November 7, 2012 / 4:41 PM / in 5 years

Poland's PGNiG to benefit from market liberalisation-CEO

WARSAW, Nov 7 (Reuters) - Polish gas monopoly PGNiG will benefit from the opening of the country’s natural gas market to competition, a process that should proceed gradually to avoid shocks to consumers, its top executive said on Wednesday.

Poland is required by the European Union to free its more than 14 billion cubic metre (bcm) market. In the past few months, government officials, PGNiG and the regulator have discussed how best to do it.

State-controlled PGNiG currently sells nearly all of the gas available in Poland, of which around 70 percent goes to industry and the rest to individuals. Gas prices are capped by energy market regulator URE, and the caps will eventually be lifted as part of liberalisation.

“We are by no means going to halt the (liberalisation) process,” PGNiG Chief Executive Grazyna Piotrowska-Oliwa told an industry seminar. “We will benefit from it.”

“We are not afraid of competition. Very much is changing at PGNiG, we are becoming more client-oriented.”

The idea that has gained the most support is to introduce a requirement for PGNiG to trade a certain amount of gas volumes on an exchange. This is what Poland has done to liberalise its wholesale power market.

Local utilities were ordered by law to sell 15 percent of their power on the market, which boosted liquidity on power exchange POLPX and helped make the market competitive.

But people involved in discussions over the future landscape of the Polish gas market differ on the question of how large a share of total gas consumption should be traded on the exchange to make the market competitive.

Poland’s economy ministry has proposed to set the level at 30 percent initially, 50 percent after six months and 70 percent after a year.

The regulator wants the share to be as high as possible. Consultancy PwC said the share should amount to at least 35 percent.

“What we are proposing is 15 percent for a start; this can be done,” Piotrowska-Oliwa said. “Later we can gradually move to 30 percent, to higher levels.”

Officials said earlier the gas exchange would be launched in the fourth quarter.

PGNiG and the regulator have agreed for now that the monopoly will offer at least 0.1 bcm of gas per quarter at the launch of the exchange, less than 1 percent of Poland’s gas consumption. (Reporting by Maciej Onoszko; Editing by Michael Kahn and Jane Baird)

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