Diversifying away from Russian Gas: The Case of Poland
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WEINER CS. DIVERSIFYING AWAY FROM RUSSIAN GAS: THE СASE OF POLAND
National Peculiarities1
DOI: 10.23932/2542-0240-2019-12-2-138-163-2
Diversifying away from Russian Gas:
The Case of Poland
Csaba WEINER
PhD in Economics, Senior Researcher, Centre for Economic and Regional Studies,
Institute of World Economics of the Hungarian Academy of Sciences, Tóth Kálmán
u. 4, H-1097, Budapest, Hungary
E-mail: weiner.csaba@krtk.mta.hu
ORCID: 0000-0002-9524-1215
CITATION: Weiner Cs. (2019) Diversifying away from Russian Gas: The Сase of Poland.
Outlines of Global Transformations: Politics, Economics, Law, vol. 12, no 2, pp. 138-163.
DOI: 10.23932/2542-0240-2019-12-2-138-163-2
Received: 20.02.2019.
This article was supported by the János Bolyai Research Scholarship of the Hungarian
Academy of Sciences. The author would like to thank the editor and two anonymous
reviewers for their useful comments and suggestions on an earlier version of this
article.
ABSTRACT. Commercial and geopolitical taken concrete action, and it has finally
realities drive Central and East European made huge progress in gas import source
(CEE) countries to reduce dependence on diversification. New pipeline and liquefied
Russian gas imports and enhance securi- natural gas capacities could allow Poland
ty of supply. While, in general, these coun- to reach its goal, though the existing im-
tries are heavily dependent on Russian gas, port portfolio still lacks a supply contract
they have different conditions, varying ap- for Norwegian gas imports to be supplied
proaches towards dependence and securi- through the yet-to-be-built Danish–Polish
ty of supply, and thus give differing energy Baltic Pipe. Without these amounts, Rus-
policy answers. Diversification is a means sian supplies could be necessary, or at least
of reducing dependence and enhancing se- Russian molecule supplies. In contrast, do-
curity of supply. There are many types of mestic gas production does not seem to
diversification. To understand this com- provide a grounding for diversification. Al-
plexity and assess CEE countries, we have beit energy efficiency and conservation are
developed a scheme of different CEE diver- significant opportunities, reducing total
sification options for Russian gas imports. gas consumption is also not possible, main-
In this article, we analyse these options and ly due to the movement away from coal.
achievements for one specific country, Po- From this point of view, sectoral diver-
land, which seeks a level of diversification sification has limited real relevance, as it
that would enable ending Russian gas im- can only limit further gas demand growth.
ports. We find that since the January 2009 With the termination of large-quantity
Russian–Ukrainian gas crisis, Poland has long-term Russian gas supplies, transit di-
1OUTLINES OF GLOBAL TRANSFORMATIONS
versification will also bear less importance. wards security of supply and dependence,
Nevertheless, it remains to be seen whether and thus provide differing energy policy
the termination of Russian (long-term) gas answers. Diversification is a means of en-
supplies will actually serve security of sup- hancing security of supply and decreas-
ply, as diversification alone does not inevi- ing dependence. While diversification
tably lead to achieving this goal. has become a buzzword in recent times,
the concept requires some clarification,
KEY WORDS: Poland, Russia, Central as there are many types of diversifica-
and Eastern Europe, natural gas, security of tion, and the degree of complexity of CEE
gas supply, gas diversification choices is high. To understand this com-
plexity and assess CEE countries, we have
developed a scheme of different CEE di-
Introduction versification options for Russian gas im-
ports (Figure 1), allowing for cross-coun-
The issue of gas imports tends to be try comparisons. In this article, we ana-
very sensitive in Central and Eastern Eu- lyse the possible diversification options
rope (CEE). This sensitivity has even ris- and achievements for one specific coun-
en in some respects since the January try, Poland, which has made a passion-
2009 Russian–Ukrainian gas crisis, as gas ate, if not obsessive, demand for diversi-
has acquired an increasingly bad image. fication away from Russian gas, its dom-
Many aspects of both the commercial and inant import source. We argue that de-
geopolitical realities have worked against cisions on gas diversification (and secu-
gas, though natural gas is the cleanest rity of supply) are the consequences of
fossil fuel and a potential backup source choices made from among different se-
for renewables (pointing to sustainabili- curity of supply dimensions (i.e., avail-
ty among the three dimensions of gas se- ability, affordability and sustainability).
curity), while also both the EU and na- These choices should be made on the ba-
tional governments have taken measures sis of such influencing factors as the fol-
to increase the security of gas supply (re- lowing: (1) the energy perspective (the
lating to its availability and affordability, energy market supply/demand and price
i.e., the two other dimensions of gas se- conditions); (2) the institutional context
curity). In terms of commercial reality, it (the role of the EU); and (3) the govern-
is worth mentioning the gas price com- ment’s approach towards dependence and
petitiveness problem between 2011 and its perceptions and expectations of threat,
2014 [Stern 2017, pp. 3–4], Gazprom’s as well as its relations with Russia. Per-
discriminating monopoly pricing [Stern ceptions are very important when evalu-
2015, p. 11], and Gazprom’s other practic- ating dependence. Poland has historically
es confirmed by the European Commis- had bad relations with Russia, and main-
sion’s Directorate-General for Competi- tains a securitized energy agenda based
tion (DG COMP) [Antitrust: Commis- on fears of problems with the availabil-
sion Imposes Binding Obligations 2018]. ity and affordability of Russian gas sup-
The geopolitical reality is associated with plies. Naturally, bilateral relations vary
Russia’s actions in Ukraine in 2014 and al- greatly from government to government.
legations related to the notion of “energy/ However, with Jarosław Kaczyński’s op-
gas weapon/diplomacy”. While, in gener- position Law and Justice (PiS) party win-
al, CEE countries are heavily dependent ning the parliamentary elections in Octo-
on Russian gas supplies, they have differ- ber 2015 (removing the ruling Civic Plat-
ent conditions, varying approaches to- form, PO, from power), the level of an-
2WEINER CS. DIVERSIFYING AWAY FROM RUSSIAN GAS: THE СASE OF POLAND
ti-Russian sentiment has reached a level Domestic means of reducing gas de-
that has resulted in an energy policy aim- mand include energy efficiency, energy
ing to eliminate all Russian gas molecules conservation and sectoral diversification
from its economy. Poland argues that this on the basis of fuels or energy produced
is necessary on grounds of security of gas domestically. Increasing gas prices affects
supply. Stern terms this ideological stand all three options. Energy efficiency refers
as “ideological physicality” [Jonathan to using technologies that require less en-
Stern, email communication, March 15, ergy to perform the same function (e.g.,
2019]. On this agenda, a significant role is using LED light bulbs, home insulation),
granted to the Polish state-owned gas sec- while energy conservation means chang-
tor enterprises – the natural gas transmis- ing behaviours in order to use less ener-
sion system operator (TSO) Gaz-System gy (e.g., turning the lights off when leaving
and Polish Gas and Oil Company PGNiG. the room) [Energy Efficiency and Conser-
The increasing politicization of the issue vation 2018]. Sectoral diversification – also
of Polish gas imports is also underlined called fuel-mix, fuel-type or energy-source
by more intensive political cooperation diversification – aims at reducing gas de-
on energy between the USA and Poland. mand in a different way. It supports efforts
Autumn 2018 saw a joint statement of the to move away from gas in the energy/elec-
US and Polish presidents, a joint declara- tricity/heat balance. In the case of domes-
tion of the energy ministries concerning tic sectoral diversification, gas is substitut-
enhanced cooperation on energy secu- ed by domestically produced primary en-
rity and a memorandum of understand- ergy (e.g., domestic coal). In contrast, ex-
ing on a Polish–US strategic dialogue on ternal sectoral diversification (i.e., sectoral
energy1. diversification based on imported fuels or
The article is structured as follows. energy) not only involves the option of re-
Firstly, in Section 2, we present our diversi- placing gas with another imported primary
fication scheme, and then in Section 3, we energy (e.g., gas is substituted by imported
apply it to Poland. Finally, Section 4 pro- coal or nuclear fuel), but also the possibili-
vides a summary and some conclusions. ty of imports of electricity, a secondary en-
ergy source, through which gas-powered
electricity generation and thus gas con-
Methodology sumption could also be reduced. How
ever, if seen in the context of diversifica-
Basically, diversification can be domes- tion away from Russia, then the sectoral
tic or external. Possible domestic diversi- diversification achievement is overshad-
fication options include increased internal owed by the fact that, for example, the coal
gas production and reduced gas consump- imports are from Russia and the domestic
tion. However, reduced gas consumption nuclear power plant uses Russian technol-
can also be achieved as external diversifi- ogy or nuclear fuel, and is set up with Rus-
cation. Other ways of external diversifica- sian participation.
tion comprise gas import source diversifi- One type of external diversification is
cation and transit or route diversification. gas import source diversification, which
The aforementioned diversification op- may be realized with or without geograph-
tions can be further broken down. ical diversification. The former refers to
1 We wish to thank an anonymous reviewer for bringing this issue to our attention.
3OUTLINES OF GLOBAL TRANSFORMATIONS
other countries or regions and the lat- plier can occur either through physical or
ter to a more diverse contractual relation- contractual diversification. In the case of
ship with the actual exporting country, i.e., contractual diversification, as compared
Russia. to physical diversification, under normal
Geographical diversification can work (i.e., non-emergency) conditions, typical-
not only without but also with Russian in- ly gas of Russian origin is delivered, al-
volvement. Regarding geographical diver- though physical delivery from a non-Rus-
sification without Russian involvement, sian seller is in principle also possible. If
purchasing gas from a non-Russian sup- Russian gas is not physically available, for
Figure 1. Central and East European gas diversification scheme
DIVERSIFICATION
Domestic diversification External diversification
Reducing gas demand
Sectoral diversification
Increasing Energy Increasing Based on fuels/ Based on Gas Transit/
domestic conserva- efficiency energy produced imports import
gas domestically (e.g., coal, source route
tion diversification
production (e.g., coal) electricity) diversification
Geographical Without geographical Via other Western CIS transit Via transit-avoidance
diversification diversification states pipelines
(non-Russian countries) (Russian companies) (e.g., Yamal-Europe) (e.g., Nord Stream)
Without Russian With non-Gazprom companies With Gazprom
Through Russia (e.g., Itera in the Baltics, potential by using various types
involvement shipments from Yamal LNG) of contracts
Contracts with
Russia serves Russia is Physical Contractual Contracts with different time
simply as involved as diversification diversification more importers horizons: short-,
a transit more than (e.g., LNG from (e.g., gas from in the CEE medium- and
country (no a transit Qatar to Poland) Norway to the country (e.g., in long-term
free transit) country Czech Rep.) Lithuania) (see in Hungary)
Re-exports via an obscure, non-transparent Re-exports through a
intermediary entity 100% Gazprom-owned subsidiary
(e.g., Eural Trans Gas, Rosukrenergo) (e.g., Gazprom Schweiz)
Source: Own compilation, partly based on Balmaceda [Balmaceda 2008; Balmaceda 2013] and Stern [Stern 2002].
4WEINER CS. DIVERSIFYING AWAY FROM RUSSIAN GAS: THE СASE OF POLAND
example during a Russian–Ukrainian gas al and refers to re-exports through a whol-
crisis, the contracted volumes will be de- ly-owned subsidiary of Gazprom. Gaz-
livered from other gas sources2. This high- prom Schweiz AG (formerly ZMB Schweiz
lights that Russian gas plays an even great- AG) re-exports Central Asian gas to CEE
er role in CEE. [Weiner 2016, p. 8]3.
Physical diversification can also be en- Some sort of gas import source diver-
sured with Russian involvement. In this sification could also be achieved without
case, the transaction is arranged through geographical diversification, either with
Russia, either in such a way that Russia non-Gazprom Russian sellers or with
serves simply as a transit country or Rus- Gazprom. The first option is quite limit-
sia is involved in the transaction as more ed, and restricted to Itera’s (former) activ-
than a transit country. The first case can- ities in the Baltic states4. This is because,
not work because no free transit is provid- theoretically, buying piped gas from other
ed through Russia. Thus, CEE consumers Russian suppliers is not possible, as Gaz-
are also unable to buy gas directly from prom holds almost exclusive rights to ex-
Central Asia transited through Russia. Di- port pipeline gas from Russia. Howev-
rect supplies to Ukraine were stopped at er, Gazprom’s almost exclusive rights to
the end of 2005. In order to purchase Cen- export liquefied natural gas (LNG) were
tral Asian gas, transit diversification avoid- partially revoked at the end of 20135. The
ing Russia is necessary. The second case second option for import source diversi-
for physical diversification with Russian fication without geographical diversifica-
involvement includes two methods. One tion is when Gazprom has various types
special method was used until the end of of contracts, either with more than one
2008. Certain CEE countries bought gas importer in the particular CEE coun-
from Central Asia through intermediary try or with one importer but for different
companies at a cheaper price than offered time horizons (short-, medium- and long-
by Gazprom, Russia’s state-controlled gas term). A few examples of the former can
giant. This gas was transited through Rus- be found, but at most only one example of
sia, and Russians played different roles in the latter is known in CEE6.
the various available obscure ways of con- Finally, there is transit or route diver-
ducting these transactions. For example, sification, which is generally supported by
gas was delivered through the controver- both CEE and Russia, but there are various
sial Russian–Ukrainian Rosukrenergo to views on how this should be implement-
Slovakia, Poland, Hungary and Roma- ed. Possible transit diversification options
nia. The second method is still operation- include other Western CIS7 transit states
2 The term “contractual diversification” is used similarly to Stern [Stern 2002], but differently from Balmaceda [Balmaceda 2008;
Balmaceda 2013]. According to Balmaceda [Balmaceda 2008; Balmaceda 2013], contractual diversification refers to a variety of
contractual relationships, either in terms of companies or types of contracts (short-term, long-term, etc.) without geographical
diversification.
3 Naturally, it is impossible to distinguish between the gas molecules originating from Central Asia and those from Russia.
4 Russia’s independent gas producer Itera Oil and Gas Company was acquired by Russia’s state-controlled Rosneft from Itera
Holdings Limited (Cyprus). On the role of Itera, see Weiner [Weiner 2016, p. 61].
5 In theory (!), LNG from Yamal LNG, a non-Gazprom project in Russia, might also reach CEE. (As an anonymous reviewer has noted,
the majority ownership of Yamal LNG is held by Novatek, in which Gazprom has an ownership stake.)
6 However, this is not a perfect example. The major Hungarian contract, which was to expire in 2015 but was instead extended, has been
divided. Thus, two contracts are effective until 2019 and two until 2021 [20 Years of Reliable Russian Gas Supplies to Panrusgas 2016].
7 The 12 non-Baltic former Soviet republics still tend to be referred to as the countries of the Commonwealth of Independent States
(CIS), though, currently, it is a regional organisation consisting of only ten post-Soviet republics, since Georgia and Ukraine are not
members of the CIS.
5OUTLINES OF GLOBAL TRANSFORMATIONS
and transit-avoidance undersea pipelines. tem constitutes roughly a quarter of Polish
Russia prefers diversification of its tran- total gas consumption [Energy Manage-
sit routes to Europe via undersea pipe- ment and Gas Supply System 2018].
lines bypassing Ukraine, mainly in order Poland is still highly dependent on
to reduce risks associated with Russian– Russian gas supplies, but this has been
Ukrainian disputes. changing recently. In 2016, 74.3 per
cent (10.3 bcm) of the total gas imports
(13.9 bcm) came from Russia. Supplies
Results and discussion from Germany and the Czech Repub-
lic represented 18.2 per cent (2.5 bcm)
Poland is the seventh biggest gas con- and 0.04 per cent (4.9 mmcm), respec-
sumer in the EU, with 16.0 billion cubic tively. Due to the start of commercial
metres (bcm) consumed in 20168. Gas pro- LNG deliveries in June 2016, the share
duction amounted to 4.2 bcm, while im- of gas from Qatar and Norway was 6.9
ports reached 13.9 bcm. Gas exports from per cent (963.6 mmcm) and 0.6 per cent
Poland increased to 839.3 million cubic (78.4 mmcm), accordingly [Report on the
metres (mmcm) in 2016 [Report on the Results of Monitoring 2017, p. 29]9.
Results of Monitoring 2017, p. 29]. How- Poland was the first country to receive
ever, despite being a notable gas consum- Soviet gas in the mid-1940s. After the
er, natural gas plays a minor role in Poland, change of the regime, in the 1990s, Rus-
though its share has grown over time. At sian gas supplies were initially arranged
end-2016, natural gas constituted 4 per according to the Yamburg and Orenburg
cent of installed electricity generation ca- agreements. These were replaced by the
pacity, whereas hard coal still accounted 1996 Yamal contract up to 2020 to supply
for 46 per cent, and lignite provided a fur- Russian gas, which was related to the 1993
ther 23 per cent [Szulc 2017]. In 2016, nat- intergovernmental agreement and 1995
ural gas was responsible for 4.7 per cent of protocol to build the Polish section of the
electricity generation, compared to 0.9 per Yamal–Europe transit gas pipeline run-
cent in 2001 and 0.1 per cent in the ear- ning from Russia to Germany across Bela-
ly 1990s. The share of solid fuels stood at rus and Poland. The Yamal–Europe pipe-
78.2 per cent in 2016, whilst 14.0 per cent line was commissioned in 1999 (see be-
of electricity generation was from renew- low). However, due to formerly overesti-
ables [Supply, Transformation and Con- mated gas demand in Poland, the Yamal
sumption of Electricity (1) 2018]. Similar- contract was modified in 2003. It was ex-
ly, in 2016, natural gas provided only about tended until 2022, while annual import
7 per cent of derived heat production. Sol- volumes were reduced. In contrast, Poland
id fuels had more than 80 per cent, while significantly increased its gas imports from
less than 5 per cent of the generation of Russia in 2009, after the early 2009 remov-
heat was from renewables [Supply, Trans- al of the controversial Russian–Ukrainian
formation and Consumption of Electricity intermediary company Rosukrenergo (al-
(2) 2018]. On the other hand, household so, see below). That year, Poland was the
gas consumption from the gas supply sys- only country to increase its imports from
8 We do not have data in bcm for 2017. According to our calculations, gas consumption was close to 17 bcm in 2017 [Report on
the Results of Monitoring 2018].
9 In 2017, the geographic distribution of imports was already somewhat different: 65.6 per cent – Russia, 22.5 per cent – Germany,
10.0 per cent – Qatar (LNG), 0.7 per cent – the Czech Republic, 0.6 per cent – the USA (LNG), and 0.6 per cent – Norway (LNG) [Report
on the Results of Monitoring 2018].
6WEINER CS. DIVERSIFYING AWAY FROM RUSSIAN GAS: THE СASE OF POLAND
Gazprom Export, Gazprom’s export arm, 2015. All of DG COMP’s three main find-
and – at that – significantly so10. In 2010, ings (preliminary view) referred to Po-
Poland was Gazprom Export’s fourth larg- land. Firstly, DG COMP found that Gaz-
est customer outside the former Sovi- prom imposed territorial restrictions (ex-
et Union, ahead of France. While other port bans, destination clauses and other
countries worried about the excess gas vol- measures) preventing gas exports. Second-
umes contracted, Poland was trying to ad- ly, these restrictions could have resulted in
just its negative gas balance in 2009–2010. higher gas prices and allowed Gazprom to
After a short-term contract in 2009, it was pursue an unfair pricing policy. Thirdly,
only in October 2010 that an annex to the Gazprom might have been leveraging its
Yamal contract was signed, allowing for an dominant market position by making gas
increase in gas purchases. With this step, supplies conditional on obtaining unre-
Gazprom’s role in Poland’s gas supplies in- lated commitments concerning gas trans-
creased. However, the contract was never port infrastructure. In Poland, gas supplies
actually renewed or extended until 2037 were made dependent on the acceptance
[Weiner 2013, pp. 7, 18–19]. Furthermore, of Gazprom reinforcing its control over
PGNiG has decided not to extend the the Yamal–Europe pipeline [Stern, Yafima-
Yamal contract with Gazprom when it ex- va 2017, pp. 2–3]. In February 2017, Gaz-
pires in 2022. Poland is to replace Russian prom proposed commitments to address
gas mainly with that of Norway via a yet- the European Commission’s competition
to-be built pipeline and with LNG via the concerns, and in March 2017, the Euro-
new LNG terminal. pean Commission invited comments from
High gas prices compared to Gazprom’s all interested parties on these proposals.
other European buyers have been the sub- Finally, in May 2018, the European Com-
ject of continuous disputes in Poland. mission adopted a decision imposing a set
PGNiG claims that it pays one of the high- of binding obligations on Gazprom [Anti-
est prices in Europe for Russian gas [El- trust/Cartel Cases 2018]. Firstly, Gazprom
liott, Easton 2018]. In 2011, PGNiG turned must remove restrictions on customers to
to arbitration, while in 2012, PGNiG se- re-sell gas cross-border. Secondly, Gaz-
cured a deal with Gazprom. Again, in prom has to facilitate gas flows to and from
2015, PGNiG filed a lawsuit against Gaz- isolated markets by swaps, flexibility, as
prom over gas prices, which resulted in a well as fixed and transparent service fees.
partial award in favour of PGNiG in 2018, Thirdly, Gazprom has to ensure competi-
but Gazprom applied to a Swedish court tive gas prices, reflecting competitive West
to challenge the ruling. Poland was one of European price benchmarks. Fourthly, re-
the Central and East European EU mem- garding the Yamal–Europe pipeline, the
ber states in which the European Commis- European Commission found that the sit-
sion investigated Gazprom’s anti-competi- uation could not be changed through such
tive practices. It is broadly known that fol- an antitrust procedure, as gas relations be-
lowing inspections at the premises of con- tween Russia and Poland are determined
cerned gas companies in these selected by intergovernmental agreements. Moreo-
states in 2011, DG COMP opened formal ver, a May 2015 decision by the Polish En-
proceedings against Gazprom in 2012 and, ergy Regulatory Office did not confirm al-
finally, issued a Statement of Objections in legations that Gazprom would have fore-
10 Switzerland took roughly the same amount as in 2008 [Weiner 2013, p. 7].
7OUTLINES OF GLOBAL TRANSFORMATIONS
closed the Polish gas market with regard to Donald Tusk believed Poland would basi-
the Yamal–Europe pipeline, since its own- cally be able to switch to using its own gas
er, Europolgaz, co-owned by Gazprom, sources by 2035 [Poland to Start Commer-
was unable to delay or block investment cial Shale Gas Production 2011]. Howev-
on the pipeline (investment enabling re- er, so far all efforts have failed. Everything
verse flows from Germany was also imple- started with lower resource assessments
mented) [Antitrust: Commission Imposes than expected. By June 2017, concession
Binding Obligations 2018]. holders had drilled 72 exploratory wells
In the early 2010s, many believed that [Shale Gas Exploration Status 2017]. The
increasing domestic gas production, a geology showed the shale was not com-
means of domestic diversification, would mercial, leading the foreign companies
be a real opportunity for Poland. In CEE, to pull out of the market [Jonathan Stern,
only Romania has a substantial gas pro- email communication, March 15, 2019]11.
duction, but it is also not negligible in Po- Regarding unconventional gas, the draft
land. However, gas production in Poland Polish Energy Policy until 2040, published
is declining and approaching 4 billion cu- in November 2018, expects progress on
bic metres per annum (bcma). It accounts coalbed or coal seam methane12. It also
for barely a quarter of the Polish gas con- assumes the use of biogas, particularly in
sumption [Report on the Results of Moni- combined heat and power generation [En-
toring 2017, p. 29; Report on the Results of ergy Policy of Poland 2018, p. 10]. Addi-
Monitoring 2018, p. 11]. Thus, the ratio of tionally, recent developments in conven-
domestic gas production to consumption tional natural gas exploration have posi-
is also showing a decreasing trend as a re- tively impacted the domestic resource base
sult of the combination of declining pro- [PGNiG: Breakthrough in Natural Gas Ex-
duction and increasing consumption. ploration 2018].
Shale gas was regarded as a genuine In Poland, there is room for reduc-
prospect in Poland, but the hype of the ing gas demand either through increas-
early 2010s has proved to be an illusion. ing efficiency or without increasing effi-
At that time, the Polish government ex- ciency (energy conservation). Yet the sig-
pected to start commercial production of nificance of these ways of introducing do-
shale gas in late 2014 or early 2015. In its mestic diversification tends to be under-
Golden Rules Case or best-case scenar- estimated. The 2017 National Energy Effi-
io, the International Energy Agency (IEA) ciency Action Plan, adopted in early 2018,
predicted unconventional gas production claims that according to the forecasts of
in the EU would be led by Poland, start- the Polish Ministry of Energy – which
ing in the mid-2010s [Golden Rules for a are, in fact, the 2013 forecasts of the Pol-
Golden Age of Gas 2012]. Poland wanted ish National Energy Conservation Agency
PGNiG to double its gas production with included in the draft Energy Policy until
both conventional and unconventional gas 2050 – the Polish primary energy demand
by 2019 [Poland Wants to Double 2012]. will remain stable at around 102–103 mil-
In September 2011, Polish Prime Minister lion tonnes of oil equivalent (mtoe) per
11 The difficult geological conditions were accompanied by regulatory challenges and lower oil prices. In 2010, Gény [Gény 2010] sug-
gested that Polish projects would not be cost competitive with imports over the following decade.
