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Libya Oil and Gas Report Q3 2011
Business Monitor International, July 2011, Pages: 86
Business Monitor International's Libya 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 Libya's oil and gas industry.
'The latest Libya Oil & Gas Report from BMI forecasts that the country will account for 6.11% of African regional oil demand by 2015, while providing 12.20% of supply. African regional oil use of 3.06mn barrels per day (b/d) in 2001 rose to an estimated 3.63mn b/d in 2010. It should average 3.62mn b/d in 2011 and then rise to around 4.09mn b/d by 2015. Regional oil production was 8.08mn b/d in 2001, and in 2010 averaged an estimated 10.74mn b/d. After dropping to an estimated 9.66mn b/d in 2011 because of the loss of Libyan volumes, it is set to rise to 12.91mn b/d by 2015. 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 6.02mn b/d. This total rose to an estimated 8.15mn b/d in 2010 and is forecast to reach 9.85mn b/d by 2015. Nigeria has the greatest production growth potential, with Angolan exports also set to climb significantly.
In terms of natural gas, the region in 2010 consumed an estimated 120.6bn cubic metres (bcm), with demand of 162.3bcm forecast for 2015. Production of an estimated 208.7bcm in 2010 should reach 295.2bcm in 2015, which implies net exports rising from an estimated 105bcm to 151bcm in 2015. In 2010, Libya consumed an estimated 5.56% of the region’s gas, with its market share forecast at 4.14% by 2015. It contributed an estimated 7.91% to 2010 regional gas production and by 2015 will account for 4.74% of supply.
The 2010 full-year outturn was US$77.45/bbl for OPEC crude, which delivered an average for North Sea Brent of US$80.34/bbl and for West Texas Intermediate (WTI) of US$79.61/bbl. The BMI price target of US$77 was reached thanks to the early onset of particularly cold weather, which drove up demand for and the price of heating oil during the closing weeks of the year.
We set our 2011 supply, demand and price forecasts in early January, targeting global oil demand growth of 1.53% and supply growth of 1.91%. With OECD inventories at the top of their five-year average range, we set a price forecast of US$80/bbl average for the OPEC basket in 2011. The unprecedented wave of popular uprisings in the Middle East and North Africa (MENA) that followed the removal of Tunisian President Ben Ali on January 14 has obviously fundamentally altered our outlook, particularly since the unrest spread to Libya in mid-February.
Taking into account the risk premium that has been added to crude prices in response to actual and perceived threats to supply, we have now raised our benchmark OPEC basket price forecast from US$80 to US$101.90/bbl for 2011 and from US$85 to US$95/bbl for 2012. Based on our expectations for differentials, this gives a forecast for Brent at US$106/bbl in 2011 and US$97.62/bbl in 2012. We have kept our long-term price assumption of US$90/bbl (OPEC basket) in place for the time being while we wait to see what path events in the MENA region take. We have also retained our existing supply and demand forecasts until the scheduled quarterly revision at the start of April.
Libyan real GDP is assumed by BMI to have risen by 3.2% in 2010. We are forecasting a 23.2% contraction in 2011 due to the effects of the civil war, although steady growth should resume in 2012 and increase to just under 5.0% by 2015. We expect oil demand to fall from an estimated 272,000b/d in 2010 to only 204,000b/d in 2011 before recovering to 250,000b/d by 2015. Gas production should reach 14bcm by 2015, up from an estimated 16.5bcm in 2010. Consumption is expected to fall from 6.7bcm in 2010 to just 5.7bcm in 2011, but should increase again to 6.73bcm by 2015.
State-owned National Oil Corporation (NOC) has historically accounted for some 40% of oil production and all gas production, although the de facto division of the country into two separate states means this may not be the case in the future. NOC’s former unit, the Arabian Gulf Oil Corporation (Agoco) has now replaced it in the east of the bulk of any future increase in production have mostly shut down operations to await the resolution of the conflict.
Libya now shares third place with Egypt and Algeria in BMI’s composite Business Environment (BE) ratings table, which combines upstream and downstream scores. It continues to occupy first place in our updated upstream Business Environment ratings, but is just one point ahead of Gabon. The country’s score benefits from its proven oil reserves and a region-topping oil reserves-to-production ratio (RPR). The competitive landscape features numerous non-state companies, and licensing terms are generally good. However, country risk factors undermine some of the hydrocarbons-specific strength. Libya is in the top half of the league table in BMI’s downstream Business Environment ratings, with a few high scores but near-term progress up the rankings unlikely. It is ranked fifth thanks to poor country risk factors, a largely state-controlled industry and reasonable oil and gas demand growth prospects.
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