Saudi Arabia Oil and Gas Report Q3 2011

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Saudi Arabia Oil and Gas Report Q3 2011 Published on August 2011

Report Summary We forecast that Saudi Arabia will account for 37.7% of Middle East regional oil demand by 2015, while providing 36.2% of supply. Middle East regional oil use rose to an estimated 7.6mn b/d in 2010. It should average 7.9mn barrels per day (b/d) in 2011 and then climb to around 8.9mn b/d by 2015. Regional oil production was 22.83mn b/d in 2001 and averaged an estimated 24.5mn b/d in 2010. After an estimated 25.7mn b/d in 2011, it is set to rise to 30.5mn b/d by 2015. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average of 17.85mn b/d. This total will have eased to an estimated 16.88mn b/d in 2010 and is forecast to reach 21.54mn b/d by 2015. Iraq has the greatest export growth potential, followed by Qatar. In terms of natural gas, the region consumed an estimated 391bn cubic metres (bcm) in 2010, with demand of 487bcm targeted for 2015, representing 25% growth. Production of an estimated 455bcm in 2010 should reach 642bcm in 2015 (+41%), which implies net exports rising to 154bcm by the end of the period. Saudi Arabia's estimated share of gas consumption in 2010 will have been 21.5%, while its share of production is put at 18.4%. By 2015, its share of gas consumption is forecast to be 19.7%, with the country accounting for 15.0% 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. We initially 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 to US$101.90/bbl for 2011 and to US$97.50/bbl for 2012. Based on our expectations for differentials, this gives a forecast for Brent at US$106/bbl in 2011 and US$101.50/bbl in 2012. We have kept our long-term price assumption of US$90/bbl (OPEC basket) in place for the time being. Saudi Arabian real GDP rose by 3.8% in 2010 and we forecast 3.2% average annual GDP growth from 2010-2015. We expect oil demand to rise from 2.79mn b/d in 2010 to 3.38mn b/d in 2015, representing up to 3.0% annual growth beyond 2009 and broadly matching our underlying economic assumptions. State-owned Saudi Aramco is wholly responsible for oil and liquids production, which is forecast to rise from an estimated 9.88mn b/d in 2010 to 10.45mn b/d by 2015. There is no significant foreign involvement in the upstream oil segment, although international oil companies (IOCs) could have a role in future gas field development and are major players in refining and petrochemicals. Gas production should reach 87bcm by 2015, up from 79bcm in 2010. Consumption should match the trend, leaving Saudi Arabia with no import requirement or export potential during the period. Between 2010 and 2020, we forecast an increase in Saudi Arabian oil production of 19.5%, with volumes rising steadily to 11.96mn b/d by the end of the 10-year forecast period. Oil consumption is set to increase by 39.2%, with growth slowing to an assumed 3.0% a year towards the end of the period and the country using 3.91mn b/d by 2020. Gas production is expected to rise from an estimated 84bcm to 127bcm by the end of the period. Demand growth of 51.3% from 2010-2020 will provide a balanced market throughout the period. Saudi Arabia now takes eighth place, ahead only of Kuwait, in BMI's composite Business Environment Ratings (BERs), which combine upstream and downstream scores. The country is ranked a surprising last place, behind Kuwait, in BMI's updated upstream ratings. It clearly has an unrivalled oil resource and production position, but the lack of upstream opportunities mean the country is

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>> Get this Report Now by email! stuck firmly at the bottom of the table. It is six points behind Kuwait and shows few signs of having the ability to challenge its rival. Saudi Arabia is in the upper half of the league table in BMI's downstream ratings, with a few high scores and further progress up the rankings a medium-term possibility. It is ranked, fourth above the UAE, thanks largely to high scores for refining capacity, oil and gas demand and nominal GDP. Healthy country risk factors help bolster the overall score.

