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Peru Oil and Gas Report Q3 2011

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Table of Contents

Management Report
Published: July 2011
Pages: 85
Tables: For full details, please email keithw@cmsinfo.com
From: GBP 330.00  Buy Now!
Research from: Business Monitor International
Sector: Oil & Gas

The Peru Oil and Gas Report has been researched at source and features Business Monitor International (BMI)'s independent forecasts to end-2015 for Peru including major indicators for oil, gas and LNG, covering all major indicators including reserves, production, consumption, refining capacity, prices, export volumes and values. The report includes full analysis of industry trends and prospects, multinational and national companies, and changes in the regulatory environment.

BMI's Peru Oil and Gas Report provides professionals, consultancies, government departments, regulatory bodies and researchers with independent forecasts and competitive intelligence on the Peruvian oil and gas industry.

The latest Peru Oil & Gas Report from BMI forecasts that the country will account for 2.48% of Latin American regional oil demand by 2015, while providing 2.41% of supply. Latin American regional use averaged an estimated 8.41mn barrels per day (b/d) in 2010. It should rise to 8.63mn b/d in 2011 and reach 9.30mn b/d by 2015. Regional oil production in 2010 averaged an estimated 9.92mn b/d. It is set to rise to 12.47mn b/d by 2015. Oil exports have been slipping, because demand growth has exceeded the pace of supply expansion. In 2001, the region was exporting an average of 3.24mn b/d. This total fell to an estimated 1.52mn b/d in 2010 and is forecast to rebound to 3.05mn b/d in 2015. The principal exporters will be Mexico, Venezuela, Colombia and Brazil.

In terms of natural gas, the region in 2010 consumed an estimated 189.5bn cubic metres (bcm), with demand of 230.8bcm targeted for 2015. Production of an estimated 203bcm in 2010 should reach 254bcm in 2015, and implies more than 20bcm of net exports at the end of the period. Peru in 2010 accounted for an estimated 2.1% of regional gas demand, while contributing around 3.45% to supply. By 2015, its share of regional demand should be 2.57%, while it will account for 4.73% of supply.

The 2010 full-year outturn was US$77.45/bbl for OPEC crude, which delivered an average for North Sea Brent of US$80.34/bbl and for West Texas Intermediate (WTI) of US$79.61/bbl. The BMI price target of US$77 was reached thanks to the early onset of particularly cold weather, which drove up demand for and the price of heating oil during the closing weeks of the year.

Taking into account the risk premium that has been added to crude prices in response to actual and perceived threats to supply, we have now raised our benchmark OPEC basket and Brent price forecasts. We expect Brent crude to average US$106/bbl in 2011, with OPEC basket averaging US$101.90/bbl. Mid-year increases in supply present downside risks to this forecast. In 2012, we expect OPEC basket to average US$95/bbl, with Brent averaging US$97.6/bbl.

Global GDP growth in 2011 is forecast at 3.6%, down from 4.3% in 2010. Growth in both the US and eurozone should be marginally higher than last year, while Chinese economic expansion will slow and Japan’s growth will slump to 0.7% as a result of the devastating earthquake and tsunami in March 2011. Our oil price forecast for 2011 is US$98.90/bbl for the OPEC Basket, giving Brent at US$103/bbl and West Texas Intermediate (WTI) at US$92.30, although these differentials are subject to change.

Peru’s real GDP in 2010 rose by an estimated 8.8%, with an expected annual average increase of 5.9% in 2010-2015. We are now assuming that oil and gas liquids production could reach 300,000b/d by 2015 as additional gas liquids volumes kick in. We are estimating Peru to pump 170,000b/d in 2011.

Consumption is forecast to increase by at least 3% per annum to 2015, implying demand of 218,000b/d by the end of the forecast period. The export potential would therefore be about 84,000b/d by 2015. Gas production is forecast to increase from an estimated 7bcm in 2010 to 12bcm over the period, with net exports of up to 6bcm by 2015.

Between 2010 and 2020, we are forecasting an increase in Peruvian oil production of 78.9%, with crude and gas liquids volumes peaking at 305,000b/d in 2016, before falling steadily to 281,300b/d at the end of the 10-year forecast period. Oil consumption between 2010 and 2020 is set to increase by 27.4%, with growth slowing to an assumed 2% per annum towards the end of the period and the country using 238,600b/d by 2020. Gas production is expected to rise steadily, from an estimated 7.0bcm in 2010 to 15.0bcm in 2020. With demand growth of 113%, this implies export potential rising from 3bcm in 2010 to at least 6.5bcm in 2020. Details of BMI’s 10-year forecasts can be found in the appendix to this report.

Peru holds third place, just behind Colombia, in BMI’s composite Business Environment (BE) ratings, which combine upstream and downstream scores. It shares first place with Brazil in BMI’s updated upstream Business Environment ratings, in spite of its modest hydrocarbons resource base. It may over the medium term struggle to keep up with the more generously endowed Brazil. Although Peru’s absolute resource base may be small, the output growth outlook is excellent, reserves-to-production ratios (RPR) are above the regional average, and licensing terms are particularly attractive. Peru has a strong position in BMI’s downstream Business Environment ratings, ranked fourth, above Trinidad and Mexico, as a result of state ownership and regulation, modest oil demand growth prospects, a lack of refining capacity expansion and the limitations of population and nominal GDP. Peru is just one point ahead of Mexico and Trinidad, but should be able to keep clear of its rivals.

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