News
Demand and supply fundamentals favour Dana Gas and Taqa
Demand and supply fundamentals in the energy sector will result in long-term mid-cycle prices of $86 per barrel of oil and $7.30 per million British thermal units (MMBtu) of gas, new research has forecast.
"On the back of about 70 per cent and 55 per cent year-on-year rise in 2008 crude oil and gas prices, we forecast… a steady decline in Brent/WTI crude prices and Henry Hub natural gas after 2008," Al Mal Capital said in a note to investors.
"Our mid-cycle price assumptions are $86/b and $7.30/MMBtu. This is because of recent softness seen in fossil fuel demand from countries that do not subsidise oil prices.
"Moreover, we contend that the acceleration in supply growth to take advantage of high oil and gas prices will have the effect of normalising these prices in the long term as demand-supply dynamics come into more of a balance."
These factors are expected to favour the Abu Dhabi National Energy Company, or Taqa, and Dana Gas, Al Mal said. "Taqa is highly leveraged to the global crude/gas demand and stands to benefit longer-term at our mid-cycle price assumptions. For Dana, increased regional energy needs plays into its natgas niche. With the UAE being a net exporter of oil, the region's escalating energy demand due to economic growth favours Dana, a regional gas player."
While Al Mal expects stable overall global energy demand growth, South and Central America, Africa, Asia Pacific and the Middle East are "clear outperformers", the report said.
"Our analysis shows that the total world primary energy consumption is set to increase by approximately 29 per cent from 2006 to 2015 at a CAGR of 2.9 per cent." From 2001 to 2006, world energy consumption grew at a rate of 3.0 per cent per annum to reach 435 quadrillion Btu. By 2015, world energy consumption is projected to reach 563 quadrillion Btu, a compounded annual growth rate of 2.9 per cent.
"However, high oil and gas prices have had some effect in dampening recent demand. Considering the tremendous increase in fuel prices, growth in consumption of primary energy supplied by fossil fuels slowed in 2006, rising by only 2.4 per cent as opposed to 3.2 per cent in 2005," the investment bank said.
"On the back of about 70 per cent and 55 per cent year-on-year rise in 2008 crude oil and gas prices, we forecast… a steady decline in Brent/WTI crude prices and Henry Hub natural gas after 2008," Al Mal Capital said in a note to investors.
"Our mid-cycle price assumptions are $86/b and $7.30/MMBtu. This is because of recent softness seen in fossil fuel demand from countries that do not subsidise oil prices.
"Moreover, we contend that the acceleration in supply growth to take advantage of high oil and gas prices will have the effect of normalising these prices in the long term as demand-supply dynamics come into more of a balance."
These factors are expected to favour the Abu Dhabi National Energy Company, or Taqa, and Dana Gas, Al Mal said. "Taqa is highly leveraged to the global crude/gas demand and stands to benefit longer-term at our mid-cycle price assumptions. For Dana, increased regional energy needs plays into its natgas niche. With the UAE being a net exporter of oil, the region's escalating energy demand due to economic growth favours Dana, a regional gas player."
While Al Mal expects stable overall global energy demand growth, South and Central America, Africa, Asia Pacific and the Middle East are "clear outperformers", the report said.
"Our analysis shows that the total world primary energy consumption is set to increase by approximately 29 per cent from 2006 to 2015 at a CAGR of 2.9 per cent." From 2001 to 2006, world energy consumption grew at a rate of 3.0 per cent per annum to reach 435 quadrillion Btu. By 2015, world energy consumption is projected to reach 563 quadrillion Btu, a compounded annual growth rate of 2.9 per cent.
"However, high oil and gas prices have had some effect in dampening recent demand. Considering the tremendous increase in fuel prices, growth in consumption of primary energy supplied by fossil fuels slowed in 2006, rising by only 2.4 per cent as opposed to 3.2 per cent in 2005," the investment bank said.