Czech Republic

Energy Information Administration

United States
Energy Information Administration

OIL        NATURAL GAS        COAL        ELECTRICITY        PROFILE


September 1995
Czech Republic

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GENERAL BACKGROUND

Since its separation from Slovakia on January 1, 1993, the Czech Republic has proceeded relatively quickly (although not always smoothly) in its transition towards a prosperous, market-oriented economy. With a stable currency, low national debt, rapidly rising exports, and a sweeping privatization program underway, the economic outlook for the Czech Republic is highly promising. Since 1989, trade with western countries has increased from 40 percent to 80 percent as a proportion of total trade, while western tourism has skyrocketed.

In the energy sector, the country has made progress in diversifying supply sources, privatizing state-owned energy companies, and reducing pollution while maintaining economic growth. As a result, membership in the Organization for Economic Cooperation and Development (OECD) and International Energy Agency (IEA), which the Czech Republic has been actively seeking, could be approved by late 1995 or early 1996. In late 1994, a European Commission-funded study called on the Czech Republic to phase out subsidies on electricity and natural gas end-use prices.

Czech energy demand declined sharply between 1987, when it peaked, and 1993. In 1994, however, energy demand (along with the overall economy) appears to have leveled off. Overall, coal is estimated currently to account for about 60 percent of Czech energy demand, oil for 16 percent, natural gas for 15 percent, and non-fossil fuels (mainly hydroelectricity and nuclear power) for about 8 percent. Except for coal, the Czech Republic produces little energy. As a result, the country relies on energy imports (mainly oil and gas from Russia) for about one fourth of its total requirements.

OIL

With almost no oil reserves of its own, the Czech Republic depends almost exclusively on imports to meet its energy needs. The country currently receives nearly all of its crude oil supplies from Russia, primarily via the Druzhba (Friendship) Pipeline. This oil supplies the main Czech refineries at Litvinov and Kralupy.

By early 1996, an oil pipeline linking Litvinov and Kralupy to German sources of supply should be completed. This 100-mile pipeline will permit the Czech Republic to import up to 200,000 b/d of non-Russian crude oil from the Italian port of Trieste via the Transalpine (TAL) pipeline network.

Refining

After its split from Slovakia, the Czech Republic inherited four of the former union's refineries (in descending order of capacity): Litvinov, Kralupy, Pardubice, and Kolin. Both Litvinov and Kralupy run on Russian crude oil imported via the Friendship Pipeline. Pardubice (a simple hydroskimming plant) and Kolin (a lube oil processing refinery) are much smaller and run on domestic crude oil supplies. In recent years, Czech refineries have altered their product mix, increasing the shares of diesel and motor gasoline, while greatly reducing the share of residual fuel oil.

The privatization of the Czech Republic's oil refining industry recently passed a major milestone, with the sale of 49 percent of state-owned Czech Refineries to a western consortium comprised of Royal Dutch/Shell, AGIP, and Conoco. This sale, worth $173 million, came after French oil company Total withdrew from the consortium in early July, threatening to unravel the entire deal. Unipetrol, a new state-owned holding company, will retain 51 percent ownership of Czech Refineries and will assume ownership of the country's petrochemical industry as well as Benzina, a gasoline retail chain.

NATURAL GAS

In 1994 (as in 1993), the Czech Republic consumed about 240 billion cubic feet of natural gas - nearly all of which was imported from Russia via the Transgas pipeline system. Transgas consists of four pipeline sections built between 1972 and 1988, with a total annual capacity of 2.6 trillion cubic feet (63 percent Czech, 37 percent Slovak). Transgas not only provides gas to the Czech Republic and Slovakia, but also serves as a transit line to Germany, France, Italy, and Austria.

Czech Industry and Trade Minister Vladimir Dlouhy visited Russia in July 1995 to discuss long-term supplies of natural gas to the Czech Republic. Also on the agenda was Russia's $3.4 billion debt to the Czech Republic, which Russia hopes to pay off at least partly with gas. Finally, the two countries are negotiating participation of Czech companies in the construction of a gas pipeline from Russia's northern Yamal peninsula to western Europe. In addition to Russia, the Czech Republic also is conducting negotiations with Norway regarding possible large-scale gas supplies from that country beginning in the year 2000. Increased natural gas imports are becoming more important as coal's traditional role in the Czech energy mix declines for environmental and economic reasons.

