NATURAL GAS IN THE CZECH REPUBLIC

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1 NATURAL GAS IN THE CZECH REPUBLIC Hugo Kysilka Marketing Director VEMEX s.r.o. International congress - Environmental and Energy Principles of the Sustainable Development Sofia, 7 May 2012

2 I. Functioning of the energy market in conformity with EU legal standards 1.1. Legal standards = transition to the Third Energy Package of the EU EU Directives No 2003/55, No 2004/67, No 1775/2005 New law on energy of the CR [Czech Republic] No 670/ Key developments - Stage One As of all of the end consumers, which in 2003 consumed more than 15 mln. cubic meters a year, as well as all holders of license for generation of electricity and heating power became qualified consumers. 2

3 - Stage Two As of all of the end consumers with the exception of households. At this stage unbundling took place in compliance with EU norms, i.e. spin-off of the transmission system operator s role. A new structure was differentiated within the RWE framework RWE Transgas Net. - Stage Three As of all both the end consumers as well as the households. Unbundling relates to gas supply; six individual regional gas distribution companies were differentiated within the RWE framework, as well as the subsurface gas storage facilities in connection with the formation of the RWE Gas Storage company. 3

4 - Next stage formation of the gas market operator Its role is to preserve the balance of the energy system, to deliver gas to the gas distribution company at a virtual point and to function as a daily commodity exchange EU goals Possibility to choose suppliers Lower prices Better quality services Reliable supply of energy Investments into the transport system 4

5 1.4. Position of CR regarding the unbundling concept In fact the EU is defining the terms for tightening the existing legal system by introducing the obligation of the so-called Code of Operation and the rules of supervision by the regulator. In practice three groups have formed within the EU: agreeing with EU Italy, UK, Denmark, Portugal, Belgium, Poland, Hungary, the Netherlands, Romania, Spain not agreeing with EU France, Germany, Latvia, Slovak Republic, Bulgaria, Luxembourg, Greece no clear attitude vis-à-vis the EU Estonia, Lithuania, Cyprus, the Czech Republic 5

6 II. Annual gas consumption in CR ,773 mln. cubic meters , , , , , , , , , ,940 6

7 Share of natural gas in the energy mix 19.7%. Length of high-pressure transit gas pipelines in excess of 2,500 km Length of high-pressure gas pipelines within CR 1,183 km Length of the distribution system 70,000 km Subsurface gas storage facilities 2.5 billion cubic meters 7

8 III. Current changes in trade 3.1. Switching of gas suppliers Total Jan Feb Large cl. /1,742/ ,656 Medium cl. /7,022/ ,142 1,456 3,662 Small cl. /192,984/ ,506 6,842 26,994 9,341 48,539 Households /2,644,936/ 0 0 6, ,402 76, ,268 64, ,538 Total , ,327 84, ,941 75, ,396 8

9 3.2. Share of natural gas sales (September 2011) RWE direct sales 11.03% RWE Energie 9.46% RWE distribution companies (3) 22.87% EON energie 5.06% Pražská plynárenská 7.08% GDF Suez 4.76% ČEZ 5.61% VEMEX 8.4 % Others (5-35) % 9

10 3.3. Share of natural gas imports (September 2011) RWE 46.43% SPP (Slovakia) 5.99% GDF Suez 5.07% EON 6.013% VNG Energie 1.99% Wingas 1.43% VEMEX 4.92% Others (about 20) % 10

11 IV. VEMEX on the gas market 4.1. A historical note Establishment of the company, focusing in consultancy in the field of energy generation VEMEX ENERGO was established in Slovakia as a wholly-owned subsidiary Member of the European Business Congress, Association of Gas Companies of Eastern Europe Formation of a new internal structure: 29% EW East-West Consult AG (Switzerland), 33% Centrex Europe Energy & Gas AG (Austria), 33% ZMB GmbH (Germany) and 5% KPP ČR (Czech Republic) Long-term natural gas supply contract signed with Gazprom Export Moscow in March 12.7 mln. cubic meters sold to direct consumers that year Member of the Gas Union of CR 245 mln. cubic meters sold to direct consumers 11

12 mln. cubic meters sold to direct consumers Changes of the interests in the company: 50.14% Gazprom Germania, 33% Centrex and 16.86% East West 748 mln. cubic meters sold to direct consumers In addition to Gazprom Export we are also purchasing gas from domestic producers - LAMA and MND 651 mln. cubic meters sold Visit of the Yamburg and Urengoy gas producers. Changes of the interests in the company 16%, formerly belonging to East West, were purchased by KKCG (gas production and storage). The company also purchased a 51% stake in RSP Energy (trading in gas and electricity for households and small consumers). 661 mln. cubic meters sold Start of natural gas sales by VEMEX ENERGO in Slovakia 12

13 4.2. Current organizational structure 13

14 4.3. What does VEMEX offer its clients multiple gas delivery points under a single contract integrated gas supply services simple payment formula for services transparent pricing formula flexible payment terms gas supply ensured transportation ensured distribution responsibility for non-conformities one-year contract, as well as two- - five-year contracts annual and daily volumes (ACQ / DCQ) take-or-pay obligation 90% 14

15 V. Natural gas a cost effective and environment-friendly resource The State Energy Concept is still under debate in the Czech Republic. The energy mix comprises nuclear power, hydro power, solar and wind power, as well as coal and natural gas. Significant growth is projected of the share of nuclear power and a halt in the growth in renewable sources. The greatest differences of opinion relate to the share of brown coal and natural gas. Sufficient brown coal volumes are still available, but the state has no clear policy in regard to non-compliance with the limits on production. The share of natural gas in view of its environmental and energy input is still 23%. 15

16 Brown coal and natural gas consumption in CR in the period 16

17 Emissions in

18 Emissions in

19 Emissions in 2011 The objective of the Energy Concept is to reduce dust emissions. How? With the input of nuclear power and natural gas. And also of renewable sources. 19

20 Let s replace coal by natural gas This would be feasible by substituting coal used for heating purposes by natural gas. 20

21 Thank you for your attention! 21

22 VEMEX s.r.o. Na Zátorce 43/ Prague 6 Czech Republic Tel.: Fax: kysilka@vemex.cz 22