The latest Indonesia Oil & Gas Report from BMI forecasts that the country will account for 4.32% of Asia Pacific regional oil demand by 2013, while providing 10.91% of supply. Asia Pacific regional oil use of 21.40mn b/d in 2001 reached 25.68mn b/d in 2007. It should average 26.32mn b/d in 2008, and then rise to around 29.65mn b/d by 2013. In terms of natural gas, in 2007 the region consumed 421bcm, with demand of 595bcm targeted for 2013. Production of 336bcm in 2007 should reach 483bcm in 2013, but implies net imports rising from 85bcm per annum in 2007 to 111bcm in 2012. This is in spite of many Asian gas producers being major exporters. Indonesia’s share of gas consumption in 2007 was 8.04%, while its share of production was 19.87%. By 2012 its share of gas consumption is forecast to be 7.47%, with the country accounting for 18.00% of supply.

In Q308, we estimate that the OPEC basket price averaged US$113.60 per barrel – down around 3.4% from the Q208 level. The OPEC basket price averaged US$112.41 in August and US$97.16/bbl in September. In October, we are assuming an average of around US$113.30. The estimated Q308 average prices for the main marker blends are now US$115.67 for Brent, US$117.22 for WTI and US$113.43/bbl for Russian Urals (Mediterranean delivery). Our projections for 2008 as a whole are unchanged from the last oil market report. We are still assuming an OPEC basket price average of US$110 per barrel for 2008. Based on recent price differentials, this implies Brent at US$113.33, WTI averaging US$114.58/bbl, and Urals at US$110.36/bbl. Our central view is that the OPEC basket price will fall from US$110/bbl in 2008 to US$96 in 2009, before settling around US$90/bbl in 2010 onwards.

In terms of our refined products forecasts, the BMI composite (Rotterdam, Singapore and New York) global indicator price for unleaded gasoline is expected to average approximately US$117.50/bbl during 2008. Our jet forecast for 2008 is just under US$141/bbl, up from US$89 in 2007. The 60% annual increase represents the second biggest for the key refined products. With gasoil, BMI is assuming a similar gain in 2008, to an average US$137/bbl. Naphtha is expected to exhibit more modest growth, rising from US$75 to US$106/bbl (+41%). During 2009, we are expecting products prices to follow the underlying crude trend lower, but to prove more resilient than the feedstock – implying a recovery in refining margins. Gasoline in 2009 is estimated at US$103/bbl, with jet falling to US$127. Gasoil is expected to average US$122, with naphtha slipping to US$91/bbl.

Indonesian real GDP growth is forecast by BMI at 6.1% for 2008, down from 6.3% in 2007. We foresee 5.0% growth in 2009, 5.2% in 2010, 5.0% in 2011, followed by 5.1% in 2012 and 5.5% in 2013. Efforts are being made by the Indonesian authorities to encourage investment in new oil and gas supply, in order to stem the decline in production. Numerous international oil companies (IOCs) work in partnership with national oil company Pertamina and the state. We are estimating oil and gas liquids production of no more than 930,000b/d by 2013, although the country is expected to pump 975,000b/d in 2008.

Consumption is forecast to increase by around 2.5% per annum to 2013. Our estimates imply demand of 1.28mn b/d by the end of the forecast period. The import requirement would therefore be approximately 350,000b/d by 2013. Gas production rising to an estimated 87bcm by 2013 should provide end-period export potential of 43bcm, with supply risk on the downside.

Between 2007 and 2018 we are forecasting a reduction in Indonesian oil production of 17.5%, with crude volumes falling steadily to 800,000b/d in 2018. Oil consumption between 2007 and 2018 is set to increase by 22.1%, with growth slowing to an assumed 2.0% per annum towards the end of the period and the country using 1.41mn b/d by 2018. Gas production is expected to rise from around 67bcm in 2007 to a possible 92bcm by 2018 (+38%). With demand growth of 49%, this provides an export capability peaking at almost 48bcm in 2012, before falling to 42bcm by 2018, largely in the form of liquefied natural gas (LNG). Details of the new BMI 10-year forecasts can be found in the appendix to this report, which provides global, regional and country-specific projections.

Indonesia still ranks ninth in BMI’s updated Upstream Business Environment rating, with a relatively strong resource position offset by poor output growth prospects, a deteriorating reserves-to-production ratio and extensive state involvement. The country sits just comfortably ahead of Japan and just behind China, with little risk from any of the countries below. The country now ranks equal sixth with South Korea in BMI’s updated Downstream Business Environment rating, reflecting its low level of retail site intensity, refinery capacity expansion plans and reasonable oil and gas demand growth outlook. It is just ahead of Thailand and Pakistan, but has the longer-term potential to move higher.