Ukraine Oil and Gas Report Q3 2010
Business Monitor International, July 2010, Pages: 93
The Ukraine 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 Ukraine's oil and gas industry.
The latest Ukraine Oil & Gas Report from BMI forecasts that the country will account for 5.36% of Central and Eastern European (CEE) regional oil demand by 2014, while providing just 0.46% of supply. CEE regional oil use of 5.42mn barrels per day (b/d) in 2001 rose to an estimated 5.81mn b/d in 2009. It should average 6.03mn b/d in 2010 and then rise to around 6.69mn b/d by 2014. Regional oil production was 8.88mn b/d in 2001, and in 2009 averaged an estimated 13.35mn b/d. It is set to rise to 14.57mn 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 3.46mn b/d. This total had risen to an estimated 7.54mn b/d in 2009 and is forecast to reach 7.88mn b/d by 2014. Azerbaijan and Kazakhstan have the greatest production growth potential, although Russia will remain the key exporter. In terms of natural gas, the region in 2009 consumed an estimated 668.5bn cubic metres (bcm), with demand of 780.0bcm targeted for 2014, representing 13.7% growth. Production of an estimated 830.3bcm in 2009 should reach 1,025.7bcm in 2014, which implies net exports rising from an estimated 162bcm in 2009 to 246bcm by the end of the period. Ukraine’s share of gas consumption in 2009 was an estimated 8.04%, while its share of production is put at 2.47%. By 2014, its share of demand is forecast to be 7.76%, with the country accounting for 2.05% of supply.
We are sticking with our forecast that the OPEC basket of crudes will average US$83.00/bbl in 2010. Wide variations in crude differentials so far in 2010 make forecasting tricky for Brent, West Texas Intermediate (WTI) and Urals, but we believe the three benchmarks will average around US$85.11, US$88.22 and US$83.62/bbl respectively, with Dubai coming in at US$83.14. By 2011, there should be further growth in oil consumption and more room for OPEC to regain market share and reduce surplus capacity through higher production quotas. We are assuming a further increase in the OPEC basket price to an average of US$85.00/bbl. For 2012 and beyond, we continue to use a central case forecast of US$90.00/bbl for the OPEC basket.
For 2010, the BMI assumption for premium unleaded gasoline is an average global price of US$96.83/bbl. The year-on-year (y-o-y) rise in 2010 gasoline prices is put at 38%. Gasoil in 2010 is expected to average US$92.45/bbl, with the full-year outturn representing a 37% increase from the 2009 level. For jet fuel in 2010, the annual level is forecast to be US$95.58/bbl. This compares with US$70.66/bbl in 2009. The 2010 average naphtha price is put by BMI at US$82.46/bbl, up 39% from the previous year’s level.
Ukraine’s real GDP is assumed by BMI to have fallen by 15.0% in 2009, followed by forecast 5.0% growth in 2010. We are assuming average annual growth of 4.1% in 2010-2014. Beyond the weakness of 2009/10, reasonable and consistent growth in oil consumption seems likely, averaging up to 3.0% per annum. This suggests that the country will be consuming around 358,000b/d of oil by 2014. With oil production likely to slip below 70,000b/d, Ukraine will require imports of at least 292,000b/d by 2014. BMI forecasts that gas demand will rise from an estimated 53.7bcm in 2009 to 60.5bcm by 2014. Domestic production, largely in the hands of state-owned Naftogaz Ukrainy but with some international oil company (IOC) involvement, should also increase, from an estimated 20.5bcm in 2009 to at least 22.0bcm in 2010-2012.
Between 2010 and 2019, we forecast a decrease in Ukraine oil and gas liquids production of 31.4%, with volumes falling steadily from the estimated 2010 level of 75,000b/d to 51,000b/d by the end of the 10- year forecast period. Oil consumption between 2010 and 2019 is set to increase by 29.8%, with growth slowing to an assumed 3.0% per annum towards the end of the period and the country using 416,000b/d by 2019. Gas production should peak at around 22bcm in 2010-2012, then fall to 17bcm by 2019. Gas imports are set to reach 51bcm by 2019. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Ukraine holds seventh place behind Romania in BMI’s composite Business Environment (BE) Ratings table, which combines upstream and downstream scores. The country now occupies 14th place ahead only of Slovenia in BMI’s updated upstream Business Environment Ratings, thanks to only modest hydrocarbons resources. Its gas reserves and favourable licensing regime account for much of the upstream score, but country risk factors and privatisation activity are less impressive. Ukraine arguably has the potential to challenge Slovakia above it, and is at little risk from Slovenia below. Ukraine is in the upper half of the league table in BMI’s downstream Business Environment Ratings, this quarter claiming fourth place below Poland. There are a few high scores but progress further up the rankings is unlikely. There are good scores for refining capacity, oil and gas demand, retail site intensity and population. The Czech Republic, Kazakhstan and Romania are four points below it in the regional rankings, so Ukraine should be at little near-term risk.
