The Hungarian government made major progress in reorienting the energy sector toward a market economy in 1991.
A study conducted by the International Energy Agency said progress was particularly evident in price reform and restructuring of the Hungarian energy industry.
The pace of change has accelerated. Effective with fourth quarter 1991 through 1992 all the main energy enterprises will begin operating under new structures.
Assuming that liberalized energy prices are set by suppliers to cover their costs and local governments do not subsidize district heating prices, all energy prices are to be at least at their economic cost level by mid-1992, IEA said. Some prices will be above this level because of sales taxes on gasoline and diesel and taxes on all imported energy.
Hungary depends on imports for about half of its primary energy supply. Because domestic production has peaked, the share of imports will rise if consumption, after a likely further decline in the short term, returns to an upward trend.
OIL SUPPLY
Hungarian oil production is expected to decline substantially in the 1990s because current reserves are likely to be depleted faster than new reserves are found.
Production depends heavily on secondary and tertiary enhanced recovery methods. As a result, production costs are rising but domestic oil production remains valuable for economic as well as security of supply reasons.
Hungary's oil production in 1990 was 39,800 b/d, accounting for 25% of the country's oil consumption. But oil's share in primary energy supply is only 29% because of low demand in the transportation sector.
Oil's average market share is 44% among European members of the Organization for Economic Cooperation and Development.
Hungary also produces 700,000 tons/year of natural gas liquids.
Projections are for a steady decline in crude production to 22,000 b/d and 700,000 tons of NGL in 2000 and to 10,000 b/d and 500,000 tons of NGL in 2010.
IEA said the pace of decline is not inevitable because there is still potential for oil discoveries and enhanced recovery with adequate investment and technologies.
The government's decision to encourage foreign investment in the upstream sector is welcome, IEA said. Geological data packages have been available to potential participants since May 1991, and there has been a good response from foreign oil companies.
But because it will take time to evaluate the geological and geophysical data, exploration by foreign companies is not likely to begin before 1993.
Until 1990, 80% of Hungary's oil supply came from the former U.S. S. R. through the Friendship pipeline. In 1990 Hungary had to purchase 16,000 b/d of crude from other sources, and last year these supplies increased to over 40,000 b/d.
Primary distillation capacity in Hungary's three refineries was about 220, 000 b/d Jan. 1, 1991. They produce about 95% of the refined products required by the Hungarian market.
Primary distillation capacity is expected to remain stable, but more complex conversion capacity will be required to meet future product requirements and specifications.
GAS PRODUCTION
Hungary's natural gas production declined from a peak of 725 MMcfd in 1985 to 474 MMcfd in 1990. Production in 2000 is forecast at 387 MMcfd in the absence of significant new investment, IEA said.
Cedigaz estimates Hungary's remaining proven gas reserves at 4.3 tcf.
Natural gas imports are steadily increasing and likely will continue to rise through the 1990s. Imports were 377 MMcfd in 1985 and 609 MMcfd in 1990. Based on projections submitted to the IEA, Hungary will need to import 1 bcfd in 2000.
IEA said increasing dependence on natural gas imports-up to as much as 72% of demand in 2000 from 56% in 1990-raises security of supply concerns, made worse by Hungary's reliance on a single source, the former Soviet Union.
In 1991, Yamburg field in Russia was under contract to supply 145 MMcfd. From 1992 until 1997, 193 MMcfd is under contract from Yamburg with an option for 193 MMcfd from 1998 to 2008.
Hungary holds a contract to buy 270 MMcfd from Orenburg field during 1991-98.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
