Belgium Oil and Gas Report Q4 2009

The new Belgium Oil & Gas Report forecasts that the country will account for 6.10% of developed European regional oil demand by 2013, while making no appreciable contribution to supply. In Developed Europe, overall oil consumption reached 13.62mn barrels per day (b/d) in 2008. It is set to ease to around 13.60mn b/d by 2013. Developed Europe regional oil production was 6.97mn b/d in 2001, and in 2008 averaged 4.90mn b/d. It is set to fall to just 3.77mn b/d by 2013. Oil imports are growing steadily, because supply is contracting and demand is rising, albeit slowly. In 2008, net crude imports were 8.72mn b/d. By 2013, they are expected to have reached 9.84mn b/d. Norway will remain the only major net exporter, with the UK becoming a net importer.

As regards natural gas, the Developed Europe region in 2008 consumed 445bn cubic metres (bcm), with demand of 478bcm targeted for 2013, representing 7.3% growth. Production of 269bcm in 2008 should rise to 278bcm in 2013, which implies net imports rising from the 2008 level of 176bcm to some 267bcm by the end of the period. Belgium’s share of gas consumption in 2008 was 3.82%, while it makes no meaningful contribution to regional production. By 2013, its share of gas consumption is forecast to be 3.70%.

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.

Belgian real GDP is now forecast to contract 3.7% in 2009, compared with growth of 1.0% in 2008. We are assuming an average 0.3% annual growth in 2009-2013. Oil demand was barely changed in 2008 and is forecast to decline in 2009, before recovering slowly to reach 830,000b/d by 2013. From 17.0bcm in 2008, we expect to see gas demand rise to a minimum of 17.7bcm by 2013, all met by increased pipeline and liquefied natural gas (LNG) imports.

Between 2008 and 2018, we are forecasting a decrease in Belgian oil and gas liquids consumption of 1.32%, with volumes easing slowly from 836,000b/d in 2008 to 825,000b/d by the end of the 10-year forecast period, with a more significant dip in demand during 2009 as a response to economic slowdown.

Gas demand should rise from the 2008 level of 17.0bcm to 18.6bcm by 2018, all based on LNG and pipeline imports. Details of the 10-year forecasts can be found in the appendix to this report.

According to the Country Risk team, Belgium’s long-term political risk score is 74.7, compared with the Developed Markets average of 87.5 and the global average of 63.6. Our long-term economic rating for the country is 70.4, above the Developed Markets average of 70.0 and the global average of 53.7.

Belgium has a privatised energy sector operating under EU guidelines. There is no upstream oil and gas segment, but downstream oil and gas features a mixture of international oil companies (IOCs) and former state companies now in foreign hands. Both the gas and power markets are open to competition.