Slovenia Oil and Gas Report Q3 2012

There are glimmers of hope in the upstream segment, with new gas finds capable of improving energy self-sufficiency and slowing the rate of growth in gas imports. However, overall volumes are likely to be relatively modest, with Russian gas set to dominate imports for the foreseeable future.

The main trends and developments in Slovenias oil & gas sector are:

- Independent explorer Ascent Resources has recorded promising results from fracture stimulation at its Petisovci tight gas project in Slovenia. Operations at the Pg-11A well indicate the potential for high gas productivity. The company is hoping to ascertain the commerciality of the project and hopes further testing at Pg-11A will outline flow potential.

- In February 2012, Ascent reported a 22% increase in P50 gas-in-place (GIP) volumes – to 14.3bn cubic metres (bcm), which was above the 11.7bcm previously announced for the Petišovci project. The upgrade forms part of an audit prepared by RPS Energy Group, a leading international oil and gas reserve assessor, that included the analysis of data from the Pg-10, Pg-11 and Pg-11A wells in Slovenia, which were drilled and successfully tested during 2011. The majority of the increase in GIP volumes comes from the deeper reservoir sands proven productive by the Pg-11A well.

- Gas demand is expected to have almost reached 1.6bcm by 2016, increasing to 2.0bcm by 2021. Domestic production for 2021 is forecast to come in at just 0.1bcm, meaning that there will be an import requirement of around 1.9bcm.The Ascent discovery at Petisovci-Lovaszi is the only incremental source of gas output in Slovenia that could be commercialised. We see gas production from this project rising from 0.02bcm in 2012 to as much as 0.1bcm by 2014, although there is little other upstream activity to suggest further upside to Slovenian gas production.

- Oil consumption is expected to track the underlying GDP trend, with demand keeping pace with economic growth. A lack of supply infrastructure means a more dramatic rise in oil use is unlikely until much later in our 10-year forecast period. Our projections state that oil consumption will reach 77,000 barrels per day (b/d) in 2016, before reaching up to 90,000b/d by 2021, met entirely by imports.

- The oil import bill for 2012 is anticipated to come in at US$2.8bn and will remain around this level until 2016. The BMI OPEC basket oil prices in this scenario are US$111.47 per barrel (bbl) in 2012, easing to US$99.00/bbl by 2016. However, given the absence of domestic refining capacity, Slovenia is largely importing refined products, so the oil import bill is expected to exceed US$3.00bn later in the forecast period. The gas import bill is due to reach US$712mn by end-2016, subject to Ascents domestic supply efforts. Taking into account the likely cost of refined products imports, the total petroleum bill by 2016 will be US$3.51bn.

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