BMI's Executive Summary

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The latest Hong Kong Oil & Gas Report from BMI forecasts that the country will account for just 1.04% of Asia Pacific regional oil demand by 2011, while making no contribution to supply. Asia Pacific regional oil use of 21.4mn barrels per day (b/d) in 2001 reached 24.84mn b/d last year. It should average 25.68mn b/d in 2007 and then rise to around 29.04mn b/d by 2011. In terms of natural gas, the region last year consumed 409bcm, with demand of 620bcm targeted for 2011, representing growth of 51.4% between 2006 and 2011. Production of 329bcm in 2006 should reach 478bcm in 2011 (+45.0%), but implies net imports rising from 80bcm per annum to 142bcm. Hong Kong's share of consumption in 2006 was 0.58%, while it has no production. By 2011, its share of demand is forecast to be 0.54%.

Global oil demand growth is expected to be around 2.0% this year, with Asia Pacific and the CEE regions dominating. This is an encouraging rate of market expansion given a relatively uncertain economic picture and high commodity prices. Our oil price projections for 2007 as a whole are revised upwards from the last quarterly report. We are now assuming an OPEC basket price average of US$59 per barrel, compared with the US$55 estimate provided by our last two quarterly reports. Based on recent price differentials, this implies Brent at US$62.83, WTI averaging US$61.25/bbl, and Urals at US$59.42/bbl.

Hong Kong's real gross domestic product (GDP) growth is forecast by BMI at 6.2% for 2007, down from 6.8% in 2006. We are assuming 6.4% growth in 2008, 4.2% in 2009, followed by 4.9% in 2010 and 5.5% in 2011. There is no upstream or refining segment, but international oil companies (IOCs) and Chinese companies are investing in import and distribution facilities. Oil consumption is forecast to increase by around 2% per annum to 2011, implying demand of 301,000b/d by the end of the forecast period. Gas demand is set to reach 3.3bcm by 2011, with all of the fuel imported.

In the BMI Business Environment Ranking matrix, Hong Kong receives a higher composite score of 28, which now ranks the country equal 11th out of 14 states included in the Asia/Pacific region, alongside Thailand. The overall business environment can be considered unattractive in a regional context, thanks to a complete absence of hydrocarbon resources and limited energy infrastructure. Long-term economic risk is perceived as being higher than average, with only the relatively low political risk, largely deregulated oil sector and established competitive framework providing any positive attributes. While China is now a magnet for IOC spending, Hong Kong can afford to be ignored, but should get some support from the China-based oil and gas companies.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

Hong Kong Economic SWOT

Hong Kong Political SWOT

Hong Kong Business Environment SWOT

Chapter 3 - Regional Market Overview

Asia/Pacific Region

Table: Asia/Pacific Oil Consumption (000b/d)

Table: Asia/Pacific Oil Production (000b/d)

Table: Asia/Pacific Oil Refining Capacity (000b/d)

Table: Asia/Pacific Gas Consumption (bcm)

Table: Asia/Pacific Gas Production (bcm)

Table: Asia/Pacific LNG Exports/(Imports) (bcm)

Hong Kong

Chapter 4 - Business Environment Rankings

Hong Kong

Asia/Pacific Region

Business Environment Ranking

Economics – Long-term Risk

Politics – Long-term Risk

Oil & Gas Growth

Oil/Gas Reserves

Licensing/Regulation

Competitive Environment

Chapter 5 - Business Environment Overview

Political Risk Summary

Economic Risk Summary

Business Environment Risk Summary

Legal Code/Corruption

Foreign Direct Investment

Tax Regime

Chapter 6 - Oil Market Outlook

Assessing The Risks

Table: Crude Price Forecasts 2007

Revised Forecasts

Table: Oil Price Forecasts

Chapter 7 - Regional Supply and Demand

Asia/Pacific

Table: Oil Production (000b/d) – Asia/Pacific

Table: Oil Consumption (000b/d) – Asia/Pacific

Chapter 8 - Global Picture

Table: Global Oil Consumption (000b/d)

Table: Global Oil Production (000b/d)

Chapter 9 - Industry Forecast Scenario

Oil and Gas Reserves

Oil Supply and Demand

Gas Supply and Demand

LNG

Refining and Oil Products Trade

Revenues/Import Costs

Table: Hong Kong Oil & Gas – Historic Data & Forecasts

Other Energy

Table: Hong Kong Other Energy – Historic Data & Forecasts

Key Risks to BMI’s Forecast Scenario

Chapter 10 - Economic Outlook

Table: Population And Output

Chapter 11 - Regional Case Study – ConocoPhillips

Table: Exploration And Production 2005

Table: Commercial Realisation – Refining And Marketing 2005

Chapter 12 - Competitive Landscape

Executive Summary

Table: Key Players – Hong Kong Oil & Gas Sector

Overview/State Role

Shell – Summary

Chevron – Summary

ExxonMobil – Summary

China Resources – Summary

Table: Key Downstream Players

CLP – Summary

HK Electric – Summary

HKCGC – Summary

Chapter 13 - BMI Forecast Modelling

How we generate our industry forecasts

Energy Industry

Cross checks

Sources

Network of Asian Oil & Gas Sources

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BMI's Asian Oil & Gas Reports are based on an extensive network of multilateral organisations, government departments, oil & gas industry associations, chambers of commerce and company reports. Information sources include: