Romania Oil and Gas Report Q3 2009

Abstract

The latest Romania Oil & Gas Report from BMI forecasts that the country will account for 4.42% of
Central and Eastern European (CEE) regional oil demand by 2013, while providing just 0.56% of supply.
CEE regional oil use of 4.65mn barrels per day (b/d) in 2001 rose to an estimated 5.39mn b/d in 2008. It
should average 5.33mn b/d in 2009 and then rise to around 5.85mn b/d by 2013. Regional oil production
was 8.83mn b/d in 2001, and in 2008 averaged an estimated 12.93mn b/d. It is set to rise to 14.39mn 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 4.18mn b/d. This total had risen to an estimated
7.54mn b/d in 2008 and is forecast to reach 8.54mn b/d by 2013.
As regards natural gas, the region in 2008 consumed an estimated 636.7bn cubic metres (bcm), with
demand of 737.8bcm targeted for 2013, representing 13.0% growth. Production of an estimated 778.7bcm
in 2008 should reach 906.1cm in 2013, which implies net exports rising from 141.9bcm in 2008 to
168.3bcm by the end of the period. Romania’s share of 2008 regional gas consumption was an estimated
2.83%, while its share of production is put at 1.36%. By 2013, its share of demand is forecast to be
3.16%, with the country accounting for 0.97% 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/bbl 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% year-on-year). 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.
Romanian real GDP is now forecast by BMI to fall 4.2% in 2009, compared with growth of 7.1% in
2008. We are assuming zero growth in 2010, 2.5% in 2011, 2.3% in 2012, followed by 5.4% in 2013.
Beyond the likely weakness of 2009/2010, oil demand could potentially grow at 3.0% per annum, rising
to 259,000b/d by 2013. In spite of greater efforts by the OMV-backed national oil company Petrom, we
see domestic oil production slipping from an estimated 99,000b/d in 2008 to 80,000b/d by 2013. This
implies rising import levels, with volumes up to 179,000b/d by 2013. Natural gas consumption of an
estimated 17.3bcm in 2008 can be expected to reach 23.3bcm by 2013. Romania’s gas production is
forecast to slip to no more than 8.8bcm by 2013, providing an import requirement of at least 14.5bcm.
Between 2008 and 2018, we are forecasting an increase in Romanian oil consumption of 29.2%, with
import volumes rising steadily from an estimated 135,000b/d to 240,000b/d by the end of the 10-year
forecast period. Domestic production is forecast to fall from an estimated 99,000b/d to 60,000b/d during
the period. Gas consumption is expected to up from an estimated 17.3bcm to 27.7bcm by 2018, met by
20.5bcm of imports. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Romania shares eighth place with Bulgaria in BMI’s updated Upstream Business Environment rating,
just behind Slovakia and Ukraine. Its gas production growth outlook, asset maturity and under-developed
competitive landscape work against the country, and are exacerbated by poor country risk factors. Longterm
scope exists for Romania to pull away from Bulgaria, as long as the government does not renationalise
OMV-managed Petrom. The country is near the top of the league table in BMI’s Downstream
Business Environment rating, with a few high scores but progress further up the rankings from second
place rather unlikely. There are decent scores for refining capacity, oil and gas demand, and retail site
intensity. Russia is just one point below it in the regional rankings, and there is significant risk of it
challenging for Romania’s second place over the medium term.