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Czech Republic Oil and Gas Report Q4 2011
Business Monitor International, Oct 2011, Pages: 70
This latest Czech Republic Oil & Gas Report from BMI comes at a moment when the steady drop in Czech oil consumption appears to be reversing. Having fallen from 213,000b/d as recently as 2005 to only 196,000b/d in 2010, we now expect oil consumption to increase to 204,000b/d in 2011 and rise to 219,000b/d in 2015. This is likely to lead to increasing crude oil imports, given that domestic production is clearly in decline. Production should fall from around 6,000b/d in 2010 to 5,000b/d by 2015, insufficient to make a significant dent in imports of 214,000b/d of imports by 2015.
The Czech Republic has no significant gas production volumes and this appears unlikely to change for the foreseeable future. Consumption is similarly modest, reaching only 8bcm in 2010. We expect a slight increase in gas consumption to 9bcm in 2011, with a longer-term increase to 10bcm in 2015. Almost all of this consumption is likely to be imported, entirely by pipeline.
In the longer term, Czech oil production is likely to remain fairly stable, albeit at a very low level. Production of just over 5,000b/d in 2015 should fall to just under 5,000b/d by 2020. With consumption set to rise slightly to 236,000b/d by 2020, the country should be importing 231,000b/d by 2020, up from 214,000b/d in 2015.
Long-term gas production will also remain stable at negligible levels, with consumption also set to see only modest increases. From 9.6bcm in 2015, the Czech Republic should increase consumption to 10.5bcm 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. The Czech Republic holds seventh place in BMI's composite Business Environment (BE) ratings table, which combines upstream and downstream scores. It now holds 14th place, above Slovenia, in BMI's updated upstream ratings, behind Romania and Hungary. 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 3rd in the league table in BMI's downstream ratings, with some high scores but no reason to expect near-term progress further up the rankings.
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