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The Warsaw Voice » Special Sections » August 29, 2012
Special Section: LOTOS
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Strengthening Energy Security
August 29, 2012   
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A major market player, Grupa Lotos aims to influence Polish and European policies in the energy sector.

Poland’s energy mix is now chiefly based on coal, but is expected to evolve and become increasingly diverse. The role of energy from renewable sources is expected to grow and nuclear energy is expected to be added to the energy mix, as well as shale gas. The latter will contribute to a rise in the role of energy derived from natural gas.

As regards fuels used in transport, the coming years are likely to see two trends. First, the consumption of transport fuels will be pushed down owing to the development of new hybrid and electric car technologies, and the use of increasingly efficient engines. The share of biofuels will grow. Second, there will be upward pressure on transport fuel consumption, as Poland will be moving towards the per-capita fuel consumption rates recorded in Western Europe.

Thanks to completing its 10+ Program, Grupa Lotos has significantly reduced demand on the Polish market for imported fuels, especially diesel oil. This, in turn, has considerably strengthened Poland’s security and self-sufficiency in the area of transport fuels.

At present, the main strategic goal for Lotos in the coming years is its operations in the exploration and extraction segment, including shale gas exploration and extraction. These operations are expected to increase the value of the company for shareholders, while enhancing Poland’s energy security.

The European Union’s climate policy is a huge challenge for the Polish energy sector, including the oil refining industry. The climate package defines the targets for the EU to be achieved by 2020, known as the 20-20-20 targets: a 20-percent cut in greenhouse gas emissions compared with 1990, a rise to 20 percent of the share of renewables in the energy mix, with a 10-percent share of renewables in transport, and a 20-percent cut in energy consumption through higher energy efficiency.

Some EU politicians and officials, especially those in the EU15, go even further in their proposals for changes to EU regulations. Connie Hedegaard, EU commissioner for climate action, has proposed that carbon dioxide emissions should be reduced by 30 percent by 2030. And the European Commission’s roadmap for the energy sector calls for a 80-90-percent cut in emissions by 2050. Other initiatives taken by the Commission, including the coal tax, also indicate that the EU’s policy in the energy sector will be aimed in this direction.

This approach does not take into account the special situation of Central Europe or the global situation, something that may cause significant economic losses due to a rise in energy prices. As a result, European economies may lose their competitiveness. It is necessary to take into account the special situation of Central Europe and Poland, where coal will play the largest role in the energy mix for many years to come, despite a gradual decrease in this role expected due to the diversification of energy sources. Coal is one of the cheapest and safest energy sources, according to experts from the International Energy Agency and the U.S. government, and its share in the global energy mix will be increasing at a rate of 1.5-2 percent annually by 2030. This shows that the EU policy guidelines aimed at reducing coal consumption go against the global trend.

The economies of Central Europe, in contrast to developed EU countries, have to grow at a much faster pace to catch up. The expansion of production capacities in many sectors means a rise in gas emissions. Many oil refineries are being closed in Europe or the volume of petroleum they process is being reduced because of a drop in demand for fuel. Per-capita oil and electricity consumption in Poland is 45 percent and 59 percent lower respectively than the EU average. It is obvious that in the process of catching up with the EU15 Poland will have to increase its fuel and energy production, which will mean higher emissions. The Central European economies should not be punished by imposing higher costs on them and eroding their competitiveness—especially as from 1990 to 2010 Central European countries cut their greenhouse gas emissions over three times more than developed EU countries. The reduction stemmed from the countries’ transition from communism to capitalism, but it also means that Central Europe has to rebuild its production capacity.

We should be aware that if the European Commission, a powerful regulatory body, takes an excessively restrictive approach, we may see a flight of production activity to countries with more liberal climate policies. Consequently, demand for raw materials would drop in the EU while demand for finished products could rise. Lotos is taking an active part in the discussion on the future of the European energy sector both at the national level and at the EU level through participation in the CEEP association. In this debate, Lotos has been supporting the position of industry in Poland and other Central European countries.
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