Last Update:
Mar. 10, 2011
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Part of the audited Consolidated Financial Statements and Management´s Analysis

Natural Gas Trading

  • Sales decline due to lower gas prices
  • Sales volumes increase as a result of the global economic recovery and cold winter weather
  • Earnings below the level of the previous year
  • Outlook 2011: slight increase in sales; slight decline in earnings due to ongoing margin pressure

Sales to third parties declined by €537 million to €6,972 million as a result of lower prices. However, the economic recovery and cold winter weather led to an increase of 6% in sales volumes to 413 billion kilowatt hours. In particular, sales volumes within Germany grew by 8% to 247 billion kilowatt hours. WINGAS sold around 11% of its volumes to BASF Group companies.

At €416 million, income from operations was €92 million below the level of the previous year. Sales prices for natural gas generally followed those of oil with a time lag of several months. The moderate but steady increase in oil prices over the course of the year therefore had a negative effect on earnings. In addition, trading margins came under strong pressure as a result of the ongoing low price level on the spot markets. Increased competition in our sales markets could be partially offset by supply-side optimization measures.

A key part of our growth strategy in natural gas trading is our stake in Nord Stream AG. In 2010, this company began constructing a pipeline that will run from Vyborg, Russia, through the Baltic Sea to the German coast near Greifswald. Construction is proceeding as planned. Around 900 kilometers of pipeline had been laid by December 31, 2010. We expect the first gas volumes to be delivered in October 2011.

In connection with the Nord Stream project, construction continued in Germany on the Jemgum natural gas storage facility as well as the OPAL pipeline (Baltic Sea Pipeline Link). By the end of 2010, around 400 kilometers of the OPAL pipeline had been laid. Planning activities for the NEL pipeline (Northern European Gas Link) continued.

For 2011, we expect a minor decline in sales volumes as a result of ongoing intense competition and the exceptionally cold winter weather in 2010. However, we anticipate sales will increase slightly as gas prices rise as a result of higher oil prices. Due to ongoing margin pressure, we anticipate a slight decline in earnings.

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