Slovakia Oil & Gas Report Q4 2013
Published by Business Monitor International
on Sep 2, 2013
, 84 pages
PDF - Download Now with 3 Quarterly Updates format - Download Now
As a net importer of energy, Slovakia faces the challenge of securing long-term gas supplies without becoming too dependent on Russia. Linking its gas network to others in the region is therefore a priority, as it will allow for more flexibility when negotiating gas purchases. Reduced nuclear power usage points to a greater reliance on gas, although renewables capacity is rising fast. Efforts to raise domestic gas prices are being resisted by the government, which may reduce the attractiveness of the Slovak gas sector to foreign investors.
The key trends and developments in Slovakia's oil and gas sector are:
- German utility E.ON and France's GDF Suez said in February 2013 they have agreed to sell their combined 49% stake in Slovak gas group SPP for EUR2.6bn to Czech investment fund Energeticky a Prumyslovy Holding (EPH). The SPP deal had long been expected and was pending the formal agreement of the Slovak government, whose 51% stake will also be sold to EPH. E.ON and GDF Suez had an equal share of their stake.
- E.ON will mothball its combined-cycle gas turbine (CCGT) in Malzenice, Slovakia, effective October 2013. It made the decision because the CCGT can no longer operate profitably in the current market environment in Europe, owing in particular to low electricity and carbon prices. The Malzenice CCGT, which has a gross generating capacity of 430MW, entered service in January 2011. In the past two and a half years it has only operated for about 5,600 hours. The unit, whose fuel efficiency exceeds 58%, was planned to operate at least 4,000 to 5,000 hours per year.
- Under our forecast Slovakia will consume 8.1bn cubic metres (bcm) of gas by 2017, virtually all of which will be imported. We believe this will rise to 9.5bcm by the end of our forecast period in 2022. However, there is downside risk to this scenario if further gas-fired power generating capacity is closed. SPP announced three measures in June 2009 to protect Slovakia from future gas supply cuts. The first was to diversify its gas imports away from Russia through new supply deals with Western European companies. The second was to speed up the time it takes to reverse gas flows in its pipelines from east-west to westeast, while the third was to fill its gas storage facilities. The company has successfully implemented all three of these measures..
- Slovakia and Hungary have signed a memorandum of understanding (MoU) to launch an EU-supported gas interconnector pipeline between the two countries. Eustream has come to an understanding with its Hungarian counterpart Orszagos Villamostavvezetek, and will commit to the 71-mile pipeline. It is hoped work on the project will begin in 2013, with commissioning due in January 2015.
- The operators of Poland and Slovakia's gas networks have selected a contractor to study a planned gas link that would be part of a corridor joining liquefied natural gas (LNG) terminals in Poland and Croatia. Poland's Gaz-System and Eustream aim to boost energy security in Central and South East Europe by creating a regional gas market and diversifying away from Russian supplies. If everything goes to plan, the connection could be operational in 2017.
- The Ukrainian government is testing the viability of importing natural gas from Slovakia, according to energy minister Eduard Stavytsky. The government commenced gas imports on May 15 2013, Stavytsky added. Ukrtransgaz, a subsidiary of Ukraine's state-owned Naftogas, had suggested the reversal of one of the four interstate pipelines to transport natural gas to the country, enabling the supply of up to 10bcm every year. Ukrtransgaz and Eustream are currently working on the interconnection agreement.
- Slovak oil consumption is forecast to rise steadily, keeping pace with underlying GDP growth over the near term and accelerating as the number of cars on the road increases. We believe that oil consumption will reach at least 99,500 barrels per day (b/d) by 2022; this volume will be imported, largely from Russia. Taking into account refinery processing gains, overall liquids production is likely to be around 8,300b/d by 2022.
- In 2013, oil imports are expected to cost around US$2.5bn. By 2017 the cost is forecast to be around US $2.7bn. At the time of writing, BMI's OPEC basket oil price assumptions were US$103.00/bbl for 2013 and US$97.00/bbl in 2017. Gas imports in 2013 add an estimated US$3.4bn to the import bill, which we expect to rise to US$3.8bn by 2017.
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