nomura impact of mena crisis on oil companies

8/7/2019 Nomura Impact of MENA Crisis on Oil Companies

1/22

W E E K L Y

3 March 2011Nomura 1

Any authors named on this report are research analysts unless otherwise indicated.See the important disclosures and analyst certifications on pages 19 to 22.

Oil & Gas/Chemicals | G L O B A L OIL MARKET UPDATE: 3 MARCH, 2011

Michael Lo, CFA +852 2252 6225 michael.lo@nom ura.com

This weeks highlights

Staff repatriation from MENA is high up on E&P companies agenda. Countries that

rely heavily on foreign oil companies for oil production could see a drop in productionsooner than expected as workers are sent home. Oman tops the list with 64% of its

production coming from foreign companies. Also, we have examined oil companies

gearing to MENA and topping the list are Occidental and Eni.

Oil Market Update impact on oil

companies from MENA crisis Weve looked at the production split between national oil companies (NOCs)

and international oil companies (IOCs) for each of the MENA countries, and

weve found that some 64% of Omans oil production is from IOCs. In our view,

this is negative for Omans oil production as IOCs could be repatriating stafffrom their oil fields, should the crisis in Oman escalate further. This could

jeopardise oil production there and production could come down sooner than

expected. Likewise, within the region, Syria, Iraq and the UAE, which have

higher IOC participation in oil production, seem to be more vulnerable to oil

supply disruption should these countries become politically unstable.

The MENA region is a prolific oil & gas area and most E&P companies will

have some exposure here. Weve examined production by the major oil

companies and found that Occidental and Eni are the most geared towards the

MENA region, while ExxonMobil and Chevron appear to have the least

exposure. MENA production accounts for about 38% of Occidentals global

production, while it represents about 35% of Enis global production. We haveanalysed the share price performance of the top-20 companies with exposure

to MENA and on an average, share prices have edged up by 6.9% since the

beginning of the crisis. We believe a strong oil price environment has lifted

these stocks as they have the highest gearing to oil prices. Most of the

laggards are companies with higher exposure to the MENA region. In general,

we believe the recent share price performances are broadly in-line with their

exposure to the MENA region.

Open interest for WTI futures rose by 0.8% w-w in the week ending 25

February. However, Brent futures open interest fell by 4.1% w-w. Open interest

for WTI and Brent now stands at 1.52mn and 0.85mn, respectively. WTI open

interest is now 2.3% higher than the January average of 1.49mn, whereasBrent open interest is now 9.5% lower than the January average of 0.94mn.

The aggregate open interest for WTI and Brent futures is now at 2.37mn, down

1.0% w-w.

N O M U R A I N T E R N A T I O N A L ( H K ) L I M I T E D

RUNNINGTHEME

Analysts

Michael Lo, CFA

+852 2252 6225

[email protected]

Cheng Khoo

+852 2252 6180

[email protected]

Saurabh Bharat

+91 22 3053 2835

[email protected]

Sanat Satyan

+91 22 6723 4076

[email protected]


2/22

Oil & Gas/Chemicals | Global Michael Lo, CFA


Exhibit 1. Price summary

Commodity Units Price YTD Average D aily Change %age Weekly Change %age Yearly Change %age YTD Change %age

Crude Oil and Products 2-Mar-11

WTI $/bbl 102.23 90.0 2.60 2.6% 6.45 6.7% 22.0 27.5% 10.7 11.7%WTI, 48-month $/bbl 101.31 97.0 0.80 0.8% 3.00 3.1% 14.0 16.0% 9.2 10.0%

Brent $/bbl 115.96 100.8 -0.06 -0.1% 4.13 3.7% 37.6 48.0% 20.8 21.9%Brent, 48-month $/bbl 107.06 99.5 1.10 1.0% 4.52 4.4% 19.8 22.6% 13.5 14.4%Oman $/bbl 110.22 97.3 2.77 -0.9% 6.05 5.8% 35.2 47.0% 17.5 19.1%

Dubai $/bbl 109.89 97.0 3.52 3.3% 5.99 5.8% 33.6 44.0% 17.4 19.0%OPEC Basket $/bbl 110.84 97.1 2.57 2.4% 4.96 4.7% 34.4 45.0% 21.1 23.4%

RBOB c/g 302.95 253.2 4.61 1.5% 31.28 11.5% 78.2 34.8% 57.6 23.7%Heating Oil c/g 305.77 271.6 3.42 1.1% 18.04 6.3% 96.4 46.0% 49.3 19.3%ICE Gasoil $/ton 964.75 844.8 24.00 2.6% 54.25 6.0% 318.3 49.2% 167.5 21.1%

Source: Bloomberg

Threat to oil companies from MENAThe Middle East and North Africa (MENA) crisis continues to push oil prices higher;

prices are now up 3.7% w-w and 18.4% since the beginning of the unrest in January.

Civil unrest and violence continues in Libya where Colonel Muammar Gaddafi has

refused to step down from power. According to Eni, as much as 1.2mmbbl/d of oil

production has been shut-in in Libya, sparking threats of disruption to global oil supply

from the region. Several international oil companies (IOCs) have evacuated their

personnel from Libya and have shut down their operations.

