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Norway Oil and Gas Report Q3 2011 Published on August 2011
Report Summary The latest Norway Oil & Gas Report from BMI forecasts that the country will account for 1.8% of regional oil consumption by 2015, while accounting for 52.7% 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. Norway's share of gas consumption in 2010 was an estimated 1.0%, while it accounted for 42.3% of production. By 2015, its share of gas consumption is forecast to be 1.1%, while its share of production will be 46.6%. 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/barrel (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$99/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. BMI assumes that Norwegian real GDP rose by 0.4% in 2010. We are forecasting 2.1% average annual growth in 2011-2015. Recent (January 2011) Norwegian oil and liquids production has averaged 2.15mn b/d. We expect the country's 2011 oil and liquids production to be about 2mn b/d, down from an estimated 2.14mn b/d in 2010. By 2015, liquids volumes look set to slip to 1.85mn b/d. Oil demand could rise to 242,000b/d by 2015, implying that net exports will slip from 1.9mn b/d in 2010 to 1.61mn b/d by the end of the period. 2010 gas production of 106.4bcm should continue to rise towards at least 116bcm by 2015. Rising domestic gas consumption, from 4.1bcm to 4.5bcm over 2010-2015, suggests that net exports will rise to 111.5bcm by the end of the forecast period. Between 2010 and 2020, we forecast a decline in Norwegian oil production of 29.8%, with output slipping steadily from 2.13mn b/d in 2010 to 1.5mn b/d at the end of the 10-year forecast period. Oil consumption over the period is also expected to fall, slipping 3.8%, resulting in a decline in exports from 1.90mn b/d to 1.27mn b/d by 2020. Gas production should rise from106.4bcm to a peak of 116bcm in 2015, before falling to 100bcm by 2020. Most exports will continue to be in the form of pipeline gas, with some liquefied natural gas (LNG). Details of BMI's 10-year forecasts can be found in the appendix to this report. According to BMI's country risk team, Norway's long-term political risk score is 98.0 out of 100, compared with the Developed Markets average of 87.8 and the global average of 62.9. Our long-term economic rating for the country is 71.7, 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 national oil company Statoil, formed in 2007 through a merger of Statoil and the oil and gas interests of Norsk Hydro. Norway
Norway Oil and Gas Report Q3 2011 (From Issuu)
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