India Oil and Gas Report Q3 2009

The latest India Oil & Gas Report from BMI forecasts that the country will account for 12.79% of Asia Pacific regional oil demand by 2013, while providing 10.58% of supply. Asia Pacific regional oil use of 21.40mn barrels per day (b/d) in 2001 reached an estimated 25.87mn b/d in 2008. It should average 25.79mn b/d in 2009, then rise to around 29.12mn b/d by 2013. Regional oil production was just under 8.41mn b/d in 2001, and averaged an estimated 8.41mn b/d in 2008. It is set to increase to 8.74mn b/d by 2013.

In terms of natural gas, in 2008 the region consumed an estimated 440bn cubic metres (bcm) and demand of 551bcm is targeted for 2013. Production of an estimated 364bcm in 2008 should reach 486bcm in 2013, but implies net imports easing from an estimated 76bcm per annum in 2008 to 65bcm in 2013. This is in spite of many Asian gas producers being major exporters. India's share of gas consumption in 2008 was an estimated 9.77%, while its share of production is put at 9.07%. By 2013 its share of gas consumption is forecast to be 10.43%, with the country accounting for 10.71% of supply.

In terms of the OPEC basket of crudes, the average price in Q109 was an estimated US$45.78 per barrel (bbl), down 13% from the US$52.51/bbl recorded during the previous three months. During the second quarter, there has been little change to our view of oil market developments. BMI is forecasting an average OPEC basket price of US$51.30/bbl, with the March gains being retained in April, before further recovery to a possible US$57.00 is seen by June. For 2009, we are still assuming an average OPEC basket price of US$52.00/bbl (-45% year-on-year). The BMI full year forecast implies Brent crude at US$53.73, WTI averaging US$54.90/bbl and Urals at US$52.66 for 2009.

For the whole of 2009, the BMI assumption for gasoline is an average US$56.89/bbl, with the price peaking at a forecast monthly average of US$64.75 in December 2009. The overall y-o-y fall in 2009 gasoline prices is put at 44.1%. For gasoil in 2009, the BMI forecast is for an average price of US$69.35/bbl, assuming a monthly high of US$94.48/bbl in December. The full-year outturn represents a 42.8% fall from the 2008 level. The monthly average jet fuel price is forecast to range from US$53.75 in February to US$96.76/bbl in December, proving an annual level of US$71.78/bbl. This compares with US$124.95/bbl in 2008.

Indian real GDP growth is now forecast by BMI at 5.0% for 2009, down from 6.3% in 2008. We are assuming 5.0% growth in 2010, 6.4% in 2011, followed by 7.0% in 2012/2013. State oil firm Oil & Natural Gas Corporation (ONGC) is charged with maximising domestic oil production, which in 2008 averaged an estimated 785,000b/d. Thanks to its efforts and those of UK-based Cairn Energy, we see production peaking at around 950,000b/d by 2011. Oil consumption is forecast to increase by 4-5% per annum to 2013, implying demand of 3.72mn b/d by 2013. The import requirement would therefore be approximately 2.80mn b/d by the end of the forecast period. Gas consumption is set to rise from an estimated 43bcm in 2008 to 57bcm, with domestic supply up from an estimated 33bcm in 2008 to at least 52bcm by 2013.

Between 2008 and 2018, we are forecasting an increase in Indian oil production of 9.55%, with crude volumes peaking in 2011 at 950,000b/d, then falling steadily to 860,000b/d in 2018. Oil consumption between 2008 and 2018 is set to increase by 48.66%, with growth slowing to an assumed 2.0% per annum towards the end of the period and the country using 4.27mn b/d by 2018. Gas production is expected to rise from around 33bcm in 2008 to a possible 65bcm by 2018 (+97.0%). With demand growth of 70.5%, India is likely to be importing up to 10bcm per annum of gas by the end of the period, largely in the form of LNG. Details of BMI's 10-year forecasts can be found in the appendix to this report, which provides global, regional and country-specific projections.

India now ranks third, behind Vietnam, in BMI's updated Upstream Business Environment rating, with a strong resource position being offset somewhat by extensive state involvement, a limited competitive landscape and only a moderate risk environment. The country sits well ahead of Pakistan and Malaysia, but 13 points behind Australia. The country is now equal first with China in BMI's updated Downstream Business Environment rating, reflecting its status as a high-growth energy market with strongly positive population and demand trends, plus a low level of retail site intensity. It is four points ahead of Singapore, with scope to pull still further away from the more mature Asian energy economy.