morgan stanley-asia oil gas benign energy environment look for bottom-up ideas

1、ASIA OIL & GASAsia Oil & GasM O R G A N S T A N L E Y R E S E A R C HAsia/PacificBenign Energy Environment, Look for Bottom-Up IdeasMorgan Stanley India Company Private Limited+Vinay JaisingVinay.J+91 (22)6118 2252We are not constructive on any part of the Energy chain and hen

2、ce prefer bottom-up stock ideas with organic growth to navigate a weak margin environment.Rakesh SethiaRakesh.S+91 (22)6118 2253Our Key OWs are BPCL, HPCL, ONGC, RIL, Sinopec, Siam Cement, SK Innovation, and FPCOur Key UWs are Hanwha, PTTEP, and GAIL Crude Supply disappointment

3、s and geopolitical tensions have supported the recent strength. Return of supply should help improve the balance towards 4Q14. Refining GRMs to weaken as capacity gradually comes back online; weaker outlook in 2H14, driven by upcoming capacity additions, as well Petrochemicals 2014 could be a waters

4、hed year for PE demand due to a slowdown in China. Aromatic/Polyester margins have remained under pressureJune 03, 2014Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest

5、that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.+=

6、 Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.M O R G A N S T

7、 A N L E Y R E S E A R C HAsia Oil & GasJune 03, 2014Asia Oil & Gas: Key Industry Drivers and Our Assessment of ThemDriverOur AssessmentOur Top PreferencesOur Top AvoidsPetrochemicalSpreads- Olefin Chain1- Aromatic/Polyester Chain 2014 could be a watershed year for PE demand due to a slowdown in Chi

8、na. YTD2014 demand is down 1.5% YoY, after a positive surprise of 11% growth in 2013. We expect some softness to persist at least for one more quarter before demand improves in 2H14 PE spreads are up 10% YoY and are close to a 3Y high and with softness in PE demand, PE margins could face headwinds.

9、Potential delays in Chinas CTO/MTO capacities an upside risk, however higher supply in North America and India are downside risks Polyester/aromatic margins have remained uner pressure, and now close to 18 month low largely due to weak demand environment in China. Oncoming supply on the PTA and PX s

10、ide brings little hope for a meaningful recovery in marginsRIL,Siam Cement FPCRIL / LG ChemHanwha/IVL Refining capacity is gradually coming back online post peak maintenance in Apr/May, which should put pressure on Asian Complex GRMs in the near term.2 Refining Margins Overall we see weaker outlook

11、in 2014, particularly in 2H14, driven by upcoming capacity additions from Middle East and China Incremental supplies are higher than incremental demand adjusted for impact of bio-fuels/NGLs;Closures in Japan/Australia to partially negate higher supplies but not sufficient enough. Light-Heavy Spreads

12、 have picked up in recent time and now US$5/bbl as compared to historical average of US$4.2/bbl which will help complex refiners like RIL to protect their GRMsBPCL, HPCL, RILThai Oil Essar Oil3 Crude Oil Supply disappointments and geopolitical tensions have supported the recent strength in crude oil

13、 prices. Return of supply should help improve the balance towards 4Q14. Supply growth concentrated in 2014/15 in longer term. Higher supplies driven by more predictable North America shale oil/NGLsSinopec ONGCOil India BPCLCairn India PTTEPWe acknowledge the contribution of Vanessa DSouza to this re

14、port.2Crude Oil: We Expect Elevated Volatility in Prices in Coming QuartersCrude demand to be seasonally strong in 3Q, supply should outpace demand in 4Q, we estimateSupply disappointments, geopolitical tensions supported the recent strength in crude oil prices Comments We expect elevated volatility

15、 in crude prices on a mix of 1) demand seasonality, 2) supply risks and outages, and 3) geopolitical tensions. We believe that the recent strength in crude oil prices is largely on account of supply disappointments including North Sea outages and uncertainty on Libyan supply returning al ngside risi

16、ng geopolitical tensions. In 3Q14, fundamentals will likely support prices (North Sea maintenance in Aug/Sep, when refinery runs are seasonally high; Iranian exports may need to be curtailed to meet quotas); thereafter return of supply (Libya, Iraq, W. Africa, US) will help improve the balance, in o

