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Israel Oil and Gas Report Q4 2011
Business Monitor International, Oct 2011, Pages: 67
Israel's real GDP rose by 4.7% in 2010, with forecast average annual growth of 4.5% in 2011-2015. We expect oil demand to rise from an estimated 238,000b/d in 2010 to 243,000b/d in 2015, with the state keen to minimise dependency on oil imports and exploit fully the country's growing gas resources. A lack of serious upstream oil prospects and limited international oil company (IOC) participation mean Israel is likely to continue importing virtually all the oil needed to supply its domestic refineries. Israeli gas production is set to rise dramatically, providing self-sufficiency and the longer-term potential for exports, thanks to the Tamar and Leviathan finds. We see gas production rising sharply from 1.5bcm in 2010 to as much as 12bcm by 2015. With the start-up of the Tamar field, gas self-sufficiency is expected by 2013.
We forecast that Israel will account for 3.14% of Middle East regional oil demand by 2015, while not contributing meaningfully to supply. Israel's estimated share of gas consumption in 2010 will have been 0.78%, while its share of production is put at 0.22%. By 2015, its share of gas consumption is forecast to be 1.65%, with the country accounting for 1.16% 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.
In light of the unrest in the Middle East and North Africa (MENA) region in H111, as well as the oil supply effects of the Libyan civil war, we have raised our benchmark OPEC Basket price forecast from US$80 to US$101.90/bbl for 2011 and from US$85 to US$97.50/bbl for 2012. We expect Brent to average US$106.00/bbl in 2011 and US$101.50/bbl in 2012. We have kept our long-term (2014-20) price assumption of US$90/bbl (OPEC Basket) in place.
Israel is now at the top of BMI's composite Business Environment (BE) ratings, which combine upstream and downstream scores. The country holds fourth place in BMI's updated upstream Business Environment ratings, in spite of the state's limited upstream potential. Bahrain below has the mediumterm potential to challenge for fourth place. Israel's score benefits from the lack of state involvement in the upstream segment, the licensing terms and privatisation progress, plus a healthy country risk outlook.
The overall score is dragged down by limited oil resources and growth prospects, in addition to recent tax changes. Israel currently tops the league table in BMI's updated downstream Business Environment rating, with a few high scores but limited potential to retain regional leadership over the longer term. It is ahead of the UAE, thanks largely to excellent country risk factors that outweigh a modest showing in terms of oil/gas demand, oil demand growth and likely refining capacity expansion.
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