Australia Oil and Gas Report

The latest Australia Oil & Gas Report from BMI forecasts that the country will account for 3.33% of Asia Pacific regional oil demand by 2013, while providing 6.00% of supply. Asia Pacific regional oil use of 21.40mn barrels per day (b/d) in 2001 reached 25.67mn b/d in 2008. It should average 24.83mn b/d in 2009, then rise to around 28.51mn b/d by 2013. Regional oil production was just under 8.41mn b/d in 2001, and averaged 8.45mn b/d in 2008. It is set to increase to 8.75mn b/d by 2013. In 2001 the region was importing an average 12.99mn b/d. This total had risen to an estimated 17.22mn b/d in 2008, and is forecast to reach 19.76mn b/d by 2013.

In terms of natural gas, in 2008 the region consumed 459bn cubic metres (bcm) and demand of 562bcm is targeted for 2013. Production of 356bcm in 2008 should reach 488bcm in 2013, but implies net imports easing from an estimated 102bcm per annum in 2008 to 74bcm in 2013. This is in spite of many Asian gas producers being major exporters. Australia's share of gas consumption in 2008 was 5.12%, while its share of production is put at 10.75%. By 2013, its share of gas consumption is forecast to be 5.25%, with the country accounting for 13.32% 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, BMI 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 BMI 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 by BMI at US$49.06/bbl, down 43.9% from the previous year's level.

Australian real GDP is now forecast by BMI to fall 1.5% in 2009, compared with growth of 2.3% in 2008. We are assuming growth of 1.1% in 2010 and 1.8% in 2011, followed by 2.4% in 2012 and 3.0% in 2013. There is no state oil industry, but a group of domestic and leading international companies is investing heavily in gas production and exports to help slow the rate of decline in Australia's oil output.

We are assuming oil and gas liquids production peaking at 580,000b/d in 2010, falling to 525,000b/d by 2013. Consumption is forecast to increase by less than 1.0% per annum to 2013, implying demand of 948,000b/d by the end of the forecast period. The import requirement would therefore be approximately 423,000b/d by 2013.

Between 2008 and 2018, we are forecasting a decrease in Australian oil production of 29.0%, with crude volumes peaking in 2010 at 580,000b/d, before falling steadily to 395,000b/d by the end of the period. Oil consumption between 2008 and 2018 is set to increase by 3.8%, with growth slowing to an assumed 0.5% per annum towards the end of the period and the country using 972,000b/d by 2018. Gas production is expected to rise rapidly, from 38bcm in 2008 to a possible 92bcm by 2018 (+140%). With demand growth of 29.4%, this provides export potential rising from 14.8bcm to 58.6bcm, all in the form of LNG.

Details of BMI's long-term oil and gas outlook can be found at the rear of this report, including regional and country-specific forecasts to 2018.

Australia still leads BMI's updated Upstream Business Environment rating, with its balance of strong gas production/export potential, world class regulatory structure and solid risk environment proving to be a winning combination. However, the gap between it and second-placed Vietnam flatters Australia as it is due largely to the poorer country risk environment in Vietnam. Indeed, given the greater potential for more rapid growth in Vietnam, the gap should narrow over the medium term, although it is unlikely to close until the country's Country Risk environment improves. The country is somewhat further down the league table in BMI's Downstream Business Environment rating, reflecting its status as a mature, deregulated and competitive energy market with limited growth potential. It now takes third place out of the 14 states, ahead of Japan, but could slip down the rankings as Country Risk improves elsewhere in the region.