ChemLog Chemical Logistics Cooperation in Central and Eastern Europe Seite 1 Chemical Logistics Cooperation in CEE Polish perspective The importance of

ChemLog

Chemical Logistics Cooperation in Central and Eastern Europe Seite 1

Chemical Logistics Cooperation in CEE Polish perspective

The importance of transnational chemical logistics for the Polish Chemical Industry

in the European context Wojciech Lubiewa – Wieleżyński

President of Polish Chamber of Chemical Industry

Joint workshop 1 within the HLG Follow up-conference in Ústí nad Labem17.04.2009

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Chemical Logistics Cooperation in CEE Polish perspective

Actual situation of chemical industry in Poland.

Polish chemical market’s Trends & Challenges.

Urgent need of better logistics connection between Poland and EU: Natural gas reverse interconnectors, Expected LNG deliveries, Crude oil reverse pipeline – „Druzhba” extension to Wilhelmshaven, Ethylene pipeline Płock – Böhlen, Road transport, Rail transport, …. transport & energy corridors.

Danish straits and hydrocarbons deliveries to Baltic Sea Region.

Why does Poland need new document „European Logistics 2030” ?

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Financial crisis

Poland: 6.5%;4,8%;3,7%(1-2%)

World GDP growthWorld GDP growth

3.7% in 20073.7% in 2007,, 2.5% in 20082.5% in 2008

and 1.2% in 2009and 1.2% in 2009

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Trends• Open and tough competition with the western

players, both on domestic and foreign markets after the accession of Poland to the EU.

• Import of chemicals of bigger added value to Poland as a method to be dominant in competition, applied by the western companies.

• Lower production capacities and higher share of basic chemicals than in Western Europe.

• Lack of the western players in multinational branch consolidation in the Region.

• Consequent consolidation accompanied by the best operational practices - a chance to compete with the global players.

POLISH CHAMBER OF CHEMICAL INDUSTRY

Sales of chemical industry in Polandin 2002-2007 in mln EUR

Source: PIPC

12771,114582,1

17561,1

20833,223447,6

0

5000

10000

15000

20000

25000

2003 2004 2005 2006 2007

Polish chemical market’s Trends & Challenges

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Challanges• Self-independence in solving of the key

problems of chemical sector is a must.

• Privatisation of Polish chemistry is still a challenge for government.

• No strategic investor close to privatisation process.

• Polish government undertakes Polish companies as potential leaders of consolidation and cooperation in the region.

• Possibility to use resources for the development of the products with bigger added value due to boom in the market for those products.

• Opportunity to compete successfully with the western player, however, necessary steps should be taken.

Polish chemical market’s Trends & Challenges

Negative trade balance of chemical industry in Poland

bn EUR

Source: PIPC based on GUS

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Economic situation of chemical branch versus GDP

Source: Roland Berger

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Urgent need of better logistics connection between Poland and EU Natural gas reverse interconnectors

Source: www.gaz-system.pl

The recognised lack of an efficient infrastructure network

is a key element to be addressed in the development of the EU,

and especially integration into the internal market.

Scheme of Polish transmission pipeline system Gaz-System S.A.

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• There are no natural gas reverse (bi-directional) pipelines in Poland.

• Main flow is from East to West.

• Poland is not a transit country („Northern light” - Jamal I only with limited access to the pipeline).

• Jamal II project is suspended(discussion can be re-open after Nord Stream building).

• Density of the grid differs by the regions from South (SSW) to North (NNE).

Source: P. Stańczak, Gaz-System S.A., Jurata, 4.09.2008

Urgent need of better logistics connection between Poland and EU Natural gas reverse interconnectors (2)

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• Government decision: construction LNG re-gas utility in Świnoujście.

• SPV – Polish LNG Sp. z o.o.owned by TSO Gaz-System S.A.

• € 80mn from EU to the „PROJECT”

Urgent need of better logistics connection between Poland and EU Expected LNG deliveries

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Central European infrastructure with possible Odessa-Brody connection

Urgent need of better logistics connection between Poland and EU Crude oil – only one reverse pipeline

Source: PERN S.A.

German/Polish infrastructure on Druzhba

Source: PERN S.A.

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DanzigRostock

BREST

VentspilsSamara

WARSAW

MINSK

MOSCOW

BUDAPEST

BRATISLAVA

VIENNA

Sahy

Schwedt

BERLINPlock

Litvinov

Leuna

Polotsk

Mozyr

Unecha

Wilhelmshaven

Bobovitshi

PRAGUE

Routing / New Pipeline for crude oil Transmission

Urgent need of better logistics connection between Poland and EU Reverse pipeline – „Druzhba” extension

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Schleswig-Holstein

Mecklenburg-Vorpommern

Berlin

Brandenburg

Sachsen-Anhalt

Niedersachsen

Bremen

Hamburg

Nordrhein-Westfalen

HessenThüringen

Sachsen

Stralsund

Rostock

Schwedt

BrandenburgStendal

Wolfsburg

Oldenburg

Wilhelmshaven

Niederlande

Polen

Dänemark

Lunow

Potsdam

Teerofen

Lüneburg

Neumünster

Kiel

Schwerin Neubrandenburg

Magdeburg

Hannover

Celle

Bremen

Oldenburg

SoltauUelzen

Thüringen

Lunow

Salzwedel

Neustadt

Wilhelmshaven

Berlin

New routing in Germany

Source : Copyright by TEP AG ©

Urgent need of better logistics connection between Poland and EU Reverse pipeline – „Druzhba” extension

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Capacity400 tt /a

Capacity per hour 75 t/h (liquid ethylene)Diameter

273 mmPressure 10

MpaLength

650 km

(444 km on Polish side and 206 km on German side)

2 booster pump stationsPipeline volume 33.7 tm3Employment 14

persons

CostsPipeline 786 mln PLN (Sept. 2006)

Urgent need of better logistics connection between Poland and EU Ethylene pipeline

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3%

18%

14%

5%1%

51%

5% 3%

Solid fuels

Food

Others

Chmicals

Fertilizers

Constr. Mat.

