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Look Towards A New Future

Aug 9, 2010

Norway Oil and Gas Report Q2 2010

Norway Oil and Gas Report Q2 2010


Countries covered: Norway

The latest Norway Oil & Gas Report from BMI forecasts that the country will account for just 1.65% of Developed European regional oil demand by 2014, while contributing 51.67% to supply. In Developed Europe, overall oil consumption was an estimated 13.28mn barrels per day (b/d) in 2009. It is set to recover to around 13.53mn b/d by 2014. Developed Europe regional oil production was 6.96mn b/d in 2001, and in 2009 averaged an estimated 4.79mn b/d. It is set to fall to just 3.70mn b/d by 2014. Oil imports are growing steadily because supply is contracting and demand is rising, albeit slowly. In 2009, net crude imports were an estimated 8.49mn b/d. By 2014, they are expected to have reached 9.83mn b/d. Norway will remain the only major net exporter, with the UK becoming a net importer.

As regards natural gas, the Developed Europe region in 2009 consumed an estimated 426bn cubic metres (bcm), with demand of 473bcm targeted for 2014, representing 10.9% growth. Production of an estimated 265bcm in 2009 is set to fall to 263bcm in 2014, which implies net imports rising from the estimated 2009 level of 161bcm to some 210bcm by the end of the period. Norway’s share of gas consumption in 2009 was an estimated 1.05%, while it contributed 39.28% to production. By 2014, its share of gas consumption is forecast to be unchanged at 1.05%, with a 45.62% contribution to regional supply. For 2009 as a whole, we have assumed an average OPEC basket price of US$60.70 per barrel (bbl), a 35.5% decline year-on-year (y-o-y). For 2010, we expect to see a significant oil price recovery to US$83.00/bbl for the OPEC basket price, gaining further ground to US$85.00 in 2011 and to US$90.00/bbl in 2012 and beyond.

In 2010, BMI is now forecasting premium unleaded gasoline prices to average US$97.00, up from US$70.22/bbl in 2009. We are assuming an average global jet fuel price for 2010 of US$97.58/bbl, compared with US$70.63 in 2009. For gasoil, the 2010 price estimate is for an average of US$97.40/bbl, compared with US$70.50 in 2009. The FY10 naphtha price average, estimated at US$81.58/bbl compares with US$59.07 in FY09.

Norwegian real GDP is assumed by BMI to have fallen by 1.5% in 2009, compared with growth of 2.1% in 2008. We are assuming 1.9% average annual growth in 2010-2014. Recent (January 2010) Norwegian oil and liquids production has averaged 2.26mn b/d. We expect the country’s 2010 oil and liquids production to be about 2.21mn b/d, down from an estimated 2.40mn b/d in 2009. By 2014, liquids volumes look set to have slipped to 1.91mn b/d. Oil demand could rise to 223,000b/d by 2014, implying net exports slipping from an estimated 2.19mn b/d in 2009 to 1.69mn b/d by the end of the period. Estimated 2009 gas production of 104bcm should continue to rise towards at least 120bcm by 2012-2014. Domestic gas consumption rising from an estimated 4.5bcm to 5.0bcm over the period 2009-2014 suggests that net exports will rise to 115bcm by the end of the forecast period.

Between 2009 and 2019, we forecast a decline in Norwegian oil production of 26.9%, with output slipping steadily from an estimated 2.40mn b/d in 2009 to 1.75mn b/d at the end of the 10-year forecast period. Given a mere 3.8% increase in oil consumption over the period, exports slide from 2.19mn b/d to 1.53mn b/d by 2019. Gas production should rise from the estimated 2009 level of 104bcm to a peak of 120bcm in 2012-2014, before falling to 100bcm by 2019. Most exports will continue to be in the form of pipeline gas, with some liquefied natural gas (LNG). Details of BMI’s 10-year forecasts can be found in the appendix to this report.

According to BMI’s country risk team, Norway’s long-term political risk score is 99.0, compared with the Developed Markets average of 86.8 and the global average of 63.2. Our long-term economic rating for the country is 74.8, above the Developed Markets average of 67.2 and above the global average of 53.6. There is a partly privatised energy sector, with government majority ownership of the key company Statoil, formed in 2007 from Statoil and the oil and gas interests of Norsk Hydro. Norway has a major, but mature and highly competitive, upstream oil and gas segment, featuring most key national and international companies. The downstream oil segment is small, open to competition and deregulated.

http://www.reportsandreports.com/market-reports/norway-oil-and-gas-report-q2-2010/