Taiwan Oil and Gas Report Q3 2009

The latest Taiwan Oil & Gas Report from BMI forecasts that the country will account for 4.34% of Asia Pacific regional oil demand by 2013, while making no meaningful contribution to 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. Taiwan's estimated share of gas consumption in 2008 was 2.78%, while its share of production was minimal. By 2013, its share of gas consumption is forecast to be 2.68%.

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.

Taiwanese real gross domestic product (GDP) growth is forecast by BMI to contract by 4.5% in 2009, compared with growth of 0.1% in 2008. We are assuming 1.4% growth in 2010, 3.0% in 2011 and 3.3% in 2012, followed by 3.5% in 2013. State-owned Chinese Petroleum Corporation (CPC) is tasked with securing oil and gas supply, but has no significant domestic volumes to contribute. Oil consumption beyond 2009 is forecast to increase by around 2.0% per annum to 2013, implying demand of 1.26mn b/d by the end of the forecast period. Gas usage is expected to rise from the estimated 2008 figure of 12.2bcm to 14.8bcm by 2013, supplied largely by LNG imports.

Between 2008 and 2018, we are forecasting an increase in Taiwan's oil consumption from an estimated 1.15mn b/d to 1.40mn b/d, with the country's refining capacity rising from 1.20mn b/d to 1.65mn b/d.

Gas demand is expected to rise from around 12.2bcm in 2008 to a possible 16.6bcm by 2018, met largely by LNG 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.

Taiwan still ranks 14th and last in BMI's updated Upstream Business Environment rating, thanks to a virtual absence of hydrocarbon resources. The score reflects the total control of the government over upstream oil activities and a healthy country risk profile, the latter offsetting partly the lack of reserves and output growth potential. The country also ranks last in BMI's Downstream Business Environment rating, some distance behind nearest rival Malaysia. The poor showing reflects its high level of state involvement, relatively high retail site intensity, and modest oil and gas demand growth outlook.