12 Still, the 2009 Polish Energy Policy until 2030 is in effect. The first version of the draft Polish Energy Policy until 2050 was published
in August 2014, while the last version dates to August 2015. However, the document was subsequently withdrawn by the new PiS
government [Energy Policies of IEA Countries 2017, p. 24].
8WEINER CS. DIVERSIFYING AWAY FROM RUSSIAN GAS: THE СASE OF POLAND
year until 2020, and then it is expected as part of the draft Polish Energy Policy
to decrease by about 15 per cent by 2050 until 2050 indicate that the energy inten-
[National Energy Efficiency Action Plan sity of the Polish economy will decrease by
2017]. At the same time, Poland’s indic- about two-thirds over the period 2010–
ative national energy efficiency target for 2050 [Conclusions from the Forecasting
its primary energy demand in 2020, pur- Analyses 2015].
suant to the 2012 EU Energy Efficiency In order to implement the 2012 EU
Directive aimed at helping the EU reach Energy Efficiency Directive, Poland de-
its 20 per cent energy efficiency target by cided to choose the standard programme
2020, amounts to 96.4 mtoe. This would of 1.5 per cent annual final energy sav-
require achieving economic development ings (compared to the average final energy
without increasing primary energy con- consumption in the period 2010–2012) by
sumption (or with decreasing primary en- energy distributors or retail energy sales
ergy demand). In contrast, final energy companies from 2014 to 2020 (i.e., a to-
consumption is well below 70 mtoe, while tal of 10.5 per cent) [National Energy Ef-
the national indicative target for 2020 ficiency Action Plan 2014]. In May 2016,
is 71.6 mtoe, which leaves room for in- the Polish Parliament adopted a new Ener-
creases until 2020 [Energy Policies of IEA gy Efficiency Act, which replaced the 2011
Countries 2017, pp. 47, 49]. Energy Efficiency Act. As of 2013, the 2011
In 2015, Poland’s energy intensity was Energy Efficiency Act introduced a system
16 per cent higher than Germany’s or the of energy efficiency certificates, so-called
IEA European average13, but 6 per cent White Certificates, imposed on compa-
lower than that of Slovakia and 23 per cent nies selling electricity, natural gas or heat
lower than that of the Czech Republic [En- to end users in Poland. This scheme is the
ergy Policies of IEA Countries 2017, pp. key energy efficiency support mechanism
47–48]. The Energy Policy until 2030 pre- in Poland [National Energy Efficiency Ac-
dicted a significant reduction in prima- tion Plan 2017]. However, there are many
ry energy consumption per unit of GDP other ways of improving energy efficien-
from around 89.4 tonne of oil equivalent cy. Wierzbowski et al. [Wierzbowski, Filipi-
(toe)/PLN million at 2007 prices in 2006 ak, Lyzwa 2017, p. 60] mention the antici-
to approximately 33.0 toe/PLN million at pated efficiency increase due to new high-
2007 prices in 2030. Consumption of elec- ly efficient power generating units replac-
tricity per GDP was expected to decline ing older assets. It is also possible to reduce
from 137.7 MWh/PLN million at 2007 electricity grid losses, as current grid losses
prices in 2006 to 60.6 MWh/PLN million are above the EU average. In addition, im-
at 2007 prices in 2030. To put these num- provements can be made to heat produc-
bers into context, the Energy Policy un- tion and distribution. Combined heat and
til 2030 declares that the energy efficien- power generation should gradually replace
cy of the Polish economy will only reach heating boiler technology. District heat-
the 2005 EU15 average at the very end ing modernization or replacement and
of the forecasted period [Forecast of Fu- the better insulation of homes would al-
el and Energy Demand 2009, p. 17]. Fore- so contribute to energy efficiency through
casts prepared by the Polish National En- the limitation of heat losses. Regarding
ergy Conservation Agency and presented this last aspect, up to 70 per cent of stand-
13 IEA Europe refers to the European member countries of the IEA.
9OUTLINES OF GLOBAL TRANSFORMATIONS
alone houses in Poland (around 3.6 mil- tionable to what extent this will occur. The
lion) are insufficiently insulated [Nation- Polish Energy Policy until 2030 assumes
al Energy Efficiency Action Plan 2017]. Fi- that gas consumption will grow by 40 per
nally, the popularity of low-energy build- cent from 14.5 bcm in 2006 to 17.1 bcm in
ings and household appliances should al- 2020 (this is close to the actual figure for
so be increased [Wierzbowski, Filipiak, Ly- 2017) and 20.2 bcm in 2030, and the share
zwa 2017, p. 60]. of natural gas in net electricity produc-
The diversification scheme indicates tion will rise from 3.1 per cent in 2006 to a
that a further option for reducing gas de- still very low 6.6 per cent in 2030 [Forecast
mand lies in sectoral diversification, either of Fuel and Energy Demand 2009, p. 15].
