Philippines Oil and Gas Report Q3 2009

The latest Philippines Oil & Gas Report from BMI forecasts that the country will account for 1.17% of Asia Pacific regional oil demand by 2013, while providing 0.80% 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, and 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. The Philippines' estimated share of gas consumption in 2008 was 0.77%, while its share of production is put at 0.93%. By 2013, its share of gas consumption is forecast to be 0.93%, with the country accounting for 1.05% 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.

The Philippines' real GDP growth is forecast by BMI at 2.8% for 2009, down from 4.6% in 2008. We are assuming 3.4% growth in 2010, 4.7% in 2011, followed by 4.4% in 2012, and 4.2% in 2013. There is international oil company (IOC) and national involvement in domestic upstream activities, leading to substantial gas output growth and some modest liquids expansion. We are assuming oil and gas liquids production of no more than 70,000b/d by 2012/2013, with the country pumping an estimated 60,000b/d in 2009. Beyond 2009, consumption is forecast to increase by up to 3% per annum to 2013, implying endThe period demand of 339,000b/d. The import requirement would therefore be about 269,000b/d by 2013. Gas demand is forecast to rise from an estimated 3.4bcm in 2008 to 5.1bcm by 2013, with imports required beyond the end of the forecast period.

Between 2008 and 2018, we are forecasting a reduction in Philippines oil production of 5.0%, with crude volumes peaking at 70,000b/d in 2012/2013 before falling steadily to 54,000b/d in 2018. Oil consumption between 2008 and 2018 is set to increase by 26.8%, with growth slowing to an assumed 3.5% per annum towards the end of the period and the country using 38,6000b/d by 2018. Gas production is expected to rise from around 3.4bcm in 2008 to a possible 7.0bcm by 2017/2018. With demand growth of 132.4%, this requires up to 1bcm of imports. Details of BMI's 10-year forecasts can be found in the appendix to this report, which provides global, regional and country-specific projections.

The Philippines now ranks sixth in BMI's updated Upstream Business Environment rating, reflecting a reasonable resource position and a better-than-average output growth outlook. The country sits just behind Malaysia. The country now ranks equal eighth with Vietnam in our Downstream Business Environment rating, reflecting its modest refinery capacity expansion plans, reasonable oil and gas demand growth outlook and relatively low level of retail site intensity.