The Republic of Poland, roughly the size of New Mexico, has an approximate population of 39 million. It is bordered by Russia, Lithuania, Belarus, and Ukraine to the east, the Czech Republic and Slovak Republic to the south, Germany to the west, and the Baltic Sea to the north. There are 16 administrative regions (called 'wojewodztwa') in Poland; these are shown in Figure 1. The capital city, Warsaw, is located in the east central part of the country and has a population of about 1.6 million. Other major cities include Lódz (784,000) and Krakó (734,000). Poland's currency, the zloty, equals approximately $0.26, or 3.81 zloty equals one U.S. dollar (as of January 2003). The gross domestic product (GDP) for 2000 was estimated to be $327.5 billion (purchasing power parity).
Poland joined the Organization for Economic Co-operation and Development (OECD) in 1996 and is a member of the Central European Free Trade Agreement (CEFTA), which includes Slovakia, Slovenia, Hungary, and the Czech Republic. In 1998 Poland became a member of the North Atlantic Treaty Organization (NATO) and in December 2002 it was one of the ten countries invited to membership in the major expansion of the European Union (which will supercede CEFTA). Poland is also a member of the World Trade Organization, the International Monetary Fund, the World Bank, and the European Bank for Reconstruction and Development.
In September 1996, Poland's Cabinet approved new guidelines for implementing reforms in the energy sector. These guidelines establish an energy regulatory authority and allow third party access to the Polish electricity transmission grid. The objective is to create a competitive energy market through the privatization of the energy industry, and to attract the investment necessary for industrial modernization and environmental protection. While emphasis is placed on the increased use of oil and natural gas, coal is expected to remain the dominant fuel, particularly in the electric power sector.
Poland's new energy law went into effect in December 1997. Under the new law, large electricity users (over 40 Gigawatt-hours [GWh] annually) can negotiate directly with generators of power. The Polish Power Grid Company -- Polskie Sieci Elektroenergetyczne (PSE) -- is obliged to provide transmission for the buyer and seller if it is technically feasible. It is estimated that 30% of Poland's electric energy is now sold competitively. The rest is sold under agreements that PSE signed with 35 power plants during the 1994-1998 period.
In December 1999, the Gielda Energii S.A. was established to set up an energy exchange in Poland. It is a consortium of several energy companies, including Endesa of Spain. The Polish Ministry of State Treasury holds 30% of the shares. The Polish energy exchange started operation on July 1, 2000. Participants in the exchange are expected to include PSE, 36 power plants, 33 distribution companies, and 183 large industrial electricity users. The goal of the exchange is to eventually sell 30% of the electricity in future years.
The Polish Energy Regulatory Authority has indicated its intention to put more emphasis on the spot market for short term contracts for electricity and less emphasis on long term contracts. This would constitute a major change, since approximately 70% of the electricity currently supplied to the grid is presently under long term contracts. At the present time, it is not clear how this policy change will be implemented. If the balance shifts to short term contracts, this might tend to favor new generation sources, municipal combined heat and power, and "green" power sources that have a legally privileged status.
The schedule for phasing in third party access to electricity and natural gas starts with the largest users and will eventually allow all customers to choose their electricity suppliers by the end of 2005. The electricity timetable is as follows:
The natural gas timetable will follow a similar pattern with the largest customers who use over 25 million cubic meters per year getting third party access on December 5, 2001, medium size users who use 15 million cubic meters on December 5, 2003, and all customers on December 5, 2005.
The Polish government plans to sell shares in the electric generating and distribution companies to investors. The plan is to sell 20-30% of each power plant and 20-25% of each distribution company. Some of these sales are currently in the stage of reviewing bids. Poland plans to complete this privatization by 2002. It is planned that the cost of electricity supplied to the grid will be deregulated, but transmission and distribution costs will still remain regulated. However, an exception is being made for three large power plants -- Belchatów, Turów, and Opole. These three plants have been deemed to be a strategic energy resource of the Treasury for guaranteeing national security and appropriate functioning of the market.
