The new Turkmenistan Oil & Gas Report forecasts that the country will account for 2.58% of Central and Eastern European (CEE) regional oil demand by 2013, while providing 2.44% 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. Turkmenistan’s share of consumption in 2008 was 3.46%, while its share of production is put at 9.91%. By 2013, its share of demand is forecast to be 4.12%, with the country accounting for 10.86% 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.

Turkmenistan’s real GDP growth is now estimated at 5.4% for 2009, following 10.5% in 2008.

We are assuming 8.5% growth in 2010, 9.7% in 2011, 10.0% in 2012, followed by 10.2% in 2013.

Domestic consumption trends can be expected to weaken in 2009/10 with the economic slowdown, but then return to a strong growth tack, estimated at an average 5.0% per annum. By 2013, the country could be using 145,000b/d of oil. Turkmenistan has traditionally been protective of its onshore basins, allowing international oil companies (IOCs) to participate only in offshore developments. This should help raise national crude and gas liquids output from 205,000b/d in 2008 to 350,000b/d by 2013. Gas production is expected to increase from 66bcm to 98bcm between 2008 and 2013.

Between 2008 and 2018, we are forecasting an increase in Turkmen oil and gas liquids production of 67.3%, with volumes peaking at 400,000b/d in 2015, before falling to 376,000b/d by the end of the 10- year forecast period. Oil consumption between 2008 and 2018 is set to increase by 52.2%, with growth slowing to an assumed 5.0% per annum towards the end of the period and the country using 186,000b/d by 2018. Gas production should rise from 2008 level of 66bcm to 126bcm by 2018, providing export potential increasing from 47bcm to 86bcm. Details of BMI’s 10-year forecasts can be found in the appendix to this report.

Turkmenistan shares last place with Croatia in the updated Upstream Business Environment rating, behind even Hungary. Its oil and gas production growth outlook, gas reserves, and asset immaturity work in the country’s favour, but are undermined by an unappealing risk environment. Scope exists for Turkmenistan to break away from Croatia, moving away from the foot of the table. The country is in the lower half of the league table in BMI’s Downstream Business Environment rating, with few particularly high scores and progress further up the rankings unlikely over the next few quarters. Oil and gas demand growth prospects represent strong suits, putting the country in ninth place, behind Hungary. Scope exists for Turkmenistan to challenge Hungary above it.