Kazakhstan Oil and Gas Report Q4 2009
Feb 09. OfficialWire
The latest Kazakhstan Oil & Gas Report forecasts that the country will account for 4.66% of Central and Eastern European (CEE) regional oil demand by 2013, while providing 16.36% of supply.
CEE regional oil use of 4.65mn barrels per day (b/d) in 2001 rose to 5.41mn b/d in 2008. It should average 5.15mn b/d in 2009 and then rise to around 5.63mn b/d by 2013. Regional oil production was 8.83mn b/d in 2001, and in 2008 averaged 12.91mn b/d. It is set to rise to 14.37mn 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 4.18mn b/d. This total had risen to 7.51mn b/d in 2008 and is forecast to reach 8.74mn b/d by 2013.
In terms of natural gas, the region in 2008 consumed 592.7bn cubic metres (bcm), with demand of 663.4bcm targeted for 2013, representing 12.3% growth. Production of 754.6bcm in 2008 should reach 906.1cm in 2013, which implies net exports rising from 161.9bcm in 2008 to 242.7bcm by the end of the period. Kazakhstan’s share of gas consumption in 2008 was 3.64%, while its share of production is put at 5.47%. By 2013, its share of demand is forecast to be 4.59%, with the country accounting for 8.28% of supply.
For 2009 as a whole, we are now assuming an average OPEC basket price of US$55.00 per barrel (bbl), a 41.5% decline year-on-year (y-o-y). This represents an upgrade from the US$52 forecast we have stuck with during the past three quarters. Our OPEC basket assumption delivers likely Brent, WTI, Urals and Dubai prices of US$56.30, US$57.50, US$55.60 and US$55.60/bbl respectively. For 2010, we expect to see a recovery to US$60.00/bbl for the OPEC price (up from our previous forecast of US$58), gaining further ground to US$65.00 in 2011 and to US$70.00/bbl in 2012. Our post-2010 forecasts are unchanged and we are continuing to use a long-term price assumption of US$70.00 for 2013-2018.
In 2009, the report is now assuming a global average gasoline price of US$62.12/bbl, with the fuel having peaked in June. The overall y-o-y fall in 2009 gasoline prices is put at 40.0%. The gasoil forecast is for an average price of US$68.62/bbl, assuming a monthly high of US$92.49/bbl in December. The fullyear outturn represents a 43.4% fall from the 2008 level. The annual jet price level for 2009 is forecast to be US$65.17/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put at US$49.06/bbl, down 43.9% from the previous year’s level.
Kazakhstan’s real GDP is now forecast to contract by 1.9% in 2009, compared with growth of 3.0% in 2008. We are assuming 2.4% growth in 2010, 5.5% in 2011, followed by 6.6% in 2012 and 6.7% in 2013. Consumption growth, beyond the likely weakness of 2009, should keep pace with the growing economy, but is unlikely to have much negative impact on export potential. We are forecasting domestic oil demand reaching 263,000b/d by 2013. State-owned KazMunaiGaz (KMG) accounts for more than 10% of oil production and participates in joint venture (JV) projects with international oil companies (IOCs), which should deliver rapid volume growth after the Karachaganak field builds up to full output in excess of 200,000b/d. Expansion of the Tengiz field and activation of the offshore Kashagan project should push Kazakh production towards 2.35mn b/d by 2013. This implies that oil exports should rise from an estimated 1.33mn b/d in 2008 to 2.09mn b/d by the end of the forecast period.
Between 2008 and 2018, we are forecasting an increase in Kazakh oil and gas liquids production of 48.4%, with volumes reaching a peak of 2.6mn b/d in 2014, before falling to 2.3mn b/d by the end of the 10-year forecast period. Oil consumption between 2008 and 2018 is set to increase by 48.9%, with growth slowing to an assumed 5.0% per annum towards the end of the period and the country using 335,000b/d by 2018. Gas production should rise from 2008 level of 30bcm to 95bcm by 2018. Gas demand rising 80.8% provides export potential increasing to 56bcm. Details of the 10-year forecasts can be found in the appendix to this report.
Kazakhstan still occupies first place in the updated Upstream Business Environment rating, having remained just ahead of neighbour Azerbaijan. Its oil and gas production growth outlook, asset immaturity, high reserves to production ratios (RPR) and competitive landscape work in the country’s favour, but are undermined by a relatively unappealing risk environment. The country is just above the mid-point of the league table in the updated Downstream Business Environment rating, although there are a few particularly high scores and progress further up the rankings from sixth place seems possible. The low level of retail site intensity represents a strong suit, along with region-leading oil demand growth prospects. Azerbaijan is just a point ahead of it in the regional rankings, and there is therefore some chance of Kazakhstan moving ahead over the medium term.