Slovenia Oil and Gas Report Q2 2008

BMI's latest Slovenia Oil & Gas Report forecasts that the country will account for 1.39% of CEE regional oil demand by 2012, while making no meaningful contribution to supply. CEE regional oil demand rose to an estimated 5.45mn barrels per day (b/d) in 2007 and should average 5.59mn b/d in 2008, then rising to around 6.23mn b/d by 2012. Production of an estimated 12.74mn b/d in 2007 is forecast to reach 15.31mn b/d by 2012. CEE gas consumption in 2007 was an estimated 612bn cubic metres (bcm), with demand of 744bcm targeted for 2012. Production of an estimated 701bcm in 2007 should reach 792bcm in 2012, which implies net exports falling from an estimated 89bcm in 2007 to just 49bcm. Slovenia has no significant share of regional gas consumption or production.

Global oil demand growth is now expected to have been 1.7% for 2007, rising to a little under 2.0% in 2008. Asia and the CEE continue to dominate. The overall demand outlook for the period to 2012 remains healthy (average growth 1.8%), but subject to review if the macroeconomic outlook deteriorates. We are still assuming some easing of energy prices during the period, but from a much higher level than envisaged earlier. Supply growth is capable of matching demand expansion - but only if OPEC cooperates as non-OPEC forecasts are fragile. Between 2006 and 2012, we see supply rising by an average 1.7% per annum - subject to OPEC strategy. Our revised central view is that the OPEC basket price will rise from around US$69/bbl in 2007 to US$74 in 2008, before settling around US$71/bbl in 2009 and falling further to US$70/bbl in 2010-12.

Slovenian real GDP growth is forecast by BMI at 5.0% for 2008, down from an estimated 6.3% in 2007.

We are assuming 4.3% growth in 2009, 3.7% in 2010, 3.3% in 2011 and 3.0% in 2012. Oil consumption can be expected to at least match the underlying GDP trend, with up to 5% annual demand growth expected. Lack of supply infrastructure means a more dramatic rise in oil use is unlikely until much later in the decade. Our projections suggest oil consumption will reach 87,000b/d in 2012, met largely by imports. Gas consumption reached an estimated 1.4bcm in 2007, with up to 0.5bcm being produced from domestic sources. Demand is expected to have reached 2.1bcm by 2012, with domestic production potentially reaching 1bcm and imports totalling 1.1bcm.

Slovenia occupies an unlikely third place in BMI's newly revised Upstream Business Environment rating, in spite of extremely limited hydrocarbons resources. The growth outlook for oil and gas is healthy, but volumes are rising from an exceptionally low base. Country risk factors work in Slovenia's favour, but its third place may prove precarious, although it currently claims a generous safety margin over Poland below it. The country is at the bottom of the league table in BMI's Downstream Business Environment rating. There are no particularly high scores and progress further up the rankings seems unlikely. There are poor scores for refining capacity, oil and gas demand, population and nominal GDP.

Croatia is just a point above it in the rankings, but there is little chance of Slovenia challenging it for 11th.