Vietnam Oil and Gas Report Q1 2007

The latest Vietnam Oil & Gas Report from BMI forecasts that the country will account for just 1.13% of Asia/Pacific regional oil demand by 2010, while providing 4.87% of supply. Asia/Pacific regional oil demand rose to an estimated 24.74mn b/d last year and should average 25.36mn b/d in 2007, before reaching 27.64mn b/d by 2010. Asia/Pacific gas consumption in 2006 is estimated at 419bcm, with demand of 602bcm targeted for 2010. Production last year of 342bcm should reach 490bcm by the end of the decade. Vietnam's share of consumption in 2006 was an estimated 1.67%, while its share of production is put at 1.59%. By 2010, its share of demand is forecast to be 2.82%, with the country accounting for 3.50% of supply.

For the whole of last year, our preliminary estimates of average prices are US$61.30 per barrel for the OPEC basket, US$65.03 for Brent, US$66.24/bbl for WTI and US$61.30 for Urals. For 2007, the revised BMI forecasts are for the OPEC basket to average US$55 per barrel. Based on last year's typical price differentials, this implies Brent at US$58.72, WTI averaging US$59.94/bbl, and Urals at US$55 per barrel. Our central view is that the OPEC basket price will slip from US$55/bbl this year to US$50 in 2008, before settling around US$45/bbl in 2009/2010.

Vietnamese real GDP growth is forecast by BMI at 8.2% for 2006, up from an estimated 8.0% in 2006.

We are assuming 8.2% growth in 2008, followed by 8.7% in 2009 and 8.5% in 2010. Exploration success is on the rise in Vietnam, with a growing number of international oil companies (IOCs) partnering PetroVietnam in finding and developing hydrocarbon resources - particularly gas. We are assuming oil and gas liquids production of no more than 380,000b/d by 2010, although the country is thought to have pumped 390,000b/d last year. Consumption is forecast to increase by 4-6% per annum to 2010, implying demand of 311,000b/d by the end of the forecast period. Gas supply and demand is forecast to increase from last year's estimated 7bcm to 17bcm by the end of the decade.

In the BMI Business Environment Ranking matrix, Vietnam receives a slightly higher composite score of 31, which now ranks the country joint seventh out of 14 states included in the Asia/Pacific region, alongside Thailand. The overall business environment can be considered neutral in a regional context, thanks to a very high level of perceived economic and political risk. These factors are offset partly by the country's high oil/gas reserves to production ratio (RPR) and healthy short- to medium-term gas output growth. Neither Vietnam's regulatory regime nor its competitive landscape is particularly attractive in a regional context. IOC spending has been rising, largely in conjunction with the development of the country's gas industry.