MOL has earmarked HUF 8bn (some US$ 42m) to develop two oil fields in Hungary that are expected to boost hydrocarbon reserves by 8.0 MMboe in the near future, the company said in a statement Wednesday.
Our view: According to our calculation, total production rate from the two fields will not exceed 1.5kbpd even at its peak years, which does not alter the general picture on MOL's E&P business. Proven reserves of MOL stood at 332 MMboe (including 65 MMboe form INA, the proportional on MOL's 25% stake) at the end of 2006 while production rate is seen to remain slightly below 100 kbpd this year. The company targets 900 MMboe hydrocarbon reserves by 2010 with an average daily production rate of 300Mboe. Given the fast aging fields in Hungary and the fact that ZMB, MOL's major crude producing filed in Russia, is also over its peak production level, the company expects 13% fall in total hydrocarbon production this year and near 10% decline in the following two years. Moreover, its seems that MOL has serious difficulties in buying further stake in INA in the lack of political willingness in Croatia. Assuming no progress with INA, but further smaller acquisitions in Russia MOL can realistically reach not more than 350-400 MMboe proven reserve by 2010, less than half of its strategic target. Smaller E&P projects in Hungary cannot change this picture.