17、ur view. We see upside risks to our commodity teams 2014 average oil price forecast of US$105/bbl: The 2Q14TD average stands at US$109/bbl compared to the base-case forecast of US$101/bbl for 2Q14. Unlike the past, E&P stock prices now have very little correlation to oil prices: No E&P stock has dis

18、played a correlation of 0.5 in the last two years. However, in the last three months, the correlation of CNOOC, Santos and Oil Search to crude has been close to 0.6. Indias Oil PSUs BPCL, HPCL, IOCL, ONGC and OIL have negative correlation to crude prices, whereas Chinas Sinopec and PetroChina typica

19、lly have low correlation with oil prices.112111110109Brent (US$/bbl)3,0002,5002,0001,500 Demand Supply(all units in kbpd)1081071061051041031021,000500- (500)(1,000)1-Jan8-Jan15-Jan 22-Jan 29-Jan 5-Feb 12-Feb 19-Feb 26-Feb 5-Mar 12-Mar 19-Mar 26-Mar 2-Apr 9-Apr 16-Apr 23-Apr 30-Apr 7-May14-May(1,500)

20、(2,000)2Q133Q134Q131Q142Q143Q144Q14MS Commodity Team EstimatesPeriodFwd CurveBase108101108105105BullBear1Q14A2Q143Q144Q14201410911411211195989699109109107108 Asian Oil & Gas Stock Prices Have Little Correlation to Crude Oil Prices in the Last 2Years2Y3M0.800.600.400.200.00(0.20)GS Hold. LG ChemSKI R

21、ILBeach Cairn IndiaLotte PTTGC CNOOCWoodside Sinopec Oil SearchGAILSantos S-Oil PTT AWEPetrochina Siam C. PTTEP IOC ONGCHPCLPetronas BPCL(0.40)Source: Morgan Stanley Commodity Research estimates, DataStream3Crude Oil: Supply Growth Concentrated in 2014/15 in longer termCommentsOil Supply Growth is C

22、oncentrated in 2014-15, Driven by NAM Shale Oil We believe Oil Supply growth is concentrated in 2014/2015. Our commodity teams field level analysis shows global supply growth is front-end loaded and should be most challenging for global oil balances in 2014 and 2015 given the resolution of supply ou

23、tages (mostly in OPEC) and ongoing growth in North America and Brazil. In the longer term, Shale is not a permanent solution for the global energy challenge. Global oil balances should firm later in the decade on heavy US decline rates and a leaner project slate3.02.52.01.51.00.5- (0.5)(1.0)(YoY in

24、global oil production capacity, mmb/d)2.32.1Total USNGL 2011 2012 2013 2014 2015 2016 2017 20188,129 9,182 10,318 11,357 12,254 13,046 13,481 13,7312,166 2,358 2,516 2,820 3,072 3,269 3,426 3,550 Crude5,963 6,824 7,802 8,537 9,182 9,777 10,055 10,180.5 Select Shale Plays Bakken 407 664 872

25、 1,141 1,344 1,462 1,542 1,613 Eagle Ford 0561 1,008 1,371 1,487 1,560 1,625 1,680 Permian (with Conven) 987 1,210 1,367 1,506 1,715 1,857 1,947 2,011 Niobrara* 6974121 187 241 282 307 327Anadarko Woodford 505865738289961022013e2014e2015e2016e2017e2018eNorth AmericaEuropeFormer USSRAsiaAfricaLatin A

26、mericaMiddle EastTotal OPECGlobal SupplyAlaska613 577565 551 518487462 443Conventional Onshore3,197 3,2963,255 3,163 3,0742,9842,889 2,797Gulf of Mexico1,317 1,2661,350 1,276 1,3621,5641,624 1,599Unconventional836 1,6852,633 3,548 4,2284,7415,080 5,342 Mississippi Lime 174586120 147 167 185 200 Utic

