Trade and Storage
In 2012, total sales of natural gas reached 14.9 billion cubic metres, of which 14.2 billion cubic metres was sold by the Trade and Storage segment. The gas was supplied to PGNiG’s 6.7 million customers in Poland and 17 thousand customers in Germany, including households and industrial users. Approximately 4,000 PGNiG employees worked on ensuring an uninterrupted and secure service.
Key events in 2012:
- Conclusion, on November 5th 2012, of an agreement between PGNiG and OOO Gazprom Export on new pricing terms for gas supplied to Poland under the Yamal Contract. Thanks to the agreement, it was possible to close the proceedings before the Arbitration Court in Stockholm.
- Conclusion, on October 17th 2012, of an agreement between PGNiG and VNG-Verbundnetz Gas AG on new pricing terms for gas supplied to Poland under the Lasów Gas Sales Agreement of August 17th 2006. The agreement provides for a new gas pricing formula, which includes elements based on both the prices of petroleum products and the market prices. A new capacity charge rate was also agreed. The agreement took effect as of October 1st 2012.
- On December 20th 2012, the first trade was executed on the gas market launched on the Polish Power Exchange (Towarowa Giełda Energii, TGE). Transactions on the gas market can only be executed and settled through brokerage houses and commodity brokerage houses which are members of the TGE and the Warsaw Commodity Clearing House operated by Izba Rozliczeniowa Giełd Towarowych SA (IRGiT). The institution responsible for the clearing and settlement of gas market transactions is IRGiT. Clearing of transactions by IRGiT is a guarantee of payment for gas sold.
- An amendment to the Regulation on detailed conditions for the operation of the gas system, introducing the “virtual gas trading point”, which enables virtual gas trading, including on the gas market.
- Approval of new rules for the provision of transmission, distribution and storage services, and the respective tariffs for such services. The documents define new rules for the organisation of the gas trading market in Poland, including the virtual market (exchange and over-the-counter markets).
The Trade and Storage segment sells natural gas imported from other countries and produced from domestic fields. Imported gas is sourced mainly from countries lying east of Poland (65% of demand), with gas volumes imported from countries to the west and south of Poland (approximately 11%) steadily increasing.
Natural gas is sold through the distribution and transmission networks, and its sale is regulated by the Energy Regulatory Office. For its own needs, the segment uses three underground gas storage facilities (in Mogilno, Wierzchowice, and Husów).
Financial performance in 2012
The Trade and Storage segment reported a marked improvement in its operating efficiency, with operating profit coming in at PLN 325 m, up by PLN 524 m on the previous year. The improvement was driven by higher margins on sales of high-methane gas. An increase in the gas fuel tariff in March 2012 was not sufficient to benefit the margin. What did help was the unit cost of imported gas, brought down in the annex to the Yamal contract. Signed in November, it revised the gas supply prices for Poland, also retrospectively. An adjustment to the segment’s result, made in the fourth quarter, to account for the revised gas import terms offset the losses incurred in the first three quarters of the year.
Tariff policy
Gas fuel trading is regulated by the President of the Energy Regulatory Office. The Office’s regulatory powers include the right to approve gas fuel tariffs, including gas fuel prices and charge rates covered by the tariffs, and control their application in terms of compliance with the Polish Energy Law; to analyse and review costs which energy companies consider relevant for the calculation of tariff prices and charge rates, and to exercise overall supervision over energy companies. The level of tariff prices and charges is the key driver behind the Company’s financial performance. The applied tariff preparation methodology is based on determination of prices and charge rates against forecast costs and gas sales targets, with the calculation of prices of gas fuels including the cost of acquisition of natural gas from all possible sources – both imported and domestically produced.
PGNiG supplies gas fuel to customers connected to the transmission network and those connected to the distribution grid, under comprehensive contracts settled based on a tariff specifying:
- prices, subscription fees and network charges applicable to settlements with customers receiving gas fuel from the transmission network;
- prices, subscription fees and network charges applicable to settlements with customers receiving gas fuel from the distribution networks;
- the manner of determining price reductions for failure to maintain the quality parameters for gas fuels and quality standards in customer service, and the manner of determining charges for exceeding the contracted capacity.
In the period from January 2011 to April 2013, the following Gas Fuel Tariffs were in effect:
- Amendment to Gas Fuel Supply Tariff No. 3/2010, approved by decision of the President of the Energy Regulatory Office No. DTA-4212-53(8)/2010/652/III/AG, dated December 16th 2010 (effective from January 1st 2011 to July 14th 2011);
- Gas Fuel Supply Tariff No. 4/2011, approved by decision of the President of the Energy Regulatory Office No. DTA-4212-12(11)/2011/652/IV/AG, dated June 30th 2011 (effective from July 15th 2011 to March 30th 2012);
- Gas Fuel Supply Tariff No. 5/2012, approved by decision of the President of the Energy Regulatory Office No. DTA-4212-53(29)/2012/652/V/AG, dated March 16th 2012 (effective from March 31st 2012 to December 31st 2012);
- Amendment to Gas Fuel Supply Tariff No. 5/2012, approved by decision of the President of the Energy Regulatory Office No. DTA-4212-48(9)/2012/652/V/AG, dated December 17th 2012 (effective since January 1st 2013);
- Amendment to Gas Fuel Supply Tariff No. 5/2012, approved by decision of the President of the Energy Regulatory Office No. DTA-4212-5(21)/2013/652/V/AG, dated January 25th 2013.
Changes in gas fuel prices for customers receiving gas from the transmission network in E, Ls and Lw tariff groups
| Tariff groups | Amendment to Tariff No. 3/2010 (effective January 1st 2011–July 14th 2011) | Tariff groups | Tariff No. 4/2012 (effective July 15th 2011–March 30th 2012) | Tariff No. 5/2012 (effective March 31st 2012–December 31st 2012) | Amendment to Tariff No. 5/2012 (effective since January 1st 2013) |
|---|---|---|---|---|---|
| PLN/m³ | PLN/m³ | PLN/m³ | |||
| E-1A – E-4B | 0.9827 | E-1A – E-1C | 1.1076 | 1.2945 | 1.2516 |
| E-2A – E-2C | 1.1073 | 1.2942 | 1.2513 | ||
| Ls-1 – Ls-4 | 0.6603 | Ls-1 | 0.7432 | 0.8687 | 0.8399 |
| Ls-2 | 0.743 | 0.8685 | 0.8397 | ||
| Lw-1 – Lw-4 | 0.7745 | Lw-1 | 0.8717 | 1.019 | 0.9851 |
| Lw-2 | 0.8715 | 1.0188 | 0.9849 |
Gas exchange
The gas exchange was launched on December 20th 2012, with the establishment of a gas futures market on the TGE. Products offered on the market include:
- monthly contracts with delivery one, two or three months ahead
- quarterly contracts with delivery one, two or three quarters ahead
- annual contracts with delivery one or two calendar years ahead.
Subsequently, on December 31st 2012, a day-ahead market was launched. The launch of the gas exchange had been previously delayed by the lack of an appropriate regulatory framework. The necessary condition for TGE to launch a gas exchange was the implementation of a new model for the Polish gas market, which would enable transmission of gas to and from a virtual gas trading point. While the new model – the new Transmission Grid Code drafted by OGP Gaz-System SA – was approved by the President of the Energy Regulatory Office as early as in July 2012, it could not be implemented until the President of the Energy Regulatory Office approved new tariffs for infrastructure operators (the Transmission System Operator, the Distribution System Operator, and the Storage System Operator), which enabled settlements for the transport of gas under the new market model. On February 8th 2012, the Ministry of Economy prepared a draft amendment to the Tariff Regulation, changing the rules of calculation for the new tariffs. However, due to protracted work on the Regulation, the President of the Energy Regulatory Office – in line with the market participants’ expectations – decided to postpone the effective date of the Transmission Grid Code to January 1st 2013. As the amendment to the Tariff Regulation was not enacted within the prescribed time, the appropriate legal infrastructure for the new gas market model was instead based on an interpretation of the existing regulations.
