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Chile Oil and Gas Report Q2 2010
Business Monitor International, March 2010, Pages: 90
The Chile 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 Chile's oil and gas industry.
The latest Chile Oil & Gas Report from BMI forecasts that the country will account for 4.41% of Latin American regional oil demand by 2014, while making no meaningful contribution to supply. Latin America regional oil use of 6.93mn barrels per day (b/d) in 2001 reached an estimated 7.78mn b/d in 2009. It should average 7.92mn b/d in 2010 and then rise to around 8.631mn b/d by 2014. Regional oil production was 10.30mn b/d in 2001, and in 2009 averaged an estimated 9.69mn b/d. It is set to rise to 10.79mn b/d by 2014. Oil exports have been slipping, because demand growth has exceeded the pace of supply expansion. In 2001, the region was exporting an average of 3.37mn b/d. This total had fallen to an estimated 1.91mn b/d in 2009 and is forecast to recover to 2.15mn b/d in 2014. The principal exporters will be Mexico, Venezuela, Ecuador and Brazil.
In terms of natural gas, the region in 2009 consumed an estimated 200.6 billion cubic metres (bcm), with demand of 263.9bcm targeted for 2014, representing 31.6% growth. Production of an estimated 216.8bcm in 2009 should reach 293.0bcm in 2014, and implies 29.1bcm of net exports by the end of the period. Chile’s estimated share of gas consumption in 2009 was 1.75%, while it had a 0.69% share of production. By 2014, its share of gas consumption is forecast to be 2.80%, with Chile making a contribution of just 0.48% to production.
For 2009 as a whole, we have assumed an average OPEC basket price of US$60.70 per barrel (bbl), a 35.5% decline year-on-year (y-o-y). For 2010, we expect to see a significant oil price recovery to US$83.00/bbl for the OPEC basket price, gaining further ground to US$85.00 in 2011 and to US$90.00/bbl in 2012 and beyond.
In 2010, BMI is now forecasting premium unleaded gasoline prices to average US$97.00, up from US$70.22/bbl in 2009. We are assuming an average global jet fuel price for 2010 of US$97.58/bbl, compared with US$70.63 in 2009. For gasoil, the 2010 price estimate is for an average of US$97.40/bbl, compared with US$70.50 in 2009. The FY10 naphtha price average, estimated at US$81.58/bbl compares with US$59.07 in FY09.
Chilean real GDP in 2009 is assumed by BMI to have fallen by 1.2%, compared with growth of 3.2% in 2008. We are assuming average annual 3.7% growth in 2010-2014. State oil and gas company Empresa Nacional del Petróleo (ENAP) is responsible for all domestic oil and gas production, with volumes in decline. We are assuming oil and gas liquids production of no more than 6,400b/d by 2014, with the country expected to pump an average of 9,900b/d in 2010. Consumption beyond 2009 is forecast to increase by 2-3% per annum to 2014, implying demand of 381,000b/d by the end of the forecast period. The import requirement would therefore be around 374,000b/d by 2014. Gas production is forecast to increase from an estimated 1.5bcm in 2009 to a peak of 1.8bcm in 2010, falling back to 1.4bcm in 2014, with net imports of 6.0bcm required by 2014.
Between 2009 and 2019, we are forecasting an increase in Chilean oil consumption of 25.52%, with demand rising steadily from an estimated 335,000b/d to 420,000b/d. The annual growth rate is expected to slow to 2.0% towards the end of the period. Gas production is expected to peak at around 1.8bcm in 2010, before declining steadily to 1.1bcm by 2019. With demand growth of 149.7% to 9.2bcm, this provides an import requirement rising from 2.0bcm to 8.1bcm during the 10-year period. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Chile shares last place in BMI’s updated Upstream Business Environment Rating with Mexico, in spite of high reserves-to-production ratios (RPR) and an investor-friendly country risk profile. There is little likelihood of a move much further up the rankings, but Chile may be able to overtake Mexico during the next few quarters. Chile fares slightly better in BMI’s updated Downstream Business Environment Rating, taking equal eighth place (alongside Venezuela), reflecting its oil demand growth outlook, regulatory environment and attractive country risk rating. It has the potential to challenge for outright eighth place by overtaking Venezuela.
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