Venezuela Oil and Gas Report

The latest Venezuela Oil & Gas Report forecasts that the country will account for 9.07% of Latin America regional oil demand by 2013, while providing 26.46% of supply. Latin America regional oil use of 6.93mn barrels per day (b/d) in 2001 reached 7.95mn b/d in 2008. It should average 7.73mn b/d in 2009 and then rise to around 8.48mn b/d by 2013. Regional oil production was 10.30mn b/d in 2001, and in 2008 averaged 9.85mn b/d. It is set to rise to 10.58mn b/d by 2013. Oil exports are slipping, because demand growth is exceeding the pace of supply expansion. In 2001, the region was exporting an average 3.37mn b/d. This total had fallen to 1.90mn b/d in 2008 and is forecast to be 2.13mn b/d in 2013. The principal exporters will be Mexico, Venezuela, Ecuador and Brazil.

In terms of natural gas, the region in 2008 consumed 205.6bn cubic metres (bcm), with demand of 243.6bcm targeted for 2013, representing 18.2% growth. Production of 212.3bcm in 2008 should reach 280.4bcm in 2013, and implies 36.8bcm of net exports the end of the period. Venezuela contributed 15.75% to 2008 regional gas consumption, while producing 14.84%. By 2013, it is expected to consume 15.95% of the region's gas, while contributing 16.05% to 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.

Venezuela's real GDP is now forecast to contract by 5.6% in 2009, following growth of 4.8% in 2008.

We are now assuming a 6.4% contraction in 2010, with growth of 3.3% in 2011, followed by 2.8% in 2012 and 2.6% in 2013. State-owned Petr??leos de Venezuela (PdVSA) works in co-operation with numerous international oil company (IOC) partners in conventional and heavy oil projects. While recent re-nationalisation moves, changes in taxation and alterations to the licensing system have reduced foreign involvement, several key players appear committed to the country. We are assuming oil and gas liquids production of 2.80mn b/d by 2013, with the country expected to pump 2.35mn b/d in 2009. Consumption beyond the economic weakness of 2009/10 is forecast to increase by around 3% per annum to 2013, implying demand of 769,000b/d by this point. The export capability would thus be about 2.03mn b/d by 2013. Gas production is forecast to rise from 31.5bcm in 2008 to 45.0bcm over the period, allowing 6.2bcm of exports by 2013.

Between 2008 and 2018, we are forecasting an increase in Venezuelan oil production of 20.8%, with liquids volumes dipping to 2.35mn b/d in 2009 before rising steadily to 3.10mn b/d by 2018. Oil consumption between 2008 and 2018 is set to increase by 24.0%, with growth slowing to an assumed 3.0% per annum towards the end of the period and the country using 892,000b/d by 2018. Gas production is expected to rise steadily, from 31.5bcm in 2008 to 78.0bcm in 2018. With demand growth of 53.1%, this implies export potential rising to 28.4bcm by 2018. Details of BMI's 10-year forecasts can be found in the appendix to this report.

Venezuela now ranks second ahead of Peru and behind only Brazil in BMI's updated Upstream Business Environment rating, having gained some ground in thanks to its vast hydrocarbons resource base. While only a point ahead of Peru, it should be able to hold position, but is unlikely to challenge Brazil for the outright regional lead unless the overall risk situation improves dramatically. As well as high scores for reserves, production growth potential and reserves-to-production ratios (RPR), Venezuela benefits from the substantial (but decreasing) number of international companies active within its upstream industry.

The country still ranks eighth in BMI's updated Downstream Business Environment rating, reflecting its refining capacity, retail site intensity and growth in GDP per capita. Chile above is within reach, while Ecuador just one point behind is unlikely to mount a challenge.