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Denmark Oil and Gas Report Q3 2011
Business Monitor International, Aug 2011, Pages: 61
Business Monitor International's 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 latest Denmark Oil & Gas Report from BMI forecasts that the country will account for 1.4% of regional oil consumption by 2015, while accounting for 5.2% of supply. In Developed Europe, overall regional oil demand was an estimated 12.99mn barrels a day (b/d) in 2010 and is set to recover slightly to 13.02mn b/d in 2011, before climbing to 13.17mn b/d by 2015. Developed Europe regional oil production was 6.96mn b/d in 2001, and estimated 4.33mn b/d in 2010, slipping to a forecast 4.20mn b/d in 2011 and potentially dropping to just 3.51mn b/d in 2015. Regional net imports are set to rise from an estimated 8.66mn b/d in 2010 to 9.66mn b/d by the end of the forecast period. Norway will remain the only major net exporter, with the UK a growing net importer.
In terms of natural gas, the Developed Europe region consumed an estimated 428bn cubic metres (bcm) in 2010, with demand of 468bcm targeted for 2015, representing 9.4% growth. Production of an estimated 251bcm in 2010 is set to fall to 249bcm in 2015, which implies net imports rising from the estimated 2010 level of 176bcm to some 219bcm by the end of the period. The Danish share of gas consumption in 2010 was an estimated 1.2%, while it accounted for 3.3% of production. By 2015, its share of gas consumption is forecast to be 1.2%, while its share of production will stand at 2.4%.
The 2010 full-year outturn was US$77.45/barrel (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.
BMI set the 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, the report sets 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 the 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, BMI has now raised the 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 expectations for differentials, this gives a forecast for Brent at US$106/bbl in 2011 and US$99/bbl in 2012. The report has kept the long-term price assumption of US$90/bbl (OPEC basket) in place for the time being while BMI wait to see what path events in the MENA region take.
Danish real GDP grew by 2.1% in 2010. The report is forecasting 2.2% average annual growth in 2011-2015. Denmark’s 2010 oil and liquids production was 249,000b/d, down from 265,000b/d in 2009. By 2015, liquids volumes look set to slip to 183,000b/d. Oil demand is expected to stay flat, reaching 179,000b/d by 2015, implying net exports slipping from an estimated 70,000b/d in 2010 to virtually nothing by the end of the period. 2010 gas production of 8.2bcm is expected to fall to 6.0bcm by 2015. Domestic gas consumption rising from an estimated 4.9bcm to 5.5bcm over 2010-2015 suggests that net exports will fall from 3.3bcm to just 0.5bcm by the end of the forecast period.
Between 2010 and 2020, BMI forecast a decrease in Danish oil production of 22.1%, with output slipping from 249,000b/d in 2010 to a low of 178,000b/d in 2014, before rebounding to 202,000b/d by 2018. Given a mere 1.1% increase in oil consumption over the period, 2010 exports of 69,000b/d will have shrunk to just 12,000b/d by 2020. Gas production should fall from 8.2bcm in 2010 to 5.5bcm by 2020. Given a 20.7% rise in gas demand during the period, the country may face a small import requirement by 2020. 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 87.8 and the global average of 62.9. The long-term economic rating for the country is 75.7, well above the Developed Markets average of 67.2 and above the global average of 52.9. 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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