On June 14, 2000, various amendments to the Energy Act went into effect, with the intent to make energy markets work on a more transparent and businesslike basis. These new regulations require that energy supplier companies audit their billings and authorize energy suppliers to enter users' premises to measure their readings. They also authorize cut off of users' supplies if electricity, gas, or heat are being obtained illegally. The amendments stipulate that owners of apartment buildings are responsible for allocating electricity, gas, and heating costs to individual apartments. Rates charged for electricity, gas, and heat are subject to approval by the Energy Regulation Authority. The amendments also give the government the power to require energy companies active in distribution to purchase electricity or heat made from renewables or unconventional sources. Energy companies will be required to submit development plans in cooperation with their communities, showing how they intend to supply energy over the next three years.
The most notable and significant feature of Poland's energy sector is its heavy dependence on coal as a primary energy source. The vast majority of electricity generation in Poland is coal-based, though diversification more toward natural gas and other energy sources is becoming a strategic priority. Table 1 shows how Poland meets its energy needs by fuel type.
An historical summary of Poland's Total Primary Energy Production (TPEP) and Consumption (TPEC) is shown in Table 2.
There are many important players in Poland's upstream and downstream oil industry. Nafta Polska (Polish Oil) is the holding company of Poland's oil industry. The state offshore exploration firm is Petrobaltic. Poland's fuel storage company is Naftobazy, which was separated from the Central Oil Distribution Company (CPN) in 1997. Naftobazy runs fuel storage, fuel trans-shipment, and national oil reserves, and also exercises laboratory quality control over oil products. The most important player of all is the Polish Oil and Gas Company (POGC), which was established in 1976 and has been a joint-stock company since October 1996, though its stock is still held by the state. POGC is responsible for exploration, development, and operation of oil deposits, and for domestic and foreign trade of crude oil and its derivatives.
The German firm EuroGas, Inc. won 10 concessions to explore and extract oil and gas from areas in southeast Poland. This included the Karpaten Flysch oil area near the city of Sanok. It has been estimated that this could potentially be a 350 million barrel oil field. EuroGas has signed an agreement with POGC to jointly develop the area. As part of the deal POGC got 30% of EuroGas Polska, Eurogas's Polish subsidiary.
Production and Consumption
Poland's crude oil production in 2000 averaged only 10,000 barrels per day (b/d). Consumption of crude and petroleum products averaged approximately 420,000 b/d in 1999, 98% of which was met by imports. Approximately half of Poland's oil imports comes from the Russian Federation, while the United Kingdom, Iran, and Norway also supply significant amounts of oil.
An historical summary of petroleum production and consumption in Poland is shown in Table 3.
|Production (Crude Oil only)||2||3||3||5||5||5||5||6||7||9||13|
Refineries and Downstream
Poland's total output of refined petroleum products in 1998 was 350,000 b/d. Poland's exports of refined products are minor, consisting of 28,000 b/d of resid in 1998. Poland has two major refineries (located at Gdansk and Plock), five smaller refineries (located in southern Poland), and a Central Distribution Company (CPN). The five small refineries, all located in southern Poland, are:
Most of the refineries in Poland are 20 to 40 years old, and they are in need of modernization. Generally, they were set up to emphasize production of heavy fuel oil, but Western European markets demand more gasoline and diesel fuel. The refineries will therefore need to be modernized and expanded if they are to be competitive. The 260,000 b/d Plock refinery run by PKN Orlen is undergoing modernization and it is expected that eventually it will conform to EU standards.
Nafta Polska is the state holding company that holds the state oil companies. Nafta Polska had planned to to sell them a 17.6% share, worth about $400 million, in the PKN Orlen refinery at Plock to the Hungarian oil company MOL and the Austrian oil company OMV, but in May 2002 this decision was suspended, pending a new Polish government strategy for the petrochemical sector. Another deal, where Rotch Energy of the UK planned to purchase 75% of the 90,000 b/d Gdansk refinery for $250 million, also has not yet happened. That agreement had also included a $600-$700 million planned investment in the refinery by Rotch in the coming years to increase its capacity to 150,000 b/d.
As part of the preparation for admission to the EU, Poland is planning for 90 days of oil storage capacity. It is expected that this reserve will be set up by 2008 as part of Poland's EU agreement.
An historical summary of refined petroleum products output by fuel type is shown in Table 4.
|Refined Product||Production Rate|
|Distillate Fuel Oil||80||75||86||101||103||106||108||104||115||142|
|Residual Fuel Oil||56||51||57||53||63||63||64||82||89||70|
|Liquefied Petroleum Gases||5||5||5||6||7||7||6||6||8||10|
|Refinery Fuel and Loss||10||7||8||10||11||11||12||13||13||10|
Natural gas reserves in Poland are estimated at were 5.1 trillion cubic feet (TCF). In 1998, to meet its natural gas needs of 444 billion cubic feet (BCF), Poland produced 181 BCF and imported 281 BCF, relying heavily on the Russian Federation for natural gas imports. Domestic natural gas production is expected to decrease to approximately 173 BCF by 2010. Estimates for future natural gas demand vary, with estimates in 2010 in the 700 BCF to 1.4 TCF per year range. Projected growth in demand for natural gas is expected to be met from increased imports, primarily from the Russian Federation. To help reduce its energy dependence on the Russian Federation, Poland is considering importing liquefied natural gas (LNG) from Qatar, Nigeria, Norway, and Algeria.
Poland has large coalbed methane reserves. However, production costs are relatively high and the full economic potential is yet to be assessed. Estimates for recoverable reserves in the Upper Silesian Basin are 3.4 TCF, while estimates for total coalbed methane reserves in Poland range as high as 35 TCF.
As is the case for Poland's oil industry, the most important player in Poland's gas industry is POGC, which is responsible for exploration, development and operation of natural gas deposits; production, processing, dispatching gaseous fuels; and import/export activities concerning natural gas.
An historical summary of natural gas production and consumption in Poland is shown in Table 5.
Approximately 97% of Poland's hard coal production comes from the Upper Silesian Basin in southern Poland, one of Europe's most important coal basins. There are two other coal producing basins, Lower Silesia and Lublin. Poland's three largest coal mines, all in the Upper Silesia basin, are located at Ziemonwist, Crenott, and Piost. Despite industry reforms of the early 1990's, production costs at many coal mines remain high, resulting in the closure of some mines and combining the remaining mines into six coal companies and one holding company (Katowice Holding Company). The number of operating mines has been in decline; in 1992 there were 70 mines in operation, but that number had dropped to 54 by the year 2000, and is expected to further decline to less than 40 by 2002. In the year 2000, the Polish coal industry operated at a profit of US$57.6 million, a dramatic improvement on the US$347.7 million loss in 1999.
Privatization of Polish coal mines has recently begun with a sale of 45% of the Bogdanka mine to Management Bogdanka, a private company of investors. Other privatizations are expected, with PriceWaterhouseCoopers advising the Ministry of the Economy.
An historical summary of coal production and consumption in Poland is shown in Table 6.
|Bukówka||Bucze||Run of River||0.8||Nysa Luzycka|
|Gorzupia I||Gorzupia||Run of River||0.6||Bóbr|
|Gorzupia II||Gorzupia||Run of River||1.7||Bóbr|
|Grajówka||Gryzyce||Run of River||2.9||Bóbr|
|Gubin||Gubin||Run of River||1.2||Nysa Luzycka|
|Kliczków||Kliczków||Run of River||0.6||Kwisa|
|Malomice||Malomice||Run of River||0.8||Bóbr|
|Porabka-Zar||Miedzybrodzie Zywieckie||Pumped Storage||500||Sola**|
|Przysieka||Dabrowa Luzycka||Run of River||0.9||Nysa Luzycka|
|Raduszec Stary||Raduszec||Run of River||2.9||Bóbr|
|Sobolice||Sobolice||Run of River||6.6||Nysa Luzycka|
|Szprotawa||Szprotawa||Run of River||2.9||Bóbr|
|Zasieki||Brozek||Run of River||0.8||Nysa Luzycka|
|Zielisko||Siedlec||Run of River||0.9||Nysa Luzycka|
|Zagan I||Zagan||Run of River||0.9||Bóbr|
|Zagan II||Zagan||Run of River||0.9||Bóbr|
|Zarki Wielkie||Zarki||Run of River||0.9||Nysa Luzycka|
Energy Transmission Infrastructure
Oil Pipelines and Rail Transportation
Oil product pipelines and crude oil storage in Poland are run by the Oil Pipeline Exploitation Enterprise (PERN), a joint stock company wholly owned by the State Treasury. The Polish government has in the past considered privatizing PERN, and if PERN is eventually scheduled for privatization, it would be expected to attract investors, since it is one of the most profitable enterprises in Poland. Currently, PERN spends $40-50 million per year in modernization of its oil pipelines.
Oil shipments via railroad tank cars are handled by a separate company, DEC. Currently DEC transports 14 million tons of products annually. DEC has 11,500 tank cars with 640,000 tons of capacity.
Natural Gas Pipelines
POGC is responsible for construction and operation of gas transmission and distribution system. The number of residential and commercial gas customers has tripled over the last 30 years, from 2.3 million in 1970 to about 6.8 million now and, over the same period, the total length of transmission and distribution network has increased more than five-fold, to 107,000 kilometers. By 2010, Poland expects to greatly expand its natural gas distribution system by adding 43,000 to 58,000 kilometers of new distribution pipelines.
Despite concerns over Polish energy dependency on the Russian Federation, Poland plans larger imports of Russian natural gas via the Yamal-Europe Transit Gas Pipeline, which is currently under construction across Poland and Western Europe. The Yamal pipeline is expected to cost $35 billion, of which the Polish section will be $2.5 billion. When completed, the Yamal pipeline will transport 13 billion cubic meters (bcm) of natural gas annually into Poland. The first 107 kilometer stretch of the Yamal pipeline, which began operating in 1997, runs from Gorzyca on the Polish-German border to Lwowek near Poznan. The second and third stretches of the pipeline were completed in 1999, extending it to Wloclawek and Kondratki respectively. It is expected that the entire project will be completed in 2010. POGC has also signed an agreement with the Danish Natural Gas Company to build a natural gas pipeline across the Baltic Sea which would carry 10 bcm annually.
Natural Gas Storage
POGC is responsible for construction and operation of underground gas storage facilities in Poland. Currently there are seven underground gas storage sites available -- six in depleted natural gas fields and one in a converted salt cavern. The total working volume of these seven sites is presently more than 1 bcm and should increase as soon as work presently underway to upgrade several of these sites is completed. In addition to these seven sites, POGC also leases storage capacity from Lvivtransgaz in Ukraine and Bieltransgaz in Belarus. The Ministry of Economy has recently advised POGC that, due to EU directives, by the year 2008 there must be sufficient reserve capacity available for the equivalent of 90 days consumption, which translates to a natural gas storage capacity of about 4.5 bcm. Upgrading natural gas storage capacity by that much will be expensive. POGC suspects that the Ministry of Economy is in error, misinterpreting an EU directive which states there must be a 90 day oil reserve capacity; also, the existing natural gas deposits in Poland are not presently recognized as "reserves." POGC believes that the amount of natural gas storage that Poland will need by the year 2008, as determined by the market, will actually be closer to 3.5 bcm; some of the money from POGC’s upcoming privatization will be undoubtedly used to upgrade the natural gas storage infrastructure.
Once part of the POKOJ power distribution system (the former power distribution system of the Ukraine and Eastern European countries), CENTREL (the new power distribution system of Poland, the Czech Republic, Slovakia, and Hungary) is now fully integrated into the Western European UCPTE system. Poland also maintains very strong links with distribution systems in the Ukraine and Belarus. These links provide Poland with an exchange potential with Western Europe and these former Soviet Union states on the order of 3,000 MWe per system.
As of the year 2000, the Polish power grid consists of about 200 kilometers of 750 kilovolt (kV) lines, about 4,700 kilometers of 400 kV lines, and about 7,900 kilometers of 220 kV lines, and is interconnected using more than 80 large substations. A diagram of the Polish power grid is shown in Figure 2.
The Polish Power Grid Company -- Polskie Sieci Elektroenergetyczne (PSE) -- was created in August 1990 by the Polish Ministry of Trade and Industry as a joint-stock company, wholly-owned by the Polish state treasury. PSE is the owner of Poland's high voltage electricity grid and is responsible for grid operations and power dispatching. The distribution subsector consists of 33 distribution companies, all of which are joint-stock companies, and utilizes 110 kV, 15 kV, and 0.4 kV lines to supply electricity to customers. Distribution companies represent approximately 40% of all Polish electricity sector assets.Electricity
Generation and Consumption
Annual electricity consumption in Poland for the past half-decade has averaged about 120 billion kWh, of which about 63% goes to the industrial sector (including the energy industries) and 15% to households.
Industry-based power generation (for its own internal use) in Poland accounts for about eight billion kWh annually, of which more than six billion kWh is produced from combined-heat-and-power (CHP) cogeneration. Nearly 16 billion kWh is generated annually from district heating CHP plants. Overall, more than 15% of Poland's total electricity generation is generated in conjunction with heat. An historical summary of electricity generation and consumption in Poland is shown in Table 9.
The Polish electricity industry has been reorganized into three layers of companies dedicated to the generation, transmission, and distribution subsectors. The generation subsector consists of large power stations (system power stations) and combined heat and power facilities (local facilities). Among the large power stations, 12 are state-owned and four are joint-stock companies. All 19 combined heat and power stations are joint-stock companies. The power generation subsector represents approximately 50% of all Polish electricity sector assets.
Generation capacity construction in Poland has been inconsistent over the past 30 years, resulting in an aging system that is becoming an increasingly serious problem. More than half of the current capacity was built in the 1970s. Approximately 60% of the system is more than 15 years old, and 40% is more than 20 years old. More than 1.5 gigawatts (GWe) [where 1,000 MWe = 1 GWe] has been in operation for more than 30 years. This problem has been exacerbated by insufficient expenditure on maintenance and modernization projects. PSE has estimated that by 2005, over 20 GWe of capacity will need rehabilitation while almost 3 GWe will need to be retired. Rehabilitation costs, including environmental protection costs, are estimated between $50 and $350 per kW of capacity. When plans to extend the transmission and distribution systems are factored in, the Polish electricity supply sector's total investment needs from 1995 to 2000 are estimated to be approximately $8 billion.
Power plants built before the 1970s were typically single 120 MWe or smaller units. During the 1970s, power plants increased to several 200 MWe units on the same site. It was not until the late 1970s and 1980s that 500 MWe units were built. Additionally, Polish power plant technologies lagged behind more recent developments in combustion and control technology, as well as environmental control. This was because all power plant elements, including boilers, turbines and generators used in facilities during this period were similar in design and construction to earlier facilities. A summary of the larger fossil fuel electricity generating plants in Poland is shown in Table 10.
|Turów||2,120 *||brown coal|
|Tadeusz Kosciusco||1,800 *||hard coal|
|Dolna Odra||1,720||hard coal|
|Opole||1,490 *||hard coal|
|Jawórzno III||1,290||hard coal|
|Siersza||740 *||hard coal|
|Siekierki||572 *||hard coal|
|67 *||hard coal|
|93 *||brown coal|
|Stalowa Wola||275||hard coal|
|110 *||hard coal|
|61 *||hard coal|
|Zeran||235 *||hard coal|
There is also a special category of thermal-electric power plants known as 'Elektrocieplownia' or 'EC', which are all CHP facilities with commercial heat sales. A summary of the largest Elektrocieplownia power plants in Poland is shown in Table 11.
