Slovakia has above-average energy import dependency with high overall energy intensity compared with the regional average. As a result, the EU has made development of better gas interconnections a priority for Slovakia as net gas imports are expected to cost the country around US $3.25bn in 2013. The country remains dependent on Russia, but a recently announced EUR5.9bn EU infrastructure programme aims to allow for more flexibility when negotiating gas purchases and may boost supply. Slovakia has a growing renewable capacity, but a drop in nuclear output has left an energy shortfall that will be filled with increased use of expensive gas power. 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:
- Ukraine signed a gas supply purchase agreement with Slovakia in early 2014. The deal allows Kiev to buy natural gas on the European spot market and annually import at least 10bn cubic metres of gas through Slovakia.
- The European Commission unveiled a EUR5.85bn funding push to diversify gas and power infrastructure across the continent, as part of its long-term infrastructure vision. Approximately 140 projects were aimed at diversification of gas supplies to significantly increase the gas system's flexibility and resilience. This included work in Slovakia for reconstruction, upgrading, maintenance and capacity increase on the JANAF and Adria pipelines.
- E.ON said it would 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 9.9bcm by the end of our forecast period in 2023. 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 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.
- 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 90,200 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 10,940b/d by 2022.
- In 2014, oil imports are expected to cost around US$2.29bn. By 2018 the cost is forecast to be around US $2.60bn. Gas imports in 2014 add an estimated US$3.54bn to the import bill, which we expect to rise to US$3.89bn by 2017.