forecast to reach 15.84mn b/d by 2013. Iraq has the greatest production growth potential, followed by Qatar.
In terms of natural gas, the region in 2008 consumed 391.5bn cubic metres (bcm), with demand of 512.8bcm targeted for 2013, representing 31.0% growth. Production of 389.5bcm in 2008 should reach 610.4bcm in 2013 (+56.7%), which implies net exports rising to 98bcm by the end of the period. Saudi Arabia in 2008 consumed 19.95% of the region’s gas, with its market share forecast at 20.35% by 2013. It contributed 20.05% to 2008 regional gas production and, by 2013, will account for 17.10% of supply.
For 2009 as a whole, we are now assuming an average OPEC basket price of US$55.00 per barrel (bbl), a 41.5% decline year-on-year (y-o-y). This represents an upgrade from the US$52 forecast we have stuck with during the past three quarters. Our OPEC basket assumption delivers likely Brent, WTI, Urals and Dubai prices of US$56.30, US$57.50, US$55.60 and US$55.60/bbl respectively. For 2010, we expect to see a recovery to US$60.00/bbl for the OPEC price (up from our previous forecast of US$58), gaining further ground to US$65.00 in 2011 and to US$70.00/bbl in 2012. Our post-2010 forecasts are unchanged and we are continuing to use a long-term price assumption of US$70.00 for 2013-2018.
In 2009, the report is now assuming a global average gasoline price of US$62.12/bbl, with the fuel having peaked in June. The overall y-o-y fall in 2009 gasoline prices is put at 40.0%. The gasoil forecast is for an average price of US$68.62/bbl, assuming a monthly high of US$92.49/bbl in December. The fullyear outturn represents a 43.4% fall from the 2008 level. The annual jet price level for 2009 is forecast to be US$65.17/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put at US$49.06/bbl, down 43.9% from the previous year’s level.
Saudi real GDP growth is now forecast at 0.5% for 2009, down from 4.2% in 2008. We are assuming 2.7% growth in 2010, 4.6% in 2011, followed by 5.1% in 2012 and 3.8% in 2013. We expect oil demand to rise from 2.22mn b/d in 2008 to 2.54mn b/d in 2013, representing 3.0% annual growth, beyond 2009, that lags our underlying economic assumptions. State-owned Saudi Aramco is wholly responsible for oil and liquids production, forecast to rise from 10.85mn b/d in 2008 to 11.05mn b/d by 2013. There is no foreign involvement in the upstream oil segment, although international oil companies (IOCs) could have a role in future gas field development and are major players in refining and petrochemicals. Gas production should reach 104bcm by 2013, up from 78bcm in 2008. Consumption should match the trend, leaving Saudi with no import requirement or export potential during the period.
Between 2008 and 2018, we are forecasting an increase in Saudi oil production of 14.3%, with volumes rising steadily to 12.4mn b/d by the end of the 10-year forecast period. Oil consumption between 2008 and 2018 is set to increase by 30.9%, with growth slowing to an assumed 3.0% per annum towards the end of the period and the country using 2.91mn b/d by 2018. Gas production is expected to rise from 78bcm to 119bcm by the end of the period. With 2008-2018 demand growth of 52.5%, this provides a balanced market throughout the period. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Saudi Arabia is still ranked a surprising last place behind Kuwait in BMI’s updated Upstream Business Environment rating. It clearly has an unrivalled oil resource and production position, but this is not sufficient to keep Saudi away from the foot of the regional league table. It is six points behind Kuwait, and shows few signs of having the ability to challenge its neighbour. The country is just in the lower half of the league table in BMI’s Downstream Business Environment rating, with a few high scores and longer-term progress up the rankings a possibility. It is ranked sixth, just behind Qatar, thanks largely to high scores for refining capacity, oil and gas demand, and nominal GDP. Generally healthy country risk factors help bolster the overall score.
Saudi Arabia Oil and Gas Report Q4 2009: http://www.companiesandmarkets.com/r.ashx?id=M5N7U1MNR166928
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