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Czech Republic Oil and Gas Report Q1 2011
Business Monitor International, Jan 2011, Pages: 84
Business Monitor International's Czech Republic 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 Czech Republic's oil and gas industry.
This latest Czech Republic Oil & Gas Report from BMI forecasts that the country will account for 3.36% of Central and Eastern European (CEE) regional oil demand by 2015, while making no material contribution to supply. CEE regional oil use of 5.42mn barrels per day (b/d) in 2001 is forecast to rise to 6.05mn b/d in 2010. It should increase to around 6.89mn b/d by 2015. Regional oil production was 8.89mn b/d in 2001 and is expected to average 13.82mn b/d in 2010. It is set to rise to 15.08mn b/d by 2015. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion.
In 2001, the region was exporting an average of 3.47mn b/d. This total is forecast to rise to an estimated 7.76mn b/d in 2010 and reach 8.19mn b/d by 2015. Azerbaijan and Kazakhstan have the greatest production growth potential, although Russia will remain the key exporter.
In terms of natural gas, the region is forecast to consume an estimated 636.3bn cubic metres (bcm) in 2010, with demand of 747.7bcm targeted for 2015, representing 17.5% growth. Production of an estimated 787.9bcm in 2010 should reach 954.2bcm in 2015, which implies net exports rising from an estimated 151.6bcm in 2010 to 206.5bcm by the end of the period. The Czech Republic’s share of gas consumption in 2010 is an estimated 1.34%, with no meaningful contribution to regional supply. Its share of demand is forecast to be 1.67% by the end of the forecast period.
For 2010 as a whole, we assume an average OPEC basket price of US$77.00/bbl (+26.5% year-on-year (y-o-y). The 2010 US WTI price is now put at US$79.16/bbl. BMI is assuming an OPEC basket price of US$80.00/bbl in 2011, with WTI averaging US$82.25, Brent at US$82.46/bbl, Urals delivering around US$81.21 and the Dubai average being US$80.74/bbl. Our central assumption for 2012 is an OPEC price averaging US$85.00/bbl, delivering WTI at approximately US$87.40 and Brent at US$87.60/bbl. From 2013 onwards, we are using an average OPEC price of US$90.00/bbl.
For the whole of 2010, the BMI assumption for the global gasoline price is an average US$87.49/bbl, representing a y-o-y rise of 24.7%. The global gasoil forecast is for an average price of US$88.00/bbl, probably peaking in December 2010 at more than US$95/bbl. The full-year outturn represents a 27.6% increase from the 2009 level. For 2010, the annual jet price level is forecast to be US$89.50/bbl. This compares with US$70.66/bbl in 2009. The 2010 average naphtha price is put by BMI at US$77.65/bbl, up almost 31% from the previous year’s level.
BMI forecasts Czech real GDP rising by 2.7% in 2010 and we expect average annual growth of 3.4% from 2010-2015. Assuming an average post-2009 rise in consumption of 1.5% per annum, below the CEE norm, oil demand will reach 231,000b/d in 2015 – implying imports of at least 222,000b/d. Despite the privatised oil industry, there is very limited international oil company (IOC) involvement in the upstream segment to boost domestic supply of oil or gas. BMI is assuming that gas demand will rise from an estimated 8.5bcm in 2010 to around 12.5bcm by 2015.
Between 2010 and 2020, we forecast an increase in Czech oil consumption of 20.4%, with import volumes rising steadily from an estimated 196,000b/d to 240,000b/d by the end of the 10-year forecast period. Gas consumption is expected to rise 79.9% from an estimated 8.5bcm to 15.3bcm by 2020, met by imports. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
The Czech Republic takes eighth place, behind Ukraine, in BMI’s composite Business Environment Ratings (BER) table, which combines upstream and downstream scores. It now shares 13th place with Ukraine in BMI’s updated upstream ratings, ahead only of Slovenia. Its minimal oil and gas reserves and poor production outlook work against the country but are offset somewhat by privatisation progress, the competitive/regulatory environment and reasonable country risk factors. The Czech Republic is in the upper half of the league table in BMI’s downstream ratings, with a few high scores but no reason to expect near-term progress further up the rankings. It shares fifth place with Romania. Refining capacity is among the region’s lowest, with low scores for likely capacity expansion and oil demand growth.
Population and GDP per capita also work against the country, but gas demand growth is relatively high. Kazakhstan is likely to challenge the Czech Republic over the medium term.
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