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Hungary Oil and Gas Report Q3 2010
Business Monitor International, July 2010, Pages: 91
The Hungary Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Hungary's oil and gas industry.
The latest Hungary Oil & Gas Report from BMI forecasts that the country will account for 2.60% of Central and Eastern European (CEE) regional oil demand by 2014, while providing just 0.18% of supply. CEE regional oil use of 5.42mn barrels per day (b/d) in 2001 rose to an estimated 5.81mn b/d in 2009. It should average 6.03mn b/d in 2010 and then rise to around 6.69mn b/d by 2014. Regional oil production was 8.88mn b/d in 2001, and in 2009 averaged an estimated 13.35mn b/d. It is set to rise to 14.57mn b/d by 2014. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average of 3.46mn b/d. This total had risen to an estimated 7.54mn b/d in 2009 and is forecast to reach 7.88mn b/d by 2014. Azerbaijan and Kazakhstan have the greatest production growth potential, although Russia will remain the key exporter.
In terms of natural gas, the region in 2009 consumed an estimated 668.5bn cubic metres (bcm), with demand of 780.0bcm targeted for 2014, representing 13.7% growth. Production of an estimated 830.3bcm in 2009 should reach 1,025.7bcm in 2014, which implies net exports rising from an estimated 162bcm in 2009 to 246bcm by the end of the period. Hungary’s share of consumption in 2009 was an estimated 1.72%, which is forecast to rise to 1.90% by 2014. Its contribution to gas production is not significant, with no improvement expected over the forecast period.
We are sticking with our forecast that the OPEC basket of crudes will average US$83.00/bbl in 2010. Wide variations in crude differentials so far in 2010 make forecasting tricky for Brent, West Texas Intermediate (WTI) and Urals, but we believe the three benchmarks will average around US$85.11, US$88.22 and US$83.62/bbl respectively, with Dubai coming in at US$83.14. By 2011, there should be further growth in oil consumption and more room for OPEC to regain market share and reduce surplus capacity through higher production quotas. We are assuming a further increase in the OPEC basket price to an average US$85.00/bbl. For 2012 and beyond, we continue to use a central case forecast of US$90.00/bbl for the OPEC basket.
For 2010, the BMI assumption for premium unleaded gasoline is an average global price of US$96.83/bbl. The year-on-year (y-o-y) rise in 2010 gasoline prices is put at 38%. Gasoil in 2010 is expected to average US$92.45/bbl, with the full-year outturn representing a 37% increase from the 2009 level. For jet fuel in 2010, the annual level is forecast to be US$95.58/bbl. This compares with US$70.66/bbl in 2009. The 2010 average naphtha price is put by BMI at US$82.46/bbl, up 39% from the previous year’s level.
Hungarian real GDP is assumed by BMI to have fallen by 6.3% in 2009, followed by forecast 0.1% growth in 2010. We are assuming average annual growth of 2.6% in 2010-2014. Hungarian oil consumption fell from 198,000b/d in 1990 to a low of 138,000b/d in 2003. It has since recovered slowly, reaching an estimated 164,000b/d in 2009. We are expecting a gradual, ongoing recovery, held back by the near-term economic outlook, with consumption reaching no more than 174,000b/d by 2014. Domestic production, which is largely in the hands of former state company MOL, is not expected to recover from this decline, with steady slippage leading to higher import volumes, reaching 148,000b/d by 2014. Gas demand is forecast to increase from an estimated 11.5bcm in 2009 to around 14.8bcm in 2014 – implying that net gas imports will reach 12.8bcm by the end of the forecast period.
Between 2010 and 2019, we are forecasting an increase in Hungarian oil consumption of 13.7%, with import volumes rising steadily from an estimated 128,000b/d to 170,000b/d by the end of the 10-year forecast period. Gas consumption is expected to rise from an estimated 11.5bcm to 18.6bcm by 2019, met largely by imports. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Hungary holds ninth place just behind the Czech Republic in BMI’s composite Business Environment (BE) Ratings table, which combines upstream and downstream scores. It now shares eighth place with Croatia, Turkmenistan, Uzbekistan and the Czech Republic in BMI’s updated upstream Business Environment Ratings. The country’s minimal oil and gas reserves and poor production outlook work against the country, but are offset by privatisation progress, the competitive/regulatory environment and reasonable country risk factors. There is a chance that the Caspian states will break free of Hungary and pull clear. Hungary is below the mid-point of the league table in BMI’s downstream Business Environment Ratings, with a few high scores but no reason to expect near-term progress further up the ratings. It is in ninth place, ahead of Turkmenistan and Slovenia. Refining capacity is among the region’s lowest, with low scores for likely capacity expansion and oil and gas demand growth. Population and GDP per capita also work against Hungary.
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