|Jaworzno I & II||266||364||hard coal|
Generating capacity is expected to be adequate for the next several years, due to lower economic growth and transition to a less energy-intensive economy. Near-term priorities are to: complete construction in progress on a new 2,160 MWe coal-fired facility and pumped storage capacity of 750 MWe; rehabilitate and retrofit aging coal-fired generating equipment (which is on average 18 years in age) improve availability, efficiency, and environmental control; and reduce losses of up to 10% in transmission and distribution. Flue gas desulfurization systems and low-NOx burners are beginning to be installed on coal-fired plants, with 4,000 MWe estimated to be retrofitted by 2000 and 8,600 MWe thereafter. In addition, coal washing plants are being installed at 18 mines to reduce the sulfur content of hard coal burned in power plants.
Since 1991, PSE and the Commonwealth Edison Company (ComEd) have been in partnership to assist PSE in its goal of becoming financially sound, improving customer relations, and implementing a company-wide human resource management plan; ultimately making PSE competitive with western markets. To date, the partnership has focused on a range of topical areas relating to utility finance and management, pricing, demand-side management, customer service, systems operation and management, and human resource management.
The Polish electric power sector is in need of modernization and refurbishment in order to create an economically efficient industry capable of meeting demand requirements. The cost of modernization over the next fifteen years is estimated at $50 billion. Modernization is needed to replace 16 gigawatts of obsolete installed capacity and to satisfy stricter environmental standards due to come into effect in 1998. Out of this amount, $15 billion is needed for the modernization of existing power plants. A substantial portion of the modernization cost will be covered by the income generated from privatizing the power enterprises.
Poland's electric power sector is in the process of restructuring (with World Bank support) into three subsystems: generation, transmission, and distribution. Plans call for reducing the number of generating companies from 35 to 7 and privatizing power generation by the end of 2001. A new energy law that took effect in December 1997 sets the groundwork for third-party access to the power grid and vests authority in an independent Energy Regulatory Office. Detailed legislation needed to implement the new law were expected by the end of 1998.
Electricite de France (EdF) purchased a 55% stake in a cogeneration plant in Kraków, while two competing bidders (Elektrim consortium and National Power) have qualified for the purchase of a minority stake in the lignite-fueled Patnow-Adamnow-Konin power complex, which controls over 10% of Poland's generating capacity. In Warsaw, 55% of the largest CHP plant was acquired by Vattenfall, a Swedish company. Since then, the Polish government has tried to change the rules for future investments so that foreign investors could acquire no more that 45% of any existing CHP plant, no more than 35% of a large power plant, and no more than 25% of any electric distribution company. Tractabel of Belgium acquired a 25% stake in the Polaniec power plant, which is the fourth largest in Poland. The Spanish utility Iberdrola acquired the right to negotiate 25% acquisition of the G8 Group electricity distributor. The American firm PSEG is building a coal-fired power plant to replace the Chorzow plant in southern Poland, which is over 100 years old. PSEG has also acquired a 35% stake in the Skawina Power Plant near Kraków.
Foreign investors are involved in joint venture projects to build new power plants, mainly using natural gas to generate both heat and electricity. These include Enron's Nowa Sarzyna plant, which came online in 2000, and another in Zielona Góra being developed by Eurogas and National Power International. A new coal-fired plant is also planned to replace an aging existing plant in Belchatów.
Environmental impacts from energy production is a major concern. Poland's main energy-related environmental problems are: air pollution from burning coal in power and district heating plants, water pollution related to coal mine dumping of saline water into the Vistula and Ober rivers and refinery effluents of insufficiently treated water, and solid waste from coal mines and power plants. Poland's three largest coal mines are among the largest sources of pollution.
Large Power plants and combined heat and power facilities have been equipped with high stacks and electrostatic precipitators (ESPs), or at least bag filters, allowing for the capture of increasing amounts of fly ash particulates. Flue gas desulfurization (FGD) and low-NOx technology were only introduced in the 1990s. Because of this, and the use of lower sulfur coal, the environmental performance of many power plants has improved considerably. However, under environmental regulations adopted in 1990, new emission standards for existing plants came into effect in 1998 that are in line with EU standards. Under these standards, all new coal and lignite these plants require FGD. Additionally, all plants will need low-NOx burners and improved fly ash particulates removal.
