On the future of LPG at the Gas Fuel Forum.

The Gas Fuels Forum proved to be the largest and most important conference event for the liquefied petroleum gas industry so far in 2023. It consisted of an opening banquet and 4 sessions:

1. Liquefied Petroleum Gas in Poland, Europe and the World.
2. Changes in liquefied petroleum gas supply chains in Poland with the presentation of the POGP Annual Report for 2022.
3. New challenges for the cylinder market in Poland.
4. Digitization of industry trading and reporting.

In session one, Przemysław Bryksa, Director of the Department of Oil and Transport Fuels from the Ministry of Climate and Environment, James Rockall, Managing Director of the World LPG Association, David Appleton, Argus Media's Vice President for LPG, Ewa Abramiuk-Lété, Managing Director of Liquid Gas Europe, and Stanislaw Jablonski, President of EkoBenz Ltd. spoke about the international climate for LPG.

Przemysław Bryksa, after discussing the advantages of LPG as a fuel, presented the risks associated with security of supply and emphasized the possible role of renewable LPG substitutes in Poland's energy transition. He considered the creation of a market for renewable fuels to be very important for preserving the role of LPG in the coming decades, as renewable fuels - especially locally produced - would ensure security of supply while meeting reduction targets. Bryksa also addressed the issue of the embargo on LPG from Russia, saying that the Polish position on this issue emphasizes the need for solidarity action at the EU level, as the imposition of unilateral restrictive measures would be ineffective. He considered the main challenges to be the need to diversify supply directions and optimize the system for maintaining mandatory stocks.

James Rockall then presented applications of liquefied petroleum gas in the context of the global energy crisis - including prospects for renewable liquefied petroleum gas (bioLPG and dimethylether), as well as hybrid solutions based on the use of liquefied petroleum gas and heat pumps. LPG is now an option that is accessible, financially affordable and acceptable to all users as being based on proven technology that does not require deep technological changes. Rockall assured that LPG will also remain present in the global energy mix in the future.

David Appleton focused on the LPG market in 2023. He noted that the relatively low LPG prices relative to other fuels in 2022 and 2023 are largely due to weakening demand from the Chinese economy. In particular, Chinese polypropylene producers have reduced consumption due to low demand for their products - arguably still related to pandemic restrictions. During the same period, the high supply of U.S. LPG kept prices low. David Appleton stressed that Russia is not a major producer on a global scale, which would determine global crude prices. Argus, on the occasion of the Gas Fuels Forum, prepared a special report on the Polish market.

In her speech, Ewa Abramiuk-Lété focused on the legislative challenges posed to the LPG market by the European Union. The biggest of these are violations of the principle of technological neutrality and pushing for the electrification of the economy as an instrument of decarbonization - examples of which are the ban on the sale of combustion cars after 2035 and calls for a ban on the sale of boilers from 2029. - and the need to ensure an adequate supply of renewable liquefied petroleum gas to meet the demand of the European economy while respecting the goal of achieving EU climate neutrality by 2050. This topic was discussed more extensively during the February POGP webinar.

Stanislaw Jablonski presented EkoBenz's experience in producing bioLPG, a renewable substitute for fossil gas, from bioethanol obtained from the fermentation of organic waste. He stressed the very high potential of renewable LPG in decarbonizing the Polish economy with investment outlays disproportionately lower than in a full electrification scenario - particularly in the transport sector. He called for the creation of support mechanisms for bioLPG production in Poland, which would allow the full realization of the available potential.

In the second part of the Gas Fuels Forum, Chairwoman of the Polish LPG Organization Ewa Gawryś-Osińska presented the latest Annual Report containing data for 2022. Poland's liquefied petroleum gas market, despite the mild winter, grew to 2495 thousand tons, up 2.5% from 2021. ThePOGP Annual Report for 2022 is available for download in the POGP Reports section.

Demand for LPG in Poland is met with supplies from abroad - domestic production covers 1/5 of demand. The volume of imports increased by 305,000 tons in 2022, with a simultaneous increase in the amount of raw material leaving Poland - by more than 104%. The difference went to Ukraine: its share of total LPG exports from Poland exceeded 51% and reached 236 thousand tons against only 10 thousand tons the previous year.

LPG enters Poland primarily from Russia (47.1% vs. 58.2% in 2021) and Sweden (30.3% vs. 20.3% in 2021). Russia's share of the import structure has been steadily declining since 2019 in favor of supplies by sea from Sweden, a process that accelerated after February 24, 2022. Kazakhstan returned to the top three suppliers after 3 years (4.3%), and for the first time the United States (2.8%) appeared in this group on a significant scale.

The Polish LPG market is distinguished from Europe by the role of autogas - an unprecedented ¾ of the liquefied petroleum gas consumed on the Vistula powers cars, and sales in this segment are recording another year of growth (3.6% year-on-year). Poland is the largest autogas market in the European Union. According to CSO data, 3.4 million passenger cars (13.6% of all registrations) use this fuel. In some provinces, the share of autogas-powered cars is higher - the leaders are Łódzkie (19.2%), Lubelskie (18.7%) and Podkarpackie (16%).

In 2022, about 65,000 new gas installations were installed in Poland,and a large group of LPG-powered Ukrainian cars also appeared on the country's roads. Interest in autogas is not fading due to its favorable price relationship with gasoline: in 2022, the price per liter of LPG at the pump accounted for 48.9% of the price of gasoline. The warm winter, however, contributed to a 5.9% drop in sales in the municipal sector. Households using LPG were not covered by the Anti-inflation Shield, but gained the opportunity to benefit from a one-time direct subsidy of PLN 500 in 2022.

