Oil and gas
At the moment, as reported by BMI, domestic production of oil and gas in Spain is negligible and the country relies on 99% imports to meet demand. However, there is now noticeable uptick in investment in the Spanish upstream sector.
The Spanish government has legalised fracking in the country, and is promoting shale glass exploration and drilling project across the nation in an effort to boost the domestic economy. However, there has been a large amount of opposition to these decisions and Repsol has delayed shale gas exploration plans.
BMI expects imports of crude and other liquids to average 1.209 million bpd this year, an increase of 0.8%, representing US$38.6 billion in expenditure. At the time that BMI released the report this piece is based on, the company assumed an OPEC oil price for 2014 of US$102/bbl falling to average US$87.8 /bbl in 2015. This drop in oil price translates in to a 13% reduction in expenditure compared to last year. Due to the oil price drop and an improved economic outlook, BMI has also revised its refined fuel consumption estimates and projects slightly positive growth to 1.2 million bpd in 2016. Imports of gas will see Spain spend a further US$14.1 billion this year, according to BMI. In the medium term the company expects combined imports of liquids and gas to be lower, on the back of moderating prices, at US$56.6 billion in 2017.
There is recovery in Spain’s petrochemicals sector and BMI has reported that the country is beginning to return to 2010 levels. However, there is volatility being experienced in the eurozone export market and this is anticipated to continue this year. Local consumption is showing modest growth. The focus for last year was on the liquidation of LSB and all of the company’s operations are to be sold of by Q1 of this year.
BMI predicts that over the next few years, due to economic growth remaining on a low growth trajectory, Spain will struggle to generate petrochemicals output growth from exports and domestic consumption will remain lacklustre and insufficient to provide compensation for this. The chemicals forecast for last year has been downgraded by BMI from 4.3% to 3.2%.
When it comes to the structure of Spain’s petrochemicals market, polypropylene is more exposed to external markets than PVC used in the domestic construction sector. Construction is set to pick up in the coming years, while the automotive industry has already seen the majority of its growth and is approaching a peak.
Adapted from press release by Joseph Green