Exhibit 2. Oil production in MENA countries

-1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Saudi

Arabia

Iran

Iraq

UAE

Kuwait

Qatar

Oman

Bahrain

Syria

Yemen

Libya

Algeria

Egypt

Tunisia

Middle East North Africa

(mb/d)NOC IOC

64%

43%

48% 29%

68%64%

39%51%

Note: The percentages indicate the contribution of IOCs in total production

Source: IEA, Company data, Nomura research

Oman has high IOC participation in the Middle East

Oman produced 0.8mmbbl/d of oil in 2010, nearly two-thirds of which came from IOCs

(IEA and company websites). According to EIA, the technical difficulties in production

in Oman made the contract terms for IOCs more favourable than elsewhere in theregion. Along with the massive EOR programme implemented, IOCs now own

significant equity stakes in oil projects in the country. Last week, protests for a

democratic state (Oman has been ruled by a family dynasty since 1932) spread across

the country; this has caused army deployment and has resulted in casualties. As such,

staff repatriation from IOCs could increase and oil production could decrease sooner

than expected as staff members are sent home.

Likewise, Syria, Iraq and UAE, which have higher IOC participation in oil production,

seem to be more vulnerable to oil supply disruption should the countries become

politically unstable. Currently, Syria has imposed restrictions on the Internet to avoid

an online revolution such as played out in Tunisia and Egypt, whereas UAE remains

isolated from protests.


3/22



Occidental and ENI most exposed to MENA

According to our calculations, Occidental and Eni are the companies most geared to

MENA oil and gas production. Their share of MENA oil production as a percentage of

global portfolio is the highest among the top 20 companies currently active in MENA

countries. In particular, Eni has significant oil and gas operations in all four North

African countries, along with Iran and Iraq in the Middle East. Total Eni production from

MENA is 626kboe/d or 35% of Enis global production (data for full year 2009). Enisexposure to Libya and Egypt is significant as it produces a total of 0.5mmboe/d for the

company, representing some 26% of the Enis total output. Occidental produces

288kboe/d in MENA (38% of the companys total output) with the majority of its

production, 100kboe/d, from Qatar. Meanwhile, Inpex has exposure to UAE, Egypt and

Algeria, but the majority of its reserves can be attributed to UAE, which has remained

stable so far; MENA production is only 14% of the companys total output. On the other

hand, ExxonMobil and Chevron have the lowest exposure to the region. Both these

companies have operations in the rest of Africa, away from the current crisis.

Exhibit 3. MENA oil and gas production as

percentage of total oil and gas production

0%

10%

20%

30%

40%

50%

Occidental

Eni

BG

A

pache

Total

OMV

Repsol

Inpe

xCorp

Nexen

Roya

lDutch

MarathonOil

BP

Hess

Suncor

Statoil

An

adarko

Conoco

phillips

CNPC

Exxonmobil

C

hevron

Note: Data for full-year 2009

Source: IEA, Company data, Bloomberg, Nomura estimates

Exhibit 4. MENA proven reserves as percentage of

total proven reserves

0%

10%

20%

30%

40%

Occide

ntal

InpexC

orp

Eni

T

otal

H

ess

R

oyal

Marathon

Re

psol

O

MV

Apa

che

St

atoil

BG

C

NPC

Sun

cor

BP

Conocophil

Anada

rko

Ne

xen

Exxonm

obil

Chevron

Note: Data for full year 2009


BG also has significant interests in the MENA region with significant production

exposure to Egypt and Tunisia. In total, BG produces about 71kboe/d in MENA,

accounting for some 30% of its global production. Other companies with over 20% of

their production from the MENA region are Apache and Total.

Share price performance broadly in-line with MENA exposure

We have analysed the share price performance of the top-20 companies with

exposure to MENA and have found that, on an average, share prices have edged up

by 6.9% since the beginning of the crisis on 14 January, 2011. We believe the strong

oil price environment has lifted these stocks higher as they have the highest gearing to

oil prices. Most of the laggards are companies with higher exposure to the MENA

region such as Eni, OMV and Apache. Eni has operations across different countries in

the MENA region, while Apaches exposure is concentrated in Egypt and OMVs

exposure is concentrated in Libya. Occidental is the first on the list of companies with

maximum exposure to the MENA region but its share price performance is relatively

better than at Eni, which we believe is because most of its assets are in Qatar

currently a more stable country. Inpex is second on the list of companies with the most

reserves in MENA, but its share price performance has remained relatively strong,which we think is because most of its reserves are in the UAE, which remains isolated

from the protests; production from MENA is only 14% of the companys total

production. Meanwhile, BG has performed well despite having significant MENA


4/22



production exposure, with 30% of its production coming from Egypt and Tunisia; we

believe this is because the region does not account for a significant portion of its

reserve portfolio.

Exhibit 5. Share price performance since the crisis

-5%

0%

5%

10%

15%

20%

25%

Suncor

Energy

M

arathonOil

InpexCorp

Co

nocophillips

Nexen

Chevron

BG

Exxonmobil

Repsol

Statoil

Occidental

Hess

RoyalDutch

Shell T

otal

Anadarko

Petroleum

Eni

OMV

BP

Apache

Average

Source: IEA, Company data, Bloomberg, Nomura research

Exhibit 6. Share price performance versus production interests

Average

Inpex Corp

Repsol

Chevron

Exxonmobil

Anadarko

Petroleum

BGNexen

Conocophillips

OMV

Suncor Energy

BP

Statoil

Apache

Royal Dutch Shell

Hess

Marathon Oil

TotalOccidental

Eni

-10%

0%

10%

20%

30%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

(MENA production as %age of total production)

(Share price

performance since

crisis)

Increasing share in total production



5/22



Weekly events summary

1. No emergency meeting for OPEC Ecuador

US$120/bbl oil price will have an important impact on global economy Oil

Minister.

2. Top Chinese refineries to cut March crude runs Thomson Reuters poll

Top-12 refineries set to run at only 83% this month.

Key oil market events during the week

1. No emergency meeting for OPEC Ecuador: According to Ecuadors Oil

Minister Wilson Pastor, OPEC members are not discussing a possibility of an

emergency meeting, amidst rising oil prices and the ongoing crisis in the Middle

East. This comes in response to speculation that the oil producer group may

convene an emergency meeting to respond to the crisis in Libya. In a forum in

Riyadh, the minister said that although OPEC is concerned about the Middle East,

it does not think that raising output will stabilise the market. He added that a

US$120/bbl oil price will have an important impact on the global economy. OPEC

continues to think that speculation is impacting oil prices during this crisis asLibyas political situation has altered the global oil market and hence, the price.

Earlier, IEA said that nearly 1.0mmbbl/d of oil production has been shut in Libya

and Saudi can make up for this loss through its spare capacity. (Source: Thomson

Reuters)

2. Top Chinese refineries to cut March crude runs Thomson Reuters poll:

According to Thomson Reuters, leading refineries in China will cut their crude

throughput in March to the lowest daily volume in a year. This is due to heavy

maintenance, bulging fuel inventories and high crude oil prices. Some 12 plants,

accounting for more than a third of Chinas capacity, plan to process 2.69mmbbl/d

in March, down 7.2% m-m, according to a Thomson Reuters poll. This will equate

to 83% of the 12 plants combined refining capacity. According to ThomsonReuters, some refinery officials have said that their plants are operating in the red

despite Chinas recent fuel price hike. This is likely to increase with rising oil prices.

The Chinese government raised fuel prices on 20 February on inflation concerns.

Exhibit 7. Thomson Reuters survey of China's refinery runs for March

Plant March runs February runs Refining Capacity

(kbbl/d) (kbbl/d) (kbbl/d)

Zhenhai 435.7 430.2 460

Maoming 270.8 276.4 270

Qilu 219.0 219 220

Gaoqiao 193.1 135.6 260Guangzhou 195.5 213.8 270

Jinling 242.5 268.5 270

Fujian 200.2 221.6 240

Dalian 353.2 391 410

Lanzhou 223.7 221.6 280

Jinzhou 129.5 130.4 140

Wepec 0 156.4 200

Huizhou 226.1 234.6 240

Total (mmbbl/d) 2.69 2.90 3.26

Source: Thomson Reuters


6/22


7/22



Exhibit 9. OECD inventories

Source: IEA * includes both crude & product indus try & govt -con tro lled s tocks Source: IEA * inc ludes bo th indus try & govt -cont rol led stocks

Total OECD Stocks OECD Oil Product Stocks

4,000

4,100

4,200

4,300

4,400

J F M A M J J A S O N D

(mmb)

Prior4 Year Range Prior 4 Year Average 2009 2010

1,500

1,600

1,700

1,800


(mmb)


Exhibit 10. Crude inventories

Source: IEA * includes both industry & govt-controlled stocks Source: DOE

Source: IEA * includes both industry & govt-controlled stocks Source: Xinhua News Agency, Thomson Reuters * commercial

Source: Petronet Source: Petroleum Association of Japan

Korea Japan

OECD United States

OECD Europe China

180

190

200

210

220

230


(mmb)

2010 2011

0

10

20

30

40


(mmb)

Prior 5 Year Range Prior 5 Year Average 2009 2010

2,100

2,200

2,300

2,400


(mmb)


460

500

540

580


(mmb)


250

300

350

400


(mmb)


70

90

110

130


(mmb)



8/22



Exhibit 11. OECD imports

Source: IEA Source: IEA

Total OECD Imports Total OECD Oil Product Imports

26

28

30

32

34

36


(mmb/d)

Prior 5 Year Range Pri or 5 Year Average 2009 2010

5

6

7

8

9

10


(mmb/d)


Exhibit 12. Crude oil imports

Source: IEA Source: DOE

Source: IEA Source: Thomson Reuters

Source: Petronet Source: METI, Thomson Reuters

Korea Japan

OECD United States

OECD Europe China

1.5

2.0

2.5

3.0

3.5


(mmb/d)


3.0

3.5

4.0

4.5

5.0

5.5


(mmb/d)


20

22

24

26

28


(mmb/d)


7

8

9

10

11


(mmb/d)


0.0

2.0

4.0

6.0


(mmb/d)


7.0

8.0

9.0

10.0

11.0

12.0


(mmb/d)



9/22



Total products

Exhibit 13. Total product demand


Source: IEA Source: Thomson Reuters


OECD Europe India

Korea Japan

OECD United States

43

45

47

49

51

53


(mmb/d)


13

14

15

16

17


(mmb/d)


1.5

1.7

1.9

2.1

2.3

2.5

2.7


(mmb/d)


2.0

3.0

4.0

5.0

6.0


(mmb/d)


5

7

9

11

13

15


(mn tonnes)


17.0

19.0

21.0

23.0


(mmb/d)



10/22


11/22



Exhibit 15. Gasoline inventories

Source: IEA * includes industry stocks Source: DOE

Source: IEA * includes industrial stocks Source: China OGP, Xinhua News Agency * Commercial



OECD United States

OECD Europe China

Korea Japan

Singapore

300

330

360

390

420

450


(mmb)


80

100

120

140


(mmb)


40

50

60

70


(mmb)

2010 2011

2.0

3.0

4.0

5.0


(mmb)


170

190

210

230

250


(mmb)


10

12

14

16

18


(mmb)

P rior 5 Year Range Prior 5 Year Average 2010 2011

5.0

7.0

9.0

11.0

13.0


(mmb)



