BMI's Executive Summary

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The latest Philippines Oil & Gas Report from BMI forecasts that the country will account for 1.21% of Asia/Pacific regional oil demand by 2011, while providing 0.75% of 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. The Philippines' share of gas consumption in 2006 was 0.64%, while its share of production was 0.79%. By 2011, its share of gas consumption is forecast to be 0.73%, with the country accounting for 0.94% of supply.

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.

The Philippines' real gross domestic product (GDP) growth is now forecast by BMI at 5.5% for 2007, up from 5.4% in 2006. We are assuming 5.2% growth in 2008, 6.0% in 2008, followed by 4.9% in 2010, and 4.8% in 2011. There is international oil company (IOC) and national company (PNOC) involvement in domestic upstream activities, leading to substantial gas output growth and some modest liquids expansion. We are assuming oil and gas liquids production of no more than 60,000b/d by 2010/11, with the country pumping an estimated 58,000b/d this year. Consumption is forecast to increase by up to 3% per annum to 2011, implying demand of 352,000b/d by the end of the forecast period. The import requirement would therefore be approximately 292,000b/d by 2011. Gas supply and demand is forecast to increase from 3bcm last year to 5bcm by 2011.

In the BMI Business Environment Ranking matrix, the Philippines receives an unchanged composite score of 30 which ranks the country equal ninth out of 14 states included in the Asia/Pacific region, alongside Pakistan. The overall business environment can be considered unattractive in a regional context, thanks largely to a particularly high level of perceived long-term political risk offsetting a respectable rate of upstream oil and gas output growth and a benign regulatory/competitive regime. The licensing and production sharing system is acceptable, but opportunities are somewhat limited in the upstream segment. Royal Dutch Shell's Malampaya project is providing healthy output growth and accounts for the respectable reserves position. The downstream oil market is very competitive and delivers below average returns to domestic companies and IOCs.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

Philippines Economic SWOT

Philippines Political SWOT

Pakistan 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)

The Philippines

Chapter 4 - Business Environment Rankings

The Philippines

Asia/Pacific Region

Chapter 5 - Philippines Business Environment Ranking

Economics – Long-Term Risk

Politics – Long-Term Risk

Oil & Gas Growth

Oil/Gas Reserves

Licensing/Regulation

Competitive Environment

Chapter 6 - Business Environment Overview

Political Risk Summary

Economic Risk Summary

Business Environment Risk Summary

Legal Code/Corruption

Foreign Direct Investment

Tax Regime

Chapter 7 - Oil Market Outlook

Assessing The Risks

Table: Crude Price Forecasts 2007

Revised Forecasts

Table: Oil Price Forecasts

Chapter 8 - Regional Supply and Demand

Asia/Pacific

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

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

Chapter 9 - Global Picture

Table: Global Oil Consumption (000b/d)

Table: Global Oil Production (000b/d)

Chapter 10 - Industry Forecast Scenario

Oil and Gas Reserves

Oil Supply and Demand

Gas Supply and Demand

Refining and Oil Products Trade

Revenues/Import Costs

Table: Philippines Oil & Gas – Historical Data & Forecasts

Other Energy

Table: Philippines Other Energy – Historical Data & Forecasts

Key Risks to Forecast Scenario

Chapter 11 - Economic Outlook

Table: Philippines: Macroeconomic Data And Forecasts

Chapter 12 - Regional Case Study – ConocoPhillips

Table: Exploration And Production 2005

Table: Commercial Realisation – Refining And Marketing 2005

Chapter 13 - Competitive Landscape

Executive Summary

Table: Key Players – Philippines Oil & Gas Sector

Overview/State Role

Petron – Summary

Shell – Summary

Chevron – Summary

Table: Key Upstream Players

PTT – Summary

Total – Summary

Others – Summary

Kogas – Summary

Table: Key Downstream Players

PetroEnergy – Summary

Chapter 14 - Company Monitor

Philippines National Oil Company (PNOC)

Petron Corporation

Pilipinas Shell Petroleum

Caltex (Philippines)

Chapter 15 - 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: