BMI's Executive Summary

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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 2011, while contributing virtually nothing to supply. CEE regional oil demand rose to an estimated 5.21mn barrels per day (b/d) last year and should average 5.35mn b/d in 2007, before reaching 5.97mn b/d by 2011. Production of an estimated 12.41mn b/d last year is forecast to reach 15.22mn b/d by 2011.

CEE gas consumption in 2006 was an estimated 587bn cubic metres (bcm), with demand of 715bcm targeted for 2011. Production last year of an estimated 680bcm should reach 758bcm by the end of the period. Croatia's share of consumption in 2006 was 0.68%, while its share of production was 0.59%. By 2011, its share of demand is forecast to be 0.84%, with the country accounting for 0.40% of supply.

For the whole of last year, our estimates of average crude oil prices are US$61.10 for the OPEC basket, US$65.10 for Brent, US$66.20 per barrel (/bbl) for WTI and US$61.30 for Urals. For the first quarter of this year, we have adjusted our forecasts to reflect the weather-induced volatility. The OPEC basket is now expected to have averaged US$54.30/bbl, with Brent at US$57.60; WTI averaging US$58.70 and Urals at US$54.00/bbl. Our projections for 2007 as a whole are barely changed from the last quarterly report. We are still assuming an OPEC basket price average of US$55/bbl. Based on last year's typical price differentials, this implies Brent at US$58.80, WTI averaging US$59.90/bbl, and Urals at US$55.30/bbl.

Croatian real GDP growth is forecast by BMI at 4.5% for 2007, down from 4.6% in 2006. We are assuming 4.5% growth in 2008, followed by 4.8% in 2009 and 4.7% in 2010/2011. Consumption of oil is set to rise at less than half the rate of the underlying economy, increasing by around 2% per annum over the forecast period and reaching an estimated 108,000b/d by 2011. Imports are therefore set to rise from an estimated 80,000b/d in 2006 to at least 94,000b/d by the end of the forecast period.

Partly privatised state oil group INA is attempting to raise local production in partnership with new shareholder MOL, but we expect to see a steady decline in crude production, from last year's estimated 18,000b/d to no more than 14,000b/d by 2011. We expect gas output to reach 4bcm in 2007/08, before starting to decline. Consumption is forecast to rise from an estimated 4.0bcm in 2006 to 6.0bcm by 2011, requiring imports of 2.7bcm.

In the BMI Business Environment Ranking matrix, Croatia receives a slightly lower composite score of 23, which still ranks the country outright 11th of 12 states included in the CEE region. The country's overall business environment can be considered very unattractive in a regional context, thanks largely to low levels of oil and gas output growth potential, modest hydrocarbon resources and a relatively high level of perceived economic and political risk. Licensing terms and the production sharing regime in the upstream segment are better than average, while the competitive landscape can be considered benign.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

Croatia Political SWOT

Croatia Economic SWOT

Croatia Business Environment SWOT

Chapter 3 - Regional Market Overview

Central/Eastern Europe Region

Table: Central/Eastern Europe Oil Consumption (000b/d)

Table: Central/Eastern Europe Oil Production (000b/d)

Table: Central/Eastern Europe Oil Refining Capacity (000b/d)

Table: Central/Eastern Europe Gas Consumption (bcm)

Table: Central/Eastern Europe Gas Production (bcm)

Table: Central/Eastern Europe LNG Exports/(Imports) (bcm)

Croatia

Chapter 4 - Business Environment Rankings

Croatia

Central/Eastern Europe Region

Chapter 5 - Croatia Business Environment Ranking

Economics – long-term risk

Politics – long-term risk

Oil & Gas Growth

Oil/Gas Reserves

Licensing/Regulation

Competitive Environment

Political Risk Summary

Economic Risk Summary

Business Environment Risk Summary

Legal Code/Corruption

Foreign Direct Investment

Tax Regime

Chapter 6 - Oil Market Outlook

Table: Crude Price Forecasts 2006

Revised Forecasts

Table: Oil Price Forecasts

Chapter 7 - Regional Supply and Demand

Central/Eastern Europe

Table: Oil Production (000b/d) – Central/Eastern Europe

Table: Oil Consumption (000b/d) – Central/Eastern Europe

Chapter 8 - Global Picture

Table: Global Oil Consumption (000b/d)

Table: Global Oil Production (000b/d)

Chapter 9 - Industry Forecast Scenario

Oil and Gas Reserves

Oil Supply and Demand

Gas Supply and Demand

LNG

Refining and Oil Products Trade

Revenues/Import Costs

Table: Croatia Oil & Gas – Historic Data & Forecasts

Other Energy

Table: Croatia Other Energy – Historic Data & Forecasts

Key Risks to BMI’s Forecast Scenario

Chapter 10 - Economic Outlook

Table: GDP, Output and Population

Chapter 11 - Country Snapshot: Croatia Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Chapter 12 - Regional Case Study

Emerging Player

Table: Lukoil Investment*

Chapter 13 - Competitive Landscape

Executive Summary

Table: Key Players in Croatian Energy Sector

Overview/State Role

INA – Summary

Table: Key Upstream Players

ENI – Summary

Janaf – Summary

Table: Key Downstream Players

MOL – Summary

Others – Summary

Chapter 14 - Company Monitor

Industrija Nafte (INA)

Jadranski Naftovod (Janaf)

INAgip (INA/Eni joint venture)

Chapter 15 - BMI Forecast Modelling

How we generate our industry forecasts

Energy Industry

Cross checks

Sources

Chapter 16 - Appendix: Regional Demographic Data

TABLE: Wages (ave labour force per annum), US$ PPP

TABLE: Population

TABLE: Household Spending Per Capita, US$

TABLE: Private Consumption Per Capita, US$ PPP

TABLE: Market Size, GDP, US$bn

Network of European Oil & Gas Sources

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BMI's European Oil & Gas Reports are based on an extensive network of multilateral organisations, government departments, oil and gas industry associations, chambers of commerce and company reports. Information sources include: