Israel will account for 2.52% of Middle East (ME) regional oil demand by 2013

July 29, 2009 - PRLog -- The latest Israel Oil & Gas Report forecasts that the country will account for 2.52% of Middle East (ME) regional oil demand by 2013, while making no appreciable contribution to rising oil supply.

Regional oil use of 8.24mn barrels per day (b/d) in 2001 rose to an estimated 10.86mn b/d in 2008. It should average 11.09mn b/d in 2009 and then rise to around 12.08mn b/d by 2013. Regional oil production was 22.87mn b/d in 2001, and in 2008 averaged an estimated 25.94mn b/d. It is set to rise to 28.99mn b/d by 2013. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 14.63mn b/d. This total had risen to an estimated 15.18mn b/d in 2008 and is forecast to reach 16.58mn b/d by 2013. Iraq has the greatest production growth potential, followed by Qatar.

As regards natural gas, the region in 2008 consumed an estimated 386bcm, with demand of 511bn cubic metres (bcm) targeted for 2013, representing 32.3% growth. Production of an estimated 407bcm in 2008 should reach 625bcm in 2013 (+53.8%), which implies net exports rising to 115bcm by the end of the period. Israel in 2008 consumed an estimated 1.81% of the region's gas, with its market share forecast at 2.06% by 2013. It contributed an estimated 1.72% to 2008 regional gas production and, by 2013, will account for 1.12% of supply.

In terms of the OPEC basket of crudes, the average price in Q1 2009 was an estimated US$45.78/bbl, down 13% from the US$52.51 recorded during the previous three months. During the second quarter, there has been little change to our view of oil market developments. The report 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% y-o-y). The 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 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 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.

Israel's real GDP is now forecast to fall 1.8% in 2009, compared with growth of 5.5% in 2008.

We assume 2.0% growth in 2010, 2.1% in 2011, 2.4% in 2012, followed by 2.6% in 2013. We expect oil demand to rise from an estimated 285,000b/d in 2008 to 297,000b/d in 2013, although the state would like to minimise dependency on imports and exploit fully the country's modest gas resources. A lack of serious upstream prospects and limited international oil company (IOC) participation mean Israel is likely to continue importing virtually all the oil needed to supply its domestic refineries. Domestic gas production has risen following the start-up of the Tethys Sea project, with up to 7bcm of supply available.

Gas imports could be as high as 3.5bcm per annum by 2013.

Between 2008 and 2018, we are forecasting an increase in Israeli oil consumption of 12.3%, with demand rising steadily from 285,000b/d to 320,000b/d by the end of the 10-year forecast period. Refining capacity between 2008 and 2018 is set to increase by 59.1%, reaching 350,000b/d by 2018. Gas production is expected to climb from 6bcm to a plateau of 7bcm. With 2008-2018 demand growth of 91.4%, this provides an import requirement increasing to 6.4bcm during the forecast period. Details of the new 10-year forecasts can be found in the appendix to this report.

Israel shares seventh place with Bahrain in the updated Upstream Business Environment rating, although Kuwait just one point below could challenge its position as it has far greater upstream potential – should the competitive environment improve. Israel's score benefits from the state's non-involvement in the upstream segment, the licensing terms and privatisation progress, plus the healthy country risk outlook. The overall score is dragged down by the lack of hydrocarbon resources and growth prospects.

The country is well in the upper half of the league table in the updated Downstream Business Environment rating, with a few high scores but near-term progress further up the rankings unlikely. It is ranked third, two points behind the UAE and ahead of Oman, thanks largely to excellent country risk factors that outweigh a modest showing in terms of oil/gas demand, oil demand growth and likely refining capacity expansion. Oman represents little immediate threat, but the UAE is likely to remain out of reach.

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