„THE IMPACT OF THE TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP (TTIP) ON INTERNATIONAL COOPERATION …” Warsaw School of Economics, Dec.,1st. 2015 The

„THE IMPACT OF THE TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP (TTIP)ON INTERNATIONAL COOPERATION …”

Warsaw School of Economics, Dec.,1st. 2015

The potential impact of TTIP on energy and energy resources sector

in Europe and Poland.

Warsaw, Dec. 1st. 2015.

dr inż. Andrzej SIKORA





Disclaimer

The information on which this presentation is based

derives from our own experience, knowledge, data and research.

The opinions expressed and interpretations offered

are those of University of Science and Technology / ISE sp z o.o.

and have been reached following careful consideration.

However, the Oil&Gas business is characterized

by much uncertainty and all of our comments

and conclusions should be taken in that light.

Accordingly, we do not accept any liability

for any reliance which our clients may place on them.



TTIP

Transatlantic Trade and Investment Partnership, (TTIP, transatlantyckie partnerstwo w obszarze handlu i inwestycji), main target => abolition of restrictions on flows of goods and capital (investment ) between the two economic areas.

A final agreement would have 24 chapters, grouped together in 3 parts:

Market access (wzajemny dostęp do rynku),

Regulatory cooperation (współpraca w obszarze regulacji),

Rules (wspólne normy).

• Na stronach internetowych Komisji są dostępne jedynie stanowiska negocjacyjne oraz zbiór podstawowych faktów w wybranych obszarach TTIP, http://trade.ec.europa.eu/doclib/press/index.cfm?id=1230 (informacja z 10 lutego 2015, z uaktualnieniami).

http://trade.ec.europa.eu/doclib/press/index.cfm?id=1230

http://trade.ec.europa.eu/doclib/press/index.cfm?id=1230



TTIP

• …analyzes the impact of TTIP on the Polish energy (and energy-intensive sectors), particularly in the context of the phenomena associated with the consequences of "shale revolution" in the United States and Canada.

• Paradoxically, the influx of cheaper energy resources to Europe (following TTIP and restrictions on exports of hydrocarbons to Europe) will have greater significance for the Polish energy sector. (The flow of coal today is not limited). TTIP in this area will bring substantial changes.



The USA - 2014

The United States is a significant producer of fuels and their derivatives.• 1st place in oil ( 12% of world production ) ;• 1st place in the extraction of natural gas ( 21% of world production ) ;• 2nd place in the coal mining (13 %).

Therefore, in the case of lifting barriers ( tariff and non-tariff ) should be expected that both energy resources and their derivatives will flow from the US to Europe, which could have a significant impact on the European energy sector . In particular so for hydrocarbons, which in principle are not exported to Europe ( NTBs ) and to a lesser extent, coal

Changes in the volume of oil production from unconventional deposits ; North America , 2005-14 (mboe / d )Source: US Energy Information Administration, “Tight oil production pushes U.S. crude supply to over 10% of world total”, 26 marca 2014



The USA – export of LNG

The export of LNG could have major geopolitical relevance, particularly at a time when tensions between Russia and Ukraine or ISIS war on the one hand and the instability coupled with booming domestic gas demand in North Africa on the other, have put the issue of the diversification of gas supplies at center stage in Europe. However, expectations must be carefully calibrated to current market realities: the cost of liquefaction and transportation of LNG from the US is likely to compromise the competitiveness of US gas on overseas markets such as Europe, compared to supplies from Russia or Africa. But the effects on European gas pricing may still not be secondary, especially if viewed in a medium-term perspective.



Geographic structure of the LNG import to the European Union versus the net LNG export



Prices

• With projected prices of coal and gas (including LNG ), the cost of gas generation can catch up with coal-fired generation only when the price of CO₂ emission rights will be at EUR 50 / ton.

• Therefore, the impact of cheaper natural gas ( LNG US ) on the Polish energy (investment in gas generation ) will probably be lower than could have been initially expected.

• But do not expect - regardless of the results TTIP - that gas prices in Europe come closer to the levels recorded in the US market.

• The cost of liquefaction, regasification and logistics significantly raise the "theoretical " cost of US gas imports by European countries.

• The exporters are looking primarily for their own profits and not to benefit the recipients, so LNG will flow to the markets with the highest prices (historically were always markets in East Asia, today the differences between Asia and Europe significantly decreased), while maintaining the maximum profit exporters.

As a result, it is not expected that natural gas will significantly increase its role in the generation of electricity in Poland.



LNG – import terminals in Europe

Mapa terminali LNG (pracujących- niebieskie, oraz w trakcie budowy – czerwone) w Europie w 2014 r.Źródło: Mapa uaktualniona (naniesienia własne) www.rynek-energii-elektrycznej.cire.pl



Coal – the flows EU vs USA

• In the EU, mining and coal consumption is to decline gradually, which include the effect of EU climate policy.

But - interestingly - growing imports of US coal.

Production, consumption and mutual flow of coal in the European Union and the United States ( million tonnes)Source: Own calculations based on m.in .: The US Energy Information Administration , Eurostat.



Conclusions

• The United States are fundamentally changing their status on the global energy market, making a transition from the role of one of the biggest net importers of energy resources to the role of an energy exporter – a significant one as for the natural gas, although relatively less significant as for the coal and crude oil (other petroleum products).

• From the perspective of greater and greater dependence of the European Union on the external supplies of natural gas, it is a particularly favourable process (after signing the TTIP agreement), because not only a rich competitor will be “eliminated”, but there will appear a reliable and flexible supplier of the most scarce raw material.

• Will Europe be able to take that chance? We may conclude that both the infrastructure for the liquefaction on the North American continent and the regasification terminals in Europe, the existing ones or those under construction, satisfactorily secure the potentially planned flows of the natural gas.



Conclusions

A question remains, however, about whether those planned volumes are or may be destined for the European market?

As a result of the agreement TTIP could significantly strengthen "pure" effect of the gas revolution shale gas in the US, leading to an influx of large amounts of gas to Europe, which would contribute to reduce the difference in prices between the US and the EU and the greater availability of gas in Europe (and indirectly improve the situation of Polish in negotiations with current suppliers of gas).



Conclusions

LNG imports to Polish , in the initial period of 3-4 years will

NOT have a major impact on the Polish power industry, risks related to its transport are

negligibly small forPolish energy sector.

www.agh.edu.pl

Metanowiec przewożący gaz w postaci LNG. Źródło: http://www.bqdoha.com

http://www.agh.edu.pl/

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„THE IMPACT OF THE TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP (TTIP) ON INTERNATIONAL COOPERATION …” Warsaw School of Economics, Dec.,1st. 2015 The