Table of Content Executive Summary .................... 7 SWOT Analysis ............................ 9 Saudi Arabia Political SWOT . 9 Saudi Arabia Economic SWOT .......................... 10 Saudi Arabia Energy Market Overview ................. 11 Regional Energy Market Overview ........................ 13 Oil Supply And Demand ............. 13 Table: Middle East Oil Consumption (000b/d) .. 14 Table: Middle East Oil Production (000b/d) ..... 15 Oil: Downstream ....................... 16 Table: Middle East Oil Refining Capacity (000b/d) ........................ 16 Gas Supply And Demand ........... 17 Table: Middle East Gas Consumption (bcm) ..... 17 Table: Middle East Gas Production (bcm) ........ 18 Liquefied Natural Gas .......... 19 Table: Middle East LNG Exports/(Imports) (bcm) .......................... 19 Business Environment Ratings 20 Middle East Region .................... 20 Composite Scores ....................... 20 Table: Regional Composite Business Environment Rating ............. 21 Upstream Scores ........................ 22 Table: Regional Upstream Business Environment Rating............... 22 Saudi Arabia Upstream Rating ' Overview ....... 23 Saudi Arabia Upstream Rating ' Rewards ........ 23 Saudi Arabia Upstream Rating ' Risks .............. 23 Downstream Scores ................... 24 Table: Regional Downstream Business Environment Rating ........... 24 Saudi Arabia Downstream Rating ' Overview ... 25 Saudi Arabia Downstream Rating ' Rewards .... 25 Saudi Arabia Downstream Rating ' Risks ......... 25 Business Environment ............. 26 Legal Framework.................. 26 Foreign Investment Policy .... 29 Tax Regime ........................... 30 Security Risk ......................... 30 Industry Forecast Scenario ....... 31 Oil And Gas Reserves ................ 31 Oil Supply And Demand ............. 32

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>> Get this Report Now by email! Gas Supply And Demand ........... 32 Refining And Oil Products Trade ............................ 34 Revenues And Import Costs ....... 35 Table: Saudi Arabia's Oil And Gas ' Historical Data And Forecasts, 2008-2015 ....... 36 Other Energy 37 Table: Saudi Arabia's Other Energy ' Historical Data And Forecasts, 2008-2015 ..... 38 Key Risks To BMI's Forecast Scenario ................... 39 Long-Term Oil And Gas Outlook ............................ 39 Oil And Gas Infrastructure ........ 40 Oil Refineries 40 Table: Refineries In Saudi Arabia ...................... 40 Oil Processing Facilities ............ 43 Service Stations .......................... 43 Oil Terminals/Ports ................... 43 Oil Pipelines . 44 Gas Pipelines 45 Macroeconomic Outlook ........... 47 Table: Saudi Arabia ' Economic Activity .......... 49 Competitive Landscape ............ 50 Table: Key Players In Saudi Arabia's Oil And Gas Sector ............. 51 Overview/State Role ................... 51 Licensing And Regulation ..... 52 Government Policy ............... 52 International Energy Relations .......................... 53 Table: Key Upstream Players ............................ 55 Table: Key Downstream Players ....................... 55 Company Monitor ...................... 56 Saudi Aramco ............................ 56 Shell Saudi Arabia ..................... 61 ExxonMobil Saudi Arabia .......... 64 Chevron ........ 67 Total ' Summary ................... 69 Eni ' Summary ...................... 69 ConocoPhillips ' Summary ... 70 BP ' Summary ...................... 70 Repsol YPF ' Summary ........ 70 Lukoil ' Summary ................. 70 Sinopec ' Summary ............... 71 Sumitomo ' Summary ........... 71 Oil And Gas Outlook: Long-Term Forecasts ........ 72 Regional Oil Demand ................ 72 Table: Middle East Oil Consumption (000b/d) .. 72 Regional Oil Supply ................... 73 Table: Middle East Oil Production (000b/d) ..... 73 Regional Refining Capacity ....... 74 Table: Middle East Oil Refining Capacity (000b/d) ........................ 74 Regional Gas Demand ............... 75 Table: Middle East Gas Consumption (bcm) ..... 75

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>> Get this Report Now by email! Regional Gas Supply .................. 76 Table: Middle East Gas Production (bcm) ........ 76 Saudi Arabia Country Overview ........................ 76 Methodology And Risks To Forecasts .................. 77 Glossary Of Terms .................... 78 Business Environment Ratings Methodology...... 79 Risk/Reward Ratings Methodology ......................... 79 Ratings Overview ....................... 79 Table: BMI's Oil & Gas Business Environment Ratings ' Structure ............................ 80 Indicators ...... 80 Table: BMI's Oil & Gas Business Environment Upstream Ratings ' Methodology ..... 81 Table: BMI's Oil & Gas Business Environment Downstream Ratings ' Methodology . 82 BMI Forecast Modelling ............ 84 How We Generate Our Industry Forecasts ............. 84 Energy Industry ......................... 84 Cross checks . 85 Sources ......... 85

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