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Iraq Oil and Gas Report Q1 2011
Business Monitor International, Jan 2011, Pages: 96
The Iraq 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 Iraq's oil and gas industry.
BMI forecasts that Iraq will account for 10.27% of Middle East (ME) regional oil demand by 2015, while providing 11.56% of supply. Middle East regional oil use of 4.98mn b/d in 2001 will rise to an estimated7.40mn barrels per day (b/d) in 2010. It should average 7.70mn b/d in 2011 and then rise to around8.70mn b/d by 2015. Regional oil production was 22.83mn b/d in 2001 and will average an estimated24.96mn b/d in 2010. After an estimated 25.22mn b/d in 2011, it is set to rise to 27.24mn b/d by 2015. Oilexports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001,the region was exporting an average of 17.85mn b/d. This total will ease to an estimated 17.55mn b/d in2010 and is forecast to reach 18.54mn b/d by 2015. Iraq has the greatest export growth potential, followedby Qatar.
In terms of natural gas, the region will consume an estimated 391bn cubic metres (bcm) in 2010, with demand of 483bcm targeted for 2015, representing 23.7% growth. Production of an estimated 467bcm in2010 should reach 614bcm in 2015 (+31.4%), which implies net exports rising to 130bcm by the end ofthe period. In 2010, Iraq will consume an estimated 1.28% of the region’s gas, with its market shareforecast at 2.38% by 2015. It will contribute 1.07% to estimated 2010 regional gas production and by2015 could account for 2.93% of supply.
For 2010 as a whole, we assume an average OPEC basket price of US$77.00/bbl (+26.5% y-o-y). The 2010 US WTI price is now put at US$79.16/bbl. BMI is assuming an OPEC basket price ofUS$80.00/bbl in 2011, with WTI averaging US$82.25, Brent at US$82.46/bbl, Urals delivering aroundUS$81.21 and the Dubai average being US$80.74/bbl. Our central assumption for 2012 is an OPEC priceaveraging US$85.00/bbl, delivering WTI at approximately US$87.40 and Brent at US$87.60/bbl. From2013 onwards, we are using an average OPEC price of US$90.00/bbl.
For the whole of 2010, the BMI assumption for the global gasoline price is an average of US$87.49/bbl, representing a y-o-y rise of 24.7%. The global gasoil forecast is for an average price of US$88.00/bbl,probably peaking in December 2010 at more than US$95/bbl. The full-year outturn represents a 27.6%increase from the 2009 level. For 2010, the annual jet price level is forecast to be US$89.500/bbl. Thiscompares with US$70.66/bbl in 2009. The 2010 average naphtha price is put by BMI at US$77.65/bbl,up almost 31% from the previous year’s level.
BMI is assuming that Iraqi real GDP will rise 3.4% in 2010, and we are forecasting average annual growth of 5.7% in 2010-2015. We expect estimated oil demand of 700,000b/d in 2010 to rise to893,000b/d in 2015, depending on investment in infrastructure and the development of domesticproduction. International oil companies (IOCs) have signed production sharing agreements (PSAs) withthe state, which should help accelerate the growth in oil output. Based on the efforts of national oilindustry bodies, we are forecasting average oil production of 2.51mn b/d in 2010. September 2010production was 2.52mn b/d, with 2.02mn b/d of exports. Further field reactivation work and the initialIOC efforts point to output of an estimated 3.15mn b/d in 2015. The government has much moreambitious targets, aiming for 0.5mn b/d annual output expansion and a long-term goal of 6.0mn b/d.However, there are major risks involving attacks on oil installations, Iraq’s OPEC entitlement and thesuccess of new energy policy in stimulating IOC investment.
Between 2010 and 2020, we are forecasting an increase in Iraqi oil production of 65.7%, with crude volumes rising steadily to 4.15mn b/d by the end of the 10-year forecast period. Oil consumption between2010 and 2020 is set to increase by 62.9%, with growth slowing to an assumed 5.0% per annum towardsthe end of the period and the country using 1.14mn b/d by 2020. Gas production is expected to climb to42bcm by the end of the period. With 2010-2020 demand growth of 281%, export potential should rise to23bcm by 2020. Details of the BMI 10-year forecasts can be found in the appendix to this report.
Iraq ranks fourth, just ahead of Iran and Bahrain, in BMI’s composite Business Environment ratings (BERs) table, which combines upstream and downstream scores. It now occupies a respectable third placein BMI’s updated upstream Business Environment ratings, but lags Qatar and the UAE by five points andthree points respectively. The country’s score benefits from exceptional oil and gas output growthpotential, a substantial hydrocarbons reserves base and the region’s highest reserves-to-production ratio(RPR). Current government control of the upstream industry and a high level of country-specific riskprevent Iraq from achieving a better overall score. Iraq is back at the bottom of the league table in BMI’sdownstream Business Environment ratings, with a few high scores but further near-term progress up therankings unlikely. It is ranked just behind Kuwait and Oman, in spite of a reasonable showing in terms ofoil demand, oil and gas demand growth and likely refining capacity expansion.
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