The presentation of the Report preceded a panel discussion on changes in LPG supply chains to the Polish market, moderated by Dr. Andrzej Sikora of the Institute for Energy Studies, and attended by Paweł Bakun , Vice President of the Management Board of Grupa Azoty Polyolefins S.A., Przemysław Podgórski , Vice President of the Management Board of Unimot Paliwa Sp. z o.o., Ernest Piotrowski, Sales Manager Market Poland VTG Rail Europe GmbH and Robert Stępień, Suply Chain Manager Primagaz Central Europe GmbH. Robert Stępień gave an introductory presentation outlining the current mechanism for supplying the Polish market with LPG with the growing role of marine terminals. Paweł Bakun discussed the implementation of the largest current investment project in Poland, a polypropylene plant with a marine terminal, which will be expanded in the future to potentially supply the wholesale market with imported propane by sea. Implementation of the project will increase domestic LPG consumption by about 20%. Przemysław Podgórski discussed the market outlook and investments of the Unimot SA group, including the acquisition of some of the logistics assets of Orlen and Lotos, and Ernest Piotrowski discussed the key limitations of the rail infrastructure for LPG transportation - including the issue of tank car availability. Russia's invasion of Ukraine in 2022 also negatively affected the rail market - Ukrainian plants such as Azovstal were important suppliers of components for this market. Stanislav Batraczenko, president of the Ukrainian Liquid Gas Association, commented to the panel, thanking the Polish industry for its support to Ukraine during the ongoing war, important especially in view of the systematic destruction of energy infrastructure by the Russians.

The third session of the Forum was a panel discussion, devoted to changes in the cylinder market in Poland. It was attended by Jan Urbanowicz, Director of the Transport Technical Inspection, Leslaw Żarski, Director of the Liquid Fuels Department of the Energy Regulatory Office, Michal Faliszewski, legal counsel for Gaspol SA, and Piotr Siudej, representative of Chemet GLI SAS, with Bartosz Kwiatkowski acting as moderator. Jan Urbanowicz discussed the TDT's experience in technical testing of LPG steel cylinders not certified under the TPED, since taking over responsibility for inspection activities in October 2022, and encouraged entrepreneurs to continue the dialogue to improve statistics - according to Urbanowicz, within 6 months the percentage of cylinders rejected in the technical testing process fell from nearly 30% to about 8%. Leslaw Zarski talked about the rationale behind the legislative initiative to regulate the cylinder market in the energy law, and signaled that in his opinion the cylinder market should be covered by a unified, comprehensive regulation. The ERO is in favor of placing LPG bottlers under a licensing obligation due to the numerous observed cases of LPG bottling by small, unlicensed operators outside the requirements of the law, creating a gray market of significant scale. Attorney Michal Faliszewski discussed the most important demands of entrepreneurs reported to the TDT and the ERO regarding the proposed and implemented changes for the cylinder market, paying particular attention to the problem of equal treatment of traders and the systemic loophole in the form of unreliable traders taking unfair advantage of cylinders legalized by others. In doing so, he agreed with Director Zarski on the lack of a unified legal act regulating the trade in LPG cylinders. Piotr Siudej, meanwhile, presented the French market's perspective on the technical testing of cylinders, carried out by notified entities selected by the entrepreneur. 2023 promises to continue the discussion on the future of the cylinder market.

After a panel that dominated the theme of steel cylinders, Edyta Filipowska-Raś and Geir Vethe of Hexagon-Ragasco introduced participants to their alternative, i.e. composite cylinders. The Norwegian product is still little known in Poland, hence the speakers focused on the threads of safety and convenience of use.

The fourth and closing session of the Forum was devoted to the computerization of reporting in the liquefied petroleum gas trading industry. Grzegorz Stępniak, Project Manager of the Fuel Platform of the Government Strategic Reserve Agency, discussed the system being launched by RARS, and Robert Michalski, Deputy Director of the Department for Combating Economic Crime of the Ministry of Finance, discussed the Connect+ package, a package of solutions including amendments to the SENT Act, the Energy Law, the Excise Law and the KAS Act. The Fuel Platform aims to introduce a unified reporting system resulting from the Act on Stockpiles, the Act on Monitoring and Controlling Fuel Quality, the Act on Biocomponents and Liquid Biofuels, and the Energy Law. Entrepreneurs would use a unified interface for reporting to RARS, the Energy Regulatory Authority, the Ministry of Climate and Environment and the National Tax Administration. The Fuel Platform will become a mandatory data reporting tool starting July 1 of this year. The Central Excise Register envisioned in the Connect+ package would come into effect on February 1, 2024, with an 18-month transition period. The law implementing the Connect+ package is currently at the stage of analyzing comments made during the public consultation process, in which the Polish LPG Organization submitted a broad comment.

The ‍Forumof Gas Fuels brought together about 220 participants at the Mercure Centrum Hotel in Warsaw, of which about a third were guests from abroad. This proves the market demand for the initiative of the Polish LPG Organization, implemented in a two-year cycle before the COVID pandemic and revived in April 2023 in a new formula of cooperation with Information Market SA. In future editions, we will address further key strategic issues for the LPG market, and will seek to expand the environment that integrates the Forum, both with domestic delegates and new foreign partners.

We would like to thank our sponsors for supporting the Gas Fuels Forum project - the event was held thanks to the support of our member companies, Gaspol SA, AmeriGas Polska Sp. z o.o. and Hexagon Ragasco.

Anyone interested in the initiatives undertaken by the Polish LPG Organization is invited to read the monthly POGP newsletter!

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