Vietnam Oil and Gas Report Q4 2009

The latest Vietnam Oil & Gas Report from BMI forecasts that the country will account for 1.52% 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 25.67mn b/d in 2008. It should average 24.83mn b/d in 2009, then rise to around 28.51mn b/d by 2013. Regional oil production was just under 8.41mn b/d in 2001, and averaged 8.45mn b/d in 2008. It is set to increase to 8.75mn b/d by 2013. In 2001 the region was importing an average 12.99mn b/d. This total had risen to an estimated 17.22mn b/d in 2008, and is forecast to reach 19.76mn b/d by 2013.

In terms of natural gas, in 2008 the region consumed 459bn cubic metres (bcm) and demand of 562bcm is targeted for 2013. Production of 356bcm in 2008 should reach 488bcm in 2013, but implies net imports easing from an estimated 102bcm per annum in 2008 to 74bcm in 2013. This is in spite of many Asian gas producers being major exporters. Vietnam's share of gas consumption in 2008 was 1.72%, while its share of production is put at 2.22%. By 2013, its share of gas consumption is forecast to be 3.74%, with the country accounting for 4.30% 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.

Vietnamese real GDP growth is now forecast by BMI at 2.9% for 2009, down from the 2008 level of 6.2%. We are assuming 5.0% 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 2008 figure of 8bcm to 21bcm by 2013.

Between 2008 and 2018, we are forecasting an increase in Vietnamese oil production of 4.1%, 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 8bcm 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 at the end of this report, which provides regional and country-specific projections.

Vietnam still 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 seventh 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.