BMI forecasts that Iraq will account for 8.41% of Middle East (ME) regional oil demand by 2013, whileproviding 11.07% of supply. Regional oil use of 8.24mn barrels per day (b/d) in 2001 rose to 11.25mn b/din 2008. It should average 11.30mn b/d in 2009 and then rise to around 12.17mn b/d by 2013. Regionaloil production was 22.87mn b/d in 2001, and in 2008 averaged 26.29mn b/d. It is set to rise to 28.01mnb/d by 2013. Oil exports are growing steadily, because demand growth is lagging the pace of supplyexpansion. In 2001, the region was exporting an average 14.63mn b/d. This total had risen to 15.04mn b/din 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 of512.8bcm targeted for 2013, representing 31.0% growth. Production of 389.5bcm in 2008 should reach610.4bcm in 2013 (+56.7%), which implies net exports rising to 98bcm by the end of the period. Iraq in2008 consumed 1.28% of the region’s gas, with its market share forecast at 1.29% by 2013. It contributed1.28% to 2008 regional gas production and by 2013 could account for 2.79% of supply.
For 2009 as a whole, we are now assuming an average OPEC basket price of US$55.00 per barrel (bbl), a41.5% decline year-on-year (y-o-y). This represents an upgrade from the US$52 forecast we have stuckwith during the past three quarters. Our OPEC basket assumption delivers likely Brent, WTI, Urals andDubai prices of US$56.30, US$57.50, US$55.60 and US$55.60/bbl respectively. For 2010, we expect tosee a recovery to US$60.00/bbl for the OPEC price (up from our previous forecast of US$58), gainingfurther ground to US$65.00 in 2011 and to US$70.00/bbl in 2012. Our post-2010 forecasts are unchangedand we are continuing to use a long-term price assumption of US$70.00 for 2013-2018.
In 2009, BMI is now assuming a global average gasoline price of US$62.12/bbl, with the fuel havingpeaked in June. The overall y-o-y fall in 2009 gasoline prices is put at 40.0%. The BMI gasoil forecast isfor an average price of US$68.62/bbl, assuming a monthly high of US$92.49/bbl in December. The fullyearoutturn represents a 43.4% fall from the 2008 level. The annual jet price level for 2009 is forecast tobe US$65.17/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put byBMI at US$49.06/bbl, down 43.9% from the previous year’s level.
Iraq’s real GDP growth is now forecast by BMI at 3.7% for 2009, following 10.9% in 2008. We areassuming 6.2% growth in 2010, 5.9% in 2011, followed by 8.0% in 2012, and 5.1% in 2013. We expectoil demand of 780,000b/d in 2008 to rise to 1.02mn b/d in 2013, depending on investment ininfrastructure and the development of domestic production. International oil companies (IOCs) aresigning production sharing agreements (PSAs) with the state, which should help accelerate the growth inoil output. Based on the efforts of national oil industry bodies, we are forecasting average oil productionof 2.48mn b/d in 2009. June 2009 production was 2.50mn b/d, with 1.93mn b/d of exports. Further fieldreactivation work and the initial IOC efforts point to output of an estimated 3.10mn b/d in 2013. Thegovernment has much more ambitious targets, aiming for 0.5mn b/d annual output expansion and a longtemgoal of 6.0mn b/d. However, there are major risks involving attacks on oil installations, Iraq’s OPECentitlement and the success of new energy policy in stimulating IOC investment.
Between 2008 and 2018, we are forecasting an increase in Iraqi oil production of 61.0%, with crudevolumes rising steadily to 3.90mn b/d by the end of the 10-year forecast period. Oil consumption between2008 and 2018 is set to increase by 86.7%, with growth slowing to an assumed 5.0% per annum towardsthe end of the period and the country using 1.31mn b/d by 2018. Gas production is expected to climb to35bcm by the end of the period. With 2008-2018 demand growth of 113%, this provides export potentialof 24.4bcm by 2018. Details of the BMI 10-year forecasts can be found in the appendix to this report.
Iraq still occupies a respectable third place in BMI’s updated Upstream Business Environment rating, butis seven points behind the UAE and therefore unlikely to move higher over the medium term. Thecountry’s score benefits from exceptional oil and gas output growth potential, a substantial hydrocarbonsreserves base and the region’s highest reserves-to-production ratios (RPR). Strict government control ofthe upstream industry and a high level of country-specific risk prevent Iraq achieving a better overallscore. The country is still at the bottom of the league table in BMI’s Downstream Business Environmentrating, with few high scores and near-term progress up the rankings unlikely. It is ranked last, belowKuwait, thanks largely to country risk factors that outweigh a reasonable showing in terms of oil demand,oil and gas demand growth, and likely refining capacity expansion.
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