Malaysia Oil and Gas Report Q3 2009

The latest Malaysia Oil & Gas Report from BMI forecasts that the country will account for 1.91% of Asia Pacific regional oil demand by 2013, while providing 8.52% 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. Malaysia's share of gas consumption in 2008 was an estimated 6.81%, while its share of production was 18.01%. By 2013 its share of gas consumption is forecast to be 6.24%, with the country accounting for 17.51% 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 [y-o-y]). 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.

Malaysian real GDP is forecast by BMI to fall by 1.9% in 2009, compared with the 2008 growth rate of 4.6%. We are assuming 2.6% growth in 2010, 4.5% in 2011, 4.7% in 2012, followed by 4.5% in 2013.

State-owned Petronas operates in partnership with various international oil companies (IOCs) under a production sharing system that we believe will result in oil production of 745,000b/d by 2013.

Consumption is forecast to rise by up to 2% per annum to 2013, implying demand of 557,000b/d.

Malaysia's gas exports are set to rise from an estimated 35.5bcm in 2008 to 50.7bcm in 2013, with production climbing from 65.5bcm to 85.0bcm over the period.

Between 2008 and 2018, we are forecasting a reduction in Malaysia oil production of 3.94%, with crude volumes falling steadily to 720,000b/d in 2018. Oil consumption between 2008 and 2018 is set to increase by 16.45%, with growth slowing to an assumed 1.5% per annum towards the end of the period and the country using 606,000b/d by 2018. Gas production is expected to rise from around 65.5bcm in 2008 to a possible 105bcm by 2018. With demand growth of 29.49%, this provides an export capability reaching 66.2bcm in 2018, 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.

Malaysia ranks fifth in BMI's updated Upstream Business Environment rating, reflecting a strong resource position and a moderate gas output growth outlook, being offset by extensive state involvement.

The country sits just ahead of the Philippines - and in a relatively strong position to defend its position.

The country ranks a lowly 13th in BMI's Downstream Business Environment rating, reflecting its limited refinery capacity expansion plans, sluggish oil and gas demand growth outlook and relatively high level of retail site intensity.