A practical condition for the gas exchange’s operation was exemption of the exchange from regulatory price control. On November 30th 2012, the President of the Energy Regulatory Office granted PGNiG’s request, exempting it from the obligation to submit tariffs for exchange trading in gas fuels for approval. The first trade on the gas futures market was executed on December 20th 2013.
As no relevant amendment to the Commodity Exchange Act has been enacted, sellers and buyers of gas are not currently exchange members. As a practical consequence, trades have to be executed through brokerage houses. At present, in connection with ongoing work on a parliamentary draft amendment to the Energy Law and certain other acts (parliamentary paper No. 946), it is proposed that the catalogue of exchange members be expanded, thus eliminating one of the factors adversely affecting the popularity of the exchange as a trading platform. In addition to transaction fees and costs related to margin establishment, the overall cost of exchange-traded gas is impacted by costs associated with execution of transactions through brokerage houses.
Imports
PGNiG is the largest natural gas importer in Poland. Gas is imported primarily from countries lying east of Poland, and also from Germany and the Czech Republic. With the existing gas infrastructure in place, it is possible to import natural gas from the following directions:
- East – through the cross-border interconnectors in Drozdovitse and Zosin (on the Polish-Ukrainian border), Kondratki, Vysokoye and Teterovka (on the Polish-Belarusian border);
- West – through the cross-border interconnector in Lasów and using the reverse flow service on the Yamal pipeline;
- South – through the cross-border interconnector in Branice or, alternatively, in Głuchołazy, and a newly built interconnector in the Cieszyn area, connecting the gas systems of Poland and the Czech Republic.
In 2012, the volume of PGNiG’s imports to Poland reached approximately 10,999.95 m m³ of high-methane gas, including:
- 9,017.31 m m³ (81.98 %) – from OOO Gazprom Export;
- 366,03 m m³ (3.33%) – from Verbundnetz Gas AG (VNG);
- 640 m m³ (5.82%) – from Vitol SA;
- 890 m m³ (8.09 %) – from PGNiG Sales and Trading.
In 2012, PGNiG continued to make natural gas deliveries using the virtual reverse flow on the Yamal gas pipeline. PGNiG requested OGP GAZ-SYSTEM SA for the virtual reverse flow service on the Yamal gas pipeline in the period from January 2012 to December 2015. Following allocation of the available capacity of the Polish section of the Yamal pipeline to the long-term reverse flow service, OGP Gaz-System SA and PGNiG entered into an agreement on the provision of the reverse flow service on an intermittent basis. The contracted capacities are used to transport natural gas purchased on the German market (VTP Gaspool), which is relatively less expensive than gas purchased under the Yamal Contract.
Following completion in 2011 of the upgrade work on the existing interconnector on the Polish-German border in Lasów (two-way connection), its throughput capacity was expanded. As a result, the annual capacity for importing natural gas from Germany has increased by approximately 0.5 bn m³, to a total of approximately 1.5 bn m³. The increased throughput capacity at the Lasów point became available in January 2012.
The system interconnections (the Lasów terminal and the interconnection with the Czech Republic, near Cieszyn, commissioned in 2011) play a very important role in ensuring Poland’s energy security, and may also be used as potential sources of emergency supplies. Further, the interconnectors support free trade flows between EU countries and foster greater economic integration of member states.
In addition, Polskie LNG SA (a wholly-owned subsidiary of OGP Gaz-System SA) is constructing an LNG terminal in Świnoujście. Initially (to 2014), the terminal’s capacity will amount to 5 bn m³ of gas. The contracted supplies of 1 m tonnes of liquefied natural gas annually (approximately 1.34 bn m³) are due to commence in mid-2014.