Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

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Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting Gas Regional Initiative – Region South-South East Gdynia, 26th June 2009

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Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting Gas Regional Initiative – Region South-South East Gdynia, 26th June 2009. The Company’s history and key changes on the Polish Energy Market. 2007: - PowerPoint PPT Presentation

Transcript of Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

Page 1: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

Overview of the Polish Energy Market & PGNiG Capital Group

6th Stakeholder Group Meeting

Gas Regional Initiative – Region South-South East

Gdynia, 26th June 2009

Page 2: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

The Company’s history and key changes on the Polish Energy The Company’s history and key changes on the Polish Energy MarketMarket

1982

1982:PGNiG was established as the State-owned Enterprise PGNiG

1996

1996: State-owned Enterprise PGNiGis transformed into a joint-stock company wholly owned by the State Treasury

2004

2004:Ownership unbundling of the transmission activity – establishment of the PGNiG-Przesył Sp. z o.o. (currently OGP GAZ-SYSTEM S.A.).

OWNERSHIP UNBUNDLING

1997

1997:Establishment of the Energy Regulatory Office

2005

2005:23 September 2005 - PGNiG on the Warsaw Stock Exchange

2007

2007:1 July – introduction of Third Party Access Rule (as a result of Directive 2003/55/WE being implemented into Polish Energy Law)

2007:Leagal unbundling of distribution activities – establishment of 6 Distribution System Operators

LEGAL UNBUNDLING

2008

2008:PGNiG appointed as Storage System Operator (31 December 2008).

FUNCTIONAL & ACCOUNTING UNBUNDLING

2006

2006:Transmission Network Code approved by the Energy Regulatory Office 2008:

Distribution Network Codes approved by the Energy Regulatory Office

2009

2009:Storage Code – published for public consultations

Page 3: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

Poland’s leading integrated gas and oil company

Leading gas and growing oil producer

Leading gas importer to Poland and owner of gas storages

Robust domestic gas distribution business

E&P – domestic production of natural gas (4.1 bcm) and crude oil (496 thousand tones);

International expansion in E&P;

Total sales – 13.9 bcm of natural gas;

Storages – 1.7 bcm of working capacity;

Retail – 6.6 million of end-customers;

Strong financial position; rating BBB+(S&P),

Baa1 (Moody’s)

Revenue – 4.4 billion EUR.

Key data *

PGNiG – Basic informationPGNiG – Basic information

Shareholder’s Structure **

* Data for 2008

**After shares distribution to employees

Page 4: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

Business structure

WholesaleE&P Storage Transmission Distribution Retail

PGNiG

PGNiG Norway

POGC Libya

Service subsidiaries

Branches: Pakistan, Denmark, Egypt, Libya.

Six regional DSO PGNiG PGNiG PGNiG

Ownership unbundling

Legal unbundling

Functional and

accounting unbundling

Overview of PGNiG’s business Overview of PGNiG’s business

Vertically integrated business;

Leading position in key market segments;

Proven ability to manage regulatory risk across the

value chain.

Page 5: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

The PGNiG’s Capital Group value is built on 6 main pillarsThe PGNiG’s Capital Group value is built on 6 main pillars

Ensuring the supply of

natural gas

The development

of E&P activities

Increase of gas storage

capacity

Raise profitability

of the gas distribution

activity

The development of

commercial activity

Enlargement of the areas and scale of operations

Transforming the company into a leader of the European fuel – energy market

Constant improvement of daily operations

Key Assumptions of PGNiG’s Group Strategy Key Assumptions of PGNiG’s Group Strategy

Page 6: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

Gas market in Poland (1/2) Gas market in Poland (1/2)

Gas consumption per capita in 2007 (cm)Gas consumption (bcm/year)

Gas consumption per capita (cm/year)

85 85

58

50

37

12 1311 12

9

91

96

70

50

43

2116

1113

10

97

91

85

4643

34

1714 13

9

0

30

60

90

120

Germany United Kingdom

Italy Netherlands France Spain Belgium Poland Hungary CzechRepublik1997 2002 2007e

