2009-11-11 17:05:43 - Recently published research from Business Monitor International, "Iraq Oil & Gas Report Q4 2009", is now available at Fast Market Research

BMI forecasts that Iraq will account for 8.48% of Middle East (ME) regional oil demand by 2013, while providing 11.38% of supply. Regional oil use of 8.24mn barrels per day (b/d) in 2001 rose to an estimated 10.86mn b/d in 2008. It should average 11.09mn b/d in 2009 and then rise to around 12.08mn b/d by 2013. Regional oil production was 22.87mn b/d in 2001, and in 2008 averaged an estimated 25.94mn b/d. It is set to rise to 28.99mn b/d by 2013. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 14.63mn b/d. This total had risen to an estimated 15.08mn b/d in 2008 and

is forecast to reach 16.91mn b/d by 2013. In terms of natural gas, the region in 2008 consumed an estimated 395bn cubic metres (bcm), with demand of 573bcm targeted for 2013, representing 45.0% growth. Production of an estimated 410bcm in 2008 should reach 617bcm in 2013 (+50.5%), which implies net exports rising to 45bcm by the end of the period. Iraq in 2008 consumed an estimated 1.27% of the region's gas, with its market share forecast at 1.15% by 2013. It contributed 1.22% to estimated 2008 regional gas production and by 2013 could account for 2.75% of supply. In terms of the OPEC basket of crudes, the average price in Q408 was an estimated US$52.53 per barrel (bbl), down sharply from the US$113.49 recorded during the previous three months. The full year 2008 average is put by BMI at US$94.08/bbl, representing a 36% year-on-year (y-o-y) increase. North Sea Brent, WTI and Russian Urals are believed to have averaged US$97.06, US$99.33 and US$94.56/bbl respectively during 2008.

For 2009, we are now assuming an average OPEC basket price of US$52/bbl (- 45% y-o-y), with Q109 expected to deliver US$40.0. The new full year forecast implies Brent crude at US$55.65, WTI averaging US$56.63/bbl and Urals at US$52.48 for 2009. For 2010, we expect to see a recovery to US$58.0/bbl for the OPEC price, gaining further ground to US$65.0 in 2011 and US$70.0/bbl in 2012. We are now using a long-term price assumption of US$70.0 for 2013-2018, down from our previous assumption of US$90.0/bbl. In 2009, we see monthly average global wholesale gasoline prices ranging from US$38.90 in January to a high of US$64.90 reached in August and in December, providing a full year average of US$56.20 - just over 55% of the 2008 outturn.

The 2009 BMI gasoil forecast is for an average price of US$67/bbl, assuming a monthly low of US$46.40 in January and a high of US$77.30/bbl in December. The full-year outturn represents a 45% downturn from the 2008 level. For 2009, the monthly average jet fuel price is forecast to range from US$47.90 in January to US$79.80/bbl in August, proving an annual level of US$69.20/bbl. Iraq real GDP growth is forecast by BMI at 6.6% for 2009, following an estimated 10.8% in 2008. We are assuming 6.8% growth in 2010, 9.4% in 2011, followed by 5.8% in 2012, and 4.9% in 2013. We expect estimated oil demand of 700,000b/d in 2008 to rise to 1.02mn b/d in 2013, depending on investment in infrastructure and the development of domestic production. International oil companies (IOCs) are in 2008/09 expected to join production sharing agreements (PSAs) with the state, which should help accelerate the growth in oil output. Based on the efforts of national oil industry bodies, we are forecasting average oil production of 2.50mn b/d in 2009. December 2008 production was 2.39mn b/d, with 1.80mn b/d of exports. Further field reactivation work and the initial IOC efforts point to output of an estimated 3.30mn b/d in 2013. The government has much more ambitious targets, aiming for 0.5mn b/d annual output expansion and a long-tem goal of 6.0mn b/d. However, there are major risks involving attacks on oil installations, Iraq's OPEC entitlement and the success of new energy policy in stimulating IOC investment. Between 2007 and 2018, we are forecasting an increase in Iraqi oil production of 86.5%, with crude volumes rising steadily to 4.0mn b/d by the end of the 10-year forecast period. Oil consumption between 2007 and 2018 is set to increase by 111%, with growth slowing to an assumed 5.0% per annum towards the end of the period and the country using 1.31mn b/d by 2018. Gas production is expected to climb to 35bcm by the end of the period. With 2007-2018 demand growth of 166%, this provides export potential rising to 24.4bcm by 2018.

Details of the new BMI 10-year forecasts can be found in the appendix to this report, which provides global, regional and country-specific projections. Iraq still occupies a respectable third place in BMI's updated Upstream Business Environment rating, but is eight points behind the UAE and therefore unlikely to move higher over the medium term. The country's score benefits from exceptional oil and gas output growth potential, a substantial hydrocarbons reserves base and the region's highest reserves-to-production ratios (RPR). Strict government control of the upstream industry and a high level of country-specific risk prevent Iraq achieving a better overall score. The country is still at the bottom of the league table in BMI's Downstream Business Environment rating, with a few high scores and near-term progress up the rankings unlikely. It is ranked last, just below Bahrain, thanks largely to country risk factors that outweigh a reasonable showing in terms of oil demand, oil/gas demand growth and likely refining capacity expansion.

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