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Denmark Oil and Gas Report Q4 2010
Business Monitor International, Oct 2010, Pages: 66
The Denmark 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 Denmark's oil and gas industry.
The Denmark Oil & Gas Report forecasts that the country will account for just 1.34% of Developed European regional oil demand by 2014, while contributing 4.75% to supply. In Developed Europe, overall oil consumption will average an estimated 13.10mn barrels per day (b/d) in 2010. It is set to recover to around 13.29mn b/d by 2014. Developed Europe regional oil production was 6.96mn b/d in 2001, and in 2010 will average an estimated 4.45mn b/d. It is set to fall to just 3.69mn b/d by 2014. Oil imports are growing steadily because supply is contracting and demand is rising, albeit slowly. In 2010, net crude imports will be an estimated 8.65mn b/d. By 2014, they are expected to have reached 9.60mn b/d. Norway will remain the only major net exporter, with the UK a net importer.
As regards natural gas, the Developed Europe region in 2010 will consume a projected 419.5bcm, with demand of 458.1bcm targeted for 2014, representing 9.2% growth. Production of an estimated 259.3bcm in 2010 is set to fall to 259.0bcm in 2014, which implies net imports rising from the estimated 2010 level of 156.6bcm to some 199.1bcm by the end of the period. Denmark’s share of gas consumption in 2010 will be an estimated 1.07%, while it will have contributed around 3.16% to production. By 2014, its share of gas consumption is forecast to be virtually unchanged at 1.06%, with a 2.12% contribution to regional 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- August. 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. 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. Danish real GDP is assumed by BMI to rise by 1.5% in 2010. We are assuming 2.2% average annual growth in 2010-2014. We expect the country’s 2010 oil and liquids production to be about 235,000b/d, down from 265,000b/d in 2009. By 2014, liquids volumes look set to have slipped to 175,000b/d. Oil demand could rise to 178,000b/d by 2014, implying net exports slipping from an estimated 60,000b/d in 2010 to nothing by the end of the period. Estimated 2010 gas production of 8.2bcm is expected to fall to 5.5bcm by 2014. Domestic gas consumption rising from an estimated 4.5bcm to 4.9bcm over the period 2010-2014 suggests that net exports will fall from 3.7bcm to 0.6bcm by the end of the forecast period. Between 2010 and 2019, we forecast a decrease in Danish oil production of 14.9%, with output slipping from an estimated 235,000b/d in 2010 to a low of 175,000b/d in 2014, before rebounding to 200,000b/d by the end of the 10-year forecast period. Given a mere 4.0% increase in oil consumption over the period, exports of 60,000b/d will have shrunk to just18,000b/d by 2019. Gas production should fall from the estimated 2010 level of 8.2bcm to 5.5bcm by 2019. Given gas demand rising by 13.7% during the period, net exports of just 0.4bcm will be available by 2019. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
According to BMI’s country risk team, Denmark’s long-term political risk score is 93.5, compared with the Developed Markets average of 86.7 and the global average of 63.0. Our long-term economic rating for the country is 72.5, above the Developed Markets average of 66.8 and above the global average of 53.2. There is a partly privatised energy sector, with government majority ownership of the key company DONG Energy. Denmark has a mature and competitive upstream oil and gas segment, featuring national and international companies. The downstream oil segment is small, open to competition and deregulated.
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