+14% +7%

+46%

-7%

+16%

+178%

+31%+30% +10%

-9%

(change in the last 10 years in %)

3 207

1 306

1 463

1 0091 191

1 039 915

313

628

273

3 106

1 5411 613

1 216 1 328

1 099931

491

723

293

2 837

1 641

1 494 1 4601 342

1 180

843762

692

359

0

700

1 400

2 100

2 800

3 500

Netherlands Belgium United Kingdom

Italy Hungary Germany Czech Republik

Spain France Poland1997 2002 2007e

-12%

+26%+2%

+45%+13%

+14%-8%

+143% +10%

+31%

(change in the last 10 years in %)

Less than 500 cm

500 cm - 1 000 cm

1 000 cm - 2 000 cm

More than 2 000 cm

Gas consumption per capita in Poland is very low - only 359 cm in 2007

Gas consumption per capita in Poland is more than 2 times lower than in Czech Republik and more than 3 times lower than in Hungary

Gas consumption – Poland vs Europe

Page 7: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

Gas share in Primary Energy Sources in Poland is much lower than an average in the EU (13% against 24%);

It is a consequence of the extensive usage of coal (hard/brown) as the source of primary energy.

source: EuroGas

Source: IEA

40,4

24,9

17,7

12,8

4,3

23,9

13,3

61,8

1

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

oil natural gas coal nuclear hydro

UE Poland

Sales of natural gas in Poland – basic information

Gas market in Poland (2/2) Gas market in Poland (2/2)

Total gas sales in 2008: 13,9 bcmTotal gas sales in 2008: 13,9 bcm

33%

34%

7%

26%

Residential & Commercial Industry Power Other

7% 1%

36%

55%

Residential & Commercial Industry Power Other

Primary energy balance EU vs Poland

Natural gas sales by sector – EU (2007) Natural gas sales by sector – Poland (2007)

Page 8: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

Gas production: increase gas production from 4,2 bcm to 6,2 bcm;

LNG: 1 million tonnes of LNG secured from Qatar;

Interconnectors: plans (ongoing analysis) to build two or three interconnectors on western and southern borders of Poland in order to extend Polish gas grid connection to EU network;

NW gas: gas supplies from Norwegian Continental Shelf;

SE gas: planned interconnector will reach Baumgarten gas hub and meet Nabucco pipeline;

Assumptions for diversification

Current sources of gas - 2008 Optimal sources of gas - 2015

Gas Supplies and Transport Routes Gas Supplies and Transport Routes

Eastern direction66%

Own production28%

Western direction6%

Eastern direction40%

Own production30%

LNG and Western direction

30%

Page 9: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

In April 2009 PGNiG and Qatargas Operating Company signed the Head of Agreement in which Qatargas agreed that approx. 1 million tonnes of LNG will be supplied annually to LNG terminal in Świnoujście for a period of 20 years, starting from 2014;

Concurrently PGNiG and Qatargas are conducting talks with a view to entering into a Sales and Purchase Agreement.

9

Location of terminal:

Reloading capacity of terminal:

LNG tanks capacity:

Implementation date:

Świnoujście

Phase 1 – 2.5 bcm/annuallyPhase 2 – 5.0 bcm/annuallyPhase 3 – 7.5 bcm/annually

2 x 160,000 m3

2014

LNG deliveries to PolandLNG deliveries to Poland

Basic information – LNG Project

LNG deliveries – PGNiG S.A.

Companies responsible for LNG terminal construction: TSO Gaz-System/PLNG

Page 10: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

Gas supplies from NCS to Central EuropeGas supplies from NCS to Central Europe

Skanled Project

Skanled

Polish coast Niechorze

NCS

Baltic Pipe

Danish transmission system

Main facts:

5 May 2009 the Skanled Project Group decided to suspend the Skanled project, due to:- increased commercial risk;- withdrawal of majority of Scandinavian companies;

- uncertainties related to timing of new field developments on NCS and gas supplies;

June 2009 – OGP Gaz-System decided to suspend the Baltic Pipe project.

