The latest Hong Kong Oil & Gas Report from BMI forecasts that the country will account for just 1.05% of Asia Pacific regional oil demand by 2012, while making no contribution to supply. Asia Pacific regional oil use of 21.4mn barrels per day (b/d) in 2001 reached an estimated 25.56mn b/d in 2007. It should rise to around 29.38mn b/d by 2012. In terms of natural gas, the region in 2007 consumed an estimated 436bcm, with demand of 591bcm targeted for 2012, representing growth of 35.57% between 2007 and 2012. Production of an estimated 354bcm in 2007 should reach 455bcm in 2012, but implies net imports rising from an estimated 82bcm per annum to 136bcm. Hong Kong's share of consumption in 2007 was an estimated 0.58%, while it has no production.

By 2012, its share of demand is forecast to be 0.59%. In Q108, we estimate that the Organisation of Petroleum Exporting Countries (OPEC) basket price averaged US$92.64 per barrel – up around 9% from the Q407 level. The OPEC basket price had exceeded US$102 a barrel (bbl) by the middle of March, slipping back towards US$96/bbl later in the month. The estimated Q108 average prices for the main marker blends are now US$96.54 for Brent, US$97.31 for WTI and US$93.44/bbl for Russian Urals (Mediterranean delivery). Our projections for 2008 as a whole are revised upwards from BMI’s last quarterly report.

We are now assuming an OPEC basket price average of US$81 per barrel for 2008, compared with the US$74 estimate provided by our last quarterly report. Based on recent price differentials, this implies Brent at US$84.71, WTI averaging US$85.63/bbl, and Urals at US$81.88/bbl. Hong Kong’s real gross domestic product (GDP) growth is now forecast by BMI at 5.6% for 2008, down from an estimated 6.2% in 2007. We are assuming 5.2% growth in 2009, 5.5% in 2010, followed by 5.9% in 2011 and in 2012. There is no upstream or refining segment, but international oil companies (IOCs) and Chinese companies are investing in import and distribution facilities. Oil consumption is forecast to increase by around 2% per annum to 2012, implying demand of 307,000b/d by the end of the forecast period. Gas demand is set to reach 3.5bcm by 2012, with all of the fuel imported.

Between 2007 and 2018, we are forecasting an increase in Hong Kong oil consumption of 24.3%, with demand reaching 346,000b/d by the end of the forecast period. Oil consumption growth slows to an assumed 2.0% per annum towards the end of the period. Gas demand growth of 84.4% provides an import requirement rising to 4.7bcm by 2018. Details of the new BMI 10-year forecasts can be found in the Appendix of this report, which provides global, regional and country-specific projections. Hong Kong now ranks equal 11th in BMI’s updated Upstream Business Environment rating, alongside Singapore and South Korea. The poor showing reflects the absence of domestic hydrocarbons. The risk environment is much more attractive than for many Asian peers, but there are no opportunities for IOCs in the upstream segment. Hong Kong is second from last in BMI’s Downstream Business Environment rating, reflecting its status as a very small energy market with few investment opportunities available. It beats only Taiwan, due to the low-risk profile.