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Hungary Oil and Gas Report Q4 2011
Business Monitor International, Oct 2011, Pages: 530
The latest Hungary Oil & Gas Report from BMI highlights the gradual stagnation of the Hungarian oil and gas industry, beset by anaemic consumption growth and low oil production levels. Oil consumption of 146,000 barrels per day (b/d) in 2010 is likely to increase to no more than 159,000b/d by 2015, while oil production is set to stage only a short-term recover from 29,000b/d in 2010 to 31,000b/d in 2011 before falling steadily to just 24,000b/d in 2015. There is little realistic medium-term prospect of either a significant increase in oil production or consumption.
The situation is much the same for gas, with BMI forecasting a collapse in gas production in 2011 as years of underinvestment take their toll, pushing output from an estimated 2.5bn cubic metres (bcm) in 2010 to only 2.2bcm. This collapse looks set to slow over the medium-term, however, with volumes falling more gently to 2.0bcm by 2015. The consumption trend is stronger, with the country expected to use 15.7bcm of gas in 2015, up from 11.6bcm in 2010.
Over the longer-term, oil consumption is likely to continue growing at around 1.5% from 2015-2020 in line with trends seen elsewhere in the region. This should mean that consumption of 159,000b/d in 2015 will increase to 172,000b/d by 2020. The oil production trend on the other hand is clearly downwards with few projects capable of reversing the decline. Hungary should be producing no more than 18,000b/d by 2020.
Gas consumption is expected to increase by 64% over the period 2010-2020, with annual growth averaging 4.6% over the second half of the decade. Hungary should be consuming 19.02bcm by 2020, far in advance of production which will fall to just 1.0bcm. The gradual fall in gas production should accelerate towards the end of the period after dropping more steadily through the middle of the decade.
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.
Hungary shares ninth place with Ukraine, Bulgaria and Slovakia in BMI's composite Business Environment (BE) ratings table, which combines upstream and downstream scores. It occupies 12th place in BMI's updated upstream ratings, close to the bottom of the table. 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 in the top 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 table. There is little likelihood of refinery capacity expansion and oil and gas demand growth. Population and GDP per capita also work against Hungary.
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