Polish Gas Market.Polish Gas Market.Overview of Current Strategic Issues.Overview of Current Strategic Issues.

PiotrPiotr DworakDworak-- DirectorDirector Gas TransportGas Transport, PGNiG, PGNiG

18 18 NovemberNovember 20092009

2

93

,9

82

77

,7

4,6 5 5,7

8,7 9,5 1

2 13

,9

14

,3 17

38

,6

39

44

,2

4,6

4,2

43,3

3,2

1,8

1,110,8

00

0

10

20

30

40

50

60

70

80

90

100

Cypru

s

Malta

Estonia

Sweden

Slovenia

Latv

iaLit

huan

i aBulg

aria

Finla

ndGre

ece

Denmar

kPor

tugal

Irelan

dSlova

kiaCze

ch R

ep.

Austria

Hungar

yPola

ndRom

ania

Belgium +

Luxe

mbo

urgHoll

and

Spain

Fran

ce Italy

Germ

any

UKGas consumption in the EU in 2008Gas consumption in the EU in 2008

mld

m3 /

rok

Source: BP statistical review of World Energy 2009

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 1 460

1 342

1 180

843762

692

359

0

700

1 400

2 100

2 800

3 500

Holland Belgium Great Britain Italy Hungary Germany Czech Rep. Spain France Poland

1997 2002 2007

-12%

+26%+2%

+45%+13%

+14%-8%

+143% +10%

+31%

Gas consumption per capita m 3/year(% change 1997-2007)

33

� Poland is consuming 14 bcm (the same level as Hungary and 3 times less than Spain);

� Gas share in Polish energy market 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.

PGNiG natural gas sales breakdown in Q1 2009

Primary energy balance in Poland

EU27 natural gas sales by sector in 2007*

Gas Market in Poland

* Source: EuroGas.

4

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 PGNiG –– Basic informationBasic information

Shareholder’s Structure **

* Data for 2008

**After shares distribution to employees

5

Overview of PGNiG Business

WholesaleE&P Storage Transmission Distribution Retail

Six regional gas companies

PGNiG

Ownership unbundling

Legal unbundling

Accounting& operationalunbundling

Storage System Operator - PGNiG

PGNiGPGNiG

� Vertically integrated business;

� Leading position in key market segments;

� Direct access to customers across the value chain;

� Proven ability to manage regulatory risk across the value chain.

Business structure

OGP Gaz-System

* Data for 2008

5

6

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

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

• Egypt (Bahariya field),

• Libya (Murzuq basin),

• Pakistan (Kirthar concession block),

• Southern Denmark.

Development of Oil and Gas Exploration & Production Development of Oil and Gas Exploration & Production by PGNiGby PGNiG

Norway

PakistanAlgeria

EgyptLibya

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.

7

TradeTrade

7

� Activities of Trade segment comprise:

� sales of natural gas both imported and domestically produced;

� Around 30% of Polish demand is met by domestic production – the rest is covered by imports;

� The Company has strong relationships with largest European player (Gazprom Export)including:

� Yamal gas contract for natural gas deliveries up to 9 bcm per year till 2022;

� short-term contract for 1,05 bcm gas deliveries till September 2009.

Sources of gas supply in 2003-2008 (bcm)

12.7 13.6 14.0 14.3 13.6 14.3

88

Storage System OperatorStorage System Operator

Creation of SSO:Creation of SSO:

� 1 November 2008creation of Storage System Operator Division in Warsaw

� 31 December 2008Designation of PGNiG S.A. as the Gas Storage System Operator

Gas Storage Service RulesGas Storage Service Rules ::

� Approval of the gas tariff of PGNiG S.A. (Part B, Gas Storage Services Tariff No. 1/2009) -decision of President of ERO dated 16 June 2009

� Tariff entered into force as of 1 July 2009 and shall be effective until 31 October 2010

� 1 July 2009 - publication of the Gas Storage Service Rules

9

Warszawa

Gdańsk

Gustorzyn

Olsztyn

Poznań

Kraków

PiotrkówTrybunalski

Jarosław

Wrocław

Katowice

Cavern UGSMogilno

UGSBrzeźnica

UGSHusów

UGSStrachocina

UGSWierzchowice

UGSDaszewo

Cavern UGSKosakowo

UGSBonikowo

30

250

370/800

200

575/1200

UGSSwarzów

90 65

350/500/500/500/500

150/330

380/800

- UGS expansion

- Planned UGS

- Existing UGS

- working capacity before/after expansion in mln m 3

- Planned UGS for low-methane gas

Storage System OperatorStorage System Operator

Current working capacity:

Target working capacity:

1,6 bcm 3,8 bcm6 UGS facilities

9 UGS facilities

~ 3 bln PLN

10

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 Tarn ów 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

11

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