Croatia Oil and Gas Report Q3 2009

Abstract

The latest Croatia Oil & Gas Report from BMI forecasts that the country will account for 1.81% of
Central and Eastern European (CEE) regional oil demand by 2013, while contributing very little to
supply. CEE regional oil use of 4.65mn barrels per day (b/d) in 2001 rose to an estimated 5.39mn b/d in
2008. It should average 5.33mn b/d in 2009 and then rise to around 5.85mn b/d by 2013. Regional oil
production was 8.83mn b/d in 2001, and in 2008 averaged an estimated 12.93mn b/d. It is set to rise to
14.39mn 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 4.18mn b/d. This total had risen to an
estimated 7.54mn b/d in 2008 and is forecast to reach 8.54mn b/d by 2013.
As regards natural gas, the region in 2008 consumed an estimated 636.7bn cubic metres (bcm), with
demand of 737.8bcm targeted for 2013, representing 13.0% growth. Production of an estimated 778.7bcm
in 2008 should reach 906.1cm in 2013, which implies net exports rising from 141.9bcm in 2008 to
168.3bcm by the end of the period. Croatia’s share of gas consumption in 2008 was an estimated 0.77%,
while its share of production is put at 0.45%. By 2013, its share of demand is forecast to be 0.89%, with
the country accounting for 0.33% of supply.
In terms of the OPEC basket of crudes, the average price in Q109 was an estimated US$45.78 per barrel
(bbl), down 13% from the US$52.51 recorded during the previous three months. During the second
quarter, there has been little change to our view of oil market developments. BMI is forecasting an
average OPEC basket price of US$51.30/bbl, with the March gains being retained in April, before further
recovery to a possible US$57.00 is seen by June. For 2009, we are still assuming an average OPEC basket
price of US$52.00/bbl (-45% y-o-y). The BMI full-year forecast implies Brent Crude at US$53.73, WTI
averaging US$54.90/bbl and Urals at US$52.66 for 2009.
For the whole of 2009, the BMI assumption for gasoline is an average US$56.89/bbl, with the price
peaking at a forecast monthly average of US$64.75 in December 2009. The overall y-o-y fall in 2009
gasoline prices is put at 44.1%. For gasoil in 2009, the BMI forecast is for an average price of
US$69.35/bbl, assuming a monthly high of US$94.48/bbl in December. The full-year outturn represents a
42.8% fall from the 2008 level. The monthly average jet fuel price is forecast to range from US$53.75 in
February to US$96.76/bbl in December, proving an annual level of US$71.78/bbl. This compares with
US$124.95/bbl in 2008.
Croatian real GDP is now forecast by BMI to decrease by 3.2% in 2009, compared with estimated 2008
growth of 3.3%. We are assuming 1.0% growth in 2010, 3.2% in 2011, followed by 3.9% in 2012, and
3.2% in 2013. Consumption of oil is set to grow more slowly than the underlying economy, increasing by
less than 1.5% per annum over the forecast period and reaching an estimated 106,000b/d by 2013.
Imports are therefore set to rise from an estimated 85,000b/d in 2008 to no more than 95,000b/d by the
end of the forecast period. Partly privatised state oil group INA is attempting to raise local production in
partnership with major shareholder MOL, but we expect to see a steady decline in crude production, from
the estimated 2008 level of 16,000b/d to no more than 11,000b/d by 2013. We expect gas output to have
reached 4bcm in 2008, before starting to decline. Consumption is forecast to rise from an estimated
4.7bcm in 2008 to 6.6bcm by 2013, requiring imports of 3.6bcm.
Between 2008 and 2018, we are forecasting an increase in Croatian oil consumption of 14.9%, with
import volumes rising steadily from an estimated 85,000b/d to 106,000b/d by the end of the 10-year
forecast period. Gas production is expected to have peaked at around 4.0bcm in 2008, before slipping to
2.6bcm by 2018. Import dependency therefore increases to 5.4bcm during the period. Details of BMI’s
10-year forecasts can be found in the appendix to this report.
Croatia shares 12th and last place in BMI’s updated Upstream Business Environment rating with
Turkmenistan. Its minimal oil and gas reserves and poor production outlook work against the country, but
are offset somewhat by privatisation progress and reasonable country risk factors. There is limited longterm
scope for Croatia to pull away from its low-scoring rival, with Turkmenistan much more likely to
leave Croatia behind. The country is well in the lower half of the league table in BMI’s Downstream
Business Environment rating, with few particularly high scores and no reason to expect near-term
progress further up the rankings. Oil and gas demand are among the region’s lowest, as is the oil demand
growth outlook. Population, nominal GDP and growth in GDP per capita are also low-scoring areas for
the country. Croatia shares 11th place with Slovenia, but may struggle to keep Bulgaria at bay.