Page 11: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

2009 PGNiG SA owns and uses

6 underground gas storage facilities:

5 UGS in partly depleted natural gas fields:

UGS Brzeźnica, UGS Husów, UGS Strachocina, UGS Swarzów and UGS Wierzchowice

1 UGS in salt cavern: UGS Mogilno.

Working capacity for 2009/2010 (bcm) - 1.6

No of storage facilities in 2015 - 9

Target working capacity (bcm) – 3.8

Estimated CAPEX (PLN bn) – 3.0

Warszawa

G d ańs k

G u sto rzyn

O lsztyn

P o zna ń

K raków

P io trkó wTryb una lsk i

Ja ros ła w

W roc ław

K a tow ice

UGSMogilno

UGSSwarzów

UGSBrzeźnica

UGSHusów

UGSStrachocina

UGSWierzchowice

UGS Daszewo

UGS Kossakowo

UGS Bonikowo

Existing UGS

Planned UGS

UGS expansion

Planned UGS for low-methane gas

Expansion of Underground Gas Storage FacilitiesExpansion of Underground Gas Storage FacilitiesBasic data

2015+

Recent changes

Current working capacity:

1.6 bcm

Target working capacity:

3.8 bcm

1 November 2008 – establishment of PGNiG – SSO Branch in Warsaw;

31 December 2008 – PGNiG appointed for Storage System Operator in Poland;

May 2009 - Market scereening process conducted by the SSO Branch

16 June 2009 – Tariff for storage services approved by the Energy Regulatory Office;

June 2009 – Storage Code published for public consultations.

UGS – construction and development

Page 12: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

International expansion of PGNiG started with the acquisition of a stake in E&P concession on Norwegian Continental Shelf (North Sea Skarv, Snadd and Idun fields).

Currently, PGNiG undertakes E&P activities also in the following regions:

• Egypt (Bahariya field),

• Libya (Murzuq basin),

• Pakistan (Kithar concession block),

• Southern Denmark.

Norway

Pakistan

Tunesia

Egypt

Libya

Denmark

PGNiG exploration and production activities will concentrate on Norwegian Continental Shelf and in the Maghreb region.

Currently, PGNiG plans to engage in new projects in Northern Africa, with Algeria as a potential new country of interest.

Development of Oil and Gas Exploration & ProductionDevelopment of Oil and Gas Exploration & Production

Page 13: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

14,5 14,115,4

17,1

1920,2

0

5

10

15

20

25

2006 2010 2015 2020 2025 2030

bcm

Natural gas demand New investments in power sector

Prospects for future gas consumptionProspects for future gas consumption

* Ministry of Economy – forecast

EC Stalowa Wola 400 MW

EC ZA Tarnów 200 MW

EC Bydgoszcz 100 MW

EC Lotos230 MW

Pozosta?e gazowe projekty

energetyczne1000 MW

EC Stalowa Wola 400 MW

EC ZA Tarnów200 MW

EC Bydgoszcz 100 MW

EC Lotos230 MW

Pozosta?e gazowe projekty

energetyczne1000 MW

Other gas fired power projects

1000 MW

Planned capacity ≈ 2000 MW

Planned gas demand ≈ 2-2,4 bcm

Gas sales to power plants (2007)

82,81

97,38

37,60

12,75 17,44

39,71

85,89

13,81

45,82

35%

31%

20%

7%

1%

40%

36%35%

11%

-

20

40

60

80

100

120

Italy UnitedKingdom

Spain Hungary Belgium Netherlands Germany Poland France

bcm

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Natural gas consumption (bcm) Natural gas sales to power sector (%)

Share of sales to power plants in total gas sales is currently very low in Poland.

In Poland only 7% of gas is sold to power plants, whereas in Hungary 35% (both countries have almost equal total gas sales).

Most probably the situation will change in the future (as a result of investments in the power sector) and sales to power plants will increase.

* Source: Eurogas

Page 14: Overview of the Polish Energy Market & PGNiG Capital Group 6th Stakeholder Group Meeting

Thank you!