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Printed: 29.03.2024.


PrintPoland energy diversification ‘success story’: government should not let it fail

Danila Bochkarev, Senior Fellow, EastWest Institute, specially for BC, 11.09.2017.
Warsaw is possibly the “best in class” in Europe regarding diversification of its energy supplies. Now it is the time for Poland to stop holding “regulatory reins” so tight and let the energy market work to the country’s own benefit. All the ingredients are there: infrastructure is in place, there are several sources of gas supply and a lot of neighboring countries willing to connect to the Polish gas network.

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Disclaimer: The views expressed here are solely those of the author and do not represent views of his organization


Warsaw is possibly the “best in class” in Europe regarding diversification of its energy supplies - the country which used to be heavily dependent on the single supplier – Russia - is currently able to receive more than 90 percent of its imported gas supplies via reverse-flows from Germany or in form of  LNG. Poland can import up to 5.5 billion cubic meters (bcm)/year of natural gas from Germany via virtual reverse flow applied to Yamal-Europe pipeline. Furthermore, additional 2.7 billion cubic meters (bcm/year) of Germany-Poland physical reverse capacity is available at the Mallnow compressor station.  Polish LNG terminal in Swinoujscie has been operational since 2016. The terminal’s initial re-gasification capacity (5 bcm/year) which will be soon extended to 7.5 bcm/year.  PGNiG also plans to build a 10 bcm/year pipeline connecting Poland to Norway’s gas fields.


In 2009 Poland’s gas company PGNiG signed an LNG delivery contract with Qatargas. According to the deal Qatargas was supposed to deliver to Poland around 1 million tonnes (1.33 bcm) of LNG annually for 20 years starting from 2014. In March 2017 Qatargas and PGNiG have agreed to double supply volumes to 2 million tonnes of LNG per year for the period 2018 – 2034. A spot delivery from the United States - LNG tanker Clean Ocean arrived to Poland in June 2017 – further diversified Poland’s natural gas portfolio.


The country’s gas market is also getting increasingly liquid and starting to resemble “mature” gas hubs in Western Europe such as Dutch TTF of the NBP in the UK. According to the Agency for the Cooperation of Energy Regulators (ACER), Poland’s gas market has the characteristics of an emerging hub with improving liquidity. This compares favorably to other countries in Eastern Europe such as the Baltic EU Member States, Bulgaria, Romania or even Slovakia. International Gas Union (IGU) confirms ACER’s findings (2016) - according to the IGU’s data gas-on-gas price formation applies to sixty percent of gas supplies in Central Europe. This number is lower than in the northwest Europe (over ninety percent), but significantly higher the Mediterranean area (Greece, Italy, Portugal and Spain) score where gas-on-gas price formation represents only 35 percent of gas supplies.


One reason for the increased liquidity is a significant improvement in the level of interconnectivity and new reverse flow options that have been created over the last few years, allowing Poland to source gas from neighboring countries situated outside traditional east-west energy supply corridors. In this region, the Czech Republic had already offered a good example of how connectivity can quickly turn a relatively isolated and illiquid market into a well-functioning hub and Poland will follow suit. For, new infrastructure has already made possible gas deliveries to the east (Ukraine) and south (Czech Republic and Slovakia) thus transforming Poland into an emerging energy hub.  Construction of a new energy infrastructure helped Poland to emerge as a competitor to Germany’s Nord Stream and this is good news for the EU’s single gas market and European customers.


The “hub strategy” is possibly the cornerstone of the national energy policy and is supported both on political and business levels. On July 6, 2017 Reuters reported that President Duda – straight after his meeting with President Trump - voiced his support for a plan to build a gas link between Poland’s LNG terminal and Croatia. Interconnectivity is also one of the key pillars of PGNiG’s strategy – the company has been exporting gas to Ukraine since 2016. In order to supply more gas to the neighboring countries, PGNiG has reserved an additional 35 percent of re-gasification capacity at Swinoujscie and the Polish gas company has already access to 65 percent of the terminal. “We have had over a year of intensive exploitation of the terminal. We have signed the second long-term contract for LNG with Qatargas and we received three spot supplies. Demand for gas in Poland is growing. We are also increasing export of the commodity to Ukraine,' said Piotr Woźniak, President of the Management Board at PGNiG SA (reported in the company’s new release on August 29, 2017).


These infrastructure developments and new supply sources have already made Poland independent from natural gas imports from Russia, while Polish energy market became fully competitive and immune to price and supply volatility shocks.


Furthermore, these developments had already put Polish energy companies in a stronger negotiating position vis-à-vis key energy exporters like Russia but also the U.S. In August 2017 Polish Minister of Foreign Affairs Witold Waszczykowski pointed out in his interview to RIA Novosti that Poland is “inclined to import gas from the United States on terms that are competitive as compared to gas from other sources, such as, Qatar or Russia.” This statement might be a first step towards de-politisation of Polish gas market when energy supplies are measured by its’ economic value and not by its’ origins or political/geo-political considerations.


The best conclusion is the quote from Shell’s[1] response to the Commission consultation on an EU Strategy for liquefied natural gas and gas storage released in 2015. Shell noted that “security of supply issues in some European countries are created or exacerbated by the very slow adoption of the European Regulatory framework”. Well-functioning market is the “best way to deliver security of supply,” - concluded Shell. In fact, non-compliance with EU “rules of the game” and neglect of legitimate interest of key market players are not in Poland’s national interest. Now it is the time for Warsaw to stop holding “regulatory reins” so tight and let the energy market work to the country’s own benefit. All the ingredients are there: infrastructure is in place, there are several sources of gas supply and a lot of neighboring countries willing to connect to the Polish gas network. Last but not least, two world’s largest natural gas producers – the U.S. and Russia – are competing for access to the Polish gas market.



http://www.baltic-course.com/eng/energy/?doc=133052