Romania Oil and Gas Report Q4 2009

The latest Romania Oil & Gas Report from BMI forecasts that the country will account for 4.37% of Central and Eastern European (CEE) regional oil demand by 2013, while providing just 0.56% of supply.

CEE regional oil use of 4.65mn barrels per day (b/d) in 2001 rose to 5.41mn b/d in 2008. It should average 5.15mn b/d in 2009 and then rise to around 5.63mn b/d by 2013. Regional oil production was 8.83mn b/d in 2001, and in 2008 averaged 12.91mn b/d. It is set to rise to 14.37mn b/d by 2013. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 4.18mn b/d. This total had risen to 7.51mn b/d in 2008 and is forecast to reach 8.74mn b/d by 2013.

In terms of natural gas, the region in 2008 consumed 592.7bn cubic metres (bcm), with demand of 663.4bcm targeted for 2013, representing 12.3% growth. Production of 754.6bcm in 2008 should reach 906.1cm in 2013, which implies net exports rising from 161.9bcm in 2008 to 242.7bcm by the end of the period. Romania's share of 2008 regional gas consumption was 2.37%, while its share of production is put at 1.43%. By 2013, its share of demand is forecast to be 2.89%, with the country accounting for 0.97% of 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.

Romanian real GDP is now forecast by BMI to fall by 5.7% in 2009, compared with growth of 7.1% in 2008. We are assuming 0.3% growth in 2010, 2.7% in 2011, 3.0% in 2012, followed by 4.4% in 2013.

Beyond the likely weakness of 2009/2010, oil demand could potentially grow at 3.0% per annum, rising to 246,000b/d by 2013. In spite of greater efforts by the OMV-backed national oil company Petrom, we see domestic oil production slipping from an estimated 99,000b/d in 2008 to 80,000b/d by 2013. This implies rising import levels, with volumes up to 166,000b/d by 2013. Natural gas consumption of 14.5bcm in 2008 can be expected to reach 19.1bcm by 2013. Romania's gas production is forecast to slip to no more than 8.8bcm by 2013, providing an import requirement of at least 10.3bcm.

Between 2008 and 2018, we are forecasting an increase in Romanian oil consumption of 29.2%, with import volumes rising steadily from an estimated 128,000b/d to 226,000b/d by the end of the 10-year forecast period. Domestic production is forecast to fall from an estimated 99,000b/d to 60,000b/d during the period. Gas consumption is expected to increase from 14.5bcm to 22.7bcm by 2018, met by 15.5bcm of imports. Details of BMI's 10-year forecasts can be found in the appendix to this report.

Romania shares eighth place with Bulgaria in BMI's updated Upstream Business Environment rating, just behind Slovakia and Ukraine. Its gas production growth outlook, asset maturity and under-developed competitive landscape work against the country, and are exacerbated by poor country risk factors. Longterm scope exists for Romania to pull away from Bulgaria, as long as the government does not renationalise OMV-managed Petrom. The country is near the top of the league table in BMI's Downstream Business Environment rating, with a few high scores but progress further up the rankings from fourth place rather unlikely. There are decent scores for refining capacity, oil and gas demand, and retail site intensity. Azerbaijan is just one point below it in the regional rankings, and there is some risk of it challenging for Romania's fourth place over the medium term.