Poland steps up bid for CEE gas hub role

By bne IntelliNews November 22, 2012

bne -

Poland has launched a review of its planned liquified natural gas (LNG) terminal on the Baltic coast, with the aim of expanding the project to increase energy security across Central and Eastern Europe.

Polskie LNG, the project company established to construct and operate the terminal in Swinoujscie, announced on November 20 that it has launched the review to assess demand for a technical expansion of the terminal - which is set to launch its first phase of operations in the second half of 2014 with a capacity of 5bn cubic metres per year (cm/y) - and the provision of additional services.

"Our business decisions ought to reflect the needs of the market. We assume that the capital invested in the construction of the LNG terminal shall be used most efficiently to bring the best returns in the future. We expect our terminal to play an important role not only on the energy map of Poland but also in the entire region of Central and Eastern Europe, offering the clients a wide range of business opportunities," CEO Rafal Wardzinski said in a statement, according to Baltic Review.

Despite having won a gas price discount from Russia's Gazprom earlier this month, Poland is pressing on with its plans to increase energy independence from Russian imports. On top of its drive to develop some of the region's largest estimated shale gas reserves, Warsaw is pushing state-controlled companies to invest in the region's first LNG terminal. That would offer it the chance of tapping into global gas prices, which are significantly lower than those in Russian long-term oil-linked contracts due to lower demand through the crisis and the effect of US shale gas production.

The launch of a review to gauge demand across CEE illustrates that it also hopes to establish itself as an alternative hub for gas for the rest of the region, most of which is also fighting Gazprom's huge leverage in the regional market to secure better prices. Warsaw signed an agreement with Croatia in September to link Swinoujscie with an LNG terminal planned in the Adriatic and set to come online in 2017, which the pair hopes will eventually offer them greater leverage in supply negotiations. While the Polish terminal is contracted to receive oil-indexed gas from Qatar, two-thirds of its capacity will be reserved for spot market purchases, according to EurActiv.

Next door, Lithuania also plans to start accepting LNG deliveries by the end of 2014 to a floating terminal as it seeks to break Russia's 100% grip on the Baltic market. Vilnius recently ran a snap tender for suppliers, and says it received 16 offers. Lithuanian officials spent much of 2012 visiting the likes of Qatar and Norway, and also has a preliminary agreement with US-based Cheniere Energy.

Poland currently consumes 14.38bn cm/y, but produces no more than 2.97bn cm/y, a recent study showed. That leaves the country relying on Russian imports for 63% of consumption. Financing for the Swinoujscie terminal was completed in early October, when the EBRD committed to a 12-year loan PLN 300 million (€75m) to Polish gas grid operator Gaz-System. The rest of the €660m costs for the originally planned terminal will come from the European Commission via grants, the European Investment Bank and Polskie LNG's own finances.

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