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Ecuador Oil and Gas Report Q2 2010
Business Monitor International, March 2010, Pages: 86
The Ecuador 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 Ecuador's oil and gas industry.
The latest Ecuador Oil & Gas Report from BMI forecasts that the country will account for 2.47% of Latin America regional oil demand by 2014, while providing 3.94% of 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 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 200.6bn 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 at the end of the period. Ecuador’s share of regional gas production and consumption will remain insignificant. 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 at an 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.
Ecuador’s real GDP in 2009 is assumed by BMI to have been unchanged, compared with growth of 6.5% in 2008. We are assuming average annual 1.2% growth in 2010-2014. State-owned Petroecuador cooperates with several international oil companies (IOCs) and they have between them delivered a greater volume of crude over the past couple of years. We are assuming oil and gas liquids production of no more than 425,000b/d by 2014, with the country expected to pump 475,000b/d in 2010. Beyond 2009/10, consumption is forecast to increase by around 3% per annum, implying demand of 213,000b/d by the end of the forecast period. The net export capability would therefore be approximately 212,000b/d by 2014. Between 2009 and 2019, we are forecasting a decrease in Ecuador’s oil production of 16.2%, with crude volumes falling from an estimated 495,000b/d in 2009 to 425,000b/d in 2014 and 415,000b/d by the end of the 10-year forecast period. Oil consumption between 2009 and 2019 is set to increase by 34.4%, with growth slowing to an assumed 3.0% per annum towards the end of the period and the country using 247,000b/d by 2019. Gas production and consumption will grow only slowly from a very low base over the period. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Ecuador now ranks eighth in BMI’s updated Upstream Business Environment rating, behind even Bolivia. Scores are mid-table or higher for proven oil reserves and reserves-to-production ratios (RPR). However, country risk is high, oil production prospects are relatively poor and the privatisation trend is unattractive, with increasing state involvement in upstream activities. The country ranks seventh ahead of Venezuela and Chile in BMI’s Downstream Business Environment rating, reflecting its unusually high country risk, regulatory concerns, state ownership of assets and a less than stellar growth outlook. The score falls three points short of Mexico and Peru, and Ecuador is two points ahead of Venezuela and Chile, leaving it vulnerable to attack during the next few quarters.
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