Poland pledges PLN100bn for its energy drive

By bne IntelliNews November 23, 2012

bne -

Poland plans to invest over PLN100bn (€24bn) in its energy sector by the end of the decade as it drives for greater independence from Russian gas supplies and lower reliance on coal for power generation, Prime Minister Donald Tusk announced on November 21.

Despite the increasing impact of the Eurozone crisis on the country's economy, Warsaw is pushing hard to develop alternative gas supplies - both imported and domestic - to replace the 63% or so of consumption it currently buys from Gazprom each year. It is also planning to develop nuclear and renewable energy in a bid to meet EU emissions targets, with 90% of its power currently produced by coal-power plants.

"It's the beginning of a large wave of investment in the Polish energy sector, which including our nuclear projects, will exceed PLN100bn by 2020," Tusk told reporters, according to AFP. "These investments have a strategic dimension," Tusk said, adding that "today, energy is the key to politics".

Arounf PLN40bn will be used to build eight new power plants, which are set to cover about 17% of Poland's annual consumption, Tusk added. Four will be coal-fired, the remainder will burn gas. A similar amount is earmarked for Poland's first nuclear reactor, due to be up and running by 2024.

Poland said on November 20 that it is currently conducting research to quantify regional demand as it mulls expanding its planned liquified natural gas (LNG) terminal on the Baltic coast in a bid to make it a CEE hub. In tandem with pipeline connectors to link the country with neighbouring states, the first domestic-facing phase of the LNG project, which is planned to launch operations in the second half of 2014, is set to cost PLN18bn, the PM said.

A further PLN5bn is earmarked to explore and develop the country's shale gas deposits, which should be capable of supplying Poland for decades, according to the latest estimates. However, Treasury Minister Mikolaj Budzanowski called the same day for exploration efforts to be upped if the country is to meet its target of doubling domestic gas output by 2020 in order to offer it greater leverage in talks with Russia on a new long-term supply contract, with the current agreement set to end in 2022.

"Achieving at least 10bn cm of domestic output is our only chance to cut that dependency," Budzanowski said, reports Bloomberg. "Ten-plus wells per year is way too little to achieve that, we need to drill several times more."

That complaint, on top of Tusk's claims of huge investment, is a warning for Poland's state-controlled giants, which have been charged with leading the energy security push. While the leading role of national gas monopoly PGNiG in exploring for shale gas is clear, the country's other giants - including utilities, oil refiners and copper miner KGHM - have also been commanded to dig deep to find the capital to fund the drive. On top of demands for high dividends to help shore up the budget, that has seen some battling to save plans for their core businesses.

While foreign - mostly US - investors were early arrivals in 2011 to explore Polish reserves, disappointing drilling results has seen their enthusiasm wane this year. Poland will have 34 exploration wells completed this year instead of the 45 expected earlier, Deputy Environment Minister Piotr Wozniak said in September. The country has granted over 100 licenses to explore for the fuel. Total investment in exploration and development of the sector by both domestic and foreign companies should reach €12.5bn by 2020, Budzanowski claimed in October.

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