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Ecuador Oil and Gas Report Q4 2010
Business Monitor International, Sep 2010, Pages: 82
Business Monitor International's Ecuador 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 Ecuador's oil and gas industry.
The latest Ecuador Oil & Gas Report from BMI forecasts that the country will account for 2.98% of Latin America regional oil demand by 2014, while providing 4.00% of supply. Latin American regional oil use will average an estimated 7.76mn barrels per day (b/d) in 2010. It should rise to 7.91mn b/d in 2011 and reach 8.41mn b/d by 2014. Regional oil production in 2010 should average an estimated 10.05mn b/d. It is set to rise to 10.63mn b/d by 2014. Oil exports have been slipping, because demand growth has exceeded the pace of supply expansion. In 2001, the region was exporting an average of 3.37mn b/d. This total falls to an estimated 2.29mn b/d in 2010 and is forecast to slip further to 2.22mn b/d in 2014. The principal exporters will be Mexico, Venezuela, Ecuador and Brazil.
In terms of natural gas, the region in 2010 will consume an estimated 209bn cubic metres (bcm), with demand of 252bcm targeted for 2014. Production of an estimated 221bcm in 2010 should reach 247bcm in 2014, which implies 5bcm of net imports at the end of the period. Ecuador’s share of regional gas production and consumption will remain insignificant.
For 2010 as a whole, we continue to assume an average OPEC basket price of US$83.00/bbl, +36.4% year-on-year (y-o-y). Risk is now clearly on the downside, thanks to the slow progress made during June. However, a full year outturn in excess of US$80 remains a strong possibility and we see no need to review our assumptions at this point. The 2010 US WTI price is now put at US$87.63/bbl. BMI is assuming an OPEC basket price of US$85.00/bbl in 2011, with WTI averaging US$89.74. Our central assumption for 2012 and beyond is an OPEC price averaging US$90.00/bbl, delivering WTI at just over US$95.00.
For 2010, the BMI assumption for premium unleaded gasoline is an average global price of US$95.45/bbl. The overall y-o-y rise in 2010 gasoline prices is put at 36%. Gasoil in 2010 is expected to average US$93.23/bbl. The full-year outturn represents a 35% increase from the 2009 level. For 2010, the annual jet price level is forecast to be US$95.90/bbl. This compares with US$70.66/bbl in 2009. The 2010 average naphtha price is put by BMI at US$83.53/bbl, up 41% from the previous year’s level. Ecuador’s real GDP in 2010 is forecast by BMI to fall by 2.8%. We are assuming average annual 1.9% growth in 2010-2014. State-owned Petroecuador cooperates with several international oil companies (IOCs) and they have between them delivered a greater volume of crude over the past couple of years. We are assuming oil and gas liquids production of no more than 425,000b/d by 2014, with the country expected to pump 480,000b/d in 2010. Beyond 2009/10, consumption is forecast to increase by around 3% per annum, implying demand of 250,000b/d by the end of the forecast period. The net export capability would therefore be approximately 175,000b/d by 2014.
Between 2010 and 2019, we are forecasting a decline in Ecuador’s oil production of 13.5%, with crude volumes falling from an estimated 480,000b/d in 2010 to 415,000b/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 slowing to an assumed 3.0% per annum towards the end of the period and the country using 290,000b/d by 2019. Gas production and consumption will grow only slowly from a very low base over the period. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Ecuador holds seventh place, ahead of Mexico, in BMI’s composite Business Environment (BE) ratings, which combine upstream and downstream scores. The country ranks seventh in BMI’s updated upstream Business Environment ratings, just ahead of Bolivia. Scores are mid-table or higher for proven oil reserves and reserves-to-production ratios (RPR). However, country risk is high, oil production prospects are relatively poor and the privatisation trend is unattractive, with increasing state involvement in upstream activities. Ecuador now shares eighth place with Venezuela in BMI’s downstream Business Environment ratings, reflecting its unusually high country risk, regulatory concerns, state ownership of assets and a less than stellar growth outlook. The score falls five points short of Chile and Mexico, so there is little chance of progress in the next few quarters.
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