12/22



Distillates

Exhibit 16. Distillate demand


Source: IEA

Source: Thomson Reuters *Implied Demand



OECD United States

OECD Europe China

Korea Japan

India

5.0

5.4

5.8

6.2

6.6

7.0


(mmb/d)


1.6

2.0

2.4

2.8

3.2

3.6


(mmb/d)


0.2

0.3

0.4

0.5


(mmb/d)


0.4

0.5

0.6

0.7

0.8


(mmb/d)


0.6

0.8

1.0

1.2

1.4


(mmb/d)


10.0

12.0

14.0

16.0


(mmb/d)


3.0

3.5

4.0

4.5

5.0


(mmb/d)



13/22



Exhibit 17. Distillate inventories

Source: IEA * includes industry stocks Source: DOE

Source: IEA * includes industry stocks Source: China OGP, Xinhua News Agency * Commercial



OECD United States

Singapore

OECD Europe China

Korea Japan

400

500

600

700


(mmb)

Pri or4 Year Range Prior 4 Year Average 2009 2010

200

230

260

290

320


(mmb)

Pri or4 Year Range Prior 4 Year Average 2009 2010

20

40

60

80

100


(mmb)

2010 2011

5

10

15

20


(mmb)

Pri or 5 Year Range Prior 5 Year Average 2009 2010

90

110

130

150

170

190


(mmb)

Pri or 5 Year Range Prior 5 Year Average 2010 2011

7

9

11

13

15

17


(mmb)


3

6

9

12

15

18


(mmb)



14/22



Exhibit 18. Trading summary

ICE Brent Futures Aggregate Open Interest Nymex WTI Futures Aggregate Open Interest

Source: Bloomberg Source: Bloomberg

ICE Brent: Price versus Open Interest NYMEX WTI: Price versus Open Interest

Source: CFTC, Bloomberg Source: CFTC, Bloomberg

60

70

80

90

100

110

-5 0 5 10 15 20 25 30 35 40 45

(US$/bbl)

Current price with open interest Previous Week Previous Year

60

70

80

90

100

110

120

130

-6M 0M 6M 12M 18M 24M 30M 36M 42M 48M

(US$/bbl)

Current price with open interest Previous Week Previous Year

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

(contracts)

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

1,600,000

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

(contracts)

Exhibit 19. OPEC crude oil statistics

Source: IEA Source: IEA, Nomura Research

OPEC Spare Capacity - January 2011OPEC Crude - Production, Capacity & Quota

22.0

25.0

28.0

31.0

34.0

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

(mmb/d)

OPEC Crude Production Capacity OPEC Crude Production OPEC Quota

0.03 0.040.23 0.22 0.26 0.18

3.50

0.330.14 0.19 0.04 0.02

0.0

0.8

1.6

2.4

3.2

4.0

Algeria

Iran

Kuwait

Libya

Nigeria

Qatar

Saudi

Arabia

U.A.E

Venezuela

Angola

Iraq

Ecuador

(mmb/d)

Exhibit 20. International rotary rig count

Source: Baker Hughes, Nomura Research Source: Baker Hughes, Nomura Research

US Oil Rig CountWorld Oil Rig Count

0

100

200

300

400

500

600

700

800

900



500

800

1,100

1,400

1,700

2,000

2,300




15/22



Exhibit 21. US Department of Energys weekly summary table

Data Product 2/25/2011 2/18/2011 W-o-W W-o-W % 2/26/2010 Y-o-Y Y-o-Y % 5 YR AVG from 5YR AVG % from 5YR AVG

Stocks Crude Oil 346 347 (0.4) -0.1% 342 4.8 1.4% 332 14.6 4.4%

(mmb) Motor Gasoline 235 238 (3.6) -1.5% 232 2.8 1.2% 225 9.5 4.2%

Distillate 159 160 (0.8) -0.5% 152 7.4 4.9% 134 24.8 18.4%

Diesel (>15 to 500 ppm) 9 9 (0.0) -0.1% 16 -6.9 -42.4% 31 (21.7) -69.9%

Diesel (500 ppm) 38 39 (1.2) -3.1% 42 -4.3 -10.1% 42 (4.4) -10.5%

Kerosene-Type Jet Fuel 41 40 0.3 0.9% 43 -2.5 -5.7% 42 (0.7) -1.7%

Residual Fuel Oil 37 37 (0.3) -0.9% 40 -2.9 -7.3% 38 (1.1) -2.9%

Total Products 705 711 (6.2) -0.9% 705 -0.3 0.0% 686 19.2 2.8%

Crude Oil Runs (kbd) 13798 13535 263 1.9% 14074 (276) -2.0% 14343 (545) -3.8%

Capacity Utilization (%) 80.9 79.4 1.5 81.9 (1.0) 83.8 (2.9)

