 Position and Future Development |
The long process of the restructuring of Cesky plynarensky podnik, statni podnik (Czech Gas Company State Enterprise, or CPP, s.p.) was brought to an end on 28 January 1998 when under Act No. 77/1977, the names Cesky plynarensky podnik, statni podnik (Reg. No. 00002674) and Cesky plynarensky podnik, statni podnik, odstepny zavod Transgas (Czech Gas Company State Enterprise's Transgas Subsidiary, Reg. No. 211320) were erased from the Companies Register and replaced by the name Transgas, s.p. (Reg. No. 00002674). The new state-owned corporation assumed on that day, all the rights and obligations of the two entities whose names had been erased from the Companies Register. The sole Founder of Transgas, s.p., is the Ministry of Industry and Trade of the Czech Republic.
Simoultaneously with incorporating Transgas, the Founder appointed a six-member Supervisory Board; four members are nominated by the Founder and two are elected from the ranks of Transgas employees.
Transgas's core line of business is gas distribution under Act No. 222/1994 on Engaging in Business and State Administration in Energy Industries, and on the State Energy Inspection Office. (Under this law, the term 'gas distribution' also covers gas transmission and transit)
Transgas's further development will reflect the Government's Energy Policy Paper now under preparation, and will be subject to several, in particular the following factors:
Natural gas transit transmission across the Czech Republic
Transgas intends to preserve its position in international natural gas transmission. For this purpose, further development of the transit system's transmission capacity will have to be adjusted, and the reliability and competitiveness of the transit system improved;
Natural gas consumption in the Czech Republic
Natural gas consumption has been on the rise in recent years, but mainly in space heating applications, which impacts negatively on the load diagram. Transgas will therefore have to focus on the following measures in the years to come:
Achieve a balance between natural gas resources and consumption through effective utilization of underground storage capacity;
Encourage such uses of natural gas that will help to reduce the difference between summer and winter demand. This will require - in co-operation with regional distributions companies - an effective Demand Side Management system, which in turn is contingent on implementing a tariff system for natural gas prices.
| CORE BUSINESS |
 International Gas Transmission |
International gas transmission across the Czech Republic continued in accordance with the relevant contracts in place; Transgas wishes to expand its co-operation with foreign partners, and therefore reinforces its system of gas transit pipelines to create the best possible preconditions for further development of natural gas transportation via the Czech Republic.
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The quantity of natural gas transported across the Czech Republic under gas transit agreements continuously increases. A total of 48.3 bcm of natural gas, i.e. 4.3 % more than in 1997, was made available at the Lanzhot transfer station on the Slovak-Czech national border, both for transit transmission and for the purposes of supplying the Czech Republic with natural gas.
The volume of natural gas transited in 1998 across the Czech Republic amounted to 39.73 bcm. The Lanzhot-Waidhaus route kept the largest share of this volume, 64%. This route is used by Gazexport. German companies Verbundnetz Gas AG and Wintershall AG are the two other major customers for transit, along the Lanzhot-St Catherine Mt route.
| Gas Purchase |
Gas purchases for customers in the Czech Republic reflected the projected supply/demand balance; the actual load diagram; and the need to accumulate sufficient stores in underground gas storage facilities and to shave off the peak loads expected.
Natural gas was purchased in 1998 under contracts for Russian natural gas imports - from Gazexport (Russia) and Wintershall (Germany), and under those for natural gas imports from Norwegian producers Statoil, Norsk Hydro, Saga Petroleum and Total Norge.
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Transgas bought a total of 9.34 bcm of natural gas from international suppliers in 1998. This volume sufficed to meet the domestic demand in full.
| Russian Gas for the Czech Republic |
The signing of a long-term agreement on natural gas deliveries with Gazexport ranks among the highlights of 1998.
Until the end of 1998, Russian natural gas was imported into the Czech Republic under short-term contracts. However, business relations between natural gas producers and gas companies are based on long-term contracts which help to lay the foundations for reliable supplies under mutually advantageous commercial and technical terms.
It was primarily for the above reasons that Transgas was assigned by the state administration to conduct talks on natural gas supplies from Russia, and subsequently to enter into a long-term agreement on such deliveries. The joint interest in the execution of this agreement is also borne out by the support provided to the talks by the Czech-Russian intergovernmental commission for economic co-operation. The new contract, signed on 15 October 1998 between state-owned Transgas and Russian Gazexport, provides for annual supplies of 8 to 9 bcm of natural gas to the Czech Republic between 1 January 1999 and the end of 2013, with an option to extend the agreement - this option constitutes an important element of safety and reliability in natural gas supplies to customers in the Czech Republic. Russian natural gas is expected to meet approximately 75% of the country's demand in the future.
At the same time another, no less important agreement was concluded - that on the terms and conditions of natural gas transit via the Czech Republic to west European countries. The new transit agreement guarantees the use of the gas transit system on the territory of the Czech Republic until 2020, and confirms the key role played by Transgas in the transport of natural gas from Russia, which, thanks to its reserves, will continue to be the most important natural gas supplier for countries in central and western Europe for a long time into the future.
| Gas Sale |
Transgas supplied gas to eight regional distribution
companies and five direct customers in 1998. Of
a total of 9.275 bcm of natural gas sold, 0.037
bcm went to direct customers. Compared with 1997,
0.028 bcm less of natural gas was sold in total,
representing a drop of 0.3 per cent. |
Monthly consumption between 1996 and 1998 reveals a direct relation to atmospheric temperature. The December 1998 maximum monthly demand to the August 1998 minimum monthly demand to the August 1998 minimum monthly demand ratio was 4.6: 1.
