Saudi output dominance to continue, analyst says

Saudi Arabia will account for 20.93% of Middle Eastern regional oil demand by 2012 while providing a dominant 40.71% of supply, according to a recent analyst report.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Nov. 10 -- Saudi Arabia will account for 20.93% of Middle Eastern regional oil demand by 2012 while providing a dominant 40.71% of supply, according to a recent analyst report.

BMI's Saudi Arabia Oil & Gas Report also said that regional oil use, which stood at 8.24 million b/d in 2001 and rose to 10.61 million b/d in 2007, should average 10.86 million b/d in 2008 and rise to some 11.81 million b/d by 2012.

Regional oil production, which stood at 22.87 million b/d in 2001 and averaged 25.24 million b/d in 2007, is set to rise to 28.94 million b/d by 2012.

In terms of natural gas, the region in 2007 consumed 370 billion cu m, with demand of 541 billion cu m targeted for 2012, representing 46% growth.

Production of 363 billion cu m in 2007 should rise some 58% across the region and reach 575 billion cu m in 2012, which implies net exports rising to 34 billion cu m by the end of the period.

BMI said Saudi Arabia in 2007 consumed 20.50% of the region' gas, with its market share forecast at 17.78% by 2012. It contributed 20.91% to 2007 regional gas production and, by 2012, will account for 16.73% of supply.

Prices forecast
In second-quarter of this year, BMI estimates that the OPEC basket price averaged just under $115/bbl—up about 24% from the first quarter level. The OPEC basket price had exceeded $127 on May 22, slipping back towards $121/bbl later in the month.

In June, BMI assumed an average of around $120, to deliver its quarterly estimate of $114.98/bbl. The estimated second quarter average prices for the main marker blends are now $118.63 for Brent, $119.61 for West Texas Intermediate, and $115.89/bbl for Russian Urals (Mediterranean delivery).

"Our projections for 2008 as a whole have been revised upwards from the last quarterly report," the analyst said. "We are now assuming an OPEC basket price average of $106/bbl for 2008, compared with the $81 estimate provided by our last quarterly report."

Based on recent price differentials, this implies Brent at $109.71, WTI averaging $110.64/bbl, and Urals at $106.88/bbl.

Saudi GDP growth
Saudi real GDP growth is now forecast by BMI at 4.0% for 2008, following 3.4% in 2007. The analyst is assuming 4.3% growth in 2009, 3.6% in 2010-11, followed by 3.9% in 2012.

"We expect [Saudi] oil demand to rise from 2.15 million b/d in 2007 to 2.47 million b/d in 2012, representing 3.0% annual growth that lags our underlying economic assumptions," BMI said.

State-owned Saudi Aramco, wholly responsible for oil and liquids production, is forecast to increase output to 11.78 million b/d by 2012 from 10.41 million b/d in 2007.

There is no foreign involvement in the upstream oil segment, although international oil companies could have a role in future gas field development and are major players in refining and petrochemicals.

Saudi gas production should reach 96.2 billion cu m by 2012, up from 75.9 billion cu m in 2007.

Consumption will match the trend, leaving Saudi Arabia with no import requirement or export potential during the period.

In 2007-18, BMI is forecasting an increase in Saudi oil production of 29.7%, with volumes rising steadily to 13.5 million b/d by the end of the 10-year forecast period.

Oil consumption during 2007-18 is set to increase by 37.1%, with growth slowing to an assumed 3.0%/year towards the end of the period and the country using 2.95 million b/d by 2018.

Gas production is expected to rise to 117 billion cu m by the end of the period from 76 billion cu m.

"With 2007-18 demand growth of 54.5%, this provides a balanced market throughout the period," BMI said.

Contact Eric Watkins at hippalus@yahoo.com.

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