Abstract
BMI forecasts that Iraq will account for 8.67% of Middle East (ME) regional
oil demand by 2013, while
providing 10.92% of 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 386bn cubic metres (bcm), with
demand of 511bcm
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. Iraq in 2008 consumed
an estimated 1.30% of the region’s gas, with its market share
forecast
at 1.29% by 2013. It contributed 1.23% to estimated 2008 regional
gas production and by 2013 could
account for 2.72% of supply.
In terms
of the OPEC basket of crudes, the average price in Q109 was an estimated
US$45.78 per barrel
(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. BMI 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 BMI 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 BMI 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 BMI 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.
Iraq’s real GDP growth is
now forecast by BMI at 6.1% for 2009, following 10.9% in 2008. We are
assuming 6.0% growth in 2010, 7.4% in 2011, followed by 7.2% in 2012, and 4.9%
in 2013. We expect
estimated oil demand of 700,000b/d in 2008 to rise to
1.02mn b/d in 2013, depending on investment in
infrastructure and the
development of domestic production. International oil companies (IOCs) are
in
2009 expected to join production sharing agreements (PSAs) with the
state, which should help accelerate
the growth in oil output. Based on the
efforts of national oil industry bodies, we are forecasting average
oil
production of 2.40mn b/d in 2009. March 2009 production was 2.27mn b/d, with
1.82mn b/d of
exports. Further field reactivation work and the initial IOC
efforts point to output of an estimated 3.10mn
b/d in 2013. The government
has much more ambitious targets, aiming for 0.5mn b/d annual output
expansion and a long-tem goal of 6.0mn b/d. However, there are major risks
involving attacks on oil
installations, Iraq’s OPEC entitlement and
the success of new energy policy in stimulating IOC
investment.
Between 2008 and 2018, we are forecasting an increase in Iraqi oil production
of 66.0%, with crude
volumes rising steadily to 3.90mn b/d by the end of
the 10-year forecast period. Oil consumption between
2008 and 2018 is set
to increase by 86.7%, with growth slowing to an assumed 5.0% per annum
towards
the end of the period and the country using 1.31mn b/d by 2018.
Gas production is expected to climb to
35bcm by the end of the period.
With 2008-2018 demand growth of 166%, this provides export potential
rising to 24.4bcm by 201. Details of the new BMI 10-year forecasts can be
found in the appendix to this
report.
Iraq still occupies a
respectable third place in BMI’s updated Upstream Business Environment
rating, but
is seven points behind the UAE and therefore unlikely to move
higher over the medium term. The
country’s score benefits from
exceptional oil and gas output growth potential, a substantial
hydrocarbons
reserves base and the region’s highest
reserves-to-production ratios (RPR). Strict government control of
the
upstream industry and a high level of country-specific risk prevent Iraq
achieving a better overall
score. The country is still at the bottom of
the league table in BMI’s Downstream Business Environment
rating,
with a few high scores and near-term progress up the rankings unlikely. It is
ranked last, below
Kuwait, thanks largely to country risk factors that
outweigh a reasonable showing in terms of oil demand,
oil/gas demand
growth and likely refining capacity expansion.
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