nomura - oil & gas, chemicals 30 sept 2010

8/8/2019 Nomura - Oil & Gas, Chemicals 30 Sept 2010

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W E E K L Y

30 September 2010Nomura 1

Any authors named on this report are research analysts unless otherwise indicated.See the important disclosures and analyst certifications on pages 18 to 21.

Oil & Gas/Chemicals | G L O B A L OIL MARKET UPDATE: 30 SEPTEMBER, 2010

Michael Lo, CFA +852 2252 6225 michael.lo@no mura.comCheng Khoo +852 2252 6180 cheng.khoo@nomu ra.com

This weeks highlights

Our latest research on Iran shows that the recent Japanese sanctions against Iran

could reduce global oil supply by 0.5mmbbl/d as the sanctions could reduce exportfrom Iran in the near term. Recent weakness in US dollar and the expectation of QE2has pushed oil prices higher but the recent gain in oil prices appears to be laggingother commodities price gain.

Oil Market Update Recent sanctions by the United Nations, United States, European Union and now

Japan and South Korea, have caused significant delays in the development of oiland gas fields in Iran. In our latest report titled Iran Sanctions and delays , dated30 September 2010, we have looked at the current sanctions on Iran and its impacton the countrys oil and gas sector. The latest sanction from Japan against Iran

could force oil exports to below 1.5mmbbl/d in the near term from the current2.0mmbbl/d, negatively affecting global supply while helping push oil prices higher.Longer term, the sanctions will limit oil and gas production from one of the mostprolific and low-cost producing regions. This will limit future supply growth, causingprices to escalate. The delay in the development of fields and high decline rate inolder fields (8-10%) will likely lead to a decline in Irans oil production capacity by15% from 2010-15, compared with the countrys pre-sanction target of 35% growth.The Iranian crude production target will likely decline from a pre-sanction target of 5.3mmbbl/d to only 3.34mmbbl/d by 2015, which is below the current productioncapacity of 3.93mmbbl/d. Similarly, we believe that Irans gas production is alsounlikely to proceed as planned. New sanctions have caused IOCs to cancel

existing contracts with Iran, delaying new gas production significantly from pre-sanction growth of 25.1% to only 9.2% by 2015. As a result, on 9 August 2010, theIranian oil ministry announced that the country is putting its plans to create an LNGindustry on hold. Please read our report Iran Sanctions & delays for more details.

WTI crude price rose 2.2% yesterday to US$77.9/bbl after demand for oil productsin the US rose 2.8% w-w in the week ending 24 Sept, as per the latest EnergyInformation Administration (EIA) weekly inventories report. Even after the end of the summer driving season, gasoline demand rose by 6.1% w-w to 9.4mmbbl/dpushing down stocks by 3.5mmbbl w-w (Consensus: 0.3mmbbl build). Distillatedemand also rose by 5.7% w-w to 3.9mmbbl/d lowering stocks by 1.3mmbbl w-w(Consensus: 0.3mmbbl build). Crude stocks also fell by 0.5mmbbl w-w on 3.4%

lower weekly imports. Crude throughput at domestic refineries in the US nowstands at 14.7mmbbl/d, 0.5% higher y-y and 1.7% higher than its five-year average.

Open interest for WTI futures fell by 2.9% w-w in the week ended 24 September.However, Brent futures open interest fell by 1.0% w-w. Open interest for WTI andBrent now stands at 1.32mn and 0.75mn, respectively. WTI open interest is now4.6% higher than the August average of 1.26mn, whereas Brent open interest isnow 4.8% lower than the August average of 0.78mn. The aggregate open interestfor WTI and Brent futures is now at 2.06mn, down 2.2% w-w.

Also see our note: Iran Sanctions &delays (30 September 2010)

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

RUNNING THEME

AnalystsMichael Lo, CFA

+852 2252 [email protected]

Cheng Khoo+852 2252 [email protected]
http://www.nomura.com/research/GetPub.aspx?spid=6901http://www.nomura.com/research/GetPub.aspx?spid=6901http://www.nomura.com/research/GetPub.aspx?spid=6901


2/21

Oil & Gas/Chemicals | Global Michael Lo, CFA / Cheng Khoo


Exhibit 1. Price summary

Commodity Units Price Daily Change % Daily Change Weekly Change % Weekly change Yearly Change % Yearly changeCrude Oil and Products 29-Sep-10WTI $/bbl 77.86 1.68 2.21% 4.48 6.11% 7.25 10.27%WTI, 48-month $/bbl 88.45 1.11 1.27% 1.53 1.76% 9.18 11.58%Brent $/bbl 80.06 1.73 2.21% 2.54 3.28% 15.31 23.64%Brent, 48-month $/bbl 89.68 1.44 1.63% 1.54 1.75% 10.68 13.52%Oman $/bbl 75.04 -0.85 1.17% -1.79 -2.33% 9.94 15.27%Dubai $/bbl 74.67 -0.85 -1.13% -1.79 -2.34% 5.94 8.64%OPEC Basket $/bbl 74.87 -0.19 -0.25% -0.47 -0.62% 10.62 16.53%RBOB c/g 199.55 4.76 2.44% 7.81 4.07% 36.74 22.57%Heating Oil c/g 219.05 6.60 3.11% 7.60 3.59% 48.99 28.81%ICE Gasoil $/ton 687.75 5.75 0.84% 17.75 2.65% 145.50 26.83%

Source: Bloomberg

Exhibit 2. 2010 YTD performance of commodities in CRB Commodity Index

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

C o t

t o n

C o f

f e e

S i l v e r

N i c k e l

S u g a r

G o l

d

C o r n

W h e a t

L e a n

H o g s

L i v e

C a t

t l e

O r a n g e

J u i c e

S o y

b e a n

C o p p e r

A l u m

i n i u m

H e a

t i n g

O i l

G a s o l

i n e

C r u

d e O i l

C o c o a

N a t

G a s

Source: Bloomberg, Nomura research

Exhibit 3. Iran pre & post-sanction targets

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Oil (lhs) Gas (rhs)

mb/d

0

100

200

300

400

500bcm/yr

Current Prod CapacityPre-sanction target (2015E)Post-sanction target (2015E)

Source: BP, Bloomberg, Nomura estimates

Exhibit 4. Iran crude production capacity estimates

-

1.0

2.0

3.0

4.0

5.0

6.0

2010E 2011E 2012E 2013E 2014E 2015E

mb/d Nomura IEA Iran Government

Source: International Energy Agency, Nomura estimates


3/21



Weekly events summary1. Oil may exceed US$80/bbl if global economic growth is 3.0-3.5% - IEA

The IEA does not expect oil prices to spike in 2010 and 2011 due to excesscapacity.

2. US may end deepwater drilling ban soon, says US Interior Secretary

Most milestones of deepwater drilling have been met according to the new rules.3. Iraq plans to increase offshore oil-loading capacity

Three single-buoy moorings of 0.9mmbbl/d each and two offshore pipelines havebeen planned by the oil ministry.

4. Nigeria aims to increase crude output to 3.3mmbbl/d in the next four years

Major oil projects in Nigeria aim to increase crude output by 1.1mmbbl/d by 2014.

Key oil market events during the week1. Oil may exceed US$80/bbl if global economic growth is 3.0-3.5% - IEA: On 29

September, Faith Birol, Chief Economist of the International Energy Agency (IEA),

said that oil prices may rise above US$80/bbl if global GDP growth is 3.0-3.5%.However, he does not expect sharp price rises in 2010 and 2011 due to excesscapacity. He also added that oil prices could fall if the global economy faces adouble-dip recession, causing economic activity to fall. In its latest oil marketreport, the IEA has estimated oil demand growth of 1.9mmbbl/d y-y in 2010 and1.3mmbbl/d in 2011. ( Source: Thomson Reuters )

2. US may end deepwater drilling ban soon, says US Interior Secretary: On 28September, US Interior Secretary, Kenneth Salazar said that the US governmentmay lift the federal ban on deepwater oil drilling soon. He did not give a particular time frame for this suspension. On 12 July 2010, the US had imposed new ruleson offshore drilling in waters deeper than 500 feet, after a New Orleans judge had

found an earlier moratorium too broad. According to the Secretary, now that themilestones for deepwater drilling have been met or are likely to be reached in thecoming days, the ban on offshore drilling could be suspended. ( Source:Bloomberg )

Exhibit 5. US offshore rig count

0

10

20

30

40

50

60

70

80

90

J a n - 0

8

A p r -

0 8

J u

l - 0 8

O c

t - 0 8

J a n - 0

9

A p r -

0 9

J u

l - 0 9

O c

t - 0 9

J a n - 1

0

A p r -

1 0

J u

l - 1 0

Rig Count

-80%

-60%

-40%

-20%

0%20%

40%

60%

80%YoYRig Count YoY

Source: Baker Hughes, Bloomberg, Nomura research

3. Iraq plans to increase offshore oil-loading capacity: According to the Iraqigovernments oil advisor, the country is planning to increase its offshore oil-loadingcapacity by 2.7mmbbl/d. He added that the oil ministry aims to seek the


4/21



governments approval within the next two weeks for the same. Iraq plans to buildtwo offshore pipelines and three single-buoy moorings. Each mooring will add0.9mmbbl/d of loading capacity. Iraq has been having trouble exporting oil out of the country due to low export terminal capacity and the new moorings andpipelines are a step towards increasing this capacity. In August 2010, Iraqexported 1.78mmbbl/d of crude oil, down 2.0% m-m. ( Source: Bloomberg )

