Market Report, "Slovenia Oil & Gas Report Q3 2016", published

Slovenia's upstream sector remains close to inexistent, with little to no oil or gas production within our forecast period. While there is upside risk in the gas segment attributed to the Ascent-operated Petisovci tight gas project, t he initiative faces continued regulatory and funding headwind s . O verall volumes are likely to be relatively modest in the case of project realisation , with imported Russian gas set to dominate supply for the foreseeable future.

The main trends and developments in Slovenia's oil and gas sector are:

There is evidence of commercial gas deposits close to the Hungarian border that can be exploited for power generation purposes. However, given project delays, we do not include it within our reserves or production forecast. The country's upstream reserves currently remain extremely limited.

Slovenian natural gas production will remain limited throughout our forecast period, thanks to the lack of upstream development in the country. While the long-delayed Petisovci project poses upside risk to our forecast, we maintain our more modest outlook, given continued financial and regulatory delays associated with the initiative.

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In May 2016, it was reported that the country's Administrative Supreme Court withdrew the provisional IPPC permit granted by the Slovenian Environment Agency in June 2015. The Court decision will delay the company's long-term plan for the field to have gas treated and sold in Slovenia.

Despite the IPCC application refusal, early production plans should not be under threat. The company had been studying two alternative options to market early gas production: selling the raw gas to a neighbouring and newly re-opened methanol plant, or outsourcing gas processing to a third party. However, in all cases Ascent highlights that for the project to move into full field development, the new processing plant (and thereby the IPCC award) remains crucial as the other two options would only enable limited uptakes of gas. As such, while these two options are viable for early production, a new processing plant is required for the production of higher volumes of gas and for bringing field production to its full capacity.

The company also faces financial problems. As a result of the permit delays, the board decided to make further cuts in expenditure, reducing amounts spent on field development 'to a minimum' from October 2015.

With no active refinery, we believe Slovenia will not produce any refined products within our forecast period. While plans for a biodiesel plant are under discussion, the poor downstream environment in Europe will likely preclude plans from materialising.

Slovenia imports all its supplies of refined products, remaining heavily dependent on Russia for its refined fuels consumption. Strengthening demand will increase the country's deficit and maintain its status as a net importer through 2025.

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