Energy to Central Europe

Trends and opportunities

The market

The Central European (CE) region is economically significant with a population in excess of 120 million and is well connected to the 500 million European Union (EU) market. The positive economic outlook together with a strong flow of foreign direct investments and EU structural funds, low labour costs and private and public sector modernisation means that this is a market of considerable potential for Australian organisations.

The energy sector in Europe and the CE region is undergoing a fundamental transformation as the region seeks to ensure its energy security. The catalyst for this transformation was the interruption to gas supplies during the Russian-Ukraine dispute in 2009. The current instability in Ukraine, a key transit country for Russian gas and coal supplies, has heightened energy security concerns in the EU. This prompted the release in May 2014 of a European Energy Security Strategy that contains initiatives to ensure energy supply and efficiently operating energy markets in the region.

The energy mix in the EU has been transformed over the last two decades with a strong decline in coal consumption (by 37 per cent) being offset by a significant increase in use of gas (30 per cent) and renewables (152 per cent) (Source: EIA, International Energy Statistics, 3 February 2015). With the shift to gas and renewables for energy generation, the EU continues to source more than 53 per cent of its energy needs from outside of the region, with Russia alone supplying 39 and 33 per cent of imported gas and oil respectively. Specifically, the EU imports 90 per cent of its crude oil, 66 per cent of its natural gas, 42 per cent of its coal and other solid fuels, 40 per cent of its uranium and other nuclear fuels (Source: European Commission, European Energy Security Strategy: Security of energy supply, August 2014).

This situation is more acute in the countries that were part of the Soviet Union’s sphere of influence. Resulting in the gas and electricity infrastructure of CE being orientated towards the east, whereas their dominant economic and political relationships are now looking west as countries such as Poland and the Czech and Slovak Republics have joined the EU.

The Central European region is seeking to improve its domestic energy supply by releasing new conventional and unconventional oil and gas concessions. This will be supplemented by the establishment of new liquefied natural gas (LNG) import terminals in Świnoujście (Poland) and Lithuania. A project is being considered on Krk Island in Croatia, which once networked, will create a European North-South gas corridor.

Opportunities

Governments and industries alike are fundamentally committed to dramatically improving energy supply and security and are expected to remain so in the medium to longer term.

Australia’s emergence as a global energy player and the capability of its resource and energy businesses are capturing the attention of governments across the Central European region.

Factors shaping energy investments include:

• creation of an effective European energy market
• building resilience to supply disruptions by improving energy efficiency
• storage facilities
• connectivity of gas and electricity networks across Europe
• securing other sources of energy supply from within and outside the EU.

There is approximately EUR200 billion in gas and electricity network infrastructure projects planned across Europe (Source: European Commission, Connecting energy markets and regions, February 2015). With opportunities in the exploration and development of new energy fields, energy efficiency, power and heat generation plants, offers prospects for Australian firms.

The opportunities include providing:

• gas pipeline opportunities
• services and technology for developing and managing the enhanced gas and electricity networks
• technology, solutions and services for renewing existing and developing new electricity and heat generation plants
• mining technologies and services that reduce the cost of existing coal extraction and processing facilities
• assistance to explore and develop new energy fields, including the shale and unconventional gas fields in Poland and new offshore gas on the Adriatic coast
• oil and gas services to support these new resource developments.

Competitive environment

Australian companies from energy sector currently operating in the Polish market:

• Subsea Engineering Associates is a provider of quality project and engineering management supporting the local and global subsea oil and gas industry, a subcontractor for CalEnergy working with LOTOS Petrobaltic on the Baltic Sea project.
• Strzelecki Energia - (Hutton Energy) exploration of unconventional gas and shale gas.
• Prairie Mining Limited (PDCo) is a hard coal exploration and development company that has a 182 kilometre2 concession in the Lublin coal basin region with a JORC coal resource estimate of 1.6 billion tonnes.
• Balamara Resources, exploration and development of hard coal. The company’s Nowa Ruda project in Southern Poland is currently undertaking a drilling program to assess the resources to JORC standard.

Mining equipment, services and technology:

• Boart Longyear: drilling services and products
• Mine Site Technologies: underground communications
• Ventyx: mining planning and asset management software
• Deswik: engineering, efficiency customised software, consulting and training solutions for the mining industry.

Links and industry contacts

European Union

Connecting Europe Facility
Eurogas –European Union of Natural Gas
European Commission – Directorate General Energy
European Commission – Innovation and Networks Executive Agency
European Committee for Standardization
European Network of Transmission System Operators for Gas (ENTSOG)
Gas Infrastructure Europe
Gas Pipeline Opportunities in Central Europe
Gas Regional Investment Plan 2014-2023
Projects of Common Interest
Shale Gas in Poland

Energy producers and distributors

Electricity

CEZ Distribuce
CEZ Group
E.ON Distribuce
Enea
Energa
PGE (Polska Grupa Energetyczna)
PRE Distibuce
Slovenske elektrarne
Stredoslovenska energetika – distribucia
RWE
Tauron
Zapadoslovenska distrubucna

Gas

Poland: Gaz-System, PGNiG, RWE, GEN Gaz Energia
Czech Republic:  Net4Gas, RWE, Prazska plynarenska, E.On
Slovak Republic: Eustream, SPP a.s., RWE Gas Slovensko, CEZ Slovensko
Hungary: FGSZ, EGAZ, TIGAZ
Bulgaria: Bulgartransgaz
Romania: Transgaz
Croatia: Plinacro, Gradska plinara Zagreb Distribucija, HEP Plin d.o.o., Termoplin d.d.
Greece: Desfa, DEPA, M and M Natural Gas S.A.

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