4. Nigeria aims to increase crude output to 3.3mmbbl/d in the next four years:According to Thomson Reuters, Nigerian oil projects aim to increase the countryscrude oil production in the next four years by 1.15mmbbl/d. Currently, Nigeriaproduces more than 2.0mmbbl/d and with the oil projects scheduled till 2014, thecountrys output can increase to 3.3mmbbl/d. ( Source: Thomson Reuters )

Exhibit 6. Major Nigerian oil projects

Field (Company) Location On-stream by Production capacityyear kbbl/d

Usan (Total) Deepwater 2012 180Sattellites I (Exxon Mobil) Offshore 2011-12 70

Sattellites II (Exxon Mobil) Offshore 2013 300Gbaran-Ubie (Shell) 2011 70Bonga North (Shell) Deepwater 2011 100Bonga Southwest (Shell) Deepwater 2013 140Bosi (Exxon) Offshore 2013 135Erha North (Exxon) Offshore 2013 50Egina (Total) Deepwater 2014-15 100 Total 1,145

Source: Thomson Reuters


5/21



Crude oil

Exhibit 7. Crude oil runs

Source: IEA Source: IEA

Source: DOE Source: IEA

Source: Thomson Reuters Source: Thomson Reuters * excludes new RPL refinery

Source: Petronet Source: Petroleum Association of Japan

China India

Korea Japan

Global Runs OECD

United States OECD Europe

5.0

6.0

7.0

8.0

9.0

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

mmb/d

Prior 5 Year Range Prior 5 Year Average 2009 2010

2.2

2.6

3.0

3.4

3.8


mmb/d


1.5

2.0

2.5

3.0


mmb/d


11

12

13

14

15

16

17


mmb/d


2.5

3.0

3.5

4.0

4.5

5.0


mmb/d


68

70

72

74

76


mmb/d

Prior3 Year Range Prior 3 Year Average 2009 2010

32

34

36

38

40

42


mmb/d


11

12

13

14

15


mmb/d



6/21



Exhibit 8. OECD inventories

Source: IEA * includes both crude and products Source: IEA

Total OECD Stocks OECD Oil Product Stocks

4,000

4,100

4,200

4,300

4,400


mmb


1,500

1,600

1,700

1,800


mmb


Exhibit 9. Crude inventories

Source: IEA Source: DOE

Source: IEA Source: Xinhua News Agency, Thomson Reuters * commercial


OECD United States

OECD Europe China

Korea Japan

180

190

200

210

220

230


mmb

2010

0

10

20

30

40


mmb


250

300

350

400


mmb


80

90

100

110

120

130

140


mmb


2,100

2,200

2,300

2,400


mmb


460

500

540

580


mmb



7/21



Exhibit 10. OECD imports

Source: IEA Source: IEA

Total OECD Imports Total OECD Oil Product Imports

28

30

32

34

36


mmb/d


5

6

7

8

9

10


mmb/d


Exhibit 11. Crude oil imports


Source: IEA Source: Thomson Reuters

Source: Petronet Source: METI, Thomson Reuters

OECD United States

OECD Europe China

Korea Japan

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


8

9

10

11


mmb/d


7

8

9

10

11

12


mmb/d


1.0

2.0

3.0

4.0

5.0

6.0


mmb/d



8/21



Total products

Exhibit 12. Total product demand


Source: IEA Source: Thomson Reuters


OECD United States

OECD Europe India

Korea Japan

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

3

4

5

6


mmb/d


5

7

9

11

13

15


m Tonnes


17

18

19

20

21

22

23


mmb/d



9/21



Gasoline

Exhibit 13. Gasoline demand


Source: IEA Source: Thomson Reuters *Implied Demand



India

OECD Europe China

Korea Japan

OECD United States

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2


mmb/d


0.9

1.1

1.3

1.5

1.7

1.9


mmb/d


0.12

0.14

0.16

0.18

0.20

0.22


mmb/d


0.8

1.0

1.2

1.4


mmb/d


0.15

0.20

0.25

0.30

0.35

0.40


mmb/d


13

14

15

16

17


mmb/d


8.0

8.5

9.0

9.5

10.0


mmb/d



10/21



Exhibit 14. Gasoline inventories

Source: IEA *Industrial stocks Source: DOE

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



Singapore

OECD Europe China

Korea Japan

OECD United States

300

330

360

390

420

450


mmb


90

100

110

120

130


mmb


40

45

50

55

60

65


mmb

2010

2.0

3.0

4.0

5.0


mmb


170

190

210

230

250


mmb


10

11

12

13

14

15

16

17


mmb


5

7

9

11

13


mmb



11/21



Distillates

Exhibit 15. Distillate demand


Source: IEASource: Thomson Reuters *Implied Demand



India

OECD Europe China

Korea Japan

OECD United States

5.0

5.4

5.8

6.2

6.6

7.0


mmb/d

Prior 5 Year Range Prior 5 Year Average 2009 20101.6

2.0

2.4

2.8

3.2

3.6


mmb/d


0.20

0.30

0.40

0.50


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

12

14

16


mmb/d


2.5

3.0

3.5

4.0

4.5

5.0


mmb/d



12/21



Exhibit 16. Distillate inventories

Source: IEA *Industrial stocks Source: DOE

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



Singapore

OECD Europe China

Korea Japan

OECD United States

400

500

600

700


mmb


200

230

260

290

320


mmb


50

60

70

80

90


mmb

2010

6

9

12

15

18


mmb


90

110

130

150

170

190


mmb


7

9

11

13

15

17


mmb


2

6

10

14

18


mmb



13/21



Exhibit 17. Trading summaryICE 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

50

60

70

80

90

100

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

$/bbl

Current Previous W eek Previous Year

50

60

70

80

90

100

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

$/bbl

Current Previous Week Previous Year

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

J a n -

0 8

F e b - 0

8

M a r - 0

8

A p r - 0

8

M a y - 0

8

J u n -

0 8

J u l - 0 8

A u g - 0

8

S e p - 0

8

O c t - 0

8

N o v - 0

8

D e c - 0

8

J a n -

0 9

F e b - 0

9

M a r - 0

9

A p r - 0

9

M a y - 0

9

J u n -

0 9

J u l - 0 9

A u g - 0

9

S e p - 0

9

O c t - 0

9

N o v - 0

9

D e c - 0

9

J a n -

1 0

F e b - 1

0

M a r - 1

0

A p r - 1

0

M a y - 1

0

J u n -

1 0

J u l - 1 0

A u g - 1

0

S e p - 1

0

contracts

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

J a n -

0 8

F e b - 0

8

M a r - 0

8

A p r - 0

8

M a y - 0

8

J u n -

0 8

J u l - 0 8

A u g - 0

8

S e p - 0

8

O c t - 0

8

N o v - 0

8

D e c - 0

8

J a n -

0 9

F e b - 0

9

M a r - 0

9

A p r - 0

9

M a y - 0

9

J u n -

0 9

J u l - 0 9

A u g - 0

9

S e p - 0

9

O c t - 0

9

N o v - 0

9

D e c - 0

9

J a n -

1 0

F e b - 1

0

M a r - 1

0

A p r - 1

0

M a y - 1

0

J u n -

1 0

J u l - 1 0

A u g - 1

0

S e p - 1

0

contracts

Exhibit 18. OPEC crude oil statistics

Source: IEA Source: IEA, Nomura Research

OPEC Spare Capacity - August 2010OPEC Crude - Production, Capacity & Quota

22.0

25.0

28.0

31.0

34.0

J a n - 0

4

J u l - 0 4

J a n - 0

5

J u l - 0 5

J a n - 0

6

J u l - 0 6

J a n - 0

7

J u l - 0 7

J a n - 0

8

J u l - 0 8

J a n - 0

9

J u l - 0 9

J a n - 1

0

J u l - 1 0

mmbls/ d

OPEC Crude Producti on Capaci ty OPEC Crud e Producti on OPEC Quo ta

0.12 0.26 0.28 0.14 0.11 0.21

3.92

0.40 0.22 0.21 0.18 0.020.0

0.8

1.6

2.4

3.2

4.0

4.8

A l g e r i a

I r a n

K u w a

i t

L i b y a

N i g e r i a

Q a

t a r

S a u

d i

A r a

b i a

U . A . E

V e n e z u e

l a

A n g o

l a

I r a q

E c u a

d o r

mmb/ d

Exhibit 19. International rotary rig count

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

World Oil Rig Count US Oil Rig Count

100

200

300

400

500

600

700



-30%

-10%

10%

30%

50%

J F M A M J J A S O N D900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

2010 Y-o-Y %age 2009 Y-o-Y %age 2007 2008 2009 2010


14/21



Exhibit 20. US Department of Energys weekly summary tableData Product 9/24/2010 9/17/2010 W-o-W W-o-W % 9/25/2009 Y-o-Y Y-o-Y % 5 YR AVG from 5YR AVG % from 5YR AVGStocks Crude Oil 358 358 (0.5) -0.1% 338 19.5 5.7% 318 40.17 12.6%(mmb) Motor Gasoline 223 226 (3.5) -1.5% 211 11.1 5.3% 199 23.14 11.6%

Distillate 174 175 (1.3) -0.7% 171 2.5 1.5% 143 30.57 21.4%Diesel (>15 to 500 ppm) 13 14 (0.4) -3.3% 20 -6.8 -34.1% 35 (21.34) -61.8%Diesel (500 ppm) 52 51 1.2 2.3% 51 1.2 2.3% 50 1.87 3.7%

Kerosene-Type Jet Fuel 48 48 (0.0) -0.1% 46 2.1 4.5% 41 6.98 17.0%Residual Fuel Oil 39 39 0.1 0.2% 34 5.3 15.7% 37 2.62 7.2%

Crude Oil Runs (kbd) 14666 15047 (381) -2.5% 14591 75 0.5% 14418 248 1.7%Capacity Utilization (%) 85.8 87.8 (2.0) 84.6 1.2 84.2 1.6

Weekly Crude Oil 9005 9322 (317) -3.4% 9533 (528) -5.5% 9796 (791) -8.1%Imports Motor Gasoline 881 850 31 3.6% 851 30 3.5% 1117 (236) -21.2%(kbd) Distillate 195 203 (8) -3.9% 150 45 30.0% 205 (10) -4.9%

Diesel (>15 to 500 ppm) 7 7 0 5 2 21 (14) -66.7%Diesel (500 ppm) 23 33 (10) -30.3% 15 8 53.3% 67 (44) -65.6%Kerosene-Type Jet Fuel 120 98 22 22.4% 115 5 4.3% 153 (33) -21.4%Residual Fuel Oil 314 352 (38) -10.8% 377 (63) -16.7% 341 (27) -7.8%

Demand Motor Gasoline 9.4 8.8 0.5 6.1% 9.1 0.3 2.8% 9.0 0.4 4.5%(mbd) Distillate 3.9 3.7 0.2 5.7% 3.4 0.5 14.4% 3.9 (0.0) -0.7%

Kerosene-Type Jet Fuel 1.4 1.5 (0.1) -8.5% 1.4 (0.1) -5.0% 1.5 (0.2) -10.7%Residual Fuel Oil 0.4 0.5 (0.1) -11.8% 0.4 (0.0) -5.0% 0.6 (0.2) -29.5%Total Products 19.7 19.2 0.5 2.8% 18.9 0.8 4.2% 19.6 0.1 0.6%

Source: Energy Information Administration, Nomura Research

Exhibit 21. Weather update and forecastAverage Temperature 6-10 Days Forecast

Code Colour Shading ForecastA Orange-Red Above NormalB Blue Below NormalN White Neutral

* * Numbers indicate %age probability above/below normal Source: National Weather Service, United States


15/21



Exhibit 22. Global retail prices for gasoline and dieselUnited States Canada

Europe Japan

China India

Singapore Korea

Source: Bloomberg

$1.00

$2.00

$3.00

$4.00

$5.00

O c t - 0

5

J a n -

0 6

A p r - 0

6

J u l - 0 6

O c t - 0

6

J a n -

0 7

A p r - 0

7

J u l - 0 7

O c t - 0

7

J a n -

0 8

A p r - 0

8

J u l - 0 8

O c t - 0

8

J a n -

0 9

A p r - 0

9

J u l - 0 9

O c t - 0

9

J a n -

1 0

A p r - 1

0

J u l - 1 0

USD/ gal

US Gasoline US Diesel

40

60

80

100

120

140

160

J a n -

0 0

J u l - 0 0

J a n -

0 1

J u l - 0 1

J a n -

0 2

J u l - 0 2

J a n -

0 3

J u l - 0 3

J a n -

0 4

J u l - 0 4

J a n -

0 5

J u l - 0 5

J a n -

0 6

J u l - 0 6

J a n -

0 7

J u l - 0 7

J a n -

0 8

J u l - 0 8

J a n -

0 9

J u l - 0 9

J a n -

1 0

J u l - 1 0

CAd/ litre

Canada G asoline Canada Diesel

800

1000

1200

1400

1600

J a n -

0 6

A p r - 0

6

J u l - 0 6

O c t - 0

6

J a n -

0 7

A p r - 0

7

J u l - 0 7

O c t - 0

7

J a n -

0 8

A p r - 0

8

J u l - 0 8

O c t - 0

8

J a n -

0 9

A p r - 0

9

J u l - 0 9

O c t - 0

9

J a n -

1 0

A p r - 1

0

J u l - 1 0

EUR/ '000 litre

Europe G asoline Europe Diesel

60

80

100

120

140

160

180

200

J u n -

0 4

O c t - 0

4

F e b - 0 5

J u n -

0 5

O c t - 0

5

F e b - 0 6

J u n -

0 6

O c t - 0

6

F e b - 0 7

J u n -

0 7

O c t - 0

7

F e b - 0 8

J u n -

0 8

O c t - 0

8

F e b - 0 9

J u n -

0 9

O c t - 0

9

F e b - 1 0

J u n -

1 0

JPY/ litre

Japan G asoline Japan Diesel

2.00

3.00

4.00

5.00

6.00

7.00

J u l - 0 5

O c t - 0

5

J a n -

0 6

A p r - 0

6

J u l - 0 6

O c t - 0

6

J a n -

0 7

A p r - 0

7

J u l - 0 7

O c t - 0

7

J a n -

0 8

A p r - 0

8

J u l - 0 8

O c t - 0

8

J a n -

0 9

A p r - 0

9

J u l - 0 9

O c t - 0

9

J a n -

1 0

A p r - 1

0

J u l - 1 0

CNY/ litre

China G asoline China Diesel

15

2025

30

35

40

45

50

55

J u l - 0 2

J a n -

0 3

J u l - 0 3

J a n -

0 4

J u l - 0 4

J a n -

0 5

J u l - 0 5

J a n -

0 6

J u l - 0 6

J a n -

0 7

J u l - 0 7

J a n -

0 8

J u l - 0 8

J a n -

0 9

J u l - 0 9

J a n -

1 0

J u l - 1 0

INR/ litre

India G asoline India Diesel

$0.50

$1.50

$2.50

A p r - 0

2

O c t - 0

2

A p r - 0

3

O c t - 0

3

A p r - 0

4

O c t - 0

4

A p r - 0

5

O c t - 0

5

A p r - 0

6

O c t - 0

6

A p r - 0

7

O c t - 0

7

A p r - 0

8

O c t - 0

8

A p r - 0

9

O c t - 0

9

A p r - 1

0

SGD/ litre

Si ng ap ore G asoli ne Si ng ap ore Di esel

500

1000

1500

2000

J a n -

0 4

M a y - 0

4

S e p -

0 4

J a n -

0 5

M a y - 0

5

S e p -

0 5

J a n -

0 6

M a y - 0

6

S e p -

0 6

J a n -

0 7

M a y - 0

7

S e p -

0 7

J a n -

0 8

M a y - 0

8

S e p -

0 8

J a n -

0 9

M a y - 0

9

S e p -

0 9

J a n -

1 0

M a y - 1

0

S e p -

1 0

KRW/ litre

Korea G asoline Korea Diesel

Source: Bloomberg


16/21



Exhibit 23. Global supply/demand balance2009 2010F 2011F Chg, 10 vs 09 Change, 11 vs 10

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

Demand

North Amer ica 25 .4 25 .5 24.2 23.5 22.9 23.2 23.6 23.3 23 .5 23.4 23.5 23.9 23 .6 23 .8 23.7 23 .9 24 .1 23.9 24.0 0.3 1 .1 0.3 1.3

Europe 15.7 15.3 15.3 14.9 14.2 14.5 14.4 14.5 14.7 14.4 14.6 14.6 14.5 14.8 14.7 14.7 14.8 14.7 14.9 0.0 0.3 0.2 1.3

Pacific 8.5 8.4 8.1 8.1 7.3 7.3 8.0 7.7 8.1 7.3 7.4 8.0 7.7 8.1 7.4 7.5 8.1 7.7 7.8 0.0 0.3 0.0 0.5

OECD 49.5 49.2 47.6 46.6 44.4 45.0 46.0 45.5 46.2 45.1 45.5 46.5 45.8 46.6 45.7 46.1 47.0 46.3 46.6 0.3 0.7 0.5 1.2

FSU 4.0 4.1 4.2 3.9 3.8 4.0 4.0 3.9 4.1 4.0 4.2 4.1 4.1 4.2 4.1 4.3 4.4 4.2 4.3 0.2 4.1 0.1 3.3

Europe 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 0.7 0.7 0.7 0.9 0.8 0.8 0.0 1.7 0.0 6.5

China 7.2 7.6 7.9 7.7 8.6 8.8 8.9 8.5 8.8 9.3 9.3 9.5 9.2 9.3 9.5 9.7 9.8 9.6 10.0 0.7 8.6 0.3 3.8

Other Asia 9.0 9.5 9.7 10.0 10.1 9.8 10.1 10.0 10.3 10.2 10.1 10.4 10.2 10.4 10.5 10.4 10.7 10.5 10.8 0.2 2 .2 0.3 2.6

Latin America 5.4 5.7 5.9 5.7 5.9 6.1 6.1 5.9 5.9 6.1 6.2 6.3 6.1 6.1 6.3 6.3 6.4 6.2 6.4 0.1 2.4 0.2 2.5

Middle East 6.3 6.5 7.1 6.7 7.3 7.8 7.1 7.2 7.0 7.6 8.1 7.3 7.5 7.5 7.8 8.3 7.6 7.8 8.0 0.3 3.6 0.3 4.1

Africa 3.0 3.1 3.2 3.2 3.2 3.2 3.2 3.2 3.3 3.3 3.3 3.3 3.3 3.4 3.3 3.4 3.4 3.4 3.4 0.1 3.0 0.1 2.2

Non OECD 35.7 37.3 38.7 37.9 39.7 40.3 40.1 39.5 40.1 41.1 41.7 41.5 41.1 41.5 42.2 43.0 43.2 42.5 43.6 1.6 4.1 1.3 3.2

Total demand 85.2 86.5 86.2 84.5 84.1 85.3 86.1 85.0 86.3 86.2 87.2 88.0 86.9 88.1 87.9 89.0 90.2 88.8 90.3 2.0 2.3 1.9 2.1

% increase y-y 1.4 1.5 (0.3) (3.4) (2.6) (0.7) 0.8 (1.5) 2.2 2.5 2.3 2.3 2.3 2.0 2.0 2.1 2.5 2.1 1 .7

Supply

North Amer ica 14 .2 14 .3 13.9 14.2 14.1 14.3 14.5 14.3 14 .5 14.3 13.9 14.2 14 .2 14 .4 14.3 14 .0 14 .2 14.2 14.3 (0 .1 ) (0.7) 0.0 0.2

Europe 5.3 5.0 4.7 4.9 4.5 4.2 4.5 4.5 4.5 4.2 4.1 4.2 4.2 4.2 3.9 3.8 3.9 4.0 4.0 (0.3) (6.7) (0.3) (6.0)

Pacific 0.6 0.6 0.6 0.7 0.6 0.7 0.6 0.6 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.1 16.7 (0.0) (3.6)

OECD 20.1 19.9 19.3 19.7 19.1 19.2 19.7 19.4 19.7 19.2 18.7 19.1 19.2 19.3 18.9 18.5 18.8 18.9 19.0 (0 .2) (1.0) (0 .4) (1 .8)

FSU 12.2 12.8 12.8 13.0 13.2 13.4 13.5 13.3 13.5 13.6 13.5 13.7 13.6 13.7 13.8 13.7 13.8 13.8 13.8 0.3 2.3 0.2 1.1

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 0.0 0.0 0.0

China 3.7 3.7 3.8 3.7 3.8 3.8 3.8 3.8 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 0.1 2.6 0.0 0.3

Other Asia 3.8 3.7 3.7 3.6 3.6 3.6 3.6 3.6 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.7 0.1 2.8 0.0 0.3

Latin America 3.9 3.9 4.1 4.3 4.3 4.3 4.4 4.3 4.5 4.6 4.7 4.7 4.6 4.8 4.9 4.9 5.0 4.9 5.1 0.3 7.0 0.3 6.5

Middle East 1.8 1.7 1.6 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.6 1.6 1.6 1.6 1.6 1.6 0.0 0.0 (0.1) (5.9)

Africa 2.5 2.5 2.6 2.6 2.6 2.6 2.5 2.6 2.6 2.6 2.5 2.6 2.6 2.6 2.6 2.7 2.7 2.7 2.7 0.0 0.0 0.1 2.3

Non OECD 28.0 28.5 28.8 29.0 29.3 29.5 29.7 29.4 30.0 30.2 30.2 30.4 30.2 30.4 30.6 30.6 30.8 30.6 30.9 0.8 2.7 0.4 1.4

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 0.0

Other Biofuels 0.2 0.3 0.4 0.3 0.4 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.1 25 0.1 14

Non OPEC 50.4 50.9 50.7 51.3 51.1 51.4 52.1 51.5 52.3 52.0 51.6 52.3 52.0 52.4 52.2 52.0 52.4 52.3 52.8 0.5 1.0 0.3 0.5

OPEC 11 crude 28.8 28.2 28.8 26.2 26.3 26.7 26.5 26.4 26.7

Iraq crude 1.9 2.1 2.4 2.3 2.5 2.6 2.5 2.4 2.4

OPEC NGLs 4.4 4.5 4.4 4.6 4.5 4.7 4.8 4.7 5.1 5.2 5.6 5.8 5.5 6.2 6.3 6.4 6.5 6.3 6.7 0.8 16.3 0.9 16.0

Total supply 85.6 85.7 86.5 84.4 84.3 85.3 85.9 85.0 86.5

Cal l on OPEC crude* 30.4 31.1 31.1 28.6 28.5 29.2 29.1 28.8 28.9 28.9 30.0 29.9 29.4 29.5 29.4 30.7 31.3 30.2 30.8 0.6 2 .2 0.8 4.6

Implied stock change - mb/d 0.3 (0.8) 0.3 (0.1) 0.2 0.0 (0.2) (0.0) 0.2

Implied stock change mmb 31 (73) 96 (8) 17 1 (16) (5) 16

OECD stock change - mmb 94 (62) 73 58 (34) (45)

Note: Demand estimates are Nomura estimates and 2010 supply estimates are IEA estimates*Call on OPEC crude from Q2 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

Exhibit 24. Nomura Brent oil price forecasts

1Q10 2Q10 3Q10F 4Q10F 1Q11F 2Q11F 3Q11F 4Q11F 2009 2010F 2011F 2012F LTBrent 76.6 78.6 87 90 92 94 95 100 62 83 95 110 75

Source: Nomura estimates


17/21



Exhibit 25. Upcoming events calendar

Monday Tuesday Wednesday Thursday Friday Saturday Sunday1 2 3 4 5DOE Weekly ReportOPEC Productionsurvey by Reuters

