Spain Oil and Gas Report Q3 2009

The latest Spain Oil & Gas Report from BMI forecasts that the country will account for 12.20% of Developed European regional oil demand by 2013, while making no appreciable contribution to supply.

In developed Europe, overall oil consumption reached an estimated 13.75mn barrels per day (b/d) in 2008. It is set to rise to around 13.88mn b/d by 2013. Developed Europe regional oil production was 6.97mn b/d in 2001, and in 2008 averaged an estimated 5.06mn b/d. It is set to fall to just 3.77mn b/d by 2013. Oil imports are growing steadily, because supply is contracting and demand is rising, albeit slowly.

In 2008, net crude imports were an estimated 8.70mn b/d. By 2013, they are expected to have reached 10.11mn b/d. Norway will remain the only major net exporter, with the UK becoming a net importer.

As regards natural gas, the Developed Europe region in 2008 consumed an estimated 440bn cubic metres (bcm), with demand of 490bcm targeted for 2013, representing 11.2% growth. Production of an estimated 269bcm in 2007 should rise to 279bcm in 2013, which implies net imports rising from the estimated 2008 level of 171bcm to some 211bcm by the end of the period. Spain's share of gas consumption in 2008 was an estimated 8.37%, while it has no meaningful share of production. By 2013, its share of gas consumption is forecast to be 10.07%.

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.

Spanish real GDP growth is forecast by BMI to fall by 3.5% in 2009, compared with growth of 1.0% in 2008. We are assuming an average 0.7% growth in 2009-2013. In terms of oil demand, the Spanish market continues to grow more rapidly than the EU norm, although there is likely to be a reduction in 2009 consumption thanks to economic weakness. Beyond 2009/10, we expect to see 0.5%-1.0% annual demand growth. Oil consumption has risen from just over 1mn b/d in 1990 to an estimated 1.62mn b/d in 2008. Our target for 2013 is demand at an average 1.69mn b/d. No meaningful local oil supply is available, with crude imports reaching 1.69mn b/d by 2013. Our gas demand forecast is for an average annual growth rate of 6%, taking the 2013 total consumption to 49.3bcm.

Between 2008 and 2018, we are forecasting an increase in Spanish oil and gas liquids consumption of 12.4%, with volumes rising steadily from an estimated 1.62mn b/d in 2008 to 1.83mn b/d by the end of the 10-year forecast period. Gas demand should rise from the estimated 2008 level of 37bcm to 59bcm by 2018, based on LNG and pipeline imports. Details of BMI's 10-year forecasts can be found in the appendix to this report.

Spain's long-term political score is 80.2, according to BMI's Country Risk team, which is below the Developed Markets average of 85.8. Spain ranks second-lowest of the BMI universe of European Developed Markets. The long-term economic rating is 65.2, which compares with a Developed Markets average of 69.3, putting Spain behind all but Greece in the Developed Europe universe. Spain has a privatised energy sector operating under EU guidelines. There is a very small upstream oil and gas segment, dominated by domestic companies. Downstream oil is controlled largely by former state company Repsol YPF.