COAL

The Czech Republic contains about 95 percent of the former Czechoslovakia's coal reserves, and all of its known hard (bituminous) coal. Most hard coal (about 90 percent) is produced from 16 underground mines in the Ostrava-Karvina Basin, located in the eastern region of Silesia. Other hard coal comes from the Kladno Basin located near Prague in central Bohemia. The largest areas for production of brown coal and lignite are the North Czech (Severocesky) and Sokolov Basins located near the German border.

Coal accounts for the vast majority (about 88 percent) of energy production in the Czech Republic, as well as nearly all of the country's net energy exports. In 1994, the country is estimated to have produced about 82 million short tons of coal (down from about 124 million short tons in 1984), of which 23 percent was hard coal and 77 percent brown coal or lignite.

Czech coal production - both hard and soft - has declined sharply in the last several years, due both to lower demand as well as to a decline in coal quality. Continued downsizing of the country's bloated, inefficient coal industry and increasing the share of other fuels in the national energy mix are considered top priorities - for both environmental and financial reasons - by the Czech government. As Czech coal production has fallen, coal exports have also declined. This trend is likely to continue for the foreseeable future.

ELECTRICITY

Total electric generating capacity in the Czech Republic is about 14 gigawatts, the vast majority of which is fueled by relatively dirty brown coal or lignite. Reducing reliance on these environmentally-damaging plants is an important priority for Czech policy makers. Despite this, however, coal is likely to generate the majority of Czech electric power for many more years. As a result both of industrial restructuring and rising prices, electricity consumption has fallen in recent years, although it now appears to have stabilized or even begun to rise once again.

Reduced electricity demand has allowed state electric company CEZ (now undergoing reorganization) to close antiquated and heavily polluting coal plants, particularly in northwestern Bohemia. As of December 1994, 12 units at six major sites (Tisova, Prunerov, Tusimice, Hodnonin, Ledvice, Pocerady) had already been shut down, with additional closings scheduled through 1998. By the end of this program, the country will have shut down about 19 high polluting, technically obsolete coal-fired generating units, with a total capacity of 2.3 gigawatts. CEZ also is seeking to increase electric generation efficiency by modernizing power plant technology, much of which dates from the 1960s and early 1970s. At the same time it is shutting down especially dirty coal plants, CEZ is also investing substantial amounts of money in retrofitting existing coal units with flue-gas de-sulfurization and fluidized-bed combustion equipment. This strategy calls into question CEZ's commitment to switching away from coal towards cleaner-burning fuels, particularly natural gas.

Reducing subsidies to domestic users of electricity is becoming an important issue in the Czech Republic. At present, commercial customers pay around twice as much as residential users for electricity. CEZ would like to reduce this differential by raising prices 35-40 percent on households, but to date it has not done so due to political and social considerations.

Nuclear

The Czech Republic has one operable nuclear power plant, located at Dukovany. The plant is equipped with four, 440-megawatt generators of the relatively new (1980's vintage) VVER-440-213 pressurized water reactor design. Dukovany provides approximately 13 percent of total Czech electric generating capacity. Despite high costs and public concern, construction is also proceeding on the VVER-1000 design Temelin nuclear plant in southern Bohemia near the border with Austria. Temelin will have 2,000 megawatts of installed capacity when completed in 1999. Nuclear power is likely to remain an important component of the Czech Republic's energy strategy as the country attempts to reduce pollution from dirty brown-coal power plants, particularly in the southern Bohemia region.

Renewable Energy/Environmental Issues

The U.S. Department of Commerce ranks pollution control equipment as the best prospect for export of U.S. goods and services to the Czech Republic. With the Czech government placing high priority on reducing the country's severe air, water, and solid waste pollution, the total market size for pollution control equipment is estimated at about $475 million in 1995. Continued integration with western Europe likely will cause the pollution control sector to expand rapidly, as the Czech Republic attempts to meet western environmental standards. In particular, clean coal technology and expertise (where the United States has a comparative advantage) is likely to play an important role. In addition, Czech coal industry officials have expressed interest in production of gas and synthetic oil products from coal.

In order to achieve the country's environmental goals, the government in early 1995 outlined a strategy which consisted of: increasing use of nuclear power; supporting energy conservation and greater use of renewables; incorporating external environmental costs into the price of energy by 1998; introducing a carbon tax by 2000; diversifying energy sources away from coal; and promoting more efficient and cleaner consumption of coal and other energy sources.

