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South Africa Oil and Gas Report Q2 2010
Business Monitor International, April 2010, Pages: 87
Business Monitor International's South Africa 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 South Africa's oil and gas industry.
BMI forecasts that South Africa will account for 14.00% of African regional oil demand by 2014, with negligible domestic crude production but a growing synthetic oil capability. African regional oil use of 2.93mn barrels per day (b/d) in 2001 rose to an estimated 3.57mn b/d in 2009. It should average 3.63mn b/d in 2010 and then rise to around 4.08mn b/d by 2014. Regional oil production was 7.77mn b/d in 2001, and in 2009 averaged an estimated 9.64mn b/d. It is set to rise to 11.83mn 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 4.83mn b/d. This total had risen to an estimated 6.07mn b/d in 2009 and is forecast to reach 7.75mn b/d by 2014.
In terms of natural gas, in 2009 Africa consumed an estimated 123bn cubic metres (bcm), with demand of 194bcm targeted for 2014. Production of an estimated 248bcm in 2009 should reach 385bcm in 2014, which implies net exports rising from 125bcm in 2009 to 191bcm. In 2009 South Africa’s estimated share of regional gas supply was 1.82%, remaining around this level in 2014. The country’s share of demand in 2009 was an estimated 4.07%, with 6.19% predicted by 2014.
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/bbl in 2011 and to US$90.00/bbl in 2012 and beyond.
BMI is now forecasting premium unleaded gasoline prices at an average US$97.00/bbl in 2010, 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 2010 naphtha price average, estimated at US$81.58/bbl compares with US$59.07/bbl in 2009.
We estimate that South African real GDP fell by 1.8% in 2009, compared with 3.1% growth in 2008. We are assuming average annual growth of 3.2% in 2010-2014. We expect oil demand to rise from an estimated 540,000b/d in 2009 to 579,000b/d in 2014, representing less than 1.5% annual growth that lags our underlying economic assumptions. There is very little domestic crude production, although national companies contribute some 200,000b/d of synthetic oil output. International oil companies (IOCs) are restricted largely to roles in oil refining and fuels distribution. Gas production could reach 7.0bcm by 2012/2013, up from an estimated 4.5bcm in 2009. Consumption is expected to rise from an estimated 5.0bcm to 12.0bcm by the end of the forecast period, requiring imports of 5.0bcm. Between 2009 and 2019 we are forecasting an increase in South African oil consumption of 17.2%, with demand rising steadily to 633,000b/d by the end of the 10-year forecast period. Synthetic oil production is set to rise from 205,000b/d to 350,000b/d, with crude imports peaking at 309,000b/d in 2011. Gas consumption is expected to rise to 17.0bcm by the end of the period, requiring imports up from an estimated 0.5bcm in 2009 to 12.0bcm by 2019. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
South Africa is still ranked eighth in BMI’s updated Upstream Business Environment rating, reflecting its virtually non-existent oil and gas resource base. It stands two points clear of Cameroon, so could be vulnerable over the medium term. South Africa’s score reflects the low level of state asset ownership and the advanced stage of privatisation, plus an established licensing framework and largely encouraging country risk factors. The absence of hydrocarbon resources offsets these positive factors. The country leads the league table in BMI’s Downstream Business Environment rating, with several high scores. It is ranked first, ahead of Egypt, thanks largely to high scores for oil demand, gas consumption growth, nonstate competition, deregulation, and nominal GDP. Egypt is five points below and represents no immediate threat to South Africa’s ranking.
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