Poland has signed a number of international agreements and accords on the environment, including adopting all obligations from the Framing Convention on Climate Change (FCCC) as well as other agreements to control transboundary emissions. An historical summary of carbon dioxide (CO2) emissions from fossil fuel use in Poland is shown in Table 12.
|CO2 from coal||73.16||73.08||72.39||74.77||70.07||65.59||58.69||70.74||63.88||61.30||59.65|
|CO2 from natural gas||5.61||5.03||4.93||5.17||5.30||5.54||6.23||6.25||6.20||5.88||6.04|
|CO2 from petroleum||10.50||10.64||11.61||12.18||11.84||11.86||13.31||14.30||14.83||14.57||15.71|
|Total CO2 from
all fossil fuels
Specific environmental needs related to Poland's energy sector include: improving coal quality through desulfurization or enrichment of coal dust; modernization of combustion technologies in power plants (e.g., fluidized bed combustion and low-emission burners); substitution of natural gas for coal; improvement of heating system efficiencies; and the use of alternative energy sources (e.g., geothermal, hydroelectric, and wind).
Historical and projected anthropogenic sulfur dioxide (SO2), nitrogen oxides (NOx), carbon monoxide (CO), and non-methane volatile organic carbon compounds (NMVOCs) emissions in Poland are shown in Table 13.
Restructuring and privatization of the energy sector has proceeded slowly due to opposition from trade unions and others. Some state owned enterprises have been transformed into state-owned joint-stock companies. Polish law does permit 100% foreign ownership of most corporations. However, Poland has declared that the state should retain a key role in certain "strategic sectors" including energy, transportation, and others.
Oil and Gas
The restructuring of Poland's downstream oil industry began in 1994 with the establishment of Nafta Polska, the joint stock holding company for Poland's oil industry, which is ultimately responsible for the privatization of Poland's oil and gas sectors. Nafta Polska is comprised of Poland's two major refineries, five smaller refineries, and the Central Distribution Company (CPN). At the end of 1996, CPN was to be divided into three companies: CPN (the gas station company), DEC Ltd. (the railway tank company), and Naftobazy Ltd. (the oil storage company).
Privatization milestones in the oil and gas exploration sector were reached in early 1996 when U.S. independent Frontier Oil Exploration was licensed to explore a two million acre concession in northern Poland, and Texaco and Tenneco Energy were awarded a 1.8 million acre concession in central Poland. Also in 1996, Exxon and Shell agreed to establish the Polish Petroleum Development Company.
POGC's privatization process is expected to be a gradual one, occurring over the next few years, and will include POGC's pipeline network as well as its upstream gas production and storage facilities. The first step, which has already happened, is the division of POGC into six different entities: four regional gas distribution companies, a company to handle gas production and storage, and the "mother" company (the "new" POGC) which would import and market most of the gas consumed in Poland. Transfer of assets from POGC to the other five companies is expected sometime this year. Strategic investors will be needed for all of the companies, and outside investors may be able to acquire more than 50% of the companies' stock. This investment money is necessary to finance infrastructure improvements if these companies are to be competitive in the EU's liberalized natural gas market.
In 1999, Poland began to privatize companies involved in the production and distribution of electricity, by selling shares to outside investors. Originally there was a limit of 20 to 30% stake in power plants and 20 to 25% in distribution companies, but this has since been increased.
In April 2001, the Polish Ministry of the Treasury published a list of firms whose shares would be available to investors. Most of the companies available for privatization were originally limited to less than 50% ownership by outside investors, but that has since been increased.