domestic or external. Nonetheless, be- In contrast, the 2013 forecasts of the Pol-
cause of the low share of natural gas in the ish National Energy Conservation Agency,
energy/electricity/heat mix, but also due presented as part of the draft Energy Policy
to energy market perspectives and envi- until 2050, show a smaller increase in gas
ronmental and climate directions, it is not demand for the period up to 2050 (from
a realistic goal to reduce gas consumption 12.8 mtoe in 2010 to 15.2 mtoe in 2020
by sectoral diversification. Rather, it is on- and 2030 and 15.5 mtoe in 2050) [Conclu-
ly possible to limit the increase in gas de- sions from the Forecasting Analyses 2015,
mand. In this sense, sectoral diversifica- p. 5]. Honoré [Honoré 2018] highlights that
tion has limited relevance in Poland. Nat- the role of renewables has increased much
urally, substitution of gas with coal cannot faster than that of gas in recent years, and
be taken into account, since the opposite believes that it is unlikely that natural gas
scenario might be the main factor leading will profit in the 2020s.
to an increase in gas demand. For this rea- Geographical gas import source di-
son, among others, the intention exists to versification implies both contractual re-
further raise the country’s gasification lev- lations for sale and purchase and the con-
el. The growing presence of renewables in struction of the appropriate infrastructure.
the grid also requires more gas, allowing In Poland, a minimum level of diversifi-
for more flexible balancing. Some increase cation is required by legislation. In 2000,
will also be seen due to the use of gas in the maximum share of imported gas from
transport. In contrast, the situation is dif- one country of origin relative to the total
ferent in the case of domestic and import- volume of imported gas was set for each
ed biomass in electricity and heat produc- year until 2020: 88 per cent in 2001–2002,
tion, which can be considered forms of do- 78 per cent in 2003–2004, 72 per cent in
mestic and external sectoral gas diversifi- 2005–2009, 70 per cent in 2010–2014, 59
cation, respectively. Likewise, nuclear en- per cent in 2015–2018 and 49 per cent in
ergy and growing electricity imports can 2019–2020 [Journal of Laws of 2000]. The
also act as external sectoral gas diversifica- regulation applied to all wholesalers buy-
tion. However, in all these cases, the ques- ing gas from abroad. However, these re-
tion is which energy source would be sub- quirements raised doubts as to their com-
stituted. Poland used to be a net electricity pliance with EU law. In 2017, a new reg-
exporter, but, for the first time in 2014, and ulation was published to specify the max-
then in 2016 and 2017 (but not in 2015), it imum percentage share of gas import-
imported more electricity than it exported ed from one country. Accordingly, it can-
[Supply, Transformation and Consump- not exceed 70 per cent in 2017–2022 and
tion of Electricity (1) 2018]. Although the 33 per cent in 2023–2026. The regulation
role of gas could witness an increase in contains a formula for calculating this
electricity and heat production, it is ques- share, and makes it possible for there to
10WEINER CS. DIVERSIFYING AWAY FROM RUSSIAN GAS: THE СASE OF POLAND
Figure 2. Cross-border pipeline gas and LNG import capacity into Poland
LT
RU BY
FSRU LNG, Gdańsk GIPL
Baltic Pipe
Cap. exp., Świnoujście Teterovka (0.2)
Kamminke1)
Świnoujście (5) Kondratki2)
Mallnow3)
(5.5) Vysokaye (5.5)
Słubice Lwówek4) Włocławek4)
Gubin1)
Lasów1) (1.5) UA
Głuchołazy (Zlate Hory) PL
DE
Hat (STORK II)
Branice Zosin/Hrubieszów (0.3)
Cieszyn (STORK)
Drozdovychi (4.4)
(0.5)
CZ New Polish–Ukrainian interconnection
Strachocina–Veľké Kapušany
SK
Cross-border point
Cross-border point, local range
Planned new cross-border point
Domestic exit points from Yamal–Europe
LNG terminal
Planned LNG terminal/capacity expansion
1) Effective April 2016, the existing cross-border connections at Lasów, Gubin and Kamminke were replaced with a single point called
GCP Gaz-System/Ontras (its capacity is 1.6 bcma).
2) The Yamal–Europe gas pipeline cross-border entry point.
3) The Yamal–Europe gas pipeline cross-border exit point and also entry point for physical and virtual reverse flows. There are some
uncertainties about the volume of physical and virtual reverse flow capacity. A 2015 Gaz-System press release suggests that 8.2 bcma
of virtual reverse flow capacity is available at Mallnow, including 5.5 bcma of firm capacity and 2.7 bcma of interruptible capacity [New
Opportunities for Importing Natural Gas 2015], while data from the Energy Regulatory Office of Poland (URE) for 2017 indicate 6.1 bcma
of firm capacity [Report on the Activities 2018, p. 148]. Nevertheless, for a selected day, Gaz-System’s Information Exchange System for
available daily transmission capacity shows similar firm technical capacity to what URE presents above, but it also offers very high total
daily interruptible capacity (almost double of the firm technical capacity) [Information Exchange System 2019].
