Belgium Oil and Gas Report Q2 2008

The new Belgium Oil & Gas Report from BMI forecasts that the country will account for 5.98% of developed European regional oil demand by 2012, while making no appreciable contribution to supply. In Developed Europe, overall oil consumption reached an estimated 14.26mn barrels per day (b/d) in 2007.

It is set to rise to around 14.72mn b/d by 2012. In terms of natural gas, the Developed Europe region in 2007 consumed an estimated 448bn cubic metres (bcm), with demand of 527bcm targeted for 2012, representing 17.7% growth. Production of an estimated 275bcm in 2007 should fall to 263bcm in 2012, which implies net imports rising from an estimated 173bcm in 2007 to some 264bcm by the end of the period. Belgium's share of gas consumption in 2007 was an estimated 3.91%, while it has no share of production. By 2012, its share of gas consumption is forecast to be 4.23%.

Global oil demand growth is now expected to have been 1.7% for 2007, rising to a little less than 2.0% in 2008. Asia and the CEE continue to dominate. The overall demand outlook for the period to 2012 remains healthy (average growth 1.8%), but subject to review if the macroeconomic outlook deteriorates. We are still assuming some easing of energy prices during the period, but from a much higher level than envisaged earlier. Supply growth is capable of matching demand expansion - but only if OPEC cooperates as non-OPEC forecasts are fragile. Between 2006 and 2012, we see supply rising by an average 1.7% per annum - subject to OPEC strategy. Our revised central view is that the OPEC basket price will rise from around US$69/bbl in 2007 to US$74 in 2008, before settling around US$71/bbl in 2009 and falling further to US$70/bbl in 2010-2012.

Belgian real GDP growth is estimated by BMI at 2.0% for 2008, down from an estimated 2.6% in 2007.

We are assuming an average 2.0% growth in 2009-2012. Ongoing oil demand growth averaging no more than 0.5-1.0% per annum is expected. Our forecast is for Belgium/Luxembourg oil consumption to rise from an estimated 850,000b/d in 2007 to 880,000b/d by 2012. From an estimated 17.5bcm in 2007, we expect to see gas demand rise to a minimum of 22.3bcm by 2012, all met by increased pipeline and liquefied natural gas (LNG) imports.

The long-term political risk score for Belgium is 74.7, the second-lowest in our Developed Markets universe, behind Italy, and well above the global average of 65.1. The Developed Markets average is 84.9. Our long-term economic rating for the country is 62.8, above the global average of 60.2, but below the Developed Markets average of 72.2. Our business environment rating is 65.5, which is the sixthhighest of the developed European countries we cover, behind Germany. It is below the Developed Markets average of 68.3. Belgium has a privatised energy sector operating under EU guidelines. There is no upstream oil and gas segment, but downstream oil and gas features a mixture of international oil companies (IOCs) and former state companies now in foreign hands. Both the gas and power markets are substantially open to competition, with full opening imminent.