On the home straight for Europe

WINGAS records significant increase in natural gas sales WKK

Kassel. By implementing a rigorous strategy for growth with OAO Gazprom, its long-standing partner, WINGAS GmbH was able to achieve a considerable increase in turnover and sales with natural gas trading in 2003. The net sales of all three joint-venture companies rose by 0.5 billion euros to 3.0 billion euros in 2003, an increase of 20 per cent compared to the previous year. Overall, the sales volume of WINGAS, WIEH (Wintershall Erdgas Handelshaus GmbH) and WIEE (Wintershall Erdgas Handelshaus Zug AG) at 286.5 billion kilowatt-hours was about 47.9 billion

(+20 per cent) higher than the volume for 2002.

WIEH was able to keep its sales of 73.6 1 (2002: 73.2) billion kilowatt-hours at the same level as in 2002. WIEE increased its natural gas sales by 17.8 billion kilowatt-hours (+51 per cent) to 51.9 billion kilowatt-hours. Not only the effects of weather conditions, but also the increased demand for natural gas by the Romanian industry and demand for power generation contributed to this positive development.

WINGAS achieved an increase of 29.9 billion kilowatt-hours to 161.0 2 billion kilowatt-hours in its natural gas sales, which represents an increase of 23 per cent. This means that the company again achieved growth levels in Germany, the home market of WINGAS, which, at +7.2 per cent, were considerably above the general average of +3.6 per cent for the market. The increases obtained in other European countries were also gratifying. The growth spurt is due to a series of long-term strategic measures.

New customers were acquired in Germany and other countries in Europe, for instance, by making full use of the opportunities offered by liberalisation of the market. Furthermore, WINGAS increased its activities in the international spot trading centres and continued to expand its own natural gas infrastructure. “We invested 36 million euros in the previous year to strengthen our existing infrastructure. As much as 21 million euros of that were start-up investments to increase the transport capacity of STEGAL, our major east-west connection,” said Dr. Rainer Seele, spokesman for the management of WINGAS. Also worth mentioning is a joint investment by the public utilities of the city of Bielefeld and WINGAS in a natural gas conditioning plant in Bielefeld, which from October 2004 onwards, will allow high-caloric natural gas to be modified in line with the quality of gas used in the Bielefeld network and subsequently injected into the local supply line.

Contracts for transportation

Over 30 contracts for transportation were concluded last year. More than 40 customers were supplied using third-party pipelines. Transportation for third parties using our pipeline network has also seen a definite increase. The number of new contracts more than doubled in comparison with the previous year. The trend is for these contracts to be concluded for shorter terms. WINGAS access conditions are continually being refined to make the use of our transport system by third parties even more transparent and easy. Consequently, the bundling of transport contracts, among other things, has been available since the autumn of 2003.

6 % market share in Belgium secured

WINGAS has established a subsidiary, WINGAS Belgium s.p.r.l., Brussels, to strengthen its marketing activities in Belgium. For the first time, Belgian natural gas customers will have a direct link into the world’s largest natural gas reserves in Russia via the long distance pipeline and storage facility of WINGAS. However, in addition to natural gas from Russian sources, WINGAS will also be making natural gas from the North Sea and from German production available to the Belgian market. With its diversified sources and natural gas storage facility in the northern German town of Rehden – the largest in western Europe – WINGAS is making a significant contribution to increasing the security and flexibility of Belgium’s natural gas supply. With the start of its marketing activities, WINGAS succeeded in securing a 6 per cent share in the Belgian gas market.

“We are already under contract to supply about 1 billion cubic metres (10 bn kWh) of natural gas in Belgium in 2005, and our plan is to double this volume in the medium term – this represents a share of more than 10 per cent in the Belgian natural gas market,” commented Seele.

In the first six months of 2003, WINGAS had already concluded a series of contracts with industrial customers, including the food manufacturer Campina, along with contracts to supply the world’s largest hydrogen production plant operated by the French company Air Liquide in Antwerp, and a gas and steam cogeneration plant being constructed by the German RWE Group in Antwerp, as well as BASF, the world’s largest chemicals group, which operates several plants in Belgium.

In the second half of the year, WINGAS managed to further strengthen its market position and acquired numerous additional industrial customers. And this success continues in 2004: there have been additional opportunities for sales as the market was opened up for industrial customers with an annual consumption in excess of 12 million kilowatt-hours in the Walloon region. “These industrial customers used to be supplied by local Belgian distributors,” said the Managing Director of WINGAS.

