2013-12-11 09:21:14 - New Energy research report from Business Monitor International is now available from Fast Market Research
Oil output will rise in the short term as new fields are brought online or are ramped up to peak production levels to offset declining volumes from the flagship Bach Ho field. We expect oil output to peak in 2017 but fall thereafter, as further growth could be hindered by exploration limits imposed by Vietnam's maritime dispute with China in the South China Sea. New developments are set to boost long-term gas production, while the country's downstream is finally picking up after years of delay in pushing forth new and much-needed projects to meet the country's growing fuel demand.
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The main trends and developments for Vietnam's oil and gas sector are:
* Total crude oil
and liquids output will rise in the short term as new fields are brought online or are ramped up to peak production levels. This could push production up from an estimate of 377,450 barrels per day (b/d) in 2013 to 422,890b/d by 2017. However, this spell will end in 2018 unless further fields are developed. BMI therefore expects production to decline from its 2017 peak to 373,560b/d by 2022.
* Economic growth - expected to average at 6.7% over our 10-year forecast period to 2022 - will continue to drive oil and gas consumption in Vietnam higher over the next decade. However, BMI's Country Risk team holds the view that Vietnam's costly welfare subsidies will need to be gradually withdrawn as part of the government's broader efforts to fix its fiscal imbalances and as such, we expect further price hikes to come. This has led us to moderate our forecasts for Vietnam's oil consumption growth rate. We expect total refined oil products consumption (previously referred to as total oil consumption) to rise at a slower rate from an estimate of 389,160b/d in 2013 to 444,410b/d in 2017 and 517,700b/d by 2022.
* BMI estimates gas production will rise from an estimated 9.3bn cubic metres (bcm) in 2012 to 13.0bcm by 2017. Despite the increase, demand will outstrip supply from 2015, with up to 0.7bcm of net imports expected in that year. By 2022, net imports of gas could hit as much as 5.5bcm, all in the form of liquefied natural gas (LNG).
* Oil and gas reserves could rise if new exploration gathers pace. However, ongoing risks from vigorous Chinese opposition to drilling in the disputed South China Sea could delay exploration. Therefore, for 2014 we have kept our oil reserves forecasts unchanged at 4.4bn barrels (bbl). However, Vietnam could still find it difficult to reverse a longer-term decline in reserves as production ramps up to meet rising domestic needs faster than discoveries are made to replace reserves. By end-2022, we expect proven oil reserves to have fallen to 4.2bn barrels (bbl).
* Rising interest in gas exploration and the number of encouraging finds to date suggests that in the short-to medium-term Vietnam's gas reserves are poised for an increase. We estimate that gas reserves will continue to rise from 699bcm at the start of 2013 to about 702.4bcm in 2017. It could start dipping towards the end of our forecast period to 631.6bcm, though we acknowledge significant upside risks from further offshore and unconventional exploration.
* Vietnam's refining production is set for a rise from the construction of two newbuild refineries - Nghi Son and Vung Ro. Its refining capacity could increase from 140,000b/d in 2012 to 345,000b/d by 2017, rising further still to 501,700b/d by the end of our forecast period when these refineries fully enter operation. There is significant upside risk to this forecast, if four other proposed projects are brought into fruition.
* Vietnam's refinery developments will preserve valuable light sweet domestic crudes for export, while allowing for the processing of cheaper heavier foreign grades for domestic consumption. At the time of writing we assumed an OPEC basket oil price for 2014 of US$101.80 per barrel (bbl), falling to US$100/bbl in 2015. Global GDP in 2014 is forecast at 3.1%, up from an assumed 2.6% in 2012. For 2015, growth is estimated at 3.3%.
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