Hong Kong Oil and Gas Report

The latest Hong Kong Oil & Gas Report from BMI forecasts that the country will account for just 1.17% of Asia Pacific regional oil demand by 2013, while making no contribution to 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. Hong Kong's share of consumption in 2008 was 0.57%, while it has no production. By 2013, its share of demand is forecast to be 0.60%.

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.

Hong Kong's real GDP growth is now forecast by BMI to contract 5.7% in 2009, compared with growth of 2.4% in 2008. We are assuming 2.4% growth in 2010, followed by 4.8% in 2011/12, and 4.6% in 2013. There is no upstream or refining segment, but international oil companies (IOCs) and Chinese companies are investing in import and distribution facilities. Oil consumption is forecast to increase by around 2.0% per annum to 2013, implying demand of 333,000b/d by the end of the forecast period. Gas demand is set to reach 3.3bcm by 2013, with all of the fuel imported.

Between 2008 and 2018, we are forecasting an increase in Hong Kong oil consumption of 24.94%, with demand reaching 367,000b/d by the end of the forecast period. Oil consumption growth slows to an assumed 2.0% per annum towards the end of the period. Gas demand growth of 68.14% provides an import requirement rising to 4.4bcm by 2018. Details of BMI's 10-year forecasts can be found at the end of this report, which provides regional and country-specific projections.

Hong Kong ranks equal 11th in BMI's updated Upstream Business Environment rating, alongside Singapore. The poor showing reflects the absence of domestic hydrocarbons. The risk environment is much more attractive than for many Asian peers, but there are no opportunities for IOCs in the upstream segment. Hong Kong is now ranked 13th in BMI's Downstream Business Environment rating, above only Taiwan, reflecting its status as a very small energy market with few investment opportunities available. It beats Taiwan due to the low risk profile.