The latest Russia Oil & Gas Report forecasts that the country will account for 50.80% of Central and Eastern European (CEE) regional oil demand by 2013, while providing 69.25% 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. Russia’s share of gas consumption in 2008 was 70.26%, while its share of production is put at 76.91%. By 2013, its share of demand is forecast to be 67.38%, with the country accounting for 73.94% 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.

Russian real GDP is now forecast to fall by 7.5% in 2009, compared with growth of 5.6% in 2008. We are assuming 2.0% growth in 2010, 3.2% in 2011 and 4.2% in 2012, followed by 4.9% in 2013.

State-controlled Gazprom has a virtual monopoly over gas transportation and exports. With it being the main provider, we see gas output rising from 602bcm in 2008 to 670bcm by 2013. Russian domestic companies control most of Russia’s oil production, with the exception being Anglo-Russian joint venture (JV) TNK-BP. Rosneft is the main state-controlled oil producer. The companies are expected to deliver 2009 output of crude oil and condensates averaging 9.91mn b/d. Oil production seems likely to stagnate over the short term, then grow only slowly over the remainder of the decade. Our 2013 production forecast is for 9.95mn b/d.

Between 2008 and 2018, we are forecasting an increase in Russian oil production of 10.4%, with output falling initially from an estimated 9.91mn b/d in 2008 to 9.75mn b/d in 2010, before rising gradually to 10.95mn b/d by 2018. Oil consumption during the period is forecast to rise by 23.1%, permitting exports peaking at 7.92mn b/d in 2016. Gas consumption is expected to be up from 420bcm to 494bcm by 2018, providing export potential peaking at 262bcm at the end of the forecast period. Details of BMI’s 10-year forecasts can be found in the appendix to this report.

Russia occupies fourth place in the updated Upstream Business Environment rating, aided by unrivalled hydrocarbons resources. Its oil and gas reserves account for much of the upstream score, but licensing, privatisation and country risk factors are less impressive. Medium-term scope exists for Russia to challenge Poland above it, while Slovenia poses no threat below. The country is near the top of the league table in BMI’s updated Downstream Business Environment rating, having overtaken Romania to take a share of second place, alongside Ukraine. There are a few particularly high scores, but a move to move pull clear of Ukraine is possible over the medium term. There are excellent scores for refining capacity, oil and gas demand, population and nominal GDP.