Macroeconomic environment

Source: In-house analysis based on data published by the Central Statistical Office and the European Commission.

According to a preliminary estimate by Statistics Poland (GUS), the country’s gross domestic product (GDP) in 2021 was up 5.7% in real terms on 2020, compared with a 2.5% decline recorded in 2020. As a result of the post-pandemic economic recovery, domestic demand grew 8.2%, and investments increased 8% year on year. Industrial output was the largest contributor to growth, having generated 14.1% of gross value added.

Source: In-house analysis based on data published by the National Bank of Poland (NBP).

Source: In-house analysis based on data published by the National Bank of Poland (NBP).

The USD and EUR exchange rates are a significant indicator for the PGNiG Group, mainly because of their impact on gas procurement costs in the Trade and Storage segment. The dollar exchange rate mainly affects settlements with gas suppliers in long-term contracts and oil revenue, while the euro exchange rate affects gas purchases from the western direction.

In 2021, prices of natural gas in Europe rose sharply relative to prices quoted at the US Henry Hub. The average natural gas price at the Dutch TTF Holdings Hub during that period was EUR 47.14MWh – having increased more than 390% year on year. Comparing the same periods, natural gas prices at the Henry Hub went up by EUR 4.43/MWh to EUR 10.75/MWh on average. Therefore, the average gas price in the United States was up 70.2% at that time. The spread between those two trading points grew by over 1,000% last year, by EUR 33.39/MWh, to reach an average of EUR 36.39/MWh in 2021. The largest price spread of EUR 103.14/MWh was recorded in December.

Source: In-house analysis based on NYMEX and ICE data. Front-month contract – contract with the delivery date in the following month.

In 2021, the average spot price of gas in Poland was EUR 48.78/MWh, up EUR 37.37/MWh year on year. Gas prices in Poland were strongly correlated with those in Germany and on the European markets in general. The average spread between spot prices (for Day Ahead products) on the POLPX and the THE (Gaspool) in 2021 was EUR 2.48/MWh, up EUR 0.71/MWh (40%) year on year. The reported increase in the spread between average closing prices on the Polish and German markets was not attributable to any fundamental changes (such as higher transmission costs), but was driven by sharp price spikes on the gas market seen especially in the last quarter of 2021, which saw an unprecedented strong upward trend. As a result of these market developments, combined with the earlier closing time of the POLPX relative to western exchanges, the closing prices in Poland were unable to follow the gas price upticks, and the POLPX price was only able to ‘catch up’ with prices quoted at the Western European hubs on the next day on market opening.

Source: In-house analysis based on POLPX and EEX data.

Source: In-house analysis based on POLPX and EEX data.

The situation on the natural gas market in Europe and globally has a bearing on the PGNiG Group's financial results, mainly due to its impact on both income and expenses of the Trade and Storage segment.

In 2021, the crude oil market saw rising prices. The average spot price of Brent crude was USD 71/bbl, compared with USD 42/bbl in 2020. The price increases were mainly triggered by the economic recovery following the global coronavirus pandemic. After vaccination campaigns were launched in many regions around the world, pandemic-related restrictions were lifted and mobility returned to near normal levels from before the pandemic. The increase in global demand for crude oil outstripped a short-term spike in production, causing a shrinkage in worldwide oil stocks.

In the fourth quarter of 2021, investors in the crude oil market were extremely jittery, and crude prices ranged from USD 65/bbl to USD 86/bbl. Such price volatility was driven, among other factors, by the uncertainty surrounding the new coronavirus variant Omicron and its impact on demand for crude oil. On the supply side, crude prices fell following a decision taken by OPEC+ members to ramp up their output, but at the same time grew due to disruptions in supplies from Libya and Kazakhstan.

Source: In-house analysis based on ICE and NYMEX data. month-ahead contract – contract with the delivery date in the following month.

In 2021, the average demand for crude oil rose by 5.2% year on year, to an average of 96.64 mbbl/day. Oil demand among the world’s largest non-OECD consumers went up by 5.1%. Other Asian countries also saw rising demand for crude oil. The global oil supply was increased in 2021 by 1.45% year on year, which means it did not rebound enough to match the demand. Output from the OPEC group rose most sharply, up by 2.69%. China’s production went up by 2.6%, and the United States increased its output by 0.99%.

The situation on the oil market in Europe and globally has a bearing on the PGNiG Group's financial performance, mainly due to its impact on the Exploration and Production segment (chiefly sales of crude produced in Norway) and the cost of gas imports in the Trade and Storage segment.

In the winter months of 2021, the temperature was below the seasonal average, averaging 2 degrees Celsius. In the first and fourth quarters, the average temperature was lower by nearly 3 and 1.5 degrees Celsius, respectively. In the spring and summer season, the temperature oscillated around 13 degrees Celsius in the second quarter and 17 degrees Celsius in the third quarter on average, while in 2020 the corresponding readings were 13 and 18 degrees Celsius. The temperature factor affects the PGNiG Group’s performance mainly in the Trade and Storage, Distribution and Generation segments.

Reference point for temperature measurement: Rzeszów.
Source: In-house analysis.