Singapore Oil Stats

6 7 8 9 10 11 12

Japan PAJ StatsCFTC Commitmentof Traders

EIA STEO Singapore Oil StatsOPEC MonthlyDOE Weekly Report

IEA OMR

13 14 15 16 17 18 19Japan PAJ StatsCFTC Commitmentof Traders

DOE Weekly ReportBrent ContractExpiration

Singapore Oil Stats

20 21 22 23 24 25 26C hina O il S ta ts J apan PAJ S ta ts

CFTC Commitmentof Traders

DOE Weekly ReportWTI ContractExpiration

Singapore Oil Stats

27 28 29 30I ndia Oil St at s Ja pan PAJ Stat s


DOE Weekly Report Singapore Oil StatsJapan METI data

*some dates are tentative

September

Monday Tuesday Wednesday Thursday Friday Saturday Sunday1 2 3OPEC Productionsurvey by Reuters

4 5 6 7 8 9 10Japan PAJ StatsCFTC Commitmentof Traders

DOE Weekly Report Singapore Oil Stats

11 12 13 14 15 16 17Japan PAJ StatsCFTC Commitmentof Traders OPECMonthly

DOE Weekly ReportEIA STEO IEA OMR

Singapore Oil StatsBrent ContractsExpiration

18 19 20 21 22 23 24C hina O il S ta ts J apan PAJ S ta ts


DOE Weekly Report Singapore Oil Stats WTI ContractsExpiration

25 26 27 28 29 30 31I ndia Oil St at s Ja pan PAJ Stat s


DOE Weekly Report Singapore Oil Stats Japan METI data

*some dates are tentative

October

Source: Nomura

Asia Oil & Gas/Chemicals Research team

Name Sector/country coverage Telephone Email

Cheng Khoo Regional Head, Asia, & China +852 2252 6180 [email protected] Lo, CFA Oil Market +852 2252 6225 [email protected]

Xavier Grunauer, CFA Australia +852 2252 6215 [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]


18/21



ANALYST CERTIFICATIONSWe, Michael Lo and Cheng Khoo, hereby certify (1) that the views expressed in this Research reportaccurately reflect our personal views about any or all of the subject securities or issuers referred to inthis Research report, (2) no part of our compensation was, is or will be directly or indirectly related tothe specific recommendations or views expressed in this Research report and (3) no part of our compensation is tied to any specific investment banking transactions performed by Nomura SecuritiesInternational, Inc., Nomura International plc or any other Nomura Group company.

Conflict-of-interest disclosures Important 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 disclosures Nomura 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] for technical 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 research reports are senior employees within the Firmwho are responsible for the sales and trading effort in the sector for which they have coverage. IndustrySpecialists do not contribute in any manner to the content of research report in which their namesappear.

Distribution of ratings Nomura Global Equity Research has 1842 companies under coverage. 50% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified asa Buy rating; 37% of companies with this rating are investment banking clients of the Nomura Group*. 36% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classifiedas a Hold rating; 47% of companies with this rating are investment banking clients of the NomuraGroup*.13% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classifiedas a Sell rating; 3% of companies with this rating are investment banking clients of the Nomura Group*. As at 30 June 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 2008 The rating system is a relative system indicating expected performance against a specific benchmarkidentified for each individual stock. Analysts may also indicate absolute upside to price target 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 anappropriate valuation methodology such as discounted cash flow or multiple analysis, etc.

STOCKS A 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 over the next 12 months. A rating of ' RS-Rating Suspended' , indicates that the rating and target price have been suspendedtemporarily to comply with applicable regulations and/or firm policies in certain circumstances includingwhen Nomura is acting in an advisory capacity in a merger or strategic transaction involving thecompany. Benchmarks are as follows: United States/Europe : Please see valuation methodologies for explanations 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.

SECTORS A '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. 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.


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Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published from 30 October 2008 and in Japan from 6 January2009 STOCKS Stock recommendations are based on absolute valuation upside (downside), which is defined as (PriceTarget - Current Price) / Current Price, subject to limited management discretion. In most cases, thePrice Target will equal the analyst's 12-month intrinsic valuation of the stock, based on an appropriatevaluation 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 ' RS' or 'Rating Suspended' indicates that the rating and target price have been suspendedtemporarily to comply with applicable regulations and/or firm policies in certain circumstances includingwhen Nomura is acting in an advisory capacity in a merger or strategic transaction involving the subjectcompany. Securities and/or companies that are labelled as ' Not rated' or shown as ' No rating' are not in regular research 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.

SECTORS A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the 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) STOCKS A 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 or underperform 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 by

15% 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.

SECTORS A '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 under coverage ex Japan published prior to 30 October 2008 STOCKS Stock recommendations are based on absolute valuation upside (downside), which is defined as (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 anappropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, if the 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 or

downside based on the prevailing market price to differ from the upside or downside implied by therecommendation. 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%.


20/21



A 'Sell' recommendation indicates that downside is more than 20%.

SECTORS A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.

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nomura - oil & gas, chemicals 30 sept 2010

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