2013-10-11 11:14:40 - Fast Market Research recommends "Uzbekistan Oil & Gas Report Q4 2013" from Business Monitor International, now available
Conventional gas deposits would support Uzbekistan's hydrocarbons industry, though we project a continued decline in oil production. Consumption growth in both oil and gas will be curtailed by the diversion of gas to external markets to meet its export obligations, a failure to meet its domestic refined products demand and restrictions on fuel imports.
The main trends and developments in Uzbekistan's oil & gas sector are:
* We have forecast a very gradual decline in oil reserves, with 485.3mn barrels (bbl) to remain by 2022, down from the EIA's forecast of 582.1mn bbl for 2013. However, exploration activity and a reasonable discovery rate lead us to believe that Uzbekistan could see a rise in its gas reserves, from a forecast 1.8trn
cubic metres (tcm) in 2013 to 1.9tcm by 2022.
* Uzbekistan has an estimated 340bn bbl of oil shale deposits and Uzbekneftegaz has established a US $600mn joint venture (JV) project that will convert the oil shale into crude oil to be processed into petroleum products. It has started first drilling at the Sangruntau deposit in March 2013, and is aiming to produce 2mn tonnes per annum (tpa) of liquids from oil shale (40,164 barrels per day, or b/d) between 2014 and 2015 and 8mn tpa (160,656b/d) by 2018 from the Sangrantau deposit alone. It has also started studying reserve potential at areas in the Kyzylkum desert and Baisun Mountains; however, we have not factored this in our forecast until the success of its first development is proven.
* Without early success in enhanced recovery, shale-based production and/or new field development, we believe crude oil supply - including lease condensate but excluding natural gas liquids (NGL) - will fall to 55,160b/d by 2017. However, additional NGL volume - thanks to higher gas output from Uzbekistan - should help stem a rapid fall, and see total liquids output fall to a lesser extent to 105,800b/d in 2017. By 2022, an increase in NGL production could see total liquids output stay stagnant at about 105,600b/d.
* We are forecasting a relatively slow growth in oil consumption from 106,500b/d in 2012 to 109,100b/d in 2017, rising gradually to 113,000b/d by 2022. Nonetheless, slower liquids output growth in face of this demand rise will see net exports of about 4,000b/d in 2013 reverse into imports of 3,300b/d in 2017 and 7,400b/d by 2022.If the Uzbek government persists with fuel import restrictions without upgrading the country's state-owned refineries or attracting private downstream investment, demand could be suppressed further.
* Official Uzbek figures highlighted a 0.2% decrease in output in 2012, which has led to our estimate of 62.9bn cubic metres (bcm) for gas production in 2012. We expect this fall to be reversed in 2013, however, and to rise to 69.5bcm by 2017 as new fields enter production. By 2022, output is expected to hit 76.7bcm. Risk appears to be to the upside in terms of output, thanks to the combined efforts of domestic and international companies, plus infrastructure expansion and rising regional demand for Uzbek gas.
* Domestic demand is expected to rise from an estimated 50.9bcm in 2012 to 52.0bcm in 2017, allowing for 17.5bcm of export capacity by 2017. This is a modest increase that also accounts for the lack of domestic gas transport infrastructure that will prevent a faster rise in demand. We warn that a long-term increase in domestic gas demand will be constrained by Uzbekistan's export obligations, particularly those with China.
* The downside risk to the materialisation of a gas-to-liquids (GTL) plant planned by Sasol, Petronas and Uzbekneftegaz is growing, following Sasol's decision to decrease its share in the project. This could see a negative outcome in H213, which is when a final investment decision for the project is expected. The total cost of the development is estimated at around US$4.1bn.
Full Report Details at
- www.fastmr.com/prod/689090_uzbekistan_oil_gas_report_q4_2013.asp ..
Uzbekistan's dependence on oil prices leads to high volatility in the country's oil and gas export revenues. At the time of writing we assumed an OPEC basket oil price for 2013 of US$103/bbl, falling to US$101/bbl in 2014. Global GDP in 2013 is forecast at 2.6%, down from an assumed 2.75% in 2012. This is on the back of our bearish view of Chinese growth particularly in H213, and continued uncertainty about the eurozone. For 2014, growth is forecast at 3.3%.
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