PGNiG will Thursday begin exploitation of a new natural gas mine in south-eastern Poland with resources estimated at 1.75 bln cubic meters, PGNiG stated Wednesday. It is expected that the mine will enable production of over 150 mln cubic meters of high-methane gas annually. PGNiG invested nearly PLN 24 mln in the development of the mine.
Our view: The exploitation of the new mine is an element of PGNiG's program of increasing gas production from domestic resources. The new mine will add 3% to current PGNiG gas production of 4.3 bn cubic meters annually. Please note than in a liberalized market environment the annual profits on the additional gas production could reach PLN 50m. Unfortunately, PGNiG currently has limited excess to upstream profits on natural gas production: higher share of domestic natural gas could easily push URE to lower wholesale and retail tariffs later the year. Therefore we expect a moderate addition to profits in 2007. We see the news as slightly positive for the company.