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Egypt Oil and Gas Report Q4 2010
Business Monitor International, Sep 2010, Pages: 108
Business Monitor International's Egypt 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 Egypt's oil and gas industry
The latest Egypt Oil & Gas Report from BMI forecasts that the country will account for 19.58% of African regional oil demand by 2014, while providing 5.72% of supply. African regional oil use of 3.06mn barrels per day (b/d) in 2001 rose to 3.75mn b/d in 2009. It should average 3.81mn b/d in 2010 and then rise to around 4.26mn b/d by 2014. Regional oil production was 7.93mn b/d in 2001, and in 2009 averaged 9.67mn b/d. From an estimated 10.23mn b/d in 2010, it is set to rise to 11.93mn b/d by 2014. Oil exports are growing steadily, because demand growth is lagging behind the pace of supply expansion. In 2001, the region was exporting an average of 4.87mn b/d. This total had risen to 5.92mn b/d in 2009 and is forecast to reach 7.67mn b/d by 2014. Angola has the greatest production growth potential, with Nigerian exports set to climb if it can resolve recent quasi-political issues.
In terms of natural gas, the region in 2010 will consume an estimated 122.9bn cubic metres (bcm), with demand of 165.6bcm forecast for 2014. Production of an estimated 219.5bcm in 2010 should reach 305.2bcm in 2014, which implies net exports rising from 97bcm to 140bcm in 2014. Egypt will have consumed an estimated 36.24% of the region’s gas in 2010, with its market share set to be 32.24% by 2014. It will have contributed an estimated 29.16% to 2010 regional gas production and, by 2014, will account for 24.57% of supply.
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. Egyptian real GDP is assumed by BMI to rise by 4.9% in 2010, with average annual growth of 5.2% forecast in 2010-2014. We expect oil demand to rise from an estimated 734,000b/d in 2010 to 835,000b/d in 2014, subject to national efforts to conserve oil and increase the use of gas. State oil company Egyptian General Petroleum Corporation (EGPC) operates in partnership with various international oil companies (IOCs), and alone accounts for just 20% of the country’s oil output. In spite of higher recent IOC investment, combined oil and gas liquids output is forecast to decrease from an estimated 730,000b/d in 2010 to 683,000b/d in 2014. Gas production should reach 75bcm by 2014, up from an estimated 64bcm in 2010. Consumption is expected to rise from an estimated 45bcm to 53bcm by the end of the forecast period, providing exports of 22bcm.
Between 2010 and 2019, we are forecasting a decrease in Egyptian oil and gas liquids production of 17.6%, with volumes slipping steadily to 601,000b/d by the end of the 10-year forecast period. Oil consumption between 2010 and 2019 is set to increase by 31.7%, with growth slowing to an assumed 3.0% per annum towards the end of the period and the country using 968,000b/d by 2019. Gas production is expected to rise to 92bcm by the end of the period. With demand rising by 47.2% between 2010 and 2019, there should be export potential increasing to 26.4bcm, largely in the form of LNG. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Egypt now shares third place with Nigeria in BMI’s composite Business Environment (BE) ratings table, which combines upstream and downstream scores. It now holds seventh place in BMI’s updated upstream Business Environment ratings. The country’s score benefits from healthy proven gas reserves, an established competitive landscape, a reasonable gas reserves-to-production ratio (RPR) and attractive licensing terms. The country’s risk environment is sound, but this alone may not be enough to push it higher during the next few quarters. Algeria is four points ahead and Egypt lacks the near-term momentum to challenge sixth place. Egypt is comfortably in the upper half of the league table in BMI’s downstream Business Environment ratings, with some high scores but progress further up the rankings unlikely. It is now ranked outright second having overtaken Algeria, thanks to high scores for refining capacity, oil and gas demand, retail site intensity, population and GDP per capita growth. The growth outlook for oil/gas consumption and refining capacity are relatively weak suits.
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