Proposed and pending energy-sector privatizations, as of mid-2002, are shown in Table 14.
|Polish Energy Company||Percent
|Koszalin Electric Distribution *||>50||Negotiation|
|Slupsk Electric Distribution *||>50||Negotiation|
|Gdanska Electric Distribution *||>50||Negotiation|
|Olsztyn Electric Distribution *||>50||Negotiation|
|Elblaskie Electric Distribution *||>50||Negotiation|
|Plock Electric Distribution *||>50||Negotiation|
|Torun Electric Distribution *||>50||Negotiation|
|Kaliska Electric Distribution *||>50||Negotiation|
|Stoleczny Electric Distribution||>50||Analysis|
|Lubelskie Electric Distribution **||>50||Analysis|
|Rzeszowski Electric Distribution **||>50||Analysis|
|Zamojska Electric Distribution **||>50||Analysis|
|Okregu Radomsko Electric Distribution **||>50||Analysis|
|Poznanskich CHP||>50||Bids due Autumn 2002|
|Bytom CHP ***||>50||Bids due July 2002|
|Zabrze CHP ***||>50||Bids due July 2002|
|Torun CHP ****||45||Invitation of Offers|
|Energotor Torun ****||45||Invitation of Offers|
|Stalowa Wola Power Plant||not yet known||Analysis|
|Ostroleka Power Plant||>50||Bids due July 2002|
|Dolna Odra Power Plant||>50||Invitation to bid expected mid 2002|
|Kozienice Power Plant||>50||Invitation to bid expected mid 2002|
|Lódz Power Plant||>50||Invitation to bid expected mid 2002|
|Przedsiebiorstwo Heat Distribution||>50||Analysis|
It is expected that some of the first power plants to be privatized will be the combined-heat-and-power Elektrocieplownia (EC) class of power plants. Six of the EC plants have already been privatized (via sale of between 45% and 58% of stock shares), and others are slated for privatization offerings in 2002 and 2003. The next one expected to be offered is Poznan EC (250 MWe and 1,022 MW thermal). After that, three coal-fired EC plants near Katowice are slated to follow -- Bytom, Zabrze, and Tychy. And then an EC plant near Lódz is expected to be offered.
Three of the larger "Electrownia" power plants are also expected to be offered for privatization this year -- Dolna Odra, Kozienice, and Olstroleka. The Skawina plant near Kraków has already been privatized, with 35% sold to the U.S. firm PSEG (which expects to increase its share later). Three of the largest power plants, Belchatów, Opole, and Turów are not expected to be privatized, as they have been declared to be a strategic energy resource for national security. There are also no plans for privatizing any of the hydroelectric plants, which are all owned by a single state-owned company.
Privatizations are also planned for electric distribution companies. The Stoen distribution company of Warsaw will be privatized, as will the eight electric distribution companies in northern Poland informally called the "G8 Group" and perhaps another grouping of distribution companies in southern Poland referred to as the "G4 Group." The "G8 Group" bids are already in and negotiations are proceeding; the others are all expected to be offered for privatization by the end of 2002.
Poland has continued to experience good economic growth; the increase in gross domestic product was 4.8% for the year 2000 and 2.5% in 2001. In 2000, Poland's foreign debt was $57 billion. The unemployment rate in 2001 was estimated to be 16.5% but the rate of inflation had decreased from more than 10% to 5.5%. An historical summary of some of Poland's economic indicators is shown in Table 15.
|Annual GDP Growth Rate*
|Average Exchange Rate
(zloties per US$)
In 2001, Poland had $30.8 billion of exports, which included manufactured goods and chemicals, machinery and equipment, agricultural and food products, and fuels. There were $41.7 billion of imports in 2001, which included manufactured goods and chemicals, machinery and equipment, fuels, and agricultural and food products. Germany and Italy were the major trading partners. Poland is encouraging foreign investment in its upstream oil and gas sector and has obtained loan assistance from the World Bank and the European Investment Bank; there have been reports that there is an investment need in Poland's downstream oil industry for refinery modernization, and possibly a new refinery in southern Poland.
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U.S. Department of Energy
Office of Fossil Energy
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Washington, D.C. 20585 USA
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