France Oil and Gas Report Q4 2009

The latest France Oil & Gas Report forecasts that the country will account for 14.15% of developed European regional oil demand by 2013, while making a 0.24% 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. France’s share of gas consumption in 2008 was 9.92%, while it has no appreciable share of production. By 2013, its share of gas consumption is forecast to be 9.31%.

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.

French real GDP is now forecast to fall by 3.1% in 2009, compared with growth of 0.4% in 2008. We are assuming 0.4% average annual growth in 2009-2013. Oil consumption is set to stagnate in spite of increased economic activity, with demand of 1.93mn b/d in 2008 expected to slip in 2009/10 to 1.89mn b/d. Crude oil imports are expected to have reached 1.92mn b/d by 2013, with domestic crude oil production falling from an estimated 20,000b/d to 9,000b/d over the period. Gas demand is expected to rise more quickly than for oil, with new sources of supply being lined up by GDF Suez, which has signed import agreements with Egypt, Russia, Norway, Algeria and the Netherlands. Gas consumption is likely to have reached 44.5bcm by 2013. Production is negligible, so imports could rise to 42.7bcm.

Between 2008 and 2018, we are forecasting a decrease in French oil and gas liquids consumption of 0.78%, with 2008 demand of 1.93mn b/d slipping below 1.89mn b/d in 2009/10, before rising slowly to a peak of 1.93mn b/d in 2013/14. By 2018, we are forecasting French consumption of 1.92mn b/d.

Production is set to fall from 20,000b/d to just 6,000b/d during the same period. Gas demand should rise from the 2008 level of 44.2bcm to a peak of 45.4bcm in 2017, 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, France’s long-term political risk score is 84.0, 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 65.6, below the Developed Markets average of 70.0 and above the global average of 53.7.

France has a fully privatised and competitive oil and gas industry. State holdings have been reduced greatly in electricity and gas suppliers EDF and GDF Suez. The upstream and downstream oil segments are privatised and deregulated, with considerable IOC involvement in refining and distribution, even though former state company Total has the greatest market share.