The latest Saudi Arabia Oil & Gas Report from BMI forecasts that the country will account for 23.12% of Middle Eastern (ME) regional oil demand by 2014, while providing a dominant 39.37% of supply. Regional oil use of 7.47mn barrels per day (b/d) in 2001 rose to an estimated 10.64mn b/d in 2009. It should average 10.98mn b/d in 2010 and then rise to around 11.95mn b/d by 2014. Regional oil production was 22.83mn b/d in 2001, and averaged an estimated 24.66mn b/d in 2009. It is set to rise to 27.18mn b/d by 2014. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 15.36mn b/d. This total had eased to an estimated 14.02mn b/d in 2009 and is forecast to reach 15.23mn b/d by 2014. Iraq has the region's greatest production growth potential, followed by Qatar.
In terms of natural gas, the Middle East consumed an estimated 367.6bn cubic metres (bcm) in 2009, with demand of 492.5bcm targeted for 2014, representing 28.7% growth. Estimated production of 429.9bcm in 2009 should reach 657.8bcm in 2014 (+39.8%), which implies net exports rising to 165.0bcm by the end of the period. Saudi Arabia consumed an estimated 22.09% of the region's gas in 2009, with its market share forecast to reach 21.72% by 2014. It contributed an estimated 21.59% to 2009 regional gas production and, will account for 23.27% of supply by 2014.
We are sticking with our forecast that the OPEC basket of crudes will average US$83.00/bbl in 2010. Wide variations in crude differentials so far in 2010 make forecasting tricky for Brent, West Texas Intermediate (WTI) and Urals, but we believe the three benchmarks will average around US$85.11, US$88.22 and US$83.62/bbl respectively, with Dubai coming in at US$83.14. By 2011, there should be further growth in oil consumption and more room for OPEC to regain market share and reduce surplus capacity through higher production quotas. We are assuming a further increase in the OPEC basket price to an average US$85.00/bbl. For 2012 and beyond, we continue to use a central case forecast of US$90.00/bbl for the OPEC basket.
BMI's assumption for premium unleaded gasoline in 2010 is an average global price of US$96.83/bbl. The year-on-year (y-o-y) rise in 2010 gasoline prices is put at 38%. Gasoil is expected to average US$92.45/bbl in 2010, with the full-year outturn representing a 37% increase from the 2009 level. The annual level for jet fuel in 2010 is forecast to be US$95.58/bbl, compared with US$70.66/bbl in 2009. BMI puts the average naphtha price at US$82.46/bbl in 2010, up 39% from the previous year's level. We assume that Saudi Arabian real GDP grew by 0.2% in 2009 and forecast 2.0% growth in 2010. Average annual GDP growth from 2010-2014 is put at 2.7%. We expect oil demand to rise from an estimated 2.34mn b/d in 2009 to 2.76mn b/d in 2014, representing around 3.0% annual growth beyond 2009 and broadly matching our underlying economic assumptions.
State-owned Saudi Aramco is wholly responsible for oil and liquids production, which is forecast to rise from an estimated 9.91mn b/d in 2009 to 10.70mn b/d by 2014. There is no foreign involvement in the upstream oil segment, although international oil companies (IOCs) could have a role in future gas field development and are major players in refining and petrochemicals. Gas production should reach 107bcm by 2014, up from an estimated 81bcm in 2009. Consumption should match the trend, leaving Saudi Arabia with no import requirement or export potential during the period.
Between 2010 and 2019 we forecast an increase in Saudi Arabian oil production of 21.9%, with volumes rising steadily to 12.10mn b/d by the end of the 10-year forecast period. Oil consumption is set to increase by 28.6%, with growth slowing to an assumed 3.0% a year towards the end of the period and the country using 3.20mn b/d by 2019. Gas production is expected to rise from an estimated 81bcm to 117bcm by the end of the period. Demand growth of 43.8% from 2010-2019 will provide a balanced market throughout the period. Details of BMI's 10-year forecasts can be found in the appendix to this report.
Saudi Arabia shares last place with Kuwait in BMI's composite Business Environment Ratings (BERs) table, which combines Upstream and Downstream scores. The country is also ranked a surprising last place, behind Oman, in BMI's updated Upstream Business Environment Rating. It clearly has an unrivalled oil resource and production position, but this is not sufficient to keep the country away from the foot of the regional league table. It is three points behind Oman and shows few signs of having the ability to challenge its smaller rival. Saudi Arabia is just in the lower half of the league table in BMI's Downstream Business Environment rating, with a few high scores and longer-term progress up the rankings a possibility. It is ranked equal fifth with Qatar, thanks largely to high scores for refining capacity, oil and gas demand and nominal GDP. Generally healthy country risk factors help bolster the overall score.
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