BMI View: Despite an efficient refining sector and favourable regulatory environment, Hungary's weak upstream profile and persisting geopolitical tensions in th e region render s the country one of the least attractive oil and gas markets in Central and Eastern Europe. Small and depleting reserves will push Hungary's oil and gas production lower over the coming decade thus making the country increasingly dependent on energy imports from Russia .
|e/f = estimate/forecast. Source: EIA, BMI|
|Crude, NGPL & other liquids prod, 000b/d||23.0||20.0||19.4||18.7||18.2||17.6||17.1|
|Refined products production & ethanol, 000b/d||165.0||165.8||172.5||169.0||167.3||168.2||167.3|
|Refined products consumption & ethanol, 000b/d||141.4||142.4||143.2||143.5||143.9||144.3||144.5|
|Dry natural gas production, bcm||2.0||1.9||1.8||1.7||1.6||1.6||1.5|
|Dry natural gas consumption, bcm||9.6||9.4||9.3||9.1||9.0||8.9||8.9|
The main trends and developments for Hungary's Oil & Gas sector are:
In July 2015, the Croatian government has declared the Krk LNG project a 'strategic investment', and is expecting to begin construction in mid-2016. A three-year construction timeframe for the facility has been outlined, with expected completion by the end of 2019. We believe the LNG project will boost the flexibility of the gas market in Hungary and the wider region, and improve bargaining power against Russian gas supplies.
In February 2015, Hungary and Russia reached an agreement on the unused volumes of gas in line with a gas supply contract signed between the two countries in 1996. The new deal freed Budapest from 'take or pay' contracts and replaced them with an agreement that Hungary only needs to pay for the gas it consumes.
According to reports in late January 2015, Irish company Falcon Oil & Gas's farm-in partner in the Mako Trough licence in Hungary, Naftna Industrija Srbije (NIS), had not completed a three-well drill programme by the original deadline. NIS's deadline to complete the work was extended to December 31 2014 from the original July 2014. NIS could only drill and test two of the three commitment wells.
In November 2014, Hungarian Prime Minister Viktor Orban urged the EU to construct gas pipeline Interconnectors across borders to enable natural gas from Azerbaijan to reach the Central Europe market. According to the current contracts guarantee, Azeri gas would reach only southern Europe through the proposed Trans Adriatic Gas Pipeline (TAP) and the Trans Anatolian Pipeline (TANAP). Connecting neighbouring countries' gas pipeline networks would be the first move in creating a common gas market in Europe, stressed Orban.
In July 2014, Falcon Oil & Gas discovered gas shows during initial drilling operations on its Besa-D-1 well in Hungary. The company drilled the well to a total depth of 3,000 metres and did not encounter any operational problems. The company stated that 'Besa-D-1 is the second of a planned three-well programme to evaluate the gas potential of the Algyo Formation in the Mako Trough licence'.