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Ukraine Oil and Gas Report Q3 2009
Business Monitor International, July 2009, Pages: 76
Business Monitor International's Ukraine Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Ukraine's oil and gas industry
The latest Ukraine Oil & Gas Report from BMI forecasts that the country will account for 6.04% of Central and Eastern European (CEE) regional oil demand by 2013, while providing just 0.49% of supply. CEE regional oil use of 4.65mn barrels per day (b/d) in 2001 rose to an estimated 5.39mn b/d in 2008. It should average 5.33mn b/d in 2009 and then rise to around 5.85mn b/d by 2013. Regional oil production was 8.83mn b/d in 2001, and in 2008 averaged an estimated 12.93mn b/d. It is set to rise to 14.39mn 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 an estimated 7.54mn b/d in 2008 and is forecast to reach 8.54mn b/d by 2013.
As regards natural gas, the region in 2008 consumed an estimated 636.7bn cubic metres (bcm), with demand of 737.8bcm targeted for 2013, representing 13.0% growth. Production of an estimated 778.7bcm in 2008 should reach 906.1cm in 2013, which implies net exports rising from 141.9bcm in 2008 to 168.3bcm by the end of the period. Ukraine’s share of gas consumption in 2008 was an estimated 10.11%, while its share of production is put at 2.66%. By 2013, its share of demand is forecast to be 9.83%, with the country accounting for 2.32% of supply.
In terms of the OPEC basket of crudes, the average price in Q109 was an estimated US$45.78 per barrel (bbl), down 13% from the US$52.51 recorded during the previous three months. During the second quarter, there has been little change to our view of oil market developments. BMI is forecasting an average OPEC basket price of US$51.30/bbl, with the March gains being retained in April, before further recovery to a possible US$57.00 is seen by June. For 2009, we are still assuming an average OPEC basket price of US$52.00/bbl (-45% y-o-y). The BMI full-year forecast implies Brent Crude at US$53.73, WTI averaging US$54.90/bbl and Urals at US$52.66 for 2009.
For the whole of 2009, the BMI assumption for gasoline is an average US$56.89/bbl, with the price peaking at a forecast monthly average of US$64.75 in December 2009. The overall y-o-y fall in 2009 gasoline prices is put at 44.1%. For gasoil in 2009, the BMI forecast is for an average price of US$69.35/bbl, assuming a monthly high of US$94.48/bbl in December. The full-year outturn represents a 42.8% fall from the 2008 level. The monthly average jet fuel price is forecast to range from US$53.75 in February to US$96.76/bbl in December, proving an annual level of US$71.78/bbl. This compares with US$124.95/bbl in 2008.
Ukraine’s real GDP is now forecast by BMI to fall by 14.7% in 2009, compared with growth of 2.1% in 2008. We are assuming 1.3% growth in 2010, 3.8% in 2011, followed by 4.5% in 2012 and 4.8% in 2013. Beyond the likely weakness of 2009/10, reasonable and consistent growth in oil consumption seems likely, averaging up to 3.0% per annum. This suggests that the country will be consuming around 353,000b/d of oil by 2013. With oil production likely to slip back to just 70,000b/d, Ukraine will require imports of at least 283,000b/d by 2013. BMI forecasts that gas demand will rise from an estimated 66.0bcm in 2008 to 72.5bcm by 2013. Domestic production, largely in the hands of state-owned Naftogaz Ukrainy but with some international oil company (IOC) involvement, should also increase, from an estimated 20.2bcm in 2008 to at least 22.0bcm in 2010-2012.
Between 2008 and 2018, we are forecasting a decrease in Ukraine oil and gas liquids production of 30.6%, with volumes falling steadily from the estimated 2008 level of 78,000b/d to 54,000b/d by the end of the 10-year forecast period. Oil consumption between 2008 and 2018 is set to increase by 27.2%, with growth slowing to an assumed 3.0% per annum towards the end of the period and the country using 410,000b/d by 2018. Gas production should peak at around 22bcm in 2009-2012, then fall to 18bcm by 2018. Gas imports are set to reach 64bcm by 2018. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Ukraine occupies equal sixth place with Slovakia in BMI’s updated Upstream Business Environment rating, in spite of only modest hydrocarbons resources. Its gas reserves and favourable licensing regime account for much of the upstream score, but country risk factors and privatisation activity are less impressive. Ukraine does not have the potential to challenge Russia above it, and is at some risk from Romania and Bulgaria below. The country is in the upper half of the league table in BMI’s Downstream Business Environment rating, this quarter claiming fourth place behind Russia. There are a few high scores, but progress further up the rankings is unlikely over the medium term. There are high scores for refining capacity, oil and gas demand, retail site intensity and population. Kazakhstan is just one point below it in the regional rankings, so Ukraine could come under threat during the coming quarters.
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