Libya Oil and Gas Report Q4 2010

Report Summary

The latest Libya Oil & Gas Report from BMI forecasts that the country will account for 7.52% of African regional oil demand by 2014, while providing 15.63% of supply. African regional oil use of 3.06mn barrels per day (b/d) in 2001 rose to 3.75mn b/d in 2009. It should average 3.81mn b/d in 2010 and then rise to around 4.26mn b/d by 2014. Regional oil production was 7.93mn b/d in 2001, and in 2009 averaged 9.67mn b/d. From a forecast 10.23mn b/d in 2010, it is set to rise to 11.93mn 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 4.87mn b/d. This total had risen to 5.92mn b/d in 2009 and is forecast to reach 7.67mn b/d by 2014. Angola has the greatest production growth potential, with Nigerian exports set to climb if it can resolve recent quasi-political issues.

In terms of natural gas, the region in 2010 will have consumed an estimated 122.9bn cubic metres (bcm), with demand of 165.6bcm forecast for 2014. Production of an estimated 219.5bcm in 2010 should reach 305.2bcm in 2014, which implies net exports rising from 97bcm to 140bcm in 2014. In 2010, Libya will consume an estimated 5.13% of the region’s gas, with its market share forecast at 5.80% by 2014. It will have contributed 7.38% to estimated 2010 regional gas production and by 2014 will account for 6.72% of supply.

For 2010 as a whole, we continue to assume an average OPEC basket price of US$83.00/bbl (+36.4% yo- y). Risk is now clearly on the downside, thanks to the slow progress made during June. However, a full year outturn in excess of US$80 remains a strong possibility and we see no need to review our assumptions at this point. The 2010 US WTI price is now put at US$87.63/bbl. BMI is assuming an OPEC basket price of US$85.00/bbl in 2011, with WTI averaging US$89.74. Our central assumption for 2012 and beyond is an OPEC price averaging US$90.00/bbl, delivering WTI at just over US$95.00. For 2010, the BMI assumption for premium unleaded gasoline is an average global price of US$95.45/bbl.

The overall y-o-y rise in 2010 gasoline prices is put at 36%. Gasoil in 2010 is expected to average US$93.23/bbl. The full-year outturn represents a 35% increase from the 2009 level. For 2010, the annual jet price level is forecast to be US$95.90/bbl. This compares with US$70.66/bbl in 2009. The 2010 average naphtha price is put by BMI at US$83.53/bbl, up 41% from the previous year’s level. Libyan real GDP is assumed by BMI to have risen by 3.8% in 2010. We are assuming average annual growth of 4.7% in 2010-2014. We expect oil demand to rise from an estimated 279,000b/d in 2010 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 1.66mn b/d in 2010 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 21bcm by 2014, up from an estimated 16bcm in 2010. Consumption is expected to rise from around 6bcm to almost 10bcm by the end of the forecast period, allowing exports of 11bcm.

Between 2010 and 2019, we are forecasting an increase in Libyan oil and gas liquids production of 38.6%, with volumes rising steadily to 2.30mn 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 27bcm by the end of the period. With demand rising by 85.4% between 2010 and 2019, there should be export potential increasing to around 15bcm, 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 now shares fifth place with Angola in BMI’s composite Business Environment (BE) ratings table, which combines upstream and downstream scores. It continues to occupy first place, this time shared with Gabon, in our updated upstream Business Environment ratings. 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 statecontrolled industry and moderate oil and gas demand growth prospects.

Table of Contents

Executive Summary  7

Libya Energy Market Overview  9
Global Oil Market Review  11
Drifting With The Tide  11
Quarterly Trends  12
Deepwater Turbulence  12
Global Oil Market Outlook  14
Waiting For The Wind To Change  14
Oil Price Forecasts  14
Oil Supply, Demand And Price Outlook  16
Short-Term Demand Outlook  16

Table: Global Oil Consumption (000b/d)  17

Short-Term Supply Outlook  17

Table: Global Oil Production (000b/d) 18

Longer-Term Supply And Demand  19
Oil Price Assumptions  20

Table: Crude Price Assumptions 2010  20

Table: Oil Price Forecasts  20

Regional Market Overview  21
Oil Supply And Demand 21

Table: Africa’s Oil Consumption, 2007-2014 (000b/d)  22

Table: Africa’s Oil Production, 2007-2014 (000b/d)  23

Oil: Downstream  24

Table: Africa’s Oil Refining Capacity, 2007-2014 (000b/d)  24

Gas Supply And Demand  25

Table: Africa’s Gas Consumption, 2007-2014 (bcm)  25

Table: Africa’s Gas Production, 2007-2014 (bcm)  26

Liquefied Natural Gas  27

Table: Africa’s LNG Exports, 2007-2014 (bcm)  27

Business Environment Ratings  28
Composite Scores 28

Table: Regional Composite Business Environment Rating  28

Upstream Scores  29

Table: Regional Upstream Business Environment Ratings  29

Libya Upstream Rating – Overview  30
Libya Upstream Rating – Overview  30
Libya Upstream Rating – Rewards  30
Libya Upstream Rating – Risks  30
Downstream Scores  31

Table: Regional Downstream Business Environment Ratings  31

Libya Downstream Rating – Overview  32
Libya Downstream Rating – Rewards  32
Libya Downstream Rating – Risks  32
Risk Summary  33
Political  33
Economic  33
Business Environment  33
Industry Forecast Scenario  34
Oil And Gas Reserves  34
Oil Supply And Demand  35
Gas Supply And Demand  35
LNG  36
Refining And Oil Products Trade  36
Revenues/Import Costs  36

Table: Libya Oil And Gas – Historical Data And Forecasts  37

Other Energy  38

Table: Libya Other Energy – Historical Data And Forecasts  38

Key Risks To BMI’s Forecast Scenario  38
Long-Term Oil And Gas Outlook  39
Oil And Gas Infrastructure  40
Oil Refineries  40

Table: Refineries In Libya  40

Oil Terminals/ Ports  41
Oil Pipelines  41
LNG Terminals  41

Table: LNG Terminals in Libya  42

Gas Pipelines  42
Macroeconomic Outlook  43

Table: Libya – Economic Activity  44

Competitive Landscape  45
Executive Summary  45

Table: Key Players – Libyan Oil And Gas Sector  46

Overview/State Role  46
Licensing And Regulation  46
Government Policy  47
Licensing Rounds  48
International Energy Relations  49

Table: Key Upstream Players  50

Table: Key Downstream Player  50

Company Monitor  51
National Oil Corporation (NOC)  51
Eni North Africa  55
Total Libya  58
OMV of Libya  61
Repsol YPF Libya  64
BP – Summary  67
ExxonMobil – Summary  67
Tatneft – Summary  68
Occidental Petroleum – Summary 69
ConocoPhillips – Summary  69
Marathon Oil – Summary  70
BG Group – Summary  70
Hess – Summary  71
Woodside Petroleum – Summary  71
Chevron – Summary 71
Statoil – Summary  72
Royal Dutch Shell – Summary  72
Suncor – Summary  72
PGNiG – Summary  73
Gazprom – Summary  73
RWE – Summary  73
Verenex Energy – Summary  74
Others – Summary  75
Oil And Gas Outlook: Long-Term Forecasts  76
Regional Oil Demand  76

Table: Africa’s Oil Consumption, 2012-2019 (000b/d)  76

Regional Oil Supply  77

Table: Africa’s Oil Production, 2012-2019 (000b/d)  77

Regional Refining Capacity  78

Table: Africa’s Oil Refining Capacity, 2012-2019 (000b/d)  78

Regional Gas Demand  79

Table: Africa’s Gas Consumption, 2012-2019 (bcm)  79

Regional Gas Supply  80

Table: Africa’s Gas Production, 2012-2019 (bcm)  80

Libya Country Overview  80
Methodology And Risks To Forecasts  81
Glossary Of Terms  82
Oil And Gas Ratings: Revised Methodology  83
Introduction  83
Ratings Overview  83

Table: BMI Oil And Gas Business Environment Ratings: Structure  84

Indicators  85

Table: BMI Oil And Gas Business Environment Upstream Ratings: Methodology  85

Table: BMI Oil And Gas Business Environment Downstream Ratings: Methodology  86

BMI Methodology  88
How We Generate Our Industry Forecasts  88
Energy Industry  88
Cross checks  89
Sources  89

List of Tables

Table: Global Oil Consumption (000b/d) . 17
Table: Global Oil Production (000b/d). 18
Table: Crude Price Assumptions 2010 . 20
Table: Oil Price Forecasts . 20
Table: Africa's Oil Consumption, 2007-2014 (000b/d) . 22
Table: Africa's Oil Production, 2007-2014 (000b/d) . 23
Table: Africa's Oil Refining Capacity, 2007-2014 (000b/d) . 24
Table: Africa's Gas Consumption, 2007-2014 (bcm) . 25
Table: Africa's Gas Production, 2007-2014 (bcm) . 26
Table: Africa's LNG Exports, 2007-2014 (bcm) . 27
Table: Regional Composite Business Environment Rating . 28
Table: Regional Upstream Business Environment Ratings . 29
Table: Regional Downstream Business Environment Ratings . 31
Table: Libya Oil And Gas – Historical Data And Forecasts . 37
Table: Libya Other Energy – Historical Data And Forecasts . 38
Table: Refineries In Libya . 40
Table: LNG Terminals in Libya . 42
Table: Libya – Economic Activity . 44
Table: Key Players – Libyan Oil And Gas Sector . 46
Table: Key Upstream Players . 50
Table: Key Downstream Player . 50
Table: Africa's Oil Consumption, 2012-2019 (000b/d) . 76
Table: Africa's Oil Production, 2012-2019 (000b/d) . 77
Table: Africa's Oil Refining Capacity, 2012-2019 (000b/d) . 78
Table: Africa's Gas Consumption, 2012-2019 (bcm) . 79
Table: Africa's Gas Production, 2012-2019 (bcm) . 80
Table: BMI Oil And Gas Business Environment Ratings: Structure . 84
Table: BMI Oil And Gas Business Environment Upstream Ratings: Methodology . 85
Table: BMI Oil And Gas Business Environment Downstream Ratings: Methodology . 86