“We will reach the ambitious targets we have set for ourselves despite the barriers to entry that are still a feature of this market,” declared Seele. WINGAS supplies the natural gas destined for the Belgian market via its WEDAL pipeline (the west German pipeline link), which was completed in 1998 as far as Aachen, near the Belgian border. As a result, the Belgian natural gas market now has access to the highly modern infrastructure of WINGAS. For some years now, WINGAS has also been intensively involved in the natural gas trade in Zeebrugge, where it possesses long-term purchase contracts for British natural gas and accordingly has years of experience in natural gas transportation in Belgium.

The natural gas is transported to the customers via the network of Fluxys, the Belgian gas transport company. “We would be able to offer our customers an even better service and greater flexibility if we were allowed to build our own pipelines. That is why WINGAS has already submitted an application for the construction of a new pipeline from the Dutch border to Antwerp,” reported the Managing Director of WINGAS. Seele has called for the construction of natural gas pipelines to be as easy and non-discriminatory as possible in other EU countries as it is in Germany. Companies are only permitted to construct their own pipelines in Belgium if Fluxys, the national gas transport company, fails to provide a reasonable offer for utilisation of its network. “However, since the transport fees charged by Fluxys are regulated tariffs and as such are always deemed to be reasonable as far as the authorities are concerned, what we have here is in fact a pipeline monopoly that prevents competition in the construction of pipelines,” criticised Seele. Given the objective of ensuring that EU member states will still have a secure supply of natural gas in the future, it is vital that a competing pipeline is constructed in Belgium.

Expansion of activities in Great Britain

WINGAS has created a wider base for its activities in Great Britain. HydroWingas Ltd. was set up at the end of the year as a joint-venture with Norsk Hydro for the marketing of natural gas. Following approval from the EU Competition Authority, the company was incorporated in England 3 and will begin trading on 1 April 2004 by supplying end customers in the growing UK market.

Since its own production of natural gas is decreasing, the UK will become increasingly dependent on imports in the coming years. “As a competitive and service-oriented supplier, we will be contributing significantly to the country’s long-term and reliable supply of natural gas, the energy source of the future,” stated Dr. Seele. At the same time, the joint-venture company will be able to benefit at an early stage from the growth potential of the British market.

Norsk Hydro and WINGAS GmbH have an equal share in HydroWingas Ltd. The core of the business will be the selling of natural gas to major industrial customers as well as regional suppliers in the UK. HydroWingas is an independent company that will be purchasing its gas on the market, from third parties or from shareholders.

Potential customers can find out further details and contact the company by visiting the HydroWingas website at www.hydrowingas.co.uk. As well as having its own website, the joint-venture will be opening its offices in London in the spring and developing its own sales structures for the marketing of natural gas from there.

Outlook

In Seele’s view there are two trends discernible in the European market, which will be instrumental in shaping the future market: “On the one hand, Russian natural gas will become increasingly important in terms of the security of supply in Europe, and on the other hand, we firmly believe that Germany’s role as a natural gas transit hub in Europe will grow.” In this context, the partnership with Gazprom contributes greatly to ensuring the security of supply for Germany and for other European countries. On account of its modern network and the opportunity to store natural gas at a location near its market, WINGAS will also be playing a bigger part in east-west transports, which will become increasingly important in the long-term as shifts occur in the areas from which gas is obtained. The strategic development of the natural gas trading operations of WINGAS must be seen against this background, as its European dimension is increasing all the time The Europe division was established at the beginning of 2004 to promote the further development of European-wide activities at WINGAS. Dr. Peter Klingenberger, a former Sales Director of GAH Aktiengesellschaft in Heidelberg, is the new Director Sales Natural Gas Europe.

According to Seele, “investments in adapting the transport capacities to the increasing demand for natural gas will be of decisive significance for the long-term security of pan-European supplies of natural gas.” The Managing Director of WINGAS continued: “To ensure that our supply offers are also attractive outside the delivery area of our own pipeline network, we are in favour of feasible transit regulations at the European level.” For reasons of stimulating competition and increasing the security of supply, he also believes that competing pipeline construction in Europe is vital. Seele announced that WINGAS would continue to invest in developing its infrastructure with the aim of further increasing the efficiency of the natural gas pipeline system and of supplying customers directly. However, the appropriate economic framework and incentives for investing in the German and European energy industry have to be in place.

1 This does not include the volumes supplied to WINGAS.
2 Without taking into account the volumes sold to WIEH (Wintershall Erdgas Handelshaus GmbH)
3 The board of management of HydroWingas was also nominated at the time of incorporation. Solveig Hinsch was appointed as Managing Director. The 33-year-old had previously worked as a lawyer in the legal department of the German Wintershall AG, the parent company of WINGAS GmbH. She is assisted by Terje Totland, the Deputy Managing Director.

PI-04-04 - 03/23/04

Contact
Michael Sasse
fon: +49 561 301-3301
fax: +49 561 301-1321
press@wingas.de

PDF of presse release
download