Poland plans and successfully diversifies on the gas market
Some time ago, the government in Warsaw focused on the diversification of natural gas supplies, while limiting gas supplies from Russia. Practical steps and challenges in this area are analyzed by Małgorzata Banasik, co-founder and partner at the BWW law firm.
Already at the end of 2019, PGNiG submitted to the Russian Gazprom a declaration of will to terminate the Yamal contract signed in 1996, with the date of December 31, 2022. Investments carried out, among others, in by Gaz-System, as well as consistency in adhering to ambitious plans.
Slow consequently work in Gaz-System
In the last 3 years, three new interconnectors with Lithuania, Slovakia and Denmark have been built in Poland. Moreover, the construction of the North-South Corridor was completed and the regasification capacity of the LNG Terminal in Świnoujście was increased. The implementation of the FSRU construction project, i.e. the floating LNG terminal in Gdańsk, was also launched. Equally impressive and illustrative as specific projects are the numbers in this “calling out”. In the last 6 years, nearly 2,000 km of gas pipelines have been built and 4 gas compressor stations have been built or expanded.
The jewel in the crown of these investments is the Baltic Pipe, which is important for increasing the security and stability of the Polish gas market, especially in the face of Russia’s aggression against Ukraine and the consequent suspension of gas supplies from Russia to Poland. The Baltic Pipe provides Poland with access to gas deposits located on the Norwegian Shelf.
Currently, the gas pipelines and the Baltic Pipe gas compressor station in Denmark have achieved the target technical parameters and can transport 10 bcm per year starting from November 30, 2022. Of course, despite everything, the cessation of gas supplies from Russia in April 2022 raised questions and shook the gas supply chain to Poland . However, investments in new gas infrastructure, especially those completed in 2022, such as the Baltic Pipe, have so far helped deliver gas to customers in accordance with their needs.
Gas in Poland’s Energy Policy
Much of the extremely important and needed diversification work has been done successfully. However, many challenges lie ahead. Adopted in 2021. “Poland’s Energy Policy until 2040.” focused on the development of renewable energy. However, the document indicates gaseous fuel as a “bridge fuel in the energy transformation.” The need to expand gas units as regulatory capacity was also emphasized.
Gas was to be treated as a transitional fuel for electricity production, e.g. due to the need to quickly reduce CO2 emissions in the power industry. Numerous large-scale gas power plant construction projects have been developed. Due to the destabilization of the Polish gas market caused by Russia’s aggression against Ukraine, which resulted in a significant increase in gas prices, this fuel became the most expensive source of electricity production.
It is highly probable that despite the assumptions of the Energy Policy, which treat gas as a transitional fuel, the energy market will have to review its plans to build gas power plants and find cheaper sources of electricity. These assumptions stated that the natural gas market would be subject to further liberalization, and the means to achieve this goal would be, inter alia, releasing gas trading companies from the tariff obligation for the last group of customers, i.e. households.
We now know that not only households will remain under tariff protection in the coming years. The catalog of protected entities was additionally extended, e.g. o entities pursuing public goals (schools, hospitals, nursing homes).
This shows how much Russia’s aggression against Ukraine and the resulting collapse of the gas market changed the original assumptions regarding liberalization, development and desired changes in the energy markets. A similar situation may occur when it comes to treating gas as a transition fuel.
We already know that PEP will be subject to necessary updates, and 2023, which started not so long ago, will bring new solutions and concepts in this regard. The question is what about the large-scale gas power plant construction projects already started, such as the Ostrołęka C gas power plant. This project has already failed spectacularly once (they concerned the construction of a coal power plant).