July 19, 2011 -
PRLog -- The latest Ecuador Oil & Gas Report from BMI forecasts that the country will account for 2.97% of Latin America regional oil demand by 2015, while providing 3.64% of supply. Latin American regional use was an estimated 7.88mn barrels per day (b/d) in 2010. It should rise to 8.07mn b/d in 2011 and reach 8.69mn b/d by 2015. Regional oil production in 2010 averaged an estimated 10.03mn b/d. It is set to rise to 11.66mn b/d by 2015. Oil exports have been slipping, because demand growth has exceeded the pace of supply expansion. In 2001, the region was exporting an average of 3.46mn b/d. This total fell to an estimated 2.15mn b/d in 2010 and is forecast to rebound to 2.97mn b/d in 2015. The principal exporters will be Mexico, Venezuela, Colombia and Brazil. In terms of natural gas, the region in 2010 consumed an estimated 209bn cubic metres (bcm), with demand of 264bcm targeted for 2015. Production of an estimated 221bcm in 2010 should reach 273bcm in 2015, and implies more than 8bcm of net exports at the end of the period. Ecuador's share of regional gas production and consumption will remain insignificant, accounting for no more than 0.38% of the market by 2015. The 2010 full-year outturn was US$77.45/bbl for OPEC crude, which delivered an average for North Sea Brent of US$80.34/bbl and for West Texas Intermediate (WTI) of US$79.61/bbl. The BMI price target of US$77 was reached thanks to the early onset of particularly cold weather, which drove up demand for and the price of heating oil during the closing weeks of the year. We set our 2011 supply, demand and price forecasts in early January, targeting global oil demand growth of 1.53% and supply growth of 1.91%. With OECD inventories at the top of their five-year average range, we set a price forecast of US$80/bbl average for the OPEC basket in 2011. The unprecedented wave of popular uprisings in the Middle East and North Africa (MENA) that followed the removal of Tunisian President Ben Ali on January 14 has obviously fundamentally altered our outlook, particularly since the unrest spread to Libya in mid-February. Taking into account the risk premium that has been added to crude prices in response to actual and perceived threats to supply, we have now raised our benchmark OPEC basket price forecast from US$80 to US$90/bbl for 2011 and from US$85 to US$95/bbl for 2012. Based on our expectations for differentials, this gives a forecast for Brent at US$94/bbl in 2011 and US$99/bbl in 2012. We have kept our long-term price assumption of US$90/bbl (OPEC basket) in place for the time being while we wait to see what path events in the MENA region take. We have also retained our existing supply and demand forecasts until the scheduled quarterly revision at the start of April. Ecuador's real GDP in 2010 rose by 2.2%. We are forecasting 2.7% average annual growth in 2010-2015. State-
owned Petroecuador has historically cooperated with several international oil companies (IOCs) and they between them delivered a rising volume of crude over the past few years. However, nationalisation and reduced investment have led to the stagnation of output. We are assuming oil and gas liquids production of no more than 425,000b/d by 2015, with the country expected to pump 460,000b/d in 2011. Beyond 2009/10, consumption is forecast to increase by around 3% per annum, implying demand of 258,000b/d by the end of the forecast period. The net export capability would therefore be approximately 167,000b/d by 2015. Between 2010 and 2020, we are forecasting a decline in Ecuador's oil production of 16.7%, with crude volumes falling from an estimated 480,000b/d in 2010 to 400,000b/d by the end of the 10-year forecast period. Oil consumption between 2010 and 2020 is set to increase by 34.4%, with growth averaging around 3.0% per annum towards the end of the period and the country using 299,000b/d by 2020. Gas production and consumption could double, albeit from a very low base over the period. Details of BMI's 10-year forecasts can be found in the appendix to this report. Ecuador holds seventh place, ahead of Mexico, in BMI's composite Business Environment (BE) ratings, which combine upstream and downstream scores. The country ranks seventh in BMI's updated upstream Business Environment ratings, just ahead of Bolivia. Scores are mid-table or higher for proven oil reserves and reserves-to-
production ratios (RPR). However, country risk is high, oil production growth prospects are poor and the privatisation trend is unattractive, with increasing state involvement in upstream activities. Ecuador now holds eighth place, above Venezuela, in BMI's downstream Business Environment ratings, reflecting an unusually high country risk, regulatory concerns, state ownership of assets and a less-than-stellar growth outlook. The score falls just one point short of Chile, but there is little chance of progress in the next few quarters.
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