companiesandmarkets.com

Return to Report | Print

Argentina Oil and Gas Report Q3 2008

http://www.companiesandmarkets.com/Summary-Market-Report/argentina-oil-and-gas-report-q3-2008-49420.asp

Report Summary

The latest Argentina Oil & Gas Report from BMI forecasts that the country will account for 6.28% of Latin America regional oil demand by 2012, while providing 6.25% of supply. Latin America regional oil use of 6.84mn barrels per day (b/d) in 2001 reached an estimated 7.28mn b/d in 2007. It should rise to around 8.16mn b/d by 2012. In terms of natural gas, the region in 2007 consumed an estimated 197bcm, with demand of 267bcm targeted for 2012, representing growth of 35.6% between 2007 and 2012. Production of an estimated 208bcm in 2007 should reach 282bcm in 2012, which implies end-period net exports of around 15bcm per annum. Argentina's share of gas consumption in 2007 was an estimated 21.79%, while its share of production was 22.89%. By 2012, its share of gas consumption is forecast to be 18.18%, with the country accounting for 18.10% of supply. 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. Real GDP growth is forecast by BMI at 6.0% for 2008, down from an estimated 8.7% in 2007. We are assuming 4.1% growth in 2009, 3.6% in 2010, followed by 3.9% in 2011 and 3.7% in 2012. A new state entity (Enarsa) partners international oil companies (IOCs) in supporting output growth efforts, operating alongside regional heavyweight RepsolYPF and others. We are assuming oil production of no more than 700,000b/d by 2012, with the country expected to pump 710,000b/d in 2008. Consumption is forecast to increase by around 2.5% per annum to 2012, implying demand of 513,000b/d by the end of the forecast period. The crude oil export capability would therefore be approximately 187,000b/d by 2012. Gas production is forecast to increase from an estimated 47.5bcm in 2007 to 51bcm over the period. Between 2007 and 2018, we are forecasting a decrease in Argentinean oil production of 27.0%, with crude volumes peaking in 2009 at 730,000b/d, before falling steadily to 515,000b/d by the end of the 10- year forecast period. Oil consumption between 2007 and 2018 is set to increase by 25.6%, with growth slowing to an assumed 1.5% per annum towards the end of the period and the country using 569,000 b/d by 2018. Gas production is expected to rise gradually, from around 47.5bcm in 2007 to a peak of 52.0bcm in 2011, before slipping back to 37.5bcm by 2018. With demand growth of 28%, this provides export potential falling from a forecast peak of 4.9bcm in 2010 to imports of 17.4bcm by 2018. 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. Argentina occupies sixth place in BMI’s newly revised Upstream Business Environment rating, above Ecuador. Its gas resources, largely privatised oil sector, licensing regime and competitive landscape work in the country’s favour, but are undermined by an absence of growth potential, asset maturity and unappealing risk environment. Scope exists for Argentina to break further away from Ecuador, where risk issues abound, but Trinidad looks set to move out of reach. The country is well up the league table in BMI’s newly-revised Downstream Business Environment rating, reflecting its privatised refining and marketing segment, substantial capacity and competitive environment, offset by only moderate growth potential and a relatively high level of retail site intensity. Trinidad is immediately behind it in the regional rankings, but there is little to choose between the two countries and Argentina isn’t at great risk of being overhauled during the next few quarters.

