Oil and gas
BMI has said that the long term trend for oil and gas production in the UK is one of stagnation due to falling volumes from mature fields, a lack of significant new discoveries, falling oil prices and increasing exploration, production and operational costs in the region through a period when oil companies are looking to cut capex. Shale is expected to present an uptick, however, BMI does not believe that this will be before 2020 at the earliest.
Oil consumption, according to BMI, is going to continue on a downward trend as a result of efficiency gains, mainly in the transport sector, along with falling domestic production and declining oil use in the power sector. BMI have however slightly reviewed oil consumption to the upside, a result of lower fuel prices in the years to come. Turning to refining, there is apparently a bleak outlook surrounding the UK industry and BMI has downwardly revised refining capacity and total refined oil products output. BMI expect capacity to fall from 1.55 million bpd in 2013 to 1.34 million bpd in 2015. There is further downside risk to refining capacity from possible downsizing and refinery closures as well. Due to this, the UK became a net refined fuels importer in 2013. While BMI does expect the UK’s refined fuels net imports requirements to increase, the faster rate of consumption decline relative to oil product output declines past 2018, in addition to a temporary increase in oil production past 2016 should see petroleum products net imports stabilise from 2016.
When it comes to gas, BMI expects gas demand growth to return to a weak but positive trend over the coming years, with risks to the downside. This will be the case if, following policy, gas becomes the feedstock of choice for new power plants that are to replace coal based ones. BMI have also reported that the UK is becoming an increasingly large net gas importer. BMI expect net gas import requirements to grow throughout the forecast period to 2023. However, while imports via pipeline will ramp up, notable from Norway, LNG imports are likely to play an increasingly important role in the UK’s gas supply mix, notably Qatari LNG.
BMI has warned that the eurozone’s woes are not over yet and combined with ongoing austerity measures, will pose a significant risk to the petrochemicals outlook. BMI has estimated that chemicals output grew by 3.8% year on year last year, while rubber and plastic production increased 11.9% as rapid growth in production was underway. The rebound apparently arrived after petrochemicals under performed compared to the rest of the industrial sector. BMI has also reported that the UK’s petrochemical sector is moving towards cheaper ethane feedstock, imported from the US.
Edited from reports by Claira Lloyd