Business Monitor International
Iran's Neka Oil Terminal
Summary: BMI forecasts that Iran will account for 15.96% of Middle East (ME) regional oil demand by 2012, while providing 15.55% of supply. ME regional oil use of 8.24mn b/d in 2001 rose to an estimated 10.61mn b/d in 2007. It should average 10.86mn b/d in 2008 and then rise to around 11.84mn b/d by 2012. Regional oil production was 22.87mn b/d in 2001, and in 2007 averaged an estimated 25.56mn b/d. It is set to rise to 28.94mn b/d by 2012.
In terms of natural gas, the region in 2007 consumed an estimated 371bcm, with demand of 542bcm targeted for 2012, representing 46% growth. Production of an estimated 368bcm in 2007 should reach 576bcm in 2012 (+56%), which implies net exports rising to 34bcm by the end of the period. Iran in 2007 consumed an estimated 29.65% of the region's gas, with its market share forecast at 29.51% by 2012. It contributed an estimated 31.22% to 2007 regional gas production and, by 2012, will account for 34.72% of supply. In Q108, we estimate that the OPEC basket price averaged US$92.64 per barrel - up around 9% from the Q407 level. The OPEC basket price had exceeded US$102 by the middle of March, slipping back towards US$96/bbl later in the month. The estimated Q108 average prices for the main marker blends are now US$96.54 for Brent, US$97.31 for WTI and US$93.44/bbl for Russian Urals (Mediterranean delivery).
Our projections for 2008 as a whole are revised upwards from BMI's last quarterly report. We are now assuming an OPEC basket price average of US$81 per barrel for 2008, compared with the US$74 estimate provided by our last quarterly report. Based on recent price differentials, this implies Brent at US$84.71, WTI averaging US$85.63/bbl, and Urals at US$81.88/bbl. Iranian real GDP growth is estimated by BMI at 5.0% for 2008, following an estimated 5.4% in 2007. We are assuming 4.6% growth in 2009 and 4.4% in 2010/11, followed by 3.5% in 2012. We expect oil demand to rise from an estimated 1.71mn b/d in 2007 to 1.89mn b/d in 2012, failing to match the underlying rate of economic expansion. State-owned National Iranian Oil Company (NIOC) is responsible for all upstream oil and gas activities, although there is some small-scale participation by international oil companies (IOCs) on a sub-contractor basis.
The lack of large-scale IOC investment contributes to modest output growth, with crude production forecast to increase from an estimated 4.35mn b/d in 2007 to 4.50mn b/d in 2012, subject to OPEC quotas and the possible impact of any sanctions resulting from the nuclear energy debate. Gas production should reach 200bcm by 2012, up from an estimated 115bcm in 2007. Consumption is expected to rise from 110bcm to 160bcm by the end of the forecast period, providing exports of 40bcm. Between 2007 and 2018, we are forecasting an increase in Iranian oil production of 9.2%, with crude volumes rising steadily to 4.75mn b/d by the end of the 10-year forecast period.
Oil consumption between 2007 and 2018 is set to increase by 31.8%, with growth slowing to an assumed 3.0% per annum towards the end of the period and the country using 2.26mn b/d by 2018. Gas production is expected to climb to 280bcm by the end of the period. With 2007-2018 demand growth of 89%, this provides export potential rising from just 5bcm to almost 72bcm by 2018. Details of the new BMI 10-year forecasts can be found in the Appendix of this report, which provides global, regional and country-specific projections.
Iran now occupies equal fifth place with Oman in BMI's updated Upstream Business Environment rating. Just one point behind Israel, it is capable of a move higher over the medium term. The country's score benefits from the region's biggest gas reserves base and a very healthy oil reserves position. Reserves-toproduction ratios (RPR) are high, but strict government control of the upstream industry prevents Iran's achieving a decent overall score.
The country is just in the upper half of the league table in BMI's newly revised Downstream Business Environment rating, with some high scores but progress further up the rankings unlikely. It is ranked fifth behind Oman, thanks to high scores for refining capacity, oil demand, gas consumption, retail site intensity and population. The growth outlooks for oil/gas consumption and refining capacity represent relatively weak suits. Saudi Arabia is immediately behind it in the regional rankings, but there is little risk of it challenging for Iran's fifth place.
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