Table of Contents

Executive Summary ......6

SWOT Analysis ...8

Argentina Political SWOT . 8

Argentina Economic SWOT ...... 9

Argentina Business Environment SWOT ... 10

Argentina Energy Market Overview ...... ....11

Global Oil Market Overview ......13

Table: Global Oil Consumption (000b/d) . 14

Table: Global Oil Production (000b/d) ..... 15

Oil Price Outlook ......16

Waiting For A Correction ... 16

Table: Crude Price Assumptions 2007/08 . 17

Revised Forecasts ...... 17

Table: Oil Price Forecasts ...... 18

Regional Energy Market Overview ...... 19

Oil Supply And Demand ...... 19

Table: Latin America Oil Consumption (000b/d) . 20

Table: Latin America Oil Production (000b/d) .. 21

Oil: Downstream 22

Table: Latin America Oil Refining Capacity (000b/d) 22

Gas Supply And Demand .... 23

Table: Latin America Gas Consumption (bcm) .. 23

Table: Latin America Gas Production (bcm) ..... 23

Liquefied Natural Gas 24

Table: Latin America LNG Exports/(Imports) (bcm) .. 24

Business Environment Ranking ..... ..25

Latin America Region 25

Composite Scores .. 25

Regional Upstream Business Environment Rating ...... 26

Regional Downstream Business Environment Rating . 27

Upstream Scores ... 27

Downstream Scores 27

Argentina Upstream Rating – Overview ... 28

Argentina Upstream Rating – Potential Returns 28

Argentina Upstream Rating – Risks to Potential Returns .... 28

Argentina Downstream Rating – Overview . 29

Argentina Downstream Rating – Potential Returns .... 29

Argentina Downstream Rating – Risks to Potential Returns 29

Business Environment ......30

Legal Framework 30

Infrastructure . 32

Labour Force . 32

Foreign Investment Policy ...... 33

Tax Regime 34

Industry Forecast Scenario ...... 35

Oil and Gas Reserves . 35

Oil Supply and Demand ...... 35
Gas Supply and Demand ..... 36
LNG 37
Refining and Oil Products Trade . 38
Revenues/Import Costs . 38
Table: Argentina Oil & Gas – Historic Data & Forecasts .. 39
Other Energy .. 40
Table: Argentina Other Energy – Historic Data & Forecasts ... 41
Key Risks to BMI’s Forecast Scenario .. 41
Long-term Oil & Gas Forecasts .. 41
Macroeconomic Outlook ....42
Table: Argentina – Economic Activity ...... 44
Regional Case Study .45
Gazprom In the Americas ... 45
Competitive Landscape 50
Executive Summary 50
Table: Key Players – Argentine Oil & Gas Sector ..... 51
Overview/State Role ... 51
Table: Key Upstream Players . 53
Table: Key Downstream Players ..... 53
Company Monitor ..54
RepsolYPF .. 54
Petrobras Energía ...... 57
Chevron Argentina ..... 60
Pan American Energy/BP ... 62
Total Austral ... 64
Esso Petrolera Argentina .... 66
Shell Compañia Argentina de Petróleo . 68
BG Group 70
Occidental – Summary ... 72
Apache – Summary . 72
Glossary of Terms ...73
Oil & Gas Ratings: Revised Methodology ... ..74
Introduction 74
Ratings Overview 74
Table: BMI Oil & Gas Business Environment Ratings: Structure 75
Indicators . 76
Table: BMI Oil & Gas Business Environment Upstream Ratings: Methodology 76
Table: BMI Oil & Gas Business Environment Downstream Ratings: Methodology .. 77
Oil & Gas Outlook: Long-term forecasts ......79
Global Oil Demand 79
Global Oil Demand (000b/d) .. 79
Global Oil Production (000b/d) 80
Global Oil Supply ...... 80
Global Gas Demand .. 81
Global Gas Demand (bcm) ..... 81
Global Gas Supply ..... 81
Global Gas Production (bcm) . 82
Regional Oil Demand 83
Latin America Oil Consumption (000b/d) . 83
Regional Oil Supply ... 84 Latin America Oil Production (000b/d) .... 84 Oil: Downstream 85 Latin America Oil Refining Capacity (000b/d) .. 85 Regional Refining Capacity 85 Regional Gas Demand . 86 Gas Supply And Demand .... 86 Latin America Gas Consumption (bcm) .... 86 Regional Gas Supply .. 87 Latin America Gas Production (bcm) 87 Argentina Country Overview 88 Argentina Energy Outlook .. 89 Argentina Oil & Gas – Long-term Forecasts ..... 89 Argentina Other Energy – Long-term Forecasts 90 Methodology & Risks To Forecasts ...... 91 BMI Forecast Modelling 92 How We Generate Our Industry Forecasts .... 92 Energy Industry 92 Cross checks ... 93 Sources .... 93