The latest Taiwan Oil & Gas Report forecasts that the country will account for 4.28% of Asia Pacific regional oil demand by 2012, while making no meaningful contribution to 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 28.99mn b/d by 2012. In terms of natural gas, the region in 2007 consumed 409bcm, with demand of 565bcm targeted for 2012, representing the strongest growth globally (34.40% between 2007 and 2012). Production of 336bcm in 2007 should reach 471bcm in 2012, but implies net imports rising from 85bcm per annum in 2007 to 94bcm in 2012. This is in spite of many Asian gas producers being major exporters. Taiwan’s share of gas consumption in 2007 was 2.80%, while its share of production was minimal. By 2012, its share of gas consumption is forecast to be 2.51%.

In Q208, we estimate that the OPEC basket price averaged just under US$115 per barrel – up around 24% from the Q108 level. The OPEC basket price had exceeded US$127 on the 22nd of May, slipping back towards US$121/bbl later in the month. In June, we assumed an average of around US$120, to deliver our quarterly estimate of US$114.98/bbl. The estimated Q208 average prices for the main marker blends are now US$118.63 for Brent, US$119.61 for WTI and US$115.89/bbl for Russian Urals (Mediterranean delivery). Our projections for 2008 as a whole have been revised upwards from the last quarterly report.

We are now assuming an OPEC basket price average of US$106 per barrel for 2008, compared with the US$81 estimate provided by our last quarterly report. Based on recent price differentials, this implies Brent at US$109.71, WTI averaging US$110.64/bbl, and Urals at US$106.88/bbl.

Taiwanese real gross domestic product (GDP) growth is forecast by BMI at 4.1% for 2008, down from 5.7% in 2007. We are assuming 4.5% growth in 2009, 4.3% in 2010/11, followed by 4.1% in 2012. Stateowned 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 1.24mn b/d by the end of the forecast period. Gas usage is expected to rise from the 2007 figure of 11.8bcm to 14.2bcm by 2012, supplied largely by LNG imports.

Between 2007 and 2018, we are forecasting an increase in Taiwan’s oil consumption from 1.12mn b/d to 1.40mn b/d (+24.3%), with the country’s refining capacity rising from 1.20mn 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 (+41%), 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 still 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 Malaysia. The poor showing reflects its high level of state involvement, relatively high retail site intensity, and modest oil and gas demand growth outlook.