2013-10-29 19:11:32 - Recently published research from Business Monitor International, "China Petrochemicals Report Q4 2013", is now available at Fast Market Research
With shale gas exploration now unlikely until beyond 2014 thanks to government and public concerns, the Czech Republic is going to remain highly dependent on imported fuel, as conventional hydrocarbons potential is limited. Demand trends are not particularly strong, but refinery disruptions show that the domestic fuels market is in a precarious state of balance. This, in turn, has prompted the government to investigate ownership options for the national refining segment.
The main trends and developments we highlight for the Czech Republic's oil and gas sector are:
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* Plans to freeze shale gas exploration for two years to allow the government to draft and implement new legislation have found plenty of support, meaning that drilling
activity is unlikely until beyond 2014. The ministry aims to establish a clear legal and technical framework so that any disputes that arise during shale gas exploration can be resolved under sound arbitration procedures, according to Environment Minister Tomas Chalupa. Several domestic and foreign companies had earlier applied for shale gas exploration permits, including the UK's Cuadrilla Resources and Basgas Energia Czech, a unit of Australia-based Basgas. Domestic upstream company MND has also applied for an exploration permit.
* Unipetrol insisted on January 23 2013 that it has no intention of selling control of the Czech Republic's major refiner Ceska Rafinerska. The statement came a day after Czech Industry Minister Martin Kuba said the government is preparing a plan to take over the company, confirming long-standing market speculation. The move is prompted by the government's desire to bolster energy security, Kuba told Reuters in an interview. To that end, an expert group has been formed to study the plan, which aims to combine the refiner with state-held crude and oil products pipeline operators Mero and Cepro.
* Consumption of natural gas fell during 2011/12, dampened by a decline in manufacturing and warm weather. However, the fuel is finding increased residential/commercial use and may displace coal in future power generation projects. BMI is forecasting that overall demand will rise from an estimated 8.2bn cubic metres (bcm) in 2012 to around 9.4bcm by 2017, then reach 10.2bcm by 2022. Carpathian Resources has identified potentially gas-bearing structures for future drilling; however, we do not expect to see domestic gas production rise above 0.2bcm over the medium term.
* German utility RWE has wrapped up another asset sale, with the disposal of Czech gas transmission operator Net4Gas for EUR1.2bn. The asset was purchased by a partnership comprising Allianz Capital Partners and Borealis. In addition to the EUR1.2bn purchase price, the partners are assuming debt of EUR400mn. The deal is due to close in H213. Net4Gas holds the exclusive rights to operate around 3,600km of natural gas pipeline in Czech Republic. The company is responsible for the national transmission of natural gas, as well as international natural gas transit.
* In 2013, BMI forecasts the Czech Republic will consume 200,900 barrels per day (b/d) of oil. Using our current GDP growth forecasts, it is unlikely that medium-term oil demand will increase dramatically. Assuming an average rise in consumption of no more than 1.5% per annum, below the Central and Eastern European norm, demand will reach 216,700b/d in 2017, then 231,800b/d by 2022 - resulting in end-period imports of 223,200b/d.
The forecast cost of crude oil imports in 2013 is US$7.2bn, reflecting an OPEC basket oil price of US $103.00 per barrel (bbl). By 2017, crude imports will cost an estimated US$7.4bn. The cost of importing some 9.2bcm of gas by 2017 is forecast at US$4.5bn. The combined crude oil and natural gas import bill for the Czech Republic in 2017 is put at almost US$12.0bn.
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