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Israel Oil and Gas Report Q2 2010
Business Monitor International, April 2010, Pages: 75
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 8.11mn 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 22.88mn b/d in 2001 and averaged an estimated 24.83mn b/d in 2009. It is set to rise to 27.19mn 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 of 14.77mn b/d. This total had eased to an estimated 13.44mn b/d in 2009 and is forecast to reach 14.51mn b/d by 2014. Iraq has the greatest production growth potential, followed by Qatar.
In terms of natural gas, the region consumed an estimated 404.6bn cubic metres (bcm) in 2009, with demand of 542.1bcm targeted for 2014, representing 34.0% growth. Estimated production of 411.9bcm in 2009 should reach 655.4bcm in 2014 (+59.1%), which implies net exports rising to 113.0bcm by the end of the period. Israel in 2009 consumed an estimated 0.56% of the region’s gas, with its market share forecast at 0.65% by 2014. It contributed 0.24% to estimated 2009 regional gas production and, by 2014, will account for 0.46% of supply.
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 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.
Israel’s real GDP is assumed by BMI to have fallen by 0.1% in 2009, compared with 5.5% growth in 2008. We are assuming average annual growth of 2.7% in 2010-2014. We expect 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. Israeli gas production has risen following the start-up of the Tethys Sea project, with up to 1bcm of current supply available. Gas imports could be as high as 1.7bcm per annum by 2013, before easing to 0.5bcm in 2014 as domestic volumes rise.
Between 2009 and 2019, we are 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 1.0bcm to a maximum of 7.2bcm. With 2009-2019 demand growth of 217%, this provides an import requirement peaking to 1.7bcm in 2013, before being replaced by rising domestic supply. Details of the BMI 10-year forecasts can be found in the appendix to this report.
Israel now shares fourth place with Turkey in BMI’s updated Upstream Business Environment Ratings, in spite of the state’s limited upstream potential. Should Iran’s risk profile improve, it could challenge Israel for fourth place. Israel’s score benefits from the lack of state 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 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 two 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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