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Israel Oil and Gas Report Q1 2010
Business Monitor International, Dec 2009, Pages: 63
Business Monitor International's Israel 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 Israel's oil and gas industry.
The latest Israel Oil & Gas Report from BMI forecasts that the country will account for 2.34% of Middle East (ME) regional oil demand by 2014, while making no appreciable contribution to rising oil supply. Regional oil use of 8.24mn barrels per day (b/d) in 2001 rose to an estimated 11.38mn b/d in 2009. It should average 11.66mn b/d in 2010 and then rise to around 12.68mn b/d by 2014. Regional oil production was 22.87mn b/d in 2001 and averaged an estimated 24.79mn b/d in 2009. It is set to rise to 28.65mn b/d by 2014. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 14.63mn b/d. This total had fallen to an estimated 13.41mn b/d in 2009, but is forecast to reach 15.96mn b/d by 2014. Iraq has the greatest production growth potential, followed by Qatar.
In terms of natural gas, the region consumed an estimated 406.5bn cubic metres (bcm) in 2009, with demand of 545.1bcm targeted for 2014, representing 34.1% growth. Estimated production of 420.6bcm in 2009 should reach 652.8bcm in 2014 (+55.2%), which implies net exports rising to 108bcm by the end of the period. Israel in 2009 consumed an estimated 1.97% of the region’s gas, with its market share forecast at 2.02% by 2014. It contributed 1.66% to estimated 2009 regional gas production and, by 2014, will account for 1.23% of supply.
For 2009 as a whole, the publisher has assumed an average OPEC basket price of US$59.00 per barrel (bbl), a 37.3% decline year-on-year (y-o-y). This represents an upgrade from the US$55.00/bbl forecast the publisher was using in the previous quarter. For 2010, the publisher expects to see a significant oil price recovery to US$83.00/bbl for the OPEC basket price, gaining further ground to US$85.00/bbl in 2011 and to US$90.00/bbl in 2012 and beyond.
For 2009, BMI has assumed a global average gasoline price of US$67.46/bbl, with the fuel having peaked in June at almost US$80.00/bbl. The overall y-o-y fall in 2009 gasoline prices is put at 33.7%. The BMI gasoil forecast is for an average price of US$70.59/bbl, assuming a monthly high above US$94/bbl in December 2009. The full-year outturn represents a 41.8% y-o-y fall. The annual jet price level for 2009 is estimated at US$68.45/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put by BMI at US$52.66/bbl, down 39.7% from the previous year’s level. Israel’s real GDP is estimated by BMI to have fallen by 0.9% in 2009, compared with 5.5% growth in 2008. The publisher is assuming average annual growth of 2.6% in 2010-2014. The publisher expects oil demand to rise from an estimated 275,000b/d in 2009 to 296,000b/d in 2014, although the state would like to minimise dependency on imports and exploit fully the country’s modest gas resources. A lack of serious upstream prospects and limited international oil company (IOC) participation mean Israel is likely to continue importing virtually all the oil needed to supply its domestic refineries. Domestic gas production has risen following the start-up of the Tethys Sea project, with up to 7bcm of supply available. Gas imports could be as high as 3bcm per annum by 2014.
Between 2009 and 2019, the publisher is forecasting an increase in Israeli oil consumption of 16.1%, with demand rising steadily from an estimated 275,000b/d to 319,000b/d by the end of the 10-year forecast period. Refining capacity between 2009 and 2019 is set to increase by 59.1%, reaching 350,000b/d by 2019. Gas production is expected to climb from an estimated 7bcm to a maximum of 12bcm. With 2009-2019 demand growth of 75.9%, this provides an import requirement increasing to 2.1bcm during the forecast period. Details of the BMI 10-year forecasts can be found in the appendix to this report.
Israel shares seventh place with Kuwait in BMI’s updated Upstream Business Environment ratings, in spite of the Gulf state’s far greater upstream potential. Should Kuwait’s competitive environment improve it could pull away from Israel. Israel’s score benefits from the state’s non-involvement in the upstream segment, the licensing terms and privatisation progress, plus the healthy country risk outlook. The overall score is dragged down by the lack of hydrocarbon resources and growth prospects. The country is high up the upper half of the league table in BMI’s updated Downstream Business Environment rating, with a few high scores but near-term progress further up the rankings unlikely. It is ranked third, just one point behind the UAE and three points ahead of Iran, thanks largely to excellent country risk factors that outweigh a modest showing in terms of oil/gas demand, oil demand growth and likely refining capacity expansion. Iran represents little immediate threat but the UAE is likely to remain out of reach.
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