2013-09-22 08:51:20 - Fast Market Research recommends "Hungary Oil & Gas Report Q4 2013" from Business Monitor International, now available
While national energy group MOL has great plans for the Central European region, maximising the impact of its downstream assets, it can do little to ease Hungary's growing dependence on imported oil and gas. Independent explorers have made some recent progress in locating untapped (largely gas) reserves, but the upstream picture remains relatively unattractive. Hungary's commitment to the new South Stream gas pipeline scheme should provide greater long-term supply security.
The main trends and developments for Hungary's oil and gas sector are:
* Falcon Oil & Gas has discovered a large Basin-Centred Gas Accumulation (BCGA) and a potential fractured oil and gas play in the Mako Trough area in south-central Hungary. RPS Energy in a report dated January 2013 estimates that
eight prospects in the Algyo Play contain gross unrisked recoverable prospective gas resources of 568bn cubic feet, or 16.1bn cubic metres (bcm) (P50). Contingent resources for the Mako Production Licence, estimated for the Deep Mako Trough, include 35.3trn cubic feet (1,000bcm) of gas and 76.7mn barrels (bbl) of oil (P50).
* In January 2013, Falcon agreed a three-well drilling exploration programme with Serbia's NIS (owned 56% by Gazprom), to target the Algyo Play. NIS has made a cash payment of US$1.5mn to Falcon and agreed to drill three exploration wells by July 2014. NIS will earn 50% of net production from the first three wells, and has the option to participate in any future drilling on terms to be negotiated, after paying Falcon US$2.75mn. Falcon is to be fully carried on the drilling and testing of the three exploration wells. Drilling preparations are already underway. NIS has informed the company that it expects the first well to spud by the end of Q2 2013.
* Explorer Ascent Resources has estimated that around 50% of the tight gas in the Petisovci-Lovaszi area (on the Hungary/Slovenia border) can be recovered. Proven and probable reserves are almost 12bcm. Recent drilling success means that Ascent can now proceed with the re-development of the Petisovci field. The company is studying options that would see it bring gas production on stream at Pg-10 and Pg-11A during the first half of 2013.
* Hungarian utility MVM is expected to acquire German utility E.ON's local gas trading and storage units. MVM could pay around EUR800mn for the two units, according to local newspaper Vilaggazdasag.
* Hungary has invited bids from both foreign and domestic companies for seven new exploration licences, four for hydrocarbons and three for geothermal exploration, as it looks to ease dependence on imports. The hydrocarbon licences will be in south-eastern Hungary near existing fields, and the geothermal licences are in the eastern and south-eastern parts of the country, the national development ministry said in a statement. The ministry said it would announce the winners within 90 days following a November 15 deadline to submit bids. The oil and gas concessions will be valid for 20 years and the geothermal ones for 35 years with extensions possible, it added.
* Over the medium term, an increase in overall gas consumption from an estimated 10.4bcm in 2012 to around 12.5bcm in 2017 is expected, followed by growth to 14.9bcm by 2022 - implying that net gas imports could reach 13.9bcm by the end the period. Efforts are being made to stabilise domestic gas production, but there is little sign of any major increase in volume.
* Hungarian oil consumption fell from its peak of 198,000 barrels per day (b/d) in 1990 to 135,000b/d by 2003. It has since recovered slowly, and in 2012 was to an estimated 128,800b/d. We expect a gradual recovery - held back by the near-term economic outlook - with consumption reaching no more than 137,100b/d by 2017 and climbing to 146,000b/d by 2022. Domestic production is not expected to rise from recent levels, with steady slippage more likely. This will lead to higher import volumes, reaching 122,500b/d by 2022.
* Fuel consumption has been steadily declining in recent years: the regional market has shrunk by 20% in the last five to six years, according to MOL's data. However, the company, which owns 80-85% of the fuel wholesale market in Hungary, believes that the end of the decline will come this year. 'Based on our calculations, the bottom of the market will be hit this year. In the private segment, we've already reached the level where any further decline in demand is hard to achieve,' said Domokos Szollar, communications director of MOL Magyarorszag.
* Crude oil import costs by 2017 should rise only slightly from the estimated US$3.9bn seen in 2013, reflecting an assumed 2013 average OPEC basket oil price of US$103.00 per barrel (bbl), falling to US $97.00/bbl in 2017. The cost of gas imports is expected to be US$5.2bn by 2017, providing a combined oil and gas import bill of US$9.2bn.
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