BMI's Executive Summary

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The latest Hungary Oil & Gas Report from BMI forecasts that the country will account for 2.76% of Central and Eastern European (CEE) regional oil demand by 2011, while providing less than 0.2% of 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. Hungary's share of consumption in 2006 was an estimated 2.39%, which is likely to have fallen to 2.24% by 2011. Its contribution to gas production is not significant, with no improvement expected over the forecast period.

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.

Hungarian real GDP growth is forecast by BMI at 2.4% for 2007, down from 3.9% in 2006. We are assuming 2.9% growth in 2008, followed by 4.8% in 2009, 4.6% in 2010 and 4.4% in 2011. Hungarian oil consumption has fallen from 198,000b/d in 1990 to an estimated 153,000b/d in 2006. We are now expecting a gradual recovery, as demand rises by 1-2% per annum, with consumption reaching 165,000b/d by 2011. Domestic production, largely in the hands of former state company MOL, is not expected to recover from the recent decline, with steady slippage leading to higher import volumes (reaching 140,000b/d by 2011). Gas demand is forecast to increase from last year's estimated 13.8bcm to around 16.0bcm (in 2011) – implying net gas imports reaching 13.7bcm by the end of the forecast period.

In the BMI Business Environment Ranking matrix, Hungary receives a slightly higher composite score of 33, which now ranks the country equal fifth out of 12 states included in the CEE region, alongside the Czech Republic. The country's overall business environment can be considered neutral in a regional context, thanks to moderate long-term economic risk and very little in the way of domestic upstream oil or gas resources, which limits Hungary's appeal.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

Hungary Political SWOT

Hungary Economic SWOT

Hungary 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)

Hungary

Chapter 4 - Business Environment Rankings

Hungary

Central/Eastern Europe Region

Chapter 5 - Hungary 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

Refining and Oil Products Trade

Revenues/Import Costs

Table: Hungary Oil & Gas – Historic Data & Forecasts

Other Energy

Table: Hungary Other Energy – Historic Data & Forecasts

Key Risks to BMI’s Forecast Scenario

Chapter 10 - Economic Outlook

Table: Nominal And Real GDP

Chapter 11 - Country Snapshot: Hungary 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 – Hungary Oil & Gas Sector

Overview/State Role

MOL – Summary

Shell – Summary

Table: Key Upstream Player

OMV – Summary

Eni – Summary

ExxonMobil – Summary

Table: Key Downstream Players

ConocoPhillips – Summary

Lukoil – Summary

Pogo/Toreador – Summary

Chapter 14 - Company Monitor

MOL

Shell Hungary

OMV Hungary

Agip Hungaria

Chapter 15 - BMI Forecast Modelling

How we generate our industry forecasts

Energy Industry

Cross checks

Sources

Appendix: Regional Demographic Data

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

Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

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: