According to BMI, the Bulgarian business environment remains challenging, suffering from high levels of corruption and inefficiency. BMI describes the country’s oil sector as uninspiring with limited new activity and a continued decline in domestic production, but the upside is that Bulgaria’s oil and gas sector comes from the US$ 1.5 billion investment to upgrade the Neftochim refinery, which will add a 50 000 bpd vacuum distillation unit (VDU), and from the natural gas sector which is looking increasingly positive.
The new VDU, mentioned above, is in the process of being build by Technip. Lukoil received a US$ 570 million credit to move the project forward in January 2014 and the new capacity is expected to be operational in 2017. When it comes to gas, progress on improving cross border infrastructure trade flexibility continues as the development of interconnections between Bulgaria, Romania, Serbia, Greece and Turkey reach different stages of completion.
BMI has said that robust international interest in Croatia’s recently opened licensing rounds has underscored the improved outlook for the market. But despite this, BMI believes that toil and gas production will continue to decline, leaving Croatia with a higher import bill as domestic output continues to fall short of demand. An uncertain outlook for the downstream sector has also been noted by BMI with reports that at least one or both of the country’s two refineries may be closed by 2018, if not earlier, due to a lack of competitiveness.
For 2014 BMI forecast crude and liquids oil produce to come in at 19 450 bpd, and dropping to 17 170 bpd by 2023. For natural gas, BMI estimate that output is set to decline from the 2008 peak of 2.04 billion m3 but consumption is set to rise at a yearly rate of 4 – 6% over the forecast period from 2014 – 2023.
As said above, BMI believe the outlook for the country’s refining sector to be uncertain. The Hungary based MOL group, which owns 49.08% of INA alongside the Croatian government’s control of a further 44.84%, has previously indicated that it could move forward with a plan to close both downstream facilities. Also, it has been rumoured that MOL sought to close its Sisak refinery this year and the Rijeka refinery in 2018. However there have not been any official reports of closure plans.
BMI believes that over the medium term, there will be little to stimulate the French petrochemical market. Last year, output of basic chemicals, fertilisers, plastics and synthetic rubber in primary forms declined by 1.7% year on year, compared to a decline of 4.5% in the previous year.
The domestic market is weighing heavily on the petrochemical’s sector performance. The automotive industry, which is a key consumer of polypropylene is expected to see a 1.9% increase in vehicle output as low base effects from a weak 2013, pent up demand from several years of declining production, and the resurgence in the domestic and European markets boosts auto production. Overall BMI remains sceptical that any major improvements in French exports will prove sustainable, given obstructive bureaucracy, high labour costs and the inflexible labour market that lies at the heart of ongoing competitiveness issues. Also, euro resilience remains a considerable downside risk to French exports, which are particularly sensitive to a strong currency.
According to BMI, the weak and volatile external demand picture is compounded by a longer tem trend of eroding export competitiveness, which is starting to make itself felt in the German petrochemical industry. BMI say that while Germany remains relatively competitive compared with its eurozone peers, the economy has lost significant price competitiveness against non-eurozone industrial economies since the middle of 2012.
The German chemicals industry did see a strong performance in the first quarter of this year with output up 4.2% year on year and sales improving by 5%. Even though production declined by 0.8% compared to Q413, domestic sales grew 3% quarter on quarter while foreign sales dropped by 1.5%. Concern throughout Germany will be with the petrochemicals sector, which say output drop 1.5% last year. In the first quarter of this year, production of petrochemicals dropped by a further 7% quarter on quarter and 2.8% year on year.
BMI has said that the UK’s petrochemical industry is emerging from recession in a leaner but fitter state than before. Output, reportedly, looks increasingly robust as the domestic industry picks up, with the country well positioned to capitalise on the high level of value added as well as strong integration of the production chain.
The petrochemicals sector has been under performing compared to the rest of the industrial sector, but now seems to be catching up, BMI has said. The UK economy will set the pace for growth in Europe this year and BMI estimates that the petrochemical sector’s output for 2013 was 1% not the 0.3% as previously thought. The first quarter of the year saw a further rebound in petrochemicals and BMI believes that growth in petrochemicals could exceed 8% this year, if output is sustained at first quarter levels.
Adapted for web by Claira Lloyd
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/12062014/more_euro_oil_gas_petchem_bmi/