Weekly Crude Oil 8010 8106 (96) -1.2% 9236 (1226) -13.3% 9473 (1463) -15.4%

Imports Motor Gasoline 808 808 0 0.0% 775 33 4.3% 1011 (203) -20.0%

(kbd) Distillate 170 171 (1) -0.6% 354 (184) -52.0% 303 (133) -44.0%

Diesel (>15 to 500 ppm) 0 1 (1) 96 (96) 71 (71) -100.0%

Diesel (500 ppm) 42 71 (29) -40.8% 127 (85) -66.9% 129 (87) -67.4%

Kerosene-Type Jet Fuel 51 24 27 112.5% 61 (10) -16.4% 125 (74) -59.3%

Residual Fuel Oil 293 180 113 62.8% 439 (146) -33.3% 371 (78) -21.1%

Demand Motor Gasoline 9.2 9.1 0.1 0.7% 8.9 0.3 3.2% 9.0 0.2 1.8%

(mbd) Distillate 3.7 3.7 0.0 1.2% 3.8 (0.1) -3.4% 4.2 (0.5) -12.1%

Kerosene-Type Jet Fuel 1.3 1.4 (0.2) -12.9% 1.3 (0.1) -4.1% 1.5 (0.2) -15.5%

Residual Fuel Oil 0.6 0.7 (0.1) -15.8% 0.7 (0.1) -18.4% 0.8 (0.2) -27.3%

Total Products 19.1 19.8 (0.8) -3.9% 19.6 (0.5) -2.7% 20.4 (1.3) -6.3%

Source: Energy Information Administration, Nomura Research

Exhibit 22. Weather update and forecast

Average Temperature 6-10 Days Forecast

Code Colour Shading Forecast

A Orange-Red Above Normal

B Blue Below Normal

N White Neutral

* * Numbers indicate %age probability above/below normal

Source: National Weather Service, United States


16/22



Exhibit 23. Global retail prices for gasoline and diesel

United States Canada

Europe Japan

China India

Singapore Korea

Source: Bloomberg

$1.00

$2.00

$3.00

$4.00

$5.00

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

USD/ ga l

US Gaso line US Diesel

40

60

80

100

120

140

160

Jan-00

Jul-00

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

CAd/ litre

Canada Gasoline Canada Diesel

800

1000

1200

1400

1600

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

EUR/ ' 00 0 li tre

Europe Gasoline Europe Diesel

60

80

100

120

140

160

180

200

Jun-04

Oct-04

Feb-05

Jun-05

Oct-05

Feb-06

Jun-06

Oct-06

Feb-07

Jun-07

Oct-07

Feb-08

Jun-08

Oct-08

Feb-09

Jun-09

Oct-09

Feb-10

Jun-10

Oct-10

Feb-11

JPY/ litre

Japan Gasoline Japan Diesel

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

CNY/ litre

China Gasoline China Diesel

15

20

25

30

35

40

45

50

55

60

65

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

INR/ litre

India Gasoline India Diesel

$0.50

$1.50

$2.50

Apr-02

Oct-02

Apr-03

Oct-03

Apr-04

Oct-04

Apr-05

Oct-05

Apr-06

Oct-06

Apr-07

Oct-07

Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10

SGD/ litre

Singapore Gasoline Singapore Diesel

500

1000

1500

2000

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

KRW/ litre

Korea Gasoline Korea Diesel

Exhibit 24. Nomura Brent oil price forecast

1Q10 2Q10 3Q10 4Q10 1Q11F 2Q11F 3Q11F 4Q11F 2009 2010 2011F 2012F LT

Brent 76.7 78.8 76.7 86.9 92 94 95 1 00 62 79.7 95 110 75

Source: Nomura estimates


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Exhibit 25. Global oil supply & demand

2009 2010F 2011F Change, 10 vs 09 Change, 11 vs 10

(mm bls/d) 2006 2007 2008 Q1 Q2 Q3 Q4 2009 Q1 Q2 Q3F Q4F 2010F Q1F Q2F Q3F Q4F 2011F 2012F (mmbbl/d) (%) (mmbbl/d) (%)

Demand

North America 25.4 25.5 24.2 23.4 22.9 23.3 23.6 23.3 23.6 23.8 23.7 23.6 23.7 23.8 24.0 24.0 23.7 23.9 24.0 0.4 1.6 0.2 0.8

Europe 15.7 15.5 15.4 14.9 14.3 14.5 14.4 14.5 14.2 14.1 14.5 14.4 14.3 14.4 14.3 14.6 14.5 14.4 14.5 (0.2) (1.3) 0.1 0.7

Pacif ic 8.5 8.4 8.0 8.1 7.3 7.2 8.0 7.7 8.2 7.3 7.3 7.9 7.7 8.1 7.4 7.5 7.9 7.7 7.8 0.0 0.2 0.0 0.2

OECD 49.5 49.3 47.6 46.4 44.5 45.0 45.9 45.4 45.9 45.2 45.5 45.9 45.6 46.2 45.6 46.0 46.1 46.0 46.2 0.2 0.4 0.3 0.7

FSU 4.0 4.1 4.2 4.0 3 .9 4 .1 4.0 4 .0 4.2 4.1 4 .2 4 .1 4.2 4.3 4 .2 4 .3 4.3 4.3 4.4 0 .2 4.1 0 .1 2 .7

Europe 0.7 0.8 0.8 0.7 0.8 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.8 0.8 0.8 (0.0) (1.7) 0.0 3.8

China 7.2 7.6 7.7 7.5 8.5 8.7 8.8 8.4 8.9 9.4 9.2 9.2 9.1 9.3 9.8 9.7 9.6 9.6 10.0 0.8 9.3 0.4 4.8

Other Asia 9.0 9.5 9.6 9.9 10.0 9.8 10.1 9.9 10.1 10.3 10.2 10.3 10.2 10.4 10.6 10.5 10.6 10.5 10.8 0.3 3.1 0.3 2.9

Latin America 5.4 5.7 6.0 5.8 6.0 6.1 6.1 6.0 6.0 6.2 6.3 6.2 6.2 6.2 6.4 6.5 6.3 6.4 6.5 0.2 2.9 0.2 3.0

Middle East 6.3 6.5 6.8 6.6 7.1 7.6 6.9 7.1 7.0 7.4 7.7 7.3 7.3 7.3 7.6 7.9 7.6 7.6 7.8 0.3 4.0 0.3 3.6

Afr ica 3.0 3.1 3.2 3.3 3.2 3.2 3.1 3.2 3.2 3.3 3.3 3.3 3.2 3.3 3.3 3.4 3.4 3.4 3.4 0.1 1.6 0.1 3.6

Non OECD 35.7 37.2 38.4 37.7 39.4 40.1 39.8 39.3 40.1 41.4 41.5 41.1 41.0 41.5 42.6 43.0 42.7 42.5 43.6 1.7 4.4 1.4 3.5

Total demand 85.2 86.5 86.0 84.2 83.9 85.1 85.7 84.7 86.1 86.6 87.0 87.0 86.7 87.7 88.2 89.0 88.7 88.4 89.9 1.9 2.3 1.8 2.0

% increase y-y 1.4 1.5 (0.6) (3.7) (2.8) (0.8) 0.4 (1.4) 2.2 3.2 2.2 1.5 2.3 1.9 1.9 2.3 2.0 2.0 1.7

Supply

North America 14.2 13.9 13.3 13.5 13.5 13.7 13.8 13.6 13.9 14.1 13.6 13.6 13.8 13.8 13.6 13.5 13.6 13.6 13.5 0.2 1.4 (0.2) (1.4)

Europe 5.3 5.0 4.8 4.9 4.5 4.2 4.5 4.5 4.5 4.2 4.1 4.3 4.3 4.3 4.0 3.9 4.1 4.1 3.9 (0.2) (5.2) (0.2) (5.4)

Pacif ic 0.6 0.6 0.6 0.7 0.6 0.7 0.6 0.6 0.6 0.6 0.7 0.7 0.6 0.7 0.7 0.7 0.7 0.7 0.7 (0.0) (1.6) 0.1 9.4

OECD 20.1 19.5 18.7 19.0 18.6 18.6 18.9 18.8 19.1 18.9 18.4 18.6 18.7 18.7 18.2 18.1 18.4 18.4 18.1 (0.1) (0.3) (0.4) (2.0)

FSU 12.2 12.8 12.8 13.0 13.3 13.4 13.5 13.3 13.5 13.5 13.6 13.8 13.6 13.8 13.8 13.6 13.9 13.8 13.8 0.3 2.5 0.2 1.2

Europe 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.0 1.0 (0.0) (3.7)

China 3.7 3.7 3.9 3.8 3.9 3.9 3.9 3.9 4.0 4.1 4.1 4.1 4.1 4.1 4.0 4.0 4.0 4.0 4.1 0.2 5.7 (0.0) (1.2)

Other Asia 3.8 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.5 0.0 1.0 0.0 0.1

Latin America 3.9 3.6 3.7 3.8 3.9 3.9 4.0 3.9 4.0 4.1 4.1 4.2 4.1 4.3 4.4 4.5 4.5 4.4 4.5 0.2 6.1 0.3 7.9

Middle East 1.8 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 0.0 1.8 0.0 1.1

Afr ica 2.5 2.6 2.7 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 (0.0) (0.4) 0.0 1.2

Non OECD 28.0 28.2 28.5 28.7 29.0 29.2 29.4 29.0 29.6 29.8 29.9 30.2 29.9 30.4 30.3 30.3 30.5 30.4 30.3 0.8 2.9 0.5 1.6

Processing gains 2.1 2.2 2.2 2.3 2.3 2.3 2.3 2.3 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.3 (0.1) (4.3) 0.0 1.9

Other Biofuels 0.2 1.1 1.5 1.5 1.5 1.6 1.7 1.6 1.8 1.8 1.8 1.8 1.8 2.0 2.0 2.0 2.0 2.0 2.1 0.2 12 0.2 12

Non OPEC 50.4 50.9 50.9 51.5 51.4 51.7 52.3 51.7 52.7 52.6 52.2 52.8 52.6 53.3 52.8 52.6 53.1 52.9 52.7 0.9 1.7 0.4 0.7OPEC 11 crude 28.8 28.2 28.9 26.2 26.0 26.2 26.5 26.2 26.7 26.6

Iraq crude 1.9 2.1 2.4 2.3 2.5 2.6 2.5 2.4 2.4 2.4

OPEC NGLs 4.4 4.3 4.4 4.6 4.5 4.7 4.8 4.7 5.0 5.0 5.2 5.4 5.2 5.7 5.8 5.8 5.9 5.8 6.2 0.5 10.8 0.6 12.6

Total supply 85.6 85.5 86.6 84.7 84.4 85.2 86.0 85.1 86.7 86.6

Call on OPEC crude* 30.4 31.3 30.6 28.1 28.0 28.7 28.6 28.4 28.4 29.0 29.6 28.8 28.9 28.7 29.7 30.6 29.7 29.7 31.0 0.6 2.0 0.7 4.7

Implied stock change - m bls/d 0.3 (1.0) 0.6 0.5 0.5 0.1 0.3 0.3 0.6 0.0

Implied stock change - m bls 31 (91) 217 41 43 4 29 117 66 8

OECD stock change - m bls 94 (62) 73 58 (34) (45) (6) (28) 42 21

Note: Demand estimates are Nomura estimates and 2010 & 2011 supply estimates are IEA estimates

* Call on OPEC crude from Q3 2010 onwards is total demand minus Non OECD supply and OPEC NGLs, such that the implied stock change in forecast years is zero

Source: International Energy Agency, Nomura estimates


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Exhibit 26. Upcoming events calendar

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

1 2 3 4 5 6OPEC production

survey by Reuters

Japan PAJ Stats

CFTC CoT

DOE Weekly Report Singapore Oil Stats

7 8 9 10 11 12 13

Japan PAJ StatsCFTC Commitment

of Traders EIA STEO

DOE Weekly Report Singapore Oil Stats OPEC Monthly

14 15 16 17 18 19 20Japan PAJ Stats

CFTC Commitment

of Traders IEA OMR


21 22 23 24 25 26 27China Oil Stats Japan PAJ Stats

CFTC CoT, WTI

Contracts expiration

Singapore Oil Stats

DOE Weekly Report

28 29 30 31Japan METI data

India Oil Stats

DOE Weekly Report

*some dates are tentative

March

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

1 2 3OPEC production

survey by Reuters

4 5 6 7 8 9 10Japan PAJ Stats

CFTC Commitment

of Traders


11 12 13 14 15 16 17Japan PAJ Stats

CFTC CoT EIA

STEO IEA OMR

OPEC Monthly


18 19 20 21 22 23 24China Oil Stats Japan PAJ Stats

CFTC Commitment

of Traders


25 26 27 28 29 30Japan METI data

India Oil Stats

Japan PAJ Stats

CFTC Commitment

of Traders


*some dates are tentative

April

Asia Oil & Gas/Chemicals Research team

Name Sector/country coverage Telephone Email

Cheng Khoo Regional Head, Asia, & China +852 2252 6180 [email protected]

Michael Lo, CFA Oil Market +852 2252 6225 [email protected]

Xavier Grunauer, CFA Australia +61 2 8062 8416 [email protected]

Yong Liang Por, CFA Taiwan, Thailand +852 2252 6220 [email protected]

Gordon Wai China +852 2252 6176 [email protected]

Cindy Park Korea +822 3783 2324 [email protected]

Anil Sharma India +91 22 4037 4338 [email protected]

Ravikumar Adukia, CFA Associate +91 22 6723 5787 [email protected]

Saurabh Bharat Associate +91 22 3053 2835 [email protected]

Sanat Satyan Associate +91 22 6723 4076 [email protected]

Chris Chang Associate +822 3783 2316 [email protected]


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Analyst CertificationWe, Michael Lo, Cheng Khoo, Saurabh Bharat and Sanat Satyan, hereby certify (1) that the viewsexpressed in this Research report accurately reflect our personal views about any or all of the subjectsecurities or issuers referred to in this Research report, (2) no part of our compensation was, is or willbe directly or indirectly related to the specific recommendations or views expressed in this Researchreport and (3) no part of our compensation is tied to any specific investment banking transactionsperformed by Nomura Securities International, Inc., Nomura International plc or any other NomuraGroup company.

Important DisclosuresConflict-of-interest disclosuresImportant disclosures may be accessed through the following website:http://www.nomura.com/research/pages/disclosures/disclosures.aspx . If you have difficulty with thissite or you do not have a password, please contact your Nomura Securities International, Inc.salesperson (1-877-865-5752) or email [email protected] for assistance.Online availability of research and additional conflict-of-interest disclosuresNomura Japanese Equity Research is available electronically for clients in the US on NOMURA.COM,REUTERS, BLOOMBERG and THOMSON ONE ANALYTICS. For clients in Europe, Japan andelsewhere in Asia it is available on NOMURA.COM, REUTERS and BLOOMBERG.Important disclosures may be accessed through the left hand side of the Nomura Disclosure web pagehttp://www.nomura.com/research or requested from Nomura Securities International, Inc., on 1-877-865-5752. If you have any difficulties with the website, please email [email protected] fortechnical assistance.The analysts responsible for preparing this report have received compensation based upon variousfactors including the firm's total revenues, a portion of which is generated by Investment Bankingactivities.Industry Specialists identified in some Nomura International plc research reports are employees withinthe Firm who are responsible for the sales and trading effort in the sector for which they have coverage.Industry Specialists do not contribute in any manner to the content of research reports in which theirnames appear.Marketing Analysts identified in some Nomura research reports are research analysts employed byNomura International plc who are primarily responsible for marketing Nomuras Equity Researchproduct in the sector for which they have coverage. Marketing Analysts may also contribute to researchreports in which their names appear and publish research on their sector.Distribution of ratings (Global)Nomura Global Equity Research has 2027 companies under coverage.48% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified asa Buy rating; 38% of companies with this rating are investment banking clients of the Nomura Group*.38% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classifiedas a Hold rating; 48% of companies with this rating are investment banking clients of the NomuraGroup*.12% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classifiedas a Sell rating; 13% of companies with this rating are investment banking clients of the NomuraGroup*.As at 31 December 2010.*The Nomura Group as defined in the Disclaimer section at the end of this report.Explanation of Nomura's equity research rating system in Europe, Middle East andAfrica, US and Latin America for ratings published from 27 October 2008The rating system is a relative system indicating expected performance against a specific benchmarkidentified for each individual stock. Analysts may also indicate absolute upside to target price definedas (fair value - current price)/current price, subject to limited management discretion. In most cases,the fair value will equal the analyst's assessment of the current intrinsic fair value of the stock using an

appropriate valuation methodology such as discounted cash flow or multiple analysis, etc.STOCKSA rating of 'Buy',indicates that the analyst expects the stock to outperform the Benchmark over thenext 12 months.A rating of 'Neutral', indicates that the analyst expects the stock to perform in line with the Benchmarkover the next 12 months.A rating of 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark overthe next 12 months.A rating of 'Suspended', indicates that the rating and target price have been suspended temporarily tocomply with applicable regulations and/or firm policies in certain circumstances including when Nomurais acting in an advisory capacity in a merger or strategic transaction involving the company.Benchmarks are as follows: United States/Europe: Please see valuation methodologies forexplanations of relevant benchmarks for stocks (accessible through the left hand side of the NomuraDisclosure web page: http://www.nomura.com/research);Global Emerging Markets (ex-Asia): MSCIEmerging Markets ex-Asia, unless otherwise stated in the valuation methodology.SECTORSA 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark duringthe next 12 months.A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmarkduring the next 12 months.


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A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmarkduring the next 12 months.Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; GlobalEmerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia.Explanation of Nomura's equity research rating system for Asian companies undercoverage ex Japan published from 30 October 2008 and in Japan from 6 January2009STOCKSStock recommendations are based on absolute valuation upside (downside), which is defined as(Target Price - Current Price) / Current Price, subject to limited management discretion. In most cases,the Target Price will equal the analyst's 12-month intrinsic valuation of the stock, based on anappropriate valuation methodology such as discounted cash flow, multiple analysis, etc.A 'Buy' recommendation indicates that potential upside is 15% or more.A 'Neutral' recommendation indicates that potential upside is less than 15% or downside is less than5%.A 'Reduce' recommendation indicates that potential downside is 5% or more.A rating of 'Suspended' indicates that the rating and target price have been suspended temporarily tocomply with applicable regulations and/or firm policies in certain circumstances including when Nomurais acting in an advisory capacity in a merger or strategic transaction involving the subject company.Securities and/or companies that are labelled as 'Not rated' or shown as 'No rating' are not in regularresearch coverage of the Nomura entity identified in the top banner. Investors should not expectcontinuing or additional information from Nomura relating to such securities and/or companies.SECTORSA 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation ofthe stocks under coverage is) a positive absolute recommendation.A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation ofthe stocks under coverage is) a neutral absolute recommendation.A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation ofthe stocks under coverage is) a negative absolute recommendation.Explanation of Nomura's equity research rating system in Japan published prior to 6January 2009 (and ratings in Europe, Middle East and Africa, US and Latin Americapublished prior to 27 October 2008)STOCKSA rating of '1' or 'Strong buy', indicates that the analyst expects the stock to outperform theBenchmark by 15% or more over the next six months.A rating of '2' or 'Buy', indicates that the analyst expects the stock to outperform the Benchmark by 5%or more but less than 15% over the next six months.

A rating of '3' or 'Neutral', indicates that the analyst expects the stock to either outperform orunderperform the Benchmark by less than 5% over the next six months.A rating of '4' or 'Reduce', indicates that the analyst expects the stock to underperform the Benchmarkby 5% or more but less than 15% over the next six months.A rating of '5' or 'Sell', indicates that the analyst expects the stock to underperform the Benchmark by15% or more over the next six months.Stocks labeled 'Not rated' or shown as 'No rating' are not in Nomura's regular research coverage.Nomura might not publish additional research reports concerning this company, and it undertakes noobligation to update the analysis, estimates, projections, conclusions or other information containedherein.SECTORSA 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark duringthe next six months.A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmarkduring the next six months.A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmarkduring the next six months.Benchmarks are as follows: Japan: TOPIX; United States: S&P 500, MSCI World TechnologyHardware & Equipment; Europe, by sector - Hardware/Semiconductors: FTSE W Europe IT Hardware;Telecoms: FTSE W Europe Business Services; Business Services: FTSE W Europe; Auto &Components: FTSE W Europe Auto & Parts; Communications equipment: FTSE W Europe ITHardware; Ecology Focus: Bloomberg World Energy Alternate Sources; Global Emerging Markets:MSCI Emerging Markets ex-Asia.Explanation of Nomura's equity research rating system for Asian companies undercoverage ex Japan published prior to 30 October 2008STOCKSStock recommendations are based on absolute valuation upside (downside), which is defined as (FairValue - Current Price)/Current Price, subject to limited management discretion. In most cases, the FairValue will equal the analyst's assessment of the current intrinsic fair value of the stock using anappropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, ifthe analyst doesn't think the market will revalue the stock over the specified time horizon due to a lackof events or catalysts, then the fair value may differ from the intrinsic fair value. In most cases,therefore, our recommendation is an assessment of the difference between current market price andour estimate of current intrinsic fair value. Recommendations are set with a 6-12 month horizon unlessspecified otherwise. Accordingly, within this horizon, price volatility may cause the actual upside ordownside based on the prevailing market price to differ from the upside or downside implied by therecommendation.


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A 'Strong buy' recommendation indicates that upside is more than 20%.A 'Buy' recommendation indicates that upside is between 10% and 20%.A 'Neutral' recommendation indicates that upside or downside is less than 10%.A 'Reduce' recommendation indicates that downside is between 10% and 20%.A 'Sell' recommendation indicates that downside is more than 20%.SECTORSA 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation ofthe stocks under coverage is) a positive absolute recommendation.

A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation ofthe stocks under coverage is) a neutral absolute recommendation.A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation ofthe stocks under coverage is) a negative absolute recommendation.Target PriceA Target Price, if discussed, reflect in part the analyst's estimates for the company's earnings. Theachievement of any target price may be impeded by general market and macroeconomic trends, andby other risks related to the company or the market, and may not occur if the company's earnings differfrom estimates.

DisclaimersThis publication contains material that has been prepared by the Nomura entity identified on the bannerat the top or the bottom of page 1 herein and, if applicable, with the contributions of one or moreNomura entities whose employees and their respective affiliations are specified on page 1 herein or

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