20^th Fuel Branch Meeting - Polish LPG Market

The twentieth edition of the Fuel Branch Meeting – Polish LPG Market took place in Jachranka near Warsaw, at the Warszawianka hotel on October 23-24, 2024. The scale of the event exceeded all expectations, as the attendance at the opening banquet and at the conference approached 300 people, representing nearly 150 companies and organizations, making the event the largest event in the history of the LPG industry in our country.

The conference opened shortly after 10:00, and the first symbolic accent was the thanking and presenting of a special gift to the retired General Director of the Polish Liquid Gas Organization (POGP), Andrzej Olechowski, who on this occasion shared numerous memories of his many years of involvement in the liquefied gas market.

The first conference panel entitled "LPG market in Poland - sector analysis. Challenges, opportunities, prospects for the tank and cylinder segments" began with a speech by Karol Sykut, head of the Lublin branch of the Transport Technical Supervision. The speaker discussed the types of damage and defects of cylinders that are encountered during TDT inspections using numerous examples from his own practice. The richly illustrated presentation clearly explained what defects and types of damage exclude cylinders from legal use - and some of the photos, showing particularly shocking cylinder deficits, will certainly be remembered by the Meeting participants.

The next lecture, delivered by Grzegorz Wojtas, representing the Laboratory of Transport Technical Inspection, complemented the subject taken up by Mr. Sykut – the subject of cylinder acceptance criteria was detailed in terms of threaded connections, which constitute a particularly sensitive element of this form of gas tanks. The expert discussed in detail the course of inspections carried out by TDT, and also explained using specific examples the risk associated with imprecise "cooperation" of cylinder and valve threads, especially in conditions of mechanical wear, causing seemingly small deformations of the material. The speaker also addressed the subject of threats related to the issues of controlling the depth of valve screwing in, and also discussed the nature of analogous inspections in various countries of the world. This provided an interesting comparison regarding the service life of cylinders and the frequency of tests in various legal systems.

The speech by Borys Zając, representing the Office of Technical Inspection (UDT), concerned experiences from operational inspections of LPG installations performed by inspectors of the institution. Using photographic documentation, the speaker explained common errors related to the foundation of tanks.
Selected, particularly striking examples of "irresponsible ingenuity" of installers show that in their inspection work, UDT employees often encounter serious safety hazards related to the existence of tanks - the same applies to "covering" tanks, placing them in traffic routes or in places posing a particular risk in the event of a possible tank leak.

After the speeches of representatives of supervisory offices, Piotr Frycz, Vice President of the Management Board of Chemet S.A., took the floor to analyze the LPG tank and cylinder sector in Poland from the perspective of a manufacturing company. In his lecture, he described the functioning of the leader of the tank market in Poland and the largest service provider in the LPG industry, the Chemet group, in the conditions of an economic slowdown, fewer tank installations after the boom of 2019-2021 or as the "Green Deal" is implemented, which does not treat liquefied petroleum gas as a priority. A separate element of the speech was the issue of implementing the EPDB directive, which could have undermined investors' confidence in LPG boilers, but thanks to the efforts of manufacturers and industry organizations, it is possible to overcome the resistance and media "black PR" towards gas heating. From the manufacturer's perspective, the issue of creating new storage infrastructure for gas is particularly pressing in the face of the embargo on the Russian product coming into force. The embargo may also translate into greater demand for new rail tankers, of which 700-1000 may be needed even without an increase in domestic LPG consumption. However, the problem of manufacturers is the reluctance of investors to buy rail tankers with a relatively long period of use by recipients - the speaker associated this with the uncertain position of fossil fuels in the next few decades. In relation to the future of the market - according to the speaker - the popularity of home installations in Poland will not be disturbed in the coming years. However, he summed up the scale of demand for cylinders on European markets somewhat less optimistically, and he saw the future of this sector in the markets of Asia or Africa.

The final presentation of the first panel concerned the market opportunities and challenges for the cylinder and tank segment in our country, and was presented by Bartosz Wyskiel, representing GAZELA Andrzej Cichy. The history of the company, which began in the 1990s, was an illustration of the volatility of market trends and a number of problems that Polish gas entrepreneurs have had to deal with in recent decades. The speaker pointed to numerous operational and legislative problems that hinder the functioning of companies on the cylinder market, and also spoke about the problems related to the prospect of cutting off supplies of relatively cheap gas from Russia - which may financially hit the retail LPG consumer. He also devoted a lot of space to the company's prospective segments of operations - not only from the LPG industry, but also technical gases or liquid nitrogen, which operate on slightly different principles than the traditional cylinder market.

