Saudi Arabia Oil & Gas Report Q3 2009

July 2009
Saudi Arabia Oil & Gas Report;Jul2009, p1
Industry Profile
The latest Saudi Arabia Oil & Gas Report from BMI forecasts that the country will account for 37.85% of Middle Eastern (ME) regional oil demand by 2014, while providing a dominant 38.99% of supply. Regional oil use of 4.98mn barrels per day (b/d) in 2001 rose to 7.15mn b/d in 2009. It should average 7.42mn b/d in 2010 and then rise to around 8.38mn b/d by 2014. Regional oil production was 22.83mn b/d in 2001 and averaged 24.41mn b/d in 2009. After an estimated 24.86mn b/d in 2010, it is set to rise to 26.67mn b/d by 2014. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average of 17.85mn b/d. This total eases to an estimated 17.44mn b/d in 2010 and is forecast to reach 18.30mn b/d by 2014. Iraq has the greatest export growth potential, followed by Qatar. In terms of natural gas, the region consumed 379.2bn cubic metres (bcm) in 2009, with demand of 481.4bcm targeted for 2014, representing 22.1% growth. Production of 407.2bcm in 2009 should reach 588.9bcm in 2014 (+26.2%), which implies net exports rising to 108.0bcm by the end of the period. Saudi Arabia is expected to consume an estimated 19.86% of the region's gas in 2010, with its market share forecast to be 17.40% in 2014. It will contribute an estimated 16.77% to 2010 regional gas production and could account for 14.23% of supply by 2014. For 2010 as a whole, we continue to assume an average OPEC basket price of US$83.00/bbl, +36.4% year-on-year (y-o-y). Risk is now clearly on the downside, thanks to the slow progress made during June. However, a full-year outturn in excess of US$80 remains a strong possibility and we see no need to review our assumptions at this point. The 2010 US WTI price is now put at US$87.63/bbl. BMI is assuming an OPEC basket price of US$85.00/bbl in 2011, with WTI averaging US$89.74. Our central assumption for 2012 and beyond is an OPEC price averaging US$90.00/bbl, delivering WTI at just over US$95.00. For 2010, the BMI assumption for premium unleaded gasoline is an average global price of US$95.45/bbl. The overall y-o-y rise in 2010 gasoline prices is put at 36%. Gasoil in 2010 is expected to average US$93.23/bbl. The full-year outturn represents a 35% increase from the 2009 level. For 2010, the annual jet price level is forecast to be US$95.90/bbl. This compares with US$70.66/bbl in 2009. The 2010 average naphtha price is put by BMI at US$83.53/bbl, up 41% from the previous year's level. We assume that Saudi Arabian real GDP will grow by 2.2% in 2010 and we are forecasting 3.1% average annual GDP growth in 2010-2014. We expect oil demand to rise from an estimated 2.79mn b/d in 2010 to 3.17mn b/d in 2014, representing up to 3.0% annual growth beyond 2009 and broadly matching our underlying economic assumptions. State-owned Saudi Aramco is wholly responsible for oil and liquids production, which is forecast to rise from an estimated 9.83mn b/d in 2010 to 10.40mn b/d by 2014. 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 84bcm by 2014, up from an estimated 78bcm in 2010. Consumption should match the trend, leaving Saudi Arabia with no import requirement or export potential during the period. Between 2010 and 2019 we forecast an increase in Saudi Arabian oil production of 21.1%, with volumes rising steadily to 11.90mn b/d by the end of the 10-year forecast period. Oil consumption is set to increase by 31.5%, with growth slowing to an assumed 3.0% a year towards the end of the period and the country using 3.68mn b/d by 2019. Gas production is expected to rise from an estimated 78bcm to 92bcm by the end of the period. Demand growth of 16.9% from 2010-2019 will provide a balanced market throughout the period. Details of BMI's 1


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