The latest Hungary Oil & Gas Report forecasts that the country will account for 3.05% of Central and Eastern European (CEE) regional oil demand by 2013, while providing just 0.13% of supply.

CEE regional oil use of 4.65mn barrels per day (b/d) in 2001 rose to 5.41mn b/d in 2008. It should average 5.15mn b/d in 2009 and then rise to 5.63mn b/d by 2013. Regional oil production was 8.83mn b/d in 2001, and in 2008 averaged 12.91mn b/d. It is set to rise to 14.37mn b/d by 2013. Oil exports are growing steadily because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average of 4.18mn b/d. This total rose to 7.51mn b/d in 2008 and is forecast to reach 8.74mn b/d by 2013.

In terms of natural gas, CEE consumed 592.7bn cubic metres (bcm) in 2008, with demand of 663.4bcm targeted for 2013, representing 12.3% growth. Production of 754.6bcm in 2008 should reach 906.1cm in 2013, which implies net exports rising from 161.9bcm in 2008 to 242.7bcm by the end of the period.

Hungary’s share of consumption in 2008 was 1.95%, which is forecast to rise to 2.03% by 2013. Its contribution to gas production is not significant, with no improvement expected over the forecast period.

For 2009 as a whole, we forecast an average OPEC basket price of US$55.00 per barrel (bbl), a 41.5% decline year-on-year (y-o-y). This is an upgrade from the US$52 forecast we have stuck with during the past three quarters. Our OPEC basket assumption delivers likely Brent, WTI, Urals and Dubai prices of US$56.30/bbl, US$57.50/bbl, US$55.60/bbl and US$55.60/bbl respectively. For 2010, we expect to see a recovery to US$60.00/bbl for the OPEC price (up from our previous forecast of US$58), gaining further ground to US$65.00 in 2011 and US$70.00/bbl in 2012. Our post-2010 forecasts are unchanged and we continue to use the long-term price assumption of US$70.00 for 2013-2018.

In 2009, the report assumes a global average gasoline price of US$62.12/bbl, with the fuel having peaked in June. The overall y-o-y fall in 2009 gasoline prices is put at 40.0%. The gasoil forecast is for an average price of US$68.62/bbl, assuming a monthly high of US$92.49/bbl in December. The full-year outturn is a 43.4% fall from the 2008 level. The annual jet price level for 2009 is forecast to be US$65.17/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put at US$49.06/bbl, down by 43.9% from the previous year’s level.

Hungarian real GDP is estimated to contract by 6.4% in 2009, following 0.5% growth in 2008.

We forecast 0.1% growth in 2010 and 2.6% in 2011, followed by 3.1% in 2012 and 3.9% in 2013.

Hungarian oil consumption fell from 198,000b/d in 1990 to a low of 138,000b/d in 2003. It has since recovered slowly, reaching 169,000b/d in 2008. We are expecting a gradual ongoing recovery, held back by the near-term economic outlook, with consumption reaching no more than 172,000b/d by 2013.

Domestic production, largely in the hands of former state company MOL, is not expected to recover from this decline, with steady slippage leading to higher import volumes, reaching 154,000b/d by 2013. Gas demand is forecast to increase from 12.0bcm in 2008 to around 13.5bcm in 2013 – implying that net gas imports will reach 11.5bcm by the end of the forecast period.

Between 2008 and 2018, we forecast an increase in Hungarian oil consumption of 14.8%, with import volumes rising steadily from 169,000b/d to 185,000b/d by the end of the 10-year forecast period. Gas consumption is expected to rise from 9.0bcm to 14.1bcm by 2018, met largely by imports. Details of the 10-year forecasts can be found in the appendix to this report.

Hungary occupies 11th place in the updated Upstream Business Environment ratings, ahead of Croatia and Turkmenistan. Its 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. There is a slight chance of Hungary challenging the Czech Republic, just one point above it, but Turkmenistan is capable of catching Hungary and then pulling away. Hungary is below the mid-point of the league table in the Downstream Business Environment ratings, with a few high scores but no reason to expect near-term progress further up the ratings. It is in ninth place, behind Turkmenistan.

Refining capacity is among the region’s lowest, with low scores for likely capacity expansion and oil and gas demand growth. Population and GDP per capita also work against Hungary. The presence of Bulgaria below it could pose a long-term threat.