BMI's Executive Summary

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The latest UK Oil & Gas Report from BMI forecasts that the country will account for 12.46% of developed European regional oil demand by 2011, while contributing 30.00% to supply. In Developed Europe, overall oil consumption reached an estimated 14.23mn barrels per day (b/d) in 2006. It is set to rise to around 14.65mn b/d by 2011. In terms of natural gas, the Developed Europe region last year consumed an estimated 451bn cubic metres (bcm), with demand of 535bcm targeted for 2011, representing 18.7% growth. Production of an estimated 286bcm in 2006 should fall to 268bcm in 2011, which implies net imports rising from last year's estimated 165bcm to some 268bcm by the end of the period. The UK's share of gas consumption in 2006 was an estimated 21.29%, while it contributed 31.82% to production. By 2011, its share of gas consumption is forecast to be 20.00%, with production accounting for 30.22%.

For the whole of last year, our estimates of average crude oil prices are US$61.10 for the OPEC basket, US$65.10 for Brent, US$66.20 per barrel (/bbl) for WTI and US$61.30 for Urals. For the first quarter of this year, we have adjusted our forecasts to reflect the weather-induced volatility. The OPEC basket is now expected to have averaged US$54.30/bbl, with Brent at US$57.60; WTI averaging US$58.70 and Urals at US$54.00/bbl. Our projections for 2007 as a whole are barely changed from the last quarterly report. We are still assuming an OPEC basket price average of US$55/bbl. Based on last year's typical price differentials, this implies Brent at US$58.80, WTI averaging US$59.90/bbl, and Urals at US$55.30/bbl.

UK real GDP growth is now forecast by BMI at 2.3% for 2007, down from 2.6% in 2006. We are assuming 2.8% growth in 2008, 3.2% in 2009, followed by 3.0% in 2010 and 2.7% in 2011. We are currently forecasting 1.72mn b/d of oil output this year. By 2011, UK oil production is unlikely to be above 1.45mn b/d. Government figures suggest production as low as 1.38mn b/d by 2009, which seems a little bearish. Oil consumption is expected to have reached 1.83mn b/d by 2011, providing a net crude import requirement of at least 375,000b/d.

Our long-term political rating is 82.5, well above the global average of 65.5, but below the regional average of 85.6, and above only Italy among developed European countries. Our long-term economic rating is 65.8, which compares with a global average of 60.9 and a regional average of 72.3, and puts the UK behind all other developed European peers. Our business environment rating is 55.2, the lowest in the region. The regional average is 66.3. The UK has a privatised energy sector operating under EU guidelines. There is a major, but mature and highly competitive upstream oil and gas segment, featuring most key national and international companies. The downstream oil segment is also competitive and deregulated. International and domestic operators control gas distribution and supply, as well as electricity generation and distribution.

Network of European Oil & Gas Sources

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