Czech Republic Oil and Gas Report Q3 2008 - Companies and Markets adds new report

2008-09-25 06:53:00 - Czech Republic Oil and Gas Report Q3 2008 - a new market research report on www.companiesandmarkets.com

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The latest Czech Republic Oil & Gas Report from BMI forecasts that the country will account for 3.78% of Central and Eastern European (CEE) regional oil demand by 2012, while making no material contribution to supply. CEE regional oil demand rose to an estimated 5.46mn barrels per day (b/d) in 2007 and should average 5.61mn b/d in 2008, before reaching 6.25mn b/d by 2012. Production of an estimated 12.74mn b/d in 2007 is forecast to reach 15.38mn b/d by 2012. CEE gas consumption in 2007 was an estimated 632bn cubic metres (bcm), with demand of 772bcm targeted for 2012. Production in 2007 of an estimated 802bcm should reach 961bcm by the end of the period. The Czech Republic’s estimated share of gas consumption in 2007 was 1.41%, with no meaningful contribution to regional supply.



Its share of demand is forecast to be 1.47% by the end of the forecast period. In Q108, we estimate that the OPEC basket price averaged US$92.64 per barrel (bbl) – up around 9% from the Q407 level. The OPEC basket price had exceeded US$102 by the middle of March, slipping back towards US$96/bbl later in the month. The estimated Q108 average prices for the main marker blends are now US$96.54 for Brent, US$97.31 for WTI and US$93.44/bbl for Russian Urals (Mediterranean delivery). Our projections for 2008 as a whole are revised upwards from BMI’s last quarterly report. We are now assuming an OPEC basket price average of US$81 per barrel for 2008, compared with the US$74 estimate provided by our last quarterly report.



Based on recent price differentials, this implies Brent at US$84.71, WTI averaging US$85.63/bbl, and Urals at US$81.88/bbl. Czech real GDP growth is now forecast by BMI at 5.0% for 2008, down from an estimated 6.6% in 2007. We are assuming 4.7% growth in 2009, followed by 4.5% in 2010/11 and 4.4% in 2012. Assuming an average rise in consumption of 2-3% per annum, below the CEE norm, oil demand will reach 237,000b/d in 2012 – implying imports of at least 234,000b/d. In spite of a privatised oil industry, there is very limited international oil company (IOC) involvement in the upstream segment to boost domestic supply of oil or gas. BMI is assuming gas demand will rise by an annual 5% from an estimated 8.9bcm in 2007 to around 11.4bcm by 2012. Between 2007 and 2018, we are forecasting an increase in Czech oil consumption of 25.6%, with import volumes rising steadily from 207,000b/d to 265,000b/d by the end of the 10-year forecast period. Gas consumption is expected to up from 8.9bcm to 14.4bcm by 2018, met by imports.



Details of the new BMI 10-year forecasts can be found in the Appendix of this report, which provides global, regional and country-specific projections. The Czech Republic now occupies equal seventh place with Slovakia in BMI’s newly revised Upstream Business Environment rating, just ahead of Romania. 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 country is in the middle of the league table in BMI’s newly-revised Downstream Business Environment rating, with a few high scores but no reason to expect near-term progress further up the rankings. It takes sixth place ahead of Azerbaijan and Hungary. Refining capacity is among the region’s lowest, with low scores for likely capacity expansion and for oil and gas demand growth. Population and GDP per capita also work against the country. Kazakhstan is likely to move out of reach above it, and there is some threat from Hungary below.

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