Metal prod.

Crde oil &products

Prepared by Hanna Kilen, Polish Chamber of Chemical Industry

Product structure of road transport in Poland

in 2006

Roads, expressways, highways in Poland

Current Figures 01/2009

18 000 km of domestic roads

(only 28,5% in good condition !)

673 km of highwaysA-2 42 %A-4 36 %A-1 9 %

until year 2013: 7200 km of express roads2085 km of highwaysFinancing intensification

Urgent need of better logistics connection between Poland and EU Road transport

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55%

1%11%

2%

1%

13%

11%

6%

Solid fuels

Food

Others

Chemicals

Fertilizers

Constr.mat.

Metal prod.

Cude oil &products

Product structure of rail transport in Poland

in 2006

Railway infrustructure:

State owned (PKP PLK S.A.)Railway Network (old)No High Speed Cars (no TGV)Terminals – old fashioned Private owned Terminals

Great outlays necessary for restauration, reconstruction and new investments.

Urgent need of better logistics connection between Poland and EU Rail transport

Prepared by Hanna Kilen, Polish Chamber of Chemical Industry

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As possible example: energy corridor Poland-Wilhelmshaven (deep sea port)

• 2003-2004 discussion about possible deliveries (rail deliveries) of LNG from German (Wilhelmshaven) to Poland.

• 2005-2006 extension (German project) DRUŻHBA to Wilhelmshaven. • 2006-2007 ethylene pipeline to Böhlen or to Wilhelmshaven.

• It is important for Europe that its industry remains competitive against other regions: US Gulf Coast, Middle East & Far East. Each one of these regions has its own intrinsic advantages; for example, Middle East feedstocks are cheaper than Europe’s, and therefore any hurdles such as disparate olefin networks only add to Europe’s disadvantages and discourage future investment in petrochemicals.

• Compared to the US situation – almost 100% olefins capacity interconnected by pipelines – the European petrochemical industry suffers a number of disadvantages due to lack of pipeline infrastructure. One main disadvantage is lower operating rate, which results in reduced margins in Europe when compared to the US.

• A bi-direction pipeline network provides an opportunity for companies to run their plants at higher operating rates. In the Benelux and Ruhr area, where the ethylene pipeline links all olefin plants (a situation similar to that in the US), the operating rate was as high as 99 %. Every 1 % higher operating rate represents 50 million Euro of additional generated added value across all European producers.

No crude oil in Lithuanian pipe …

Urgent need of better logistics connection between Poland and EU …transportation & energy corridors

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• The Danish straits are the three channels connecting the Baltic Sea to the North Sea through the Kattegat, bounded by Denmark and Sweden and Skagerrak connecting the North Sea and the Kattegat strait, which leads to the Baltic Sea.

• The Kiel Canal, known as the Kaiser-Wilhelm-Kanal is a 61 miles (98 km) long channel. Not only saves time but also avoids potentially dangerous storm-prone seas. According to the official website, it is the most heavily used artificial seaway in the world; over 43,000 ships passed through in 2007, excluding small craft. Most large, modern cruise ship, tankers cannot pass through this channel due to clearance limits under bridges.

• Medium size tankers only.(the largest vessels that enter the Baltic Sea are vessels with a capacity of up to 300,000 DWT and a draft up to 15 m can be accommodated).

• No deep water ships into the Region.

• Heavy used corridor for Russian crude oil exportation to the USA.

• Baltic Sea or Baltic See….

• …..should we compare with Bosfor?

Source U.S. CIA

Danish straits & The Kiel Canal

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• Europe is confronted with an overburdened transportation infrastructure, and that above-ground infrastructure should be kept, as much as possible, for matters directly related to our daily lives, and that is good policy to shift as much as possible the transportation to underground structures such as pipelines.

• Pipeline infrastructure improvement contributes to further strengthening the position of European chemical industry in a global competitive context.

• A European pipeline network should include the linking of existing pipelines (gas, crude oil, olefines) by building new connector lines, and the transformation of existing pipelines.

• It is recognised that any pipeline project should be economically viable and must be open-access.

• A unified European network is essential to guarantee free movement of goods, to bring island and land-locked areas closer to central regions and to create a bridge towards the Central / Eastern European countries.

• Enlargement was expected to trigger exponential growth in trade between the countries of the EU. The recognised lack of an efficient infrastructure network is a key element to be addressed in the development of the EU and especially the new entrants countries’ integration into the internal market.

• The inclusion of the development of an gas/crude/product/olefin pipelines infrastructure is a unique opportunity to achieve a modern, environmentally-friendly transport infrastructure.

• This should prevent the re-occurrence of transportation problems already encountered in the old EU.

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ChemLog Chemical Logistics Cooperation in Central and Eastern Europe Seite 1 Chemical Logistics Cooperation in CEE Polish perspective The importance of