COUNTRY OVERVIEW

President: Vaclav Havel
Prime Minister: Vaclav Klaus
Independence: January 1, 1993 (from Czechoslovakia)
Population (July 1994): 10.4 million
Location/Size: Central Europe/78,703 sq. kilometers, slightly smaller than South Carolina
Major Cities: Prague (capital), Brno, Ostrava
Languages: Czech, Slovak
Ethnic Groups: Czech (94%), Slovak and other (6%)
Religions: Atheist (40%), Roman Catholic (39%)
Defense: 92,900 (army: 37,400, air force: 25,000)

ECONOMIC OVERVIEW

Currency: Czech Koruna (Kc)
Market Exchange Rate (8/24/95): US$1 = 27 Kc
Gross Domestic/National Product (GDP) (1993E, purchasing power equivalent): $75 billion
Real GDP Growth Rate (1995E): 4.1%
Inflation Rate (consumer prices, 1995E): 9%
Major Trading Partners: Slovakia, former Soviet republics, Germany, Austria, Poland, Switzerland, UK, Italy
Merchandise Exports (1995E): $12.5 billion
Merchandise Imports (1995E): $16.9 billion
Major Export Products: Manufactured goods, machinery and transport equipment, chemicals, fuels, minerals, metals
Major Import Products: Machinery and transport equipment, fuels and lubricants, manufactured goods, raw materials, chemicals, agricultural products
Unemployment Rate (1995E): 4%
Total External Debt (12/93): $8.7 billion

ENERGY OVERVIEW

Industry and Trade Minister: Vladimir Dlouhy
Proven Oil Reserves (1/1/95): 7 million barrels
Oil Production (1994E): 2,400 barrels per day (b/d)
Oil Consumption (1993E): 152,000 b/d
Net Oil Imports (1993E): 150,000 b/d
Crude Oil Refining Capacity (1/1/95): 307,000 b/d
Natural Gas Reserves (1/1/95): 137 billion cubic feet (bcf)
Natural Gas Production (1993E): None
Natural Gas Imports (1993E): 240 bcf
Coal Reserves (1994E): 6 billion short tons
Coal Production (1993E): 88.1 million short tons (mmst)
Net Coal Exports (1993E): 13.5 mmst
Electric Generation Capacity (1994E): 14.2 gigawatts
Electricity Generation (1993E): 56 billion kilowatthours

ENVIRONMENT OVERVIEW

Total Energy Consumption (1993E): 2.4 quadrillion Btu
Energy Consumption per 1987 Dollar of GDP (1993E): 32 thousand Btu (vs. 16.3 thousand Btu in U.S.)
Energy Consumption per Capita (1993E): 228 million Btu (vs. 325.6 million Btu in U.S.) Energy-related Carbon Emissions (1993E): 52 million metric tons (0.1% of world carbon emissions)
Carbon Emissions per Thousand 1987 Dollars of GDP (1993E): 0.69 metric tons (vs. 0.29 metric tons in U.S.)
Carbon Emissions per Capita (1993E): 5.2 metric tons (vs. 5.3 metric tons in U.S.)
Major Environmental Issues: Air and water pollution in areas of northwest Bohemia centered around Zeplica and in northern Moravia; acid rain

ENERGY INDUSTRIES

Organization: - Hard and soft coal - produced by a variety of largely state-subsidized companies, including Mostecka, Uheln Spolecnost, and Ostravsko-karvinske doly; Czech Refineries - crude oil refining; Transgas - controls Czech gas trade, transit, and transmission sectors; CEZ - the predominately state-owned Czech Power Enterprise, which traditionally (especially prior to 1990) acted as a central coordinating body for a series of power stations, electric distribution enterprises, centralized heat suppliers, power equipment manufacturers. In May 1992, CEZ was converted to a joint stock company, and privatization of electricity distributors and other companies is proceeding.
Major Coal Producing Areas: Hard Coal (Bituminous): Ostrava- Karvina, Kladno basins; Brown Coal and Lignite: Severocesky, Sokolov basins
Oil and Gas Pipelines Crossing Czech Territory (note - only Transgas is a domestically-owned pipeline): Friendship (oil); Adria (oil); Transgas (natural gas); Brotherhood (natural gas)
Oil Refineries: Litvinov, Kralupy, Pardubice, Kolin
Nuclear Power Plants: Dukovany, Temelin (under construction)

Links to other sites:
 Latest EIA Detailed Annual Data (1994)
 1997 CIA World Factbook - Czech Republic

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File last modified: September 1995

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