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Bulgaria Oil and Gas Report Q4 2011
Business Monitor International, Oct 2011, Pages: 82
The latest Bulgaria Oil & Gas Report from BMI forecasts that the country will account for 1.58% of Central and Eastern European (CEE) regional oil demand by 2015, while making no significant contribution to supply. After a post-communist collapse, oil consumption has been gradually staging something of a comeback, although the global economic downturn temporarily halted the recovery. We expect estimated oil production of 112,000b/d in 2010 to rise to 122,000b/d by 2015. Production should remain static at around 1,000b/d for the foreseeable future.
In terms of natural gas, Bulgaria consumed 3.18bn cubic metres (bcm) in 2010, down from 6.82bcm in 1990. We expect gas consumption to recover alongside economic growth, rising to 5.26bcm in 2015. Gas consumption will remain far ahead of production, which grew to an estimated 0.2bcm in 2010 and is likely to peak at 1.5bcm in 2014, before falling back to 1.4bcm in 2015. Production will depend entirely upon the Kaliakra, Kavarna and Kavarna East fields for the foreseeable future, with long-term production depending upon additional reserves being proved up.
Long-term oil demand is set to rise more quickly than short term demand, as the country resumes its former levels of consumption growth which were disrupted by the global economic downturn. Bulgarian consumption should rise to as much as 135,000b/d by 2020 on the back of increased car ownership and miles travelled. Oil production is likely to remain insignificant over the long term, with greater volumes being provided as refinery processing gain than are produced from oil wells.
By 2020, Bulgaria should be consuming nearly as much gas as before the post-communist collapse in economic activity, with volumes reaching 6.71bcm. By that date, production will have sunk back to only slightly above current levels, falling to 1bcm. As a result, Bulgarian gas imports should rise from 2.98bcm in 2010 to as much as 5.71bcm by 2020.
Although Russia will continue to dominate oil supply in the region, backed by huge and under-exploited reserves, the Caspian states have an important role to play, with Azerbaijan and Kazakhstan an increasingly significant factor. The growth rate in Russian oil supply has slowed appreciably since the early-2000s but the acceleration of Caspian expansion means that the region will make a growing contribution to world oil production.
Global GDP growth in 2011 is forecast at 3.2%, down from 4.3% in 2010. Growth in the eurozone should be marginally higher than 2010, while US and Chinese economic expansion will slow and Japan's growth will be negative, reflecting the devastating earthquake and tsunami in March 2011. Our oil price assumption for 2011 is US$101.90/bbl for the OPEC basket, falling to US$97.50/bbl in 2012.
Bulgaria occupies 11th place in BMI's composite Business Environment (BE) ratings table, which combines upstream and downstream scores. It now holds eighth place, below Romania, in BMI's updated upstream Business Environment ratings. Its minimal oil and gas reserves, limited production potential and constrained competitive landscape work against the country, but are offset by reasonable country risk factors. There is little scope for further progress up the league table during the next few quarters. Bulgaria now occupies ninth place in BMI's downstream Business Environment ratings, with few particularly high scores and no reason to expect much near-term progress further up the rankings, particularly given the recent spat between the government and Lukoil, owners of the country's only refinery.
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