The Terminal

“Natural gas is hemispheric. I like to call it hemispheric in nature because it is a product that we can find in our neighbourhoods.” So remarked George W. Bush and, I suppose, if your neighbourhood is in Texas, you are in with a fighting chance. Poland, alas, is not Texas, and so gas has tended to come from the neighbour to the east with whom, as is often the case with neighbours, Poland does not always see eye to eye. Which is why the opening of Poland’s new liquefied natural gas (LNG) terminal at Świnoujście on the Baltic is so important.

The Polish Prime Minister, Ewa Kopacz, opened the LNG facility on Monday, hailing it as a key move to improve the energy independence of Poland. “Today we can say that as much as 90 per cent of our gas can be imported from sources other than the East, and next year, when we are in full swing, we will stand at 100 percent,” she said during the opening ceremony.

Which is no doubt reassuring if one is worried about brother Putin turning off the supply just when winter comes, since Russia currently supplies the majority of Poland’s gas, as it does that of other countries in the region. Given Russia’s adventures elsewhere, all of which require money, it seems unlikely that the gas would actually be turned off. Still, it’s reassuring to know that there is an alternative and a way of reducing dependency on gas those supplies.

Of course, just because all of Poland’s natural gas requirements may be met from elsewhere doesn’t mean that they actually will be. As I wrote here in Pipeline, gas is normally supplied on long term contracts, typically on a take or pay basis, whereby the buyer must accept delivery and pay for the agreed minimum volumes of gas during the contract term. If it chooses, the buyer may decline to take that volume of gas on any given day in which case it must still pay for the agreed volume, and has a limited opportunity to take at a later date the gas paid for but not actually taken. Thus, assuming the normal rules of commerce apply, Poland may not be immediately free to seek all its gas elsewhere.

And then there is cost. Pipeline gas is, all things being equal, typically cheaper than LNG for distances of up to 3,000 km, and over 90 per cent of the world’s gas is delivered via pipelines. LNG is relatively expensive in construction and operational cost, although it is being supplied to an increasing range of markets. In the longer term, much will depend on the price at which Poland is able to secure LNG from suppliers such as Qatar as to whether the economic, as opposed to the geo-political, arguments favour LNG. Nevertheless, it is better to have this new terminal than not, and it remains to be seen how skilful Poland is in grasping the opportunity to build itself up as a regional LNG hub supplying gas to other Baltic and regional markets.

Be that as it may, the LNG terminal at Świnoujście is at last open after a number of postponements. “This investment is not only the first but also the only such investment in this part of Europe,” Ewa Kopacz said. The first gas tanker is due to dock in Świnoujście between late November and early December, with the terminal starting operations several months later, becoming fully operational in the second quarter of 2016.

Needless to say, even the terminal opening could not avoid becoming caught up in this month’s elections. Beata Szydło, the candidate for Prime Minister from the Law and Justice (PiS) party, has criticised the government for taking so to open the terminal. In her view, it could have been opened two years ago although, even if that were true, it seems a little harsh on Kopacz who has only been prime minister for a year. But that is politics for you – for the opposition nothing is ever quite good enough. Goodness knows how she will react to the news that Polish exports jumped 7.2 percent to EUR 115.6 million in the first eight months of the year; that Polish beer production is at a ten year high; and that insolvencies are down, to take three random examples.

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