Polish LNG terminal finally set for lift off

By bne IntelliNews October 12, 2015

bne IntelliNews -

 

Poland's liquefied natural gas (LNG) import terminal on the Baltic coast was finally officially opened on October 12. 

With Poland's shale gas dream apparently dead now, the PLN2.4bn (€583mn) terminal has inherited the leading role in Warsaw's bid to increase energy security by reducing dependence on gas imports from Russia. However, the government's confused energy strategy in recent years has delayed  the facility in the northwestern town of Swinoujscie - it was orginally planned to launch in 2014 - while claims that the facility could replace Russian gas by 2016 look highly ambitious. 

Poland consumes around about 16.5bn cubic meters (cm) of gas per year. Of that, it imports 12bn cm, with 7bn cm flowing from Russia. However, with the onset of the crisis in Ukraine, Poland has led calls to reduce reliance on Gazprom, despite securing price discounts recently. 

"Today we can say that as much as 90% of our gas can be imported from other sources than the east, and next year, when we are in full swing, we will stand at 100%," Prime Minister Ewa Kopacz claimed during the opening ceremony. 

Independence

Lithuania, perhaps the only EU member state to challenge Poland in the strenght of its hawkish stance towards Russia, launched its own LNG terminal at the start of the year, and hopes to offer supplies to Poland and other CEE states soon in order to improve its economic performance. However, Vilnius also claims the "Independence" is already paying its way by having forced Gazprom to offer a price cut of over 20%. 

Like Lithuania, the Polish facility will kick off slowly. It has secured just one supply contract so far, with Qatargas to supply 1.5bn cm annually over the next 20 years. The first shipment was expected in 2014, but project delays and disagreements with the contractor have consistently pushed the launch date back. 

The first test shipments will now arrive in Swinoujscie in December and Q1 2016. Commercial operations won't kick off until the second quarter at the earliest, Polskie LNG - the state-owned operator - said in early September. 

The company hopes to quickly sign more supply contracts to fill the terminal's 5bn cm capacity. However, the Lithuanian experience with pricey LNG suggests that could be a struggle. Poland says it hopes to offer gas to the Czech Republic, Slovakia, Ukraine and Lithuania via the terminal. 

At the same time, Poland has several large state-controlled companies that are major gas consumers that it can push into the cause. Chemicals group Azoty, the country's top user, is building a new propylene plant right next door to the facility. 

Polskie LNG says it plans to decide next year whether to expand the facility to handle 7.5bn cm - which would constitute nearly 50% of Poland's annual consumption. It is that scenario that Kopacz means when she refers to "full swing" operations, although the PM's arithmatic appears a little off. However, state-controlled gas utility PGNiG has a contract with Gazprom committing it to buy 8.5bn cm per year to 2022. 

In other words, Russia's role as the main regional gas supplier remains key. Poland, Slovakia, and Ukraine recently criticised an agreement that Western European energy companies signed with Gazprom to double the size of the Nord Stream pipeline that runs under the Baltic Sea to dock directly in Germany. The expanded Nord Stream would mean further diversion of Russian exports to Europe from these countries' transit infrastructure, resulting in severe financial losses, they claim. 

 

 

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