BMI's Executive Summary

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The latest Ukraine Oil & Gas Report from BMI forecasts that the country will account for 5.88% of Central and Eastern European (CEE) regional oil demand by 2011, while providing just 0.49% of supply. CEE regional oil demand rose to an estimated 5.21mn barrels per day (b/d) last year and should average 5.35mn b/d in 2007, before reaching 5.97mn b/d by 2011. Production of an estimated 12.41mn b/d last year is forecast to reach 15.22mn b/d by 2011. CEE gas consumption in 2006 was an estimated 587bn cubic metres (bcm), with demand of 715bcm targeted for 2011. Production last year of an estimated 680bcm should reach 758bcm by the end of the period. Ukraine's share of consumption in 2006 was an estimated 12.95%, while its share of production was 2.94%. By 2010, its share of demand is forecast to be 12.87%, with the country accounting for 2.90% of supply.

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.

Ukraine's real GDP growth is now forecast by BMI at 6.0% for 2007, down from 7.0% in 2006. We are assuming 5.5% growth in 2008, followed by 5.0% per annum during 2009-11. Reasonable and consistent growth in oil consumption seems likely, averaging approximately 3.0% per annum. This suggests that the country will be consuming around 351,000b/d of oil by 2011. With oil production likely to slip back to just 75,000b/d, Ukraine will require imports of at least 276,000b/d by 2011. BMI forecasts that gas demand will rise from an estimated 75.8bcm in 2006, through 78.8bcm in 2007 to 99.2bcm by 2011. Domestic production, largely in the hands of state-owned Naftogaz Ukrainy but with some international oil company (IOC) involvement, should also increase, from an estimated 19.5bcm last year to at least 22bcm in 2010/11.

In the BMI Business Environment Ranking matrix, Ukraine now receives a lower composite score of 22, which still ranks the country 12th and last of 12 states included in the CEE region. The overall business environment can be considered very unattractive, due largely to high levels of perceived political and economic risk, only moderate progress in deregulation and competition, plus limited growth potential in oil and gas production. The country's reserves-to-production ratio (RPR) is above average for the region, but the prospects, licensing framework and regulatory regime do little to attract investment from leading IOCs.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

Ukraine Political SWOT

Ukraine Economic SWOT

Ukraine Business Environment SWOT

Chapter 3 - Regional Market Overview

Central/Eastern Europe Region

Table: Central/Eastern Europe Oil Consumption (000b/d)

Table Central/Eastern Europe Oil Production (000b/d)

Table: Central/Eastern Europe Oil Refining Capacity (000b/d)

Table: Central/Eastern Europe Gas Consumption (bcm)

Table: Central/Eastern Europe Gas Production (bcm)

Table: Central/Eastern Europe LNG Exports/(Imports) (bcm)

Ukraine

Chapter 4 - Business Environment Rankings

Ukraine

Central/Eastern Europe Region

Chapter 5 - Ukraine Business Environment Ranking

Economics – Long-term Risk

Politics – Long-term Risk

Oil & Gas Growth

Oil/Gas Reserves

Licensing/Regulation

Competitive Environment

Political Risk Summary

Economic Risk Summary

Business Environment Risk Summary

Legal Code/Corruption

Foreign Direct Investment

Tax Regime

Chapter 6 - Oil Market Outlook

Table: Crude Price Forecasts 2006

Revised Forecasts

Table: Oil Price Forecasts

Chapter 7 - Regional Supply and Demand

Central/Eastern Europe

Table: Oil Production (000b/d) – Central/Eastern Europe

Table: Oil Consumption (000b/d) – Central/Eastern Europe

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

Refining and Oil Products Trade

Revenues/Import Costs

Table: Ukraine Oil & Gas – Historic Data & Forecasts

Other Energy

Table: Ukraine Other Energy – Historic Data & Forecasts

Key Risks to BMI’s Forecast Scenario

Chapter 10 - Economic Outlook

Table: Ukraine: Macroeconomic Data And Forecasts

Chapter 11 - Country Snapshot: Ukraine Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Chapter 12 - Regional Case Study

Emerging Player

Table: Lukoil Investment*

Chapter 13 - Competitive Landscape

Executive Summary

Table: Key Players – Ukraine Oil & Gas Sector

Overview/State Role

JKX – Summary

TNK-BP – Summary

Lukoil – Summary

Shell – Summary

Table: Key Upstream Players

Tatneft – Summary

Table: Key Downstream Players

Rosneft – Summary

Others – Summary

Chapter 14 - Company Monitor

Naftogaz Ukrainy

TNK-BP

Lukoil Ukraine

Chapter 15 - BMI Forecast Modelling

How we generate our industry forecasts

Energy Industry

Cross checks

Sources

Chapter 16 - Appendix: Regional Demographic Data

Table: Wages (ave labour force per annum), US$ PPP

Table: Population

Table: Household Spending Per Capita, US$

Table: Private Consumption Per Capita, US$ PPP

Table: Market Size, GDP, US$bn

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: