BMI View: Subdued oil demand growth means the prospects for refiners and fuels distributors – already faced with strong competition and the need to maintain investment for environmental reasons – are not good. The gas market has greater potential, both in terms of rising domestic demand and the scope to re-sell surplus LNG through regional pipeline links. A mature market means there is a risk leading industry players which are seeking higher growth and wider margins may seek to divest assets.

France Oil and Gas Market Report Q1 2012

Order Now, Contact: + 1 888 391 5441 or [email protected]

The main trends and developments we highlight in the French Oil and Gas sector are:

.. France-focused explorer Toreador Resources and US independent Hess won approval from the French energy ministry in June 2010 for an oil shale joint venture (JV) in the Paris Basin. However, environmental concerns over hydraulic fracturing (fraccing), the controversial drilling method used to tap reserves locked in tight shale rock formations, have scuttled these hopes. Hydraulic fracturing was banned in France in mid-2011and this policy seems unlikely to be reversed in the immediate future.

.. Gas demand is expected to rise more quickly than oil demand, with new sources of supply being lined up by GdF Suez, which has signed import agreements with Egypt in addition to those already signed with Russia, Norway, Algeria and the Netherlands. Gas consumption is likely to reach 53.5bn cubic metres (bcm) in 2016. Gas production is negligible, so imports could rise significantly to a high of around 52.9bcm by the end of the forecast period.

.. In May 2011, EdF and Total confirmed that they would proceed with the US$2.2bn Nord-Pas-de- Calais Liquefied Natural Gas (LNG) project at Dunkirk, which is expected to add between 10bcm and 13bcm of import capacity when it comes onstream. Furthermore, there are plans to expand capacity at the Montoir-de-Bretagne terminal to 16.5bcm by 2014.

.. Thanks to improved energy efficiency and efforts to reduce oil dependency, oil demand is now expected to remain mostly flat over the coming decade. Our assumptions point to oil consumption reaching 1.88mn barrels per day (b/d) by 2016. Crude oil imports are expected to have reached 1.86mn b/d by 2016.

.. Crude oil imports will cost an assumed US$66.7bn in 2011, falling to US$63.4bn in 2016. With virtually no domestic gas supply, we anticipate French gas imports of 48.8bcm in 2011, costing US$24.5bn. Combined crude oil and gas imports are expected to cost France an estimated US$87.9bn by 2016.

At time of writing, we assume an OPEC basket oil price for 2011 of US$101.90 per barrel (bbl), falling to US$99.40/bbl in 2012. Global GDP in 2011 is forecast at 3.2%, down from 4.3% in 2010, reflecting slowing growth in China, a faltering recovery in the US and a worsening eurozone debt crisis. For 2012, growth is put at 3.6%.