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Azerbaijan Oil and Gas Report Q4 2009
Market |
Energy and Utilities |
Report Type |
Market Research |
Country |
Azerbaijan |
Published |
30 October 2009 |
Number of Pages |
73 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Azeri oil and gas liquids production is forecast to total 1.2mn b/d by the end of 2018
The latest Azerbaijan Oil & Gas Report forecasts that the country will account for 1.63% of the Central and Eastern European (CEE) regional oil demand by 2013, while providing 9.74% of supply.
CEE regional oil use of 4.65mn barrels per day (b/d) in 2001 rose to 5.41mn b/d in 2008. It should average 5.15mn b/d in 2009 and then rise to around 5.63mn b/d by 2013. Regional oil production was 8.83mn b/d in 2001, and in 2008 averaged 12.91mn b/d. It is set to rise to 14.37mn 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 4.18mn b/d. This total had risen to 7.51mn b/d in 2008 and is forecast to reach 8.74mn b/d by 2013.
In terms of natural gas, the region in 2008 consumed 592.7bn cubic metres (bcm), with demand of 663.4bcm targeted for 2013, representing 12.3% growth. Production of 754.6bcm in 2008 should reach 906.1cm in 2013, which implies net exports rising from 161.9bcm in 2008 to 242.7bcm by the end of the period. Azerbaijan’s share of gas consumption in 2008 was 1.86%, while its share of production is put at 2.09%. By 2013, its share of gas consumption is forecast to be 2.22%, with the country accounting for 2.43% 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.
Azeri real GDP is now forecast to grow 3.8% in 2009, down from 10.8% in 2008. We are assuming 9.0% growth in 2010, 8.5% in 2011, followed by 8.0% in 2012, and 7.8% in 2013. Domestic oil consumption, having tumbled since the 1990s, should now have resumed a growth tack, estimated at an average 7% per annum beyond the likely weakness in 2009. By 2013, the country could be using 92,000b/d of oil. The main government vehicle, Socar, currently accounts for almost half of domestic oil production but, in partnership with international oil companies (IOCs), should raise national output from 914,000b/d in 2008 to 1.40mn b/d by 2012-2013. Gas output should increase from 14.7bcm in 2008 to 22.0bcm during the forecast period.
Between 2008 and 2018, we are forecasting an increase in Azeri oil and gas liquids production of 27.8%, with volumes reaching a plateau of 1.4mn b/d in 2012-2014, before falling to 1.2mn b/d by the end of the 10-year forecast period. Oil consumption between 2008 and 2018 is set to increase by 83.9%, with growth averaging an assumed 7.0% per annum towards the end of the period and the country using 129,000b/d by 2018. Gas production should rise from its 2008 level of 14.7bcm to 30bcm by 2018, providing export potential increasing to at least 11bcm. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Azerbaijan continues to occupy second place in the updated Upstream Business Environment rating, two points behind neighbour Kazakhstan. Its oil and gas production growth outlook, asset immaturity, high reserves-to-production ratios (RPR) and competitive landscape work in the country’s favour, but are undermined by a relatively unappealing risk environment. The country is just above the mid-point of the league table in the Downstream Business Environment rating, ranked fifth with some high scores but progress further up the rankings is unlikely. The low level of retail site intensity represents a strong suit, along with region-leading oil demand growth prospects. Kazakhstan now just one point behind it in the regional rankings, and there is near-term scope for Kazakhstan to challenge for fifth place.
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