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Uzbekistan Oil and Gas Report Q3 2010
Business Monitor International, July 2010, Pages: 72
The Uzbekistan 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 Uzbekistan's oil and gas industry.
The new Uzbekistan Oil & Gas Report from BMI forecasts that the country will account for 2.26% of Central and Eastern European (CEE) regional oil demand by 2014, while providing 0.65% 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. Uzbekistan’s share of consumption in 2009 was an estimated 7.33%, while its share of production is put at 7.59%. By 2014, its share of demand is forecast to be 7.08%, with the country accounting for 8.14% 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.
Uzbekistan’s real GDP is assumed by BMI to have risen by 8.1% in 2009, followed by forecast 8.0% growth in 2010. We are assuming average annual growth of 7.7% in 2010-2014. By 2014, the country is estimated to be using 151,000b/d of oil. The majority of the known oil fields are operated by state-owned oil and gas group Uzbekneftegaz. It is forming partnerships with international companies under production sharing terms. While there is limited scope to halt the decline in oil production from around 105,000b/d, gas output is capable of rising 33% to almost 84bcm by 2014. Gas exports should therefore double from 14bcm to 28bcm during the period.
Between 2010 and 2019, we are forecasting a decrease in Uzbek oil and gas liquids production of 16.6%, with volumes falling steadily to 88,000b/d by the end of the 10-year forecast period. Oil consumption between 2010 and 2019 is set to increase by 55.1%, with growth averaging an assumed 5.0% per annum towards the end of the period and the country using 193,000b/d by 2019. Gas production should rise from the estimated 2010 level of 63bcm to 100bcm by 2019, providing export potential increasing from an estimated 15bcm to 38bcm. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Uzbekistan shares 14th and last place with Slovenia in BMI’s composite Business Environment (BE) Ratings table, which combines upstream and downstream scores. It now has a share of eighth place with Hungary, the Czech Republic, Croatia and Turkmenistan in BMI’s updated upstream Business Environment Ratings, ahead of Slovenia. Its gas production growth outlook, gas reserves, and gas asset immaturity work in the country’s favour, but are undermined by an underwhelming risk environment. Scope exists for Uzbekistan to break away from its non-Caspian rivals and move further away from the foot of the table. Uzbekistan is near the bottom of the league table in BMI’s downstream Business Environment Ratings, ahead only of Bulgaria, with few particularly high scores and progress further up the rankings unlikely over the next few quarters. Gas demand growth prospects represent a strong suit, putting the country in third place. Medium-term scope exists for Uzbekistan to pull further away from Bulgaria.
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