Taiwan Oil and Gas Report Q2 2012

BMI View: Refinery expansion plans have been thrown into turmoil due to political intervention, andTaiwan may not see a new plant built within the next decade. Meanwhile, a growing appetite for importedgas has created a need for fresh LNG purchase schemes, with Australian and Qatari volumes on the riseand Papua New Guinea set to become a new source of supply.

The main trends and developments we highlight in the Taiwanese Oil and Gas sector are:

.. In January 2012, Ichthys LNG signed a legally binding sales and purchase agreement (SPA)with Taiwan’s state-owned CPC. Taiwan will now take delivery of liquefied natural gas (LNG)from the Ichthys LNG project offshore Western Australia. Under the terms of the 15-yearagreement, Ichthys LNG will sell 1.75mn tonnes per annum (tpa) to Taiwan from 2017. Thisequates to 2.4bn cubic metres (bcm) of gas a year.

.. In December 2011 CPC signed a 21-year LNG purchase agreement with Qatar’s Ras LaffanLiquefied Natural Gas Company – for an annual 1.5mn tonnes (2.1bcm) starting from 2013. InMarch 2010, the partners in the Papua New Guinea (PNG) LNG project also signed a 20-yearSPA with CPC. Under the agreement, the PNG LNG project will supply CPC with around 1.2mntpa of LNG.

.. Taiwan’s gas-fired power generation capacity will increase 67% by 2030, Minister of EconomicAffairs Shih Yen-shiang said in October 2011. This rise in capacity will be a major driver of thestrong and sustained gas demand growth trend. Taiwanese demand should be around 19.5bncubic metres (bcm) by 2016.

.. BMI forecasts a gradual rise in Taiwanese LNG imports throughout the decade, with volumesincreasing from an estimated 16.0bcm in 2011 to 19.4bcm in 2016, and to 21.4bcm by 2021.

.. Given large industrial and demand, which is inherent in the energy equation, consumption of oiland power can be expected to move broadly in line with the GDP trend. Taiwan’s domesticcrude oil production is expected to have been less than 700 barrels per day (b/d) in 2011,meaning virtually all of the country’s oil was imported. Our forecasts for crude oilconsumption are for an increase from an estimated 994,000b/d in 2011 to around 1.15mnb/d by 2016.

.. The cost of crude imports will average around US$39.0bn per annum between 2011 and 2016.Virtually all of Taiwan’s gas is imported, with the cost estimated at US$9.1bn in 2011 and risingto US$9.6bn by 2016. The Taiwanese government’s combined crude oil and gas import billwill be around US$48.5bn by 2016.At the time of writing we assume an OPEC basket oil price for 2012 of US$99.38/bbl, falling toUS$97.23/bbl in 2013. Global GDP in 2012 is forecast at 3.2%, up from an assumed 3.1% in 2011,reflecting a faltering recovery in the US and an uncertain eurozone debt situation. For 2013, growth isestimated at 3.7%.