In contrast to the surge in natural gas sales in 1994, 1995 and 1996, the rise slowed down in 1997, and the stagnant tendency continued in 1998 when overall sales of natural gas were lower than in 1997.
The main reasons for this development largely include the current economic economic situation in the Czech Republic, manifest inter alia, in declining off, take by industrial customers. Another major cause can be seen in the atmospheric temperatures that prevailed in 1998, with average annual air temperature up by 0.6 °C as against 1997 which had a mean annual temperature corresponding to the long-term average. Converting the volumes of the natural gas sold to long- term average atmospheric temperatures, gas sales increased by approximately 3.4% in 1998 compared with 1997. This temperature-adjusted indicator of the rate of growth in gas sales also dropped significantly in comparison with the previous years when almost a double of the above percentage was achieved.
Transgas's largest customers for natural gas included South Moravian Gas and North Moravian gas, which took 24.2 and 18.7 per cent, respectively, of the total quantity of the natural gas sold by Transgas in 1998. With its share taken by each of the remaining regional gas distribution companies of total natural gas sales was less than 12%.
In this respect, North Bohemian Gas and South Bohemian Gas made the greatest year-on-year increases in their shares in 1998, by 26.4 mcm and 25.1 mcm, respectively. In contrast to this, the volumes bought by four gas distribution companies dropped, most of all those bought by Prague Gas whose annual demand declined by 74.7 mcm. In addition to the effects of higher average air temperatures, this figure also reflects the replacement of district heating plants fired by natural gas by supplied of heat from the Melnik Power Station. A district drop in annual demand for natural gas supplied by Transgas could be felt with South Moravian Gas. Lower demand could be registered for the two companies already in 1997. Overall plunge in Prague Gas' and South Moravian Gas' consumption in 1998 amounts to nearly 290 mcm in comparison with 1996.
| OBJECTIVES OF INVESTMENT AND INNOVATION POLICIES |
| Investments in the Czech Republic |
Planned construction projects were continued in 1998, with a focus on achieving Transgas's long-term developmental and innovation objectives, i.e. reinforcing the transit system's transmission capacity; increasing the number of transfer stations; extending the capacity of underground storage facilities; enhancing operational safety and reliability of gas supplies; and ongoing upgrading of the telecom system. Among the projects which contributed to the above goals of transmission capacity expansion was the completion of another section of the ND 1000 pipeline. To improve the safety of supplies to the Sumava region, and interconnecting ND 150 line was laid between Eeisenstein in Germany and Alzbetin in the Czech Republic. Large transfer stations at Kolin, Sirejovice, Lodherov and Zvestov were completed, together with their remote data transmission capabilities and remote control from Prague dispatching office. Storage capacity reinforcement: Withdrawal/injection wells were drilled at the Tranovice underground storage site, which also involved the casing and laying of gas feeding lines; the drying capacity was expanded and a compressor installed at the Starmberk site; and the unique Haje excavated storage facility was commissioned in May 1998.
In line with developmental objectives, 1998 saw the completion of a project designed to upgrade the transit system's communication lines, which also included interconnection with the telecom systems operated by partner companies in Slovakia and Germany. With a view to enhance the reliability of the Transgas telecom system and to connect Haje site and the relevant inland transfer stations on the Prague-Zvestov-Haje-Strazovice route to the telecom network, a project intended to erect a long-distance optical fibre cable to interconnect the above sites was launched.
Including the above, a total of 41 projects were completed in 1998, while preparations for and construction under an additional 50 projects were under way.
| Investments outside the Czech Republic |
Transgas continued in 1998 its co-operation with Moscow-based RAO Gazprom under the Yamburg Agreement, in line with the relevant protocol signed between the Governments of the Czech Republic and the Russian Federation on 3 May 1996.
In co-operation with its subcontractors, Transgas continued the construction of the Uvyazovsk underground storage facility in the Ryazan area; most of the plant erected there was put into operation. Furthermore, houses were handed over to the operating staff of gas facilities in Volgograd, Kamyshin and Frolovo, and housing developments complete with infrastructure were commissioned in Krutoyarsk and Borky in the Ryazan area.
Helping to improve food supplies to gas industry personnel, some food processing plants were completed and put into operation in the Volgograd and Satarov areas. A health care complex accommodating 600 persons was opened on the Black Sea coast near the town of Anapy to provide health care to gas field workers employed by Urengoigazprom. Co-operation under the Yamburg Agreement is not limited to merely gas industry or housing infrastructure. An noteworthy example is the completion of two plants for producing bricks and roofing in the Nizhnevgorod and Satarov areas, which were built for the subsidiaries and transport companies in the RAO Gazprom group.
Additioanl industrial plant and housing infrastructure facilities for RAO Gazprom are under construction, to be completed in 1999.
| ENVIRONMENTAL PROTECTION |
Transgas has traditionally and responsibly devoted great attention to protecting the environment from the potential negative consequences of its own operations.
The principal tool of maintaining control over environmental impacts is the Company's Integrated System of Quality Control and Environmental Protection, which synthesizes the requirements of ISO 9001 and ISO 14001. One part of this control system, under ISO 9001, has already been certified, while certification under ISO 14001 is envisaged after environmental audits have been completed.
Transgas has mechanisms in place for monitoring emissions from the operation of large pollution sources (the Emission Monitoring System) as well as for medium and small-sized pollution sources. Water pollution levels, in both released and consumed water, are measured on a regular basis as part of the Company's water management system.
With a view to nature conservation, i.e. protection of the farmland and forest soil, ecosystems and biotope that exist in and along pipeline localities and routes, extensive investigations are undertaken and technical measures are adopted prior to the construction of new facilities to minimize unfavorable effects. For the existing gas facilities, biological data is collected continuously, and stored in the Company's information system. |