The second panel, entitled "International sanctions against Russia and their impact on fuel markets", also aroused considerable interest among the audience, who turned up in large numbers in the conference room. In their introduction, Dr. Szymon Araszkiewicz and Dr. Jakub Bogucki explained the current trends in the supply and pricing of liquefied gas on the domestic market. Representatives of industry organizations, the Polish Liquid Gas Organization, Mateusz Kędzierski, and the Polish Chamber of Liquid Gas (PIGP) - Paweł Bielski, spoke in reference to the opening presentation. While the first speaker saw the prospects quite optimistically and suggested that a significant part of the "departure" from imports from Russia is already being indirectly implemented, Paweł Bielski's speech was more pessimistic, especially in relation to price forecasts for the first quarters of 2025. He pointed to structural difficulties in logistics, but also to the "social resistance" to the expansion of rail and storage infrastructure, rarely discussed in the industry. According to the expert, the problem may also be the long-term abandonment of LPG installations in the coming years, not only in 2025.

The next panel presentation was delivered by Iwona Wiśniewska, representing the Eastern Studies Centre. Its subject was the consequences of Western sanctions for the Russian fuel sector. The speaker pointed first to the loss of the Western market and the dependence of the Russian Federation on two recipients - China and India. Much attention was paid to the issue of changing the directions of exports by Russia, as well as the financial and fiscal consequences for this country. A separate element of the presentation was an analysis of the scale of the operation of the fleet of tankers distributing Russian oil in many markets around the world (divided into the "grey" and "black" fleet). In conclusion, Wiśniewska addressed the issue of the impact of the LPG embargo on the Russian economy. Russian LPG accounted for approx. 6% of the total EU imports of this raw material in 2023, and according to European Union estimates, the costs of introducing the embargo for Russia will amount to approx. EUR 1 billion per year - the speaker summed up.

The second panel ended with a presentation by Piotr Ulko and Andrzej Sakowicz from Rail Cargo Group - they discussed the prospects for LPG rail deliveries from Western and Southern Europe in the face of the embargo coming into force. Due to their many years of experience in LPG rail logistics, the speakers were able to estimate the scale of possible changes in relation to the number of transports and their dynamics in the coming months. They analyzed in detail the issues of rail infrastructure, especially in Germany and Poland, in relation to the expected increase in transit from the ARA direction. As if alternative directions, which they analyzed, were deliveries from Southern Europe, e.g. through Hungary or Romania. The speakers analyzed the possibilities of optimizing rail transport for the customer's needs, talking about the non-obvious nuances of the functioning of this sector of the economy.

The third panel was devoted to legal issues, which, as new legal regulations appear at the European level, will have a strong impact on the operating conditions of companies in the LPG industry in Poland. Wojciech Kotala Cabaj&Kotala Tax Advisory The opening presentation belonged to tax advisors Wojciech Kotala and Adrian Biały from the Cabaj&Kotala law firm. It was devoted to the new and extensive issue of EU ETS2 - a new form of taxation of heating and transport fuels. The lawyers thoroughly analyzed the idea behind the introduction of the new regulation, parallel to the previous emission trading system (EU ETS1). In accordance with the new legal order - the fuel supplier will be obliged to report and pay fees. The presentation of the attorneys developed the issue of obtaining a permit for gas emissions and the issue of monitoring this emission. A valuable summary here was the schedule of changes concerning entities from the fuel industry, allowing for the entry into force of new regulations, even if their state of preparation still leaves much to be desired.

The conference was concluded with a remote presentation by Bartosz Kwiatkowski, General Director of POGP, which “placed” the LPG sector in the broad panorama of European energy policy. Among the issues raised, it is worth mentioning the building directive and the issue of building emissions in the European understanding of this issue. Kwiatkowski also devoted a lot of attention to the issue of fossil fuels used in the heating sector, and finally, the place of LPG in the EU concepts of transport – explaining the complex assumptions of the planned emission restrictions and the financial burden of this fuel. The detailed discussion of the schedule of decarbonisation activities was also of great value, which can help companies in the industry plan their own activities in the face of the upcoming changes.

Due to the abundance of issues discussed and the numerous questions and comments from the participants present in the room, the conference lasted longer than intended and ended at around 5:30 p.m., and the continuation of lively debates and conversations continued in the corridors.