The latest Libya Oil & Gas Report from BMI forecasts that the country will account for 7.74% of African regional oil demand by 2014, while providing 15.82% of supply. African regional oil use of 2.98mn barrels per day (b/d) in 2001 rose to an estimated 3.60mn b/d in 2009. It should average 3.67mn b/d in 2010 and then rise to around 4.14mn b/d by 2014. Regional oil production was 7.84mn b/d in 2001, and in 2009 averaged an estimated 9.69mn b/d. It is set to rise to 11.79mn b/d by 2014. Oil exports are growing steadily, because demand growth is lagging behind the pace of supply expansion. In 2001, the region was exporting an average of 4.86mn b/d. This total had risen to an estimated 6.08mn b/d in 2009 and is forecast to reach 7.66mn b/d by 2014. Angola has the greatest production growth potential, with Nigerian exports set to soar if it can resolve recent quasi-political issues.
In terms of natural gas, the region in 2009 consumed an estimated 122.9bn cubic metres (bcm), with demand of 175.9bcm forecast for 2014. Production of an estimated 242.6bcm in 2009 should reach 391.9bcm in 2014, which implies net exports rising from 120bcm in 2009 to 216bcm in 2014. In 2009, Libya consumed an estimated 5.44% of the region’s gas, with its market share forecast at 4.49% by 2014. It contributed 7.42% to estimated 2009 regional gas production and by 2014 will account for 8.93% of supply.
We are sticking with our forecast that the OPEC basket of crudes will average US$83.00/bbl in 2010. Wide variations in crude differentials so far in 2010 make forecasting tricky for Brent, West Texas Intermediate (WTI) and Urals, but we believe the three benchmarks will average around US$85.11, US$88.22 and US$83.62/bbl respectively, with Dubai coming in at US$83.14. By 2011, there should be further growth in oil consumption and more room for OPEC to regain market share and reduce surplus capacity through higher production quotas. We are assuming a further increase in the OPEC basket price to an average of US$85.00/bbl. For 2012 and beyond, we continue to use a central case forecast of US$90.00/bbl for the OPEC basket.
For 2010, the BMI assumption for premium unleaded gasoline is an average global price of US$96.83/bbl. The year-on-year (y-o-y) rise in 2010 gasoline prices is put at 38%. Gasoil in 2010 is expected to average US$92.45/bbl, with the full-year outturn representing a 37% increase from the 2009 level. For jet fuel in 2010, the annual level is forecast to be US$95.58/bbl. This compares with US$70.66/bbl in 2009. The 2010 average naphtha price is estimated by BMI at US$82.46/bbl, up 39% from the previous year’s level.
Libyan real GDP is assumed by BMI to have fallen by 2.7% in 2009, followed by forecast 3.8% growth in 2010. We are assuming average annual growth of 5.0% in 2010-2014. We expect oil demand to rise from an estimated 274,000b/d in 2009 to 320,000b/d in 2014. State-owned National Oil Corporation (NOC) accounts for some 40% of oil production and all gas production, but it has a growing number of international oil company (IOC) partners contributing to a forecast rise in oil production from an estimated 1.69mn b/d in 2009 to 1.87mn b/d by 2014. The state itself has far more ambitious volume goals that may be frustrated by OPEC quota policy. Gas production should reach 35.0bcm by 2014, up from an estimated 18.0bcm in 2009. Consumption is expected to rise from around 6.7bcm to 7.9bcm by the end of the forecast period, allowing exports of 27.1bcm.
Between 2010 and 2019, we are forecasting an increase in Libyan oil and gas liquids production of 47.5%, with volumes rising steadily to 2.50mn b/d by the end of the 10-year forecast period. Oil consumption between 2010 and 2019 is set to increase by 39.6%, with growth slowing to an assumed 4.0% per annum towards the end of the period and the country using 390,000b/d by 2019. Gas production is expected to rise to 55bcm by the end of the period. With demand rising by 39.6% between 2010 and 2019, there should be export potential increasing to around 45bcm, via pipeline and in the form of LNG. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Libya holds fourth place in BMI’s composite Business Environment (BE) Ratings table, which combines upstream and downstream scores. It continues to occupy first place, above Gabon, in our updated upstream Business Environment Ratings, with a comfortable margin over its nearest rival of three points. The country’s score benefits from its proven oil reserves and a region-topping oil reserves-to-production ratio (RPR). The competitive landscape features numerous non-state companies, and licensing terms are generally good. However, country risk factors undermine some of the hydrocarbons-specific strength. Libya is in the middle of the league table in BMI’s downstream Business Environment Ratings, with a few high scores but near-term progress up the rankings unlikely. It is ranked sixth thanks to poor country risk factors, a largely state-controlled industry and moderate oil and gas demand growth prospects.