27、a 1113969136 141 151 164Oil Balance to Loosen in 2014/15 before its starts to tighten again in 2016-18 OECD Crude inventories have grown YTD, Product inventories continue to decline(YoY in Kbpd Demand SupplyOPEC Spare Capacity (RHS)5,7425,525 5,5704,9085,1414,3254,5943,9863,5433,4902,9942008 2009 20

28、10 2011 20122016 2017 20182013 2014 20153,0002,5002,0001,5001,000500- (500)(1,000)7,0006,0005,0004,0003,0002,0001,000-Source: IHS, IEA, Company Data, Morgan Stanley Research estimates4Crude Oil: Despite Supply Pressure We Dont See Brent below US$90/bblCommentsNGLs/Liquids notable share of growth; Gl

29、obal outages are becoming more frequentPlenty of offsets that suggest a large sustained decline (below US$90/bbl) in global oil prices is unlikely.1) Non-crude growth represents a notable share of total supply growth.2) Supply could be at risk with rising project complexity, higher-risk supply sourc

30、es, and more frequent outages and maintenance.3) Feedback loops are often ignored: If prices slip, demand will be stimulated and the pace of investment in new supply will slow.4) OPEC will increasingly act as a balancing force. OPEC has publicly stated its preference for US$100/bbl oil, and Saudi Ar

31、abia would prefer to produce at lower levels to better manage decline rates. As a result, we dont see prices averaging below US$90-95/bbl for any extended period.Choke PointsMn BpdCountriesIran, Oman, Saudi Arabia.Strait of Hormuz 15.5-17.5 IraqComment20% of all oil tradeSuez Canal3.5-4.5EgyptTotal1

32、9-2225% of oil demandGeopolitical risk premium due to two key oil choke points in Middle East2.52.01.51.00.50.0-0.5-1.0-40Demand drivenMS Estimates-30-20-10010202005200620072008200920102011201220132014201520162017201830Non-OPEC CrudeNGLsOther LiquidsPriceIf prices fall below US$90/bbl, 10% of additi

33、ons through 2018 would be at risk; also OPEC will cut production if prices fall too far160140120100806040200Escravos GTL, NGArctic Russia Pq. de Baleia, Bakken, US Permian, USW. Qurna, IQFranco, BR Oilsands, CA Eagle Ford, US Lula, BR 0510152025(Left axis: OPEC production, mmb/d; right axis: OPEC ba

34、sket price, $/bbl)333231302928May-08Nov-08May-09Nov-09May-10Nov-10May-11Nov-11May-12Nov-12May-1327$150$135$120$105$90$75$60$45$30(y-axis: 2013 marginal breakeven price* by project on a Brent- equivalent basis, US$/bbl; x-axis: incremental production added from 2013-2018, mmb/d)Note: W.Qurna is onsho

35、re, Permian, Eagle Ford, Bakken are Shale related supplies, Pq De Balerla and Lula BR are offshore projects. Encrovas is GTL (Gas to Liquids) projectOPEC Production (LHS)OPEC Basket Price (RHS)Source: IHS, Company data, Morgan Stanley Research. E = Morgan5Stanley Research estimatesN on-O PECC EOPOEC

36、D demand growth to remain poorDelays in projects in Angola and Nigeria have tempered the growth in West Africa. Libyan production to recover only in 2015Saudi Arabian capacity likely to stay around current levels, as 900kbpd addition in Manifa will be enough to stem declines. Irans capacity to fall

37、as projects continue to be delayed, with the latest round of sanctions. Iraq to see highest supply growth in OPEC in 2013-18.2013 2014 2015 2016 2017 2018 Net 2013-2018Saudi Arabia12.212.512.512.412.312.1-0.16Iran3.02.52.4-0.57Iraq1.50UAE2.93.03.00.27Kuwai2.92.92.

38、-0.31Qatar-0.12Angola0.11Nigeria0.31Libya1.02Algeria-0.15Ecuador-0.04Venezuela-0.09Total Crude Capacity34.534.735.635.835.735.50.97OPEC NGL0.48Tot

39、al OPEC40.941.342.442.642.642.31.45DEMAND2011201220132014OECD Americas23,96123,62123,99524,488YoY % -0.8%-1.4%1.6%2.1%OECD Europe14,27713,76813,65313,604YoY % -2.8%-3.6%-0.8%-0.4%OECD Asia Oceania8,2328,5858,4018,380YoY % 0.5%4.3%-2.1%-0.3%OECD Demand46,47045,97346,05046,472YoY % -1.2%-1.1%0.2%0.9%C

40、hina9,3229,82010,09910,160YoY % 4.4%5.3%2.8%0.6%India3,1963,3503,3683,462YoY % 2.5%4.8%0.5%2.8%Other Asia7,8277,9708,2128,255YoY % 2.8%1.8%3.0%0.5%Africa3,4883,6583,7883,899YoY % -1.2%4.9%3.6%2.9%Non OECD Europe663673676681YoY % -0.2%1.5%0.5%0.8%FSU4,3894,4924,6304,688YoY % 6.3%2.3%3.1%1.2%Latin Ame

41、rica6,1746,4026,6216,778YoY % 1.5%3.7%3.4%2.4%Middle East7,4607,7227,8868,001YoY % 2.0%3.5%2.1%1.5%Non OECD42,52044,08645,28045,924YoY % 2.7%3.7%2.7%1.4%Total Demand88,99090,05991,33092,396YoY % 0.7%1.2%1.4%1.2%SUPPLY2011201220132014Total Non OPEC (A)52,84053,35954,67656,101YoY % 0.4%1.0%2.5%2.6%OPE

42、C NGLs + Unconv. (B)5,9176,2786,3966,581YoY % 6.4%6.1%1.9%2.9%Call on OPEC Crude30,23430,42230,25929,713Total Demand88,99090,05991,33092,396Crude Oil Supply-Demand Balance Demand Already at Record LevelsOPEC Crude Production (C)29,667OPEC Sparecapacity (Average)3,49031,6552,99430,5883,98730,0824,889

43、Total Supply (A+B+C)88,42491,29291,65992,764Of which NGLs10.110.310.51.6Bio Fuels2.0Total10.911.512.012.312.512.71.8YoYGrowth mbpd0.410.610.450.320.220.16Data in Kbpd. Note: Supply excludes spare capacity. Source: IEA, Morgan Stanley Commodities Research estimates. Call on

44、 OPEC crude and Actual OPEC production may not be the same.Oil demand growth coming from non-OECDNorth American production growth is largely owing to an expansion in the Canadian oil sands and a US Lower 48 production from shale oil2013 2014 2015 2016 2017 2018 Net 2013-2018Latin American supply is

45、seen growing through to 2018 as a host of offshore projects in Brazil come onlineClose to 1.2mbpd of YoY supply growth in N. America alone, offset by declines elsewhereLarge part of OPEC additions come from NGLs, which cannot be used for producing distillates, a key demand driver for crude.China, In

46、dia driving demand growth, however slowdown in China to temper growth in 2014.OECD Americas17.218.419.520.621.421.94.7United States10.311.312.313.113.613.83.5Canada4.0Mexico & Others0.0OECD Europe0.0OECD AsiaOceania0.1Total OECD

47、20.922.023.324.4Former USSR13.813.813.713.713.813.8-0.1China0.0India0.0Indonesia0.0Malaysia0.1Thailand-0.1Vietnam0.1Other Asia-0.1Asia ex China0.

48、0Other Europe0.0Latin America1.1Brazil2.93.03.51.4Middle East-0.2Africa0.2Total Non-OECD29.629.830.50.9Processing Gains0.2Biofuels2.0TOTAL Non-OPEC54.756.157.859.059.960.9

49、6.2Overall, total capacity will increase by 7.7mmb/d by 20187.7Total Capacity 95.697.4 100.2 101.6 102.5 103.22014 year-end spare capacity estimated at 4.9mmb/d.6Incremental Supply to Exceed Demand A global overview suggests that incremental supplies largely matching incremental demand over 2013-15e. However, adjusting for bio-fuels and NGLs (not part of refining system) supply to exceed incremental demand. Chinese capacity additions likely to grow only to match its demand growth. New capacity additions likely come from Middle East in 2014-