Vietnam Oil and Gas Report Q3 2009

The latest Vietnam Oil & Gas Report from BMI forecasts that the country will account for 1.49% of Asia Pacific regional oil demand by 2013, while providing 4.40% 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, 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. Vietnam's share of gas consumption in 2008 was an estimated 2.27%, while its share of production is put at 2.75%. By 2013, its share of gas consumption is forecast to be 3.81%, with the country accounting for 4.33% 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.

Vietnamese real GDP growth is now forecast by BMI at 2.9% for 2009, down from the 2008 level of 6.3%. We are assuming 6.0% growth in 2010, followed by 7.0% in 2011, 7.7% in 2012 and 7.9% in 2013.

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 peaking at 400,000b/d in 2010, before easing back to 385,000b/d by 2013. Beyond 2009, consumption is forecast to increase by around 7% per annum to 2013, implying demand of 434,000b/d by the end of the forecast period. Gas supply and demand is forecast to increase from the estimated 2008 figure of 10bcm to 21bcm by 2013.

Between 2008 and 2018, we are forecasting an increase in Vietnamese oil production of 6.5%, with crude volumes peaking at 400,000b/d in 2010, before slipping to 330,000b/d by 2018. Oil consumption between 2008 and 2018 is set to increase by 76.5%, with growth beyond 2009 slowing to an assumed 6.0-7.0% per annum towards the end of the period and the country using 589,000 b/d by 2018. Gas production is expected to rise from around 10bcm in 2008 to 27bcm in 2018. With identical demand growth, we see no potential for imports or exports during the period. Details of BMI's 10-year forecasts can be found in the appendix to this report, which provides global, regional and country-specific projections.

Vietnam now ranks second ahead of India in BMI's updated Upstream Business Environment rating, reflecting a reasonable resource position, better-than-average growth outlook, attractive licensing terms and an IOC-friendly competitive environment. The country sits well behind Australia. Vietnam now ranks equal eighth with the Philippines in BMI's updated Downstream Business Environment rating, reflecting its lack of 2008 refining capacity, but above-average oil and gas demand growth outlook, plus a low level of retail site intensity.