The latest Taiwan Oil & Gas Report from BMI forecasts that the country will account for 4.29% of Asia Pacific regional oil demand by 2012, while making no meaningful 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. Taiwan’s share of gas consumption in 2007 was an estimated 2.81%, while its share of production was minimal.

By 2012, its share of gas consumption is forecast to be 2.47%. In Q108, we estimate that the OPEC basket price averaged US$92.64 per barrel – up around 9% from the Q407 level. The OPEC basket price had exceeded US$102 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.

Taiwanese real gross domestic product (GDP) growth is now forecast by BMI at 4.1% for 2008, down from an estimated 5.7% in 2007. We are assuming 4.5% growth in 2009, 4.3% in 2010/11, followed by 4.1% in 2012. State-owned Chinese Petroleum Corporation (CPC) is tasked with securing oil and gas supply, but has no significant domestic volumes to contribute. Oil consumption is forecast to increase by 2% per annum to 2012, implying demand of 1.26mn b/d by the end of the forecast period. Gas usage is expected to rise from the estimated 2007 figure of 12.3bcm to 14.6bcm by 2012, supplied largely by LNG imports. Between 2007 and 2018, we are forecasting an increase in South Korea’s oil consumption from 1.14mn b/d to 1.42mn b/d (+24.3%), with the country’s refining capacity rising from 1.29mn b/d to 1.65mn b/d. Gas demand is expected to rise from around 12bcm in 2007 to a possible 17bcm by 2017/2018 (+40%), met largely by LNG imports.

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. Taiwan ranks 14th and last in BMI’s updated Upstream Business Environment rating, thanks to a virtual absence of hydrocarbon resources. The score reflects the total control of the government over upstream oil activities and a healthy country risk profile, the latter offsetting partly the lack of reserves and output growth potential. The country also ranks last in BMI’s Downstream Business Environment rating, although its score is somewhat closer to other regional players such as Hong Kong. The poor showing reflects its high level of state involvement, relatively high retail site intensity, and modest oil and gas demand growth outlook.