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Bahrain Oil and Gas Report Q3 2010
Business Monitor International, July 2010, Pages: 79
Bahrain 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 Bahrain's oil and gas industry.
In this report, we forecast that Bahrain will account for 0.41% of Middle East regional oil demand by 2014, while providing 0.28% of supply. Regional oil use of 7.47mn barrels per day (b/d) in 2001 rose to an estimated 10.64mn b/d in 2009. It should average 10.98mn b/d in 2010 and then rise to around 11.95mn b/d by 2014. Regional oil production was 22.83mn b/d in 2001, and in 2009 averaged an estimated 24.66mn b/d. It is set to rise to 27.18mn 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 15.36mn b/d. This total had eased to an estimated 14.02mn b/d in 2009 and is forecast to reach 15.23mn b/d by 2014. Iraq has the greatest production growth potential, followed by Qatar.
In terms of natural gas, the region consumed an estimated 367.6bn cubic metres (bcm) in 2009, with demand of 492.5bcm targeted for 2014, representing 28.7% growth. Estimated production of 429.9bcm in 2009 should reach 657.8bcm in 2014 (+39.8%), which implies net exports rising to 165.0bcm by the end of the period. Bahrain’s estimated share of gas consumption in 2009 was 2.72%, while its share of production is put at 3.02%. By 2014, its share of gas consumption is forecast to be 2.69%, with the country accounting for 2.28% 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 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 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, compared with US$70.66/bbl in 2009. BMI puts the average naphtha price for 2010 at US$82.46/bbl, up 39% from 2009.
Bahrain’s real GDP is assumed by BMI to have fallen by 0.1% in 2009, followed by forecast 1.4% growth in 2010. We are assuming average annual growth of 5.0% in 2010-2014. Consumption of oil is set to rise with the moderate growth of the economy, reaching a maximum of 49,000b/d by 2014. The state accounts for all domestic oil and gas production, as well as the refining and distribution segment. International oil company (IOC) involvement is very limited. Thanks to a lack of significant resource potential and the absence of large-scale IOC upstream ventures, crude and liquids output is now averaging approximately 50,000b/d, but with growth potential to reach 75,000b/d by 2014. Gas output is set to increase slightly from an estimated 13bcm in 2009 to 15bcm by 2014, providing a broadly balanced market.
Between 2010 and 2019, we are forecasting an increase in Bahrain oil production of 81.8%, with crude volumes doubling to 100,000b/d by the end of the 10-year forecast period. Oil consumption between 2010 and 2019 is set to increase by 30.5%, with growth at an assumed 3.0% per annum towards the end of the period and the country using 57,000 b/d by 2019. Gas production is expected to climb towards 21.0bcm by 2018/19. With 2010-2019 demand growth of 60.8%, this provides an export capability of around 4.1bcm by 2019. Details of BMI’s 10-year forecasts can be found in the appendix to this report. Bahrain ranks sixth, just behind Iran, in BMI’s composite Business Environment (BE) ratings table, which combines Upstream and Downstream scores. The country this quarter takes an improved fifth place in BMI’s updated Upstream Business Environment Ratings, above Iran. It has improved despite its very modest oil and gas reserves and also thanks to an improving production growth outlook. There are low reserves-to-production ratios (RPR) and modest non-state involvement in the upstream segment. The country’s risk environment is very sound, but this may prove insufficient to help Bahrain move further up the league table. Bahrain is now ranked seventh in BMI’s updated Downstream Business Environment Ratings, with few high scores and progress further up the rankings unlikely. It is ranked third from last thanks to low scores for refining capacity, oil and gas demand, population and the privatisation trend. The growth prospects for oil/gas consumption and refining capacity also represent relatively weak suits, along with the pedestrian increase in GDP per capita. Kuwait is behind it in the regional rankings and there is some risk of it challenging Bahrain.
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