Executive Summary
SWOT Analysis
Ukraine Political SWOT
Ukraine Economic SWOT
Ukraine Business Environment SWOT
Ukraine Energy Market Overview
Global Oil Market Outlook
Is The Price Right?
Oil Price Forecasts
Oil Supply, Demand And Price Outlook
Short-Term Demand Outlook
Table: Global Oil Consumption (000b/d)
Short-Term Supply Outlook
Table: Global Oil Production (000b/d)
Longer-Term Supply And Demand
Oil Price Assumptions
Table: Crude Price Assumptions 2010
Table: Oil Price Forecasts
Regional Energy Market Overview
Oil Supply And Demand
Table: Central/Eastern Europe Oil Consumption (000b/d)
Table: Central/Eastern Europe Oil Production (000b/d)
Oil: Downstream
Table: Central/Eastern Europe Oil Refining Capacity (000b/d)
Gas Supply And Demand
Table: Central/Eastern Europe Gas Consumption (bcm)
Table: Central/Eastern Europe Gas Production (bcm)
Liquefied Natural Gas
Table: Central/Eastern Europe LNG Exports/(Imports) (bcm)
Business Environment Ratings
Central/Eastern Europe Region
Composite Scores
Table: Regional Composite Business Environment Ratings
Upstream Scores
Table: Regional Upstream Business Environment Ratings
Ukraine Upstream Rating – Overview
Ukraine Upstream Rating – Potential Returns
Ukraine Upstream Rating – Risks To Potential Returns
Downstream Scores
Table: Regional Downstream Business Environment Ratings
Ukraine Downstream Rating – Overview
Ukraine Downstream Rating – Potential Returns
Ukraine Downstream Rating – Risks To Potential Returns
Business Environment
Legal Framework
Infrastructure
Labour Force
Foreign Investment Policy
Tax Regime
Security Risk
Industry Forecast Scenario
Oil And Gas Reserves
Oil Supply And Demand
Gas Supply And Demand
Refining And Oil Products Trade
Revenues/Import Costs
Table: Ukraine Oil And Gas – Historical Data And Forecasts
Other Energy
Table: Ukraine Other Energy – Historical Data And Forecasts
Key Risks To BMI’s Forecast Scenario
Long-Term Oil And Gas Outlook
Oil And Gas Infrastructure
Oil Refineries
Table: Refineries In Ukraine
Oil Pipelines
Gas Storage
Gas Pipelines
Macroeconomic Outlook
Table: Ukraine - Economic Activity
Competitive Landscape
Executive Summary
Table: Key Players – Ukraine Oil And Gas Sector
Overview/State Role
Government Policy
International Energy Relations
Table: Key Upstream Players
Table: Key Downstream Players
Company Monitor
Naftogaz Ukrainy
TNK-BP
Lukoil Ukraine
JKX Oil & Gas
Galnaftogaz
Royal Dutch Shell – Summary
UkrTatNafta – Summary
Tatneft – Summary
Regal Petroleum – Summary
Cadogan Petroleum – Summary
Transeuro Energy – Summary
Oil And Gas Outlook: Long-Term Forecasts
Regional Oil Demand
Table: CEE Oil Consumption (000b/d)
Regional Oil Supply
Table: CEE Oil Production (000b/d)
Regional Refining Capacity
Table: CEE Oil Refining Capacity (000b/d)
Regional Gas Demand
Table: CEE Gas Consumption (bcm)
Regional Gas Supply
Table: CEE Gas Production (bcm)
Ukraine Country Overview
Methodology And Risks To Forecasts
Glossary Of Terms
Oil And Gas Ratings: Revised Methodology
Introduction
Ratings Overview
Table: BMI Oil And Gas Business Environment Ratings: Structure
Indicators
Table: BMI Oil And Gas Business Environment Upstream Ratings: Methodology
Table: BMI Oil And Gas Business Environment Downstream Ratings: Methodology
BMI Methodology
How We Generate Our Industry Forecasts
- Naftogaz Ukrainy
- TNK-BP
- Lukoil Ukraine
- JKX Oil & Gas
- Galnaftogaz
- Royal Dutch Shell
- UkrTatNafta
- Tatneft
- Regal Petroleum
- Cadogan Petroleum
- Transeuro Energy
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