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Russia Oil and Gas Report Q4 2010

Russia 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 Russia's oil and gas industry.

This latest Russia Oil & Gas Report from BMI forecasts that the country will account for 47.21% of Central and Eastern European (CEE) regional oil demand by 2014, while providing 71.01% of supply. CEE regional oil use of 5.42mn barrels per day (b/d) in 2001 will rise to an estimated 6.02mn b/d in 2010. It should increase to around 6.68mn b/d by 2014. Regional oil production was 8.89mn b/d in 2001, and in 2010 will average an estimated 13.67mn b/d. It is set to rise to 14.44mn 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 3.47mn b/d. This total had risen to an estimated 7.65mn b/d in 2010 and is forecast to reach 7.76mn 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 2010 consumed an estimated 638.6bn cubic metres (bcm), with demand of 728.8bcm targeted for 2014, representing 14.1% growth. Production of an estimated 788.4bcm in 2010 should reach 936.4bcm in 2014, which implies net exports rising from an estimated 149.8bcm in 2010 to 207.5bcm by the end of the period. Russia’s share of gas consumption in 2010 is an estimated 61.94%, while its share of production is put at 71.03%. By 2014, its share of demand is forecast to be 58.74%, with the country accounting for 67.82% 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. Russian real GDP is assumed by BMI to rise by 4.7% in 2010. We are assuming average annual growth of 4.5% in 2010-2014. State-controlled Gazprom has a virtual monopoly over gas transportation and exports. With it being the main provider, we see gas output rising from an estimated 560bcm in 2010 to 635bcm by 2014. Russian domestic companies control most of Russia’s oil production. Rosneft is the main state-controlled oil producer. The companies delivered 2009 output of crude oil and condensates averaging 10.03mn b/d. Oil production seems likely to rise only slowly over the next few years. Our 2014 production forecast is for 10.25mn b/d.

Between 2010 and 2019, we are forecasting an increase in Russian oil production of 6.25%, with output rising slowly from an estimated 10.25mn b/d in 2010 to a peak of 11.00mn b/d in 2016/17, before easing to 10.89mn b/d by 2019. Oil consumption during the period is forecast to rise by 24.9%, permitting exports peaking at 7.69mn b/d in 2017. Gas consumption is expected to be up from an estimated 396bcm to 473bcm by 2019, providing export potential peaking at 213bcm in 2015. Details of BMI’s 10-year forecasts can be found in the appendix to this report.

Russia now shares third place with Turkey in BMI’s composite Business Environment (BE) ratings table, which combines upstream and downstream scores. It has a share of third place with Poland in BMI’s updated upstream Business Environment ratings, aided by unrivalled hydrocarbons resources. Its oil and gas reserves account for much of the upstream score, but licensing, privatisation and country risk factors are less impressive. Medium-term scope exists for Russia to pull clear of Poland, but it is likely to remain behind Azerbajan and Kazakhstan. Russia is near the top of the league table in BMI’s updated downstream Business Environment ratings, behind only Turkey and just ahead of Poland. There are a few particularly high scores, but there is some risk from Poland over the longer term. There are excellent scores for refining capacity, oil and gas demand, population and nominal GDP.
Executive Summary

SWOT Analysis
Russia Political SWOT
Russia Economic SWOT
Russia Business Environment SWOT

Russia Energy Market Overview

Global Oil Market Review
Drifting With The Tide
Quarterly Trends
Deepwater Turbulence

Global Oil Market Outlook
Waiting For The Wind To Change
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 Rating
Upstream Scores
Table: Regional Upstream Business Environment Rating
Russia Upstream Rating – Overview
Russia Upstream Rating – Rewards
Russia Upstream Rating – Risks
Downstream Scores
Table: Regional Downstream Business Environment Rating
Russia Downstream Rating – Overview
Russia Downstream Rating – Rewards
Russia Downstream Rating – Risks

Business Environment
Legal Framework
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
Russia Oil And Gas – Historical Data And Forecasts
Other Energy
Russia 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 Of 50,000b/d Capacity Or Greater In Russia
Oil Terminals/Ports
Oil Pipelines
LNG Terminals
Gas Pipelines

Macroeconomic Outlook
Table: Russia – Economic Activity

Competitive Landscape
Executive Summary
Table: Key Domestic And Foreign Companies In The Russian Oil And Gas Sector
Overview/State Role
Licensing And Regulation
Government Policy
International Energy Relations
Gas Transit
Oil Transit
Table: Key Upstream Players
Key Downstream Players

Company Monitor
Gazprom Neft
Imperial Energy
Surgutneftegaz – Summary
Russneft – Summary
Sistema – Summary
Novatek – Summary
Itera – Summary
Royal Dutch Shell – Summary
ExxonMobil – Summary
Transneft – Summary
Sakhalin Energy – Summary
Wintershall – Summary
BP – Summary
Lundin Petroleum – Summary
Irkutsk Oil Company – Summary
Aladdin Oil & Gas – Summary
PetroNeft – Summary
Alliance Oil – Summary
Others – Summary
Former IOC Partners – 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)
Russia Country Overview
Methodology And Risks To Forecasts

Glossary Of Terms

Oil And Gas Ratings: Revised Methodology
Ratings Overview
Table: BMI Oil And Gas Business Environment Ratings: Structure
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
Energy Industry
Cross Checks
Companies Mentioned
- Gazprom
- Gazprom Neft
- Rosneft
- Lukoil
- Tatneft
- Total
- Imperial Energy
- Surgutneftegaz
- Russneft
- Sistema
- Novatek
- Itera
- Royal Dutch Shell
- ExxonMobil
- Transneft
- Sakhalin Energy
- Wintershall
- BP
- Lundin Petroleum
- Irkutsk Oil Company
- Aladdin Oil & Gas
- PetroNeft
- Alliance Oil
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