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Hungary Oil and Gas Report Q2 2011
Business Monitor International, April 2011, Pages: 83
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 forecasts that the country will account for 2.55% of Central and Eastern European (CEE) regional oil demand by 2015, while providing just 0.16% of supply. CEE regional oil use of 5.42mn barrels per day (b/d) in 2001 rose to an estimated 6.09mn b/d in 2010. It should increase to around 6.93mn b/d by 2015. Regional oil production was 8.89mn b/d in 2001 and in 2010 averaged an estimated 13.78mn b/d. 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 rose to an estimated 7.69mn b/d in 2010 and is forecast to reach 8.15mn b/d by 2015. Azerbaijan and Kazakhstan have the greatest production growth potential, although Russia will remain the most important exporter.
In terms of natural gas, the region in 2010 consumed an estimated 636.3bn cubic metres (bcm), with demand of 736.3bcm targeted for 2015, representing 15.7% 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 217.9bcm by the end of the period. Hungary’s share of consumption in 2010 was an estimated 1.63%, which is forecast to rise to 1.90% by 2015. Its contribution to gas production is not significant, with no improvement expected over the forecast period.
The 2010 full-year outturn was US$77.45/bbl for OPEC crude, which delivered an average for North Sea Brent of US$80.34/bbl and for West Texas Intermediate (WTI) of US$79.61/bbl. The BMI price target of US$77 was reached thanks to the early onset of particularly cold weather, which drove up demand for and the price of heating oil during the closing weeks of the year.
We set our 2011 supply, demand and price forecasts in early January, targeting global oil demand growth of 1.53% and supply growth of 1.91%. With OECD inventories at the top of their five-year average range, we set a price forecast of US$80/bbl average for the OPEC basket in 2011. The unprecedented wave of popular uprisings in the Middle East and North Africa (MENA) that followed the removal of Tunisian President Ben Ali on January 14 has obviously fundamentally altered our outlook, particularly since the unrest spread to Libya in mid-February.
Taking into account the risk premium that has been added to crude prices in response to actual and perceived threats to supply, we have now raised our benchmark OPEC basket price forecast from US$80 to US$90/bbl for 2011 and from US$85 to US$95/bbl for 2012. Based on our expectations for differentials, this gives a forecast for Brent at US$94/bbl in 2011 and US$99/bbl in 2012. We have kept our long-term price assumption of US$90/bbl (OPEC basket) in place for the time being while we wait to see what path events in the MENA region take. We have also retained our existing supply and demand forecasts until the scheduled quarterly revision at the start of April.
Hungarian real GDP rose by an estimated 1.1% in 2010. We are forecasting average annual growth of 2.7% in 2011-2015. Hungarian oil consumption is forecast to average 165,000b/d in 2011 and we expect a gradual, ongoing recovery, held back by the near-term economic outlook, with consumption reaching no more than 177,000b/d by 2015. Domestic production, which is largely in the hands of former state company MOL, is not expected to recover from its decline, with steady slippage leading to higher import volumes, which are forecast to reach 153,000b/d by 2015. Gas demand is forecast to increase from an estimated 10.4bcm in 2010 to around 14.0bcm in 2015 – implying that net gas imports will reach 12.0bcm by the end of the forecast period.
Between 2010 and 2020, we are forecasting an increase in Hungarian oil consumption of 17.5%, with import volumes rising steadily from an estimated 127,000b/d to 172,000b/d by the end of the 10-year forecast period. Gas consumption is expected to rise from an estimated 10.4bcm to 17.0bcm by 2020, met largely by imports. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Hungary now shares eighth place with Bulgaria and the Czech Republic in BMI’s composite Business Environment (BE) ratings table, which combines upstream and downstream scores. It shares 11th place with Slovakia in BMI’s updated upstream 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. Hungary is around the mid-point of the league table in BMI’s downstream ratings, with a few high scores but no reason to expect nearterm progress further up the ratings. It shares seventh place with Azerbaijan. 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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