4) Yamal–Europe gas pipeline exit points (located) in Poland. The aggregation of these two physical points is called Point of Intercon-
nection (PWP). Virtual (and also physical) reverse flow capacity can be limited by the PWP capacity [Peters 2018, p. 22], but currently this
is not a constraint.
Note: According to our collected data, all the border crossings are indicated on the map (including pipelines of local significance; either
for transmission or distribution). In parentheses, import capacity is indicated in bcma where data are available [Report on the Activities
2018, pp. 147–148; New Integrated Annual Report Gaz-System Group 2018, pp. 24–25].
Source: Own compilation.
Blank map: http://www.youreuropemap.com/
11OUTLINES OF GLOBAL TRANSFORMATIONS
be exemptions from the obligation (e.g., Until the January 2009 Russian–Ukrai-
for the LNG terminal in Świnoujście). It is nian gas crisis, only one interconnection
notable that intra-EU purchases and sup- worth mentioning had been built to re-
plies originating from the states of the Eu- ceive gas from the non-eastern direction.
ropean Free Trade Association (EFTA) This German–Polish interconnection with
and Switzerland are not defined as imports an entry point at Lasów has been used to
[The Minimum Level of Diversification import gas from Germany (still ongoing)
2017]. Until recently, Poland has mostly and Norway (in the past). Recently, Po-
just talked about diversifying away from land’s import possibilities from the non-
Russian gas supplies. Instead of costly in- eastern directions have been increased
vestments in infrastructure and contrac- due to (1) a new interconnector with the
tual relations, Poland has tended to em- Czech Republic (called STORK); (2) vir-
phasize solidarity as a means of conceal- tual reverse flow services on the Yamal–
ing its own responsibility, while – as Bar- Europe gas pipeline; (3) capacity expan-
tuška [Bartuška 2008, p. 57] has aptly for- sion at Lasów; and (4) the first LNG termi-
mulated – there can be no supply security nal. Without taking into account the vir-
without a willingness to pay for it. Howev- tual reverse flow service, more than 6 bc-
er, the question is how and at what cost se- ma of capacity has been added. These three
curity is achieved. (No. 1, 3 and 4) provide a total of 7 bcma
Poland required not only new of cross-border entry capacity into Poland
cross-border infrastructure but also sig- (Table 1), compared to the almost 17 bcm
nificant enhancement of its domestic pipe- of gas demand in 2017. However, if virtual
line network. Finally, in the 2010s, nota- reverse flow is also added to the above ca-
ble steps have been made to achieve di- pacity, total non-eastern cross-border ca-
versification. Since 2016, Poland has been pacity will be much higher. Therefore, it is
able to import non-Russian gas not only by worth comparing the sum of the latter ca-
pipeline but also as LNG. Via pipeline, Po- pacity and domestic gas production with
land can buy gas from the east, west and annual gas demand.
south, but capacities are very limited at the Further pipeline plans or projects in-
southern and western borders. Some of the clude (1) the Baltic Pipe, an intercon-
cross-border pipelines aim only to meet nection between Denmark and Poland
local needs and gas is not introduced in- for transporting Norwegian gas; new (2)
to the transmission grid. Poland can phys- Polish–Ukrainian and (3) Polish–Czech
ically receive gas through the following (STORK II) interconnections; and the
channels: first (4) Polish–Slovakian and (5) Polish–
(1) from the east through Belarus Lithuanian (GIPL) interconnections. The
(through two entry points from main geographical source diversification
the Gazprom Transgaz Belarus net- project aiming to end Russian gas im-
work and two exit points from the ports by 2022 is the Northern Gate pro-
Yamal–Europe gas pipeline) and ject that includes the Baltic Pipe and the
from/through Ukraine (through LNG terminal in Świnoujście. While the
two entry points); LNG plan has finally been realised, the
(2) from the west from/through Ger- Baltic Pipe still has to be constructed. Al-
many (through four entry points); though the final investment decision was
and made in end-November 2018, and the
(3) from the south from/through the project has strong Polish commitments,
Czech Republic (through three en- several issues still need to be elucidated.
try points) (Figure 2). One such issue is the Norwegian resource
12WEINER CS. DIVERSIFYING AWAY FROM RUSSIAN GAS: THE СASE OF POLAND
Table 1. N
ew cross-border pipeline gas and LNG import capacity in Poland since the
January 2009 Russian–Ukrainian gas crisis
Year of putting into
Capacity (bcma)
operational
Pipeline gas
Czech–Polish interconnection (STORK) 0.5 2011
8.2
Virtual reverse flow service on the Yamal–Europe gas pipeline 2011–2016
(5.5 + 2.7)*
1.5
Capacity expansion of the German–Polish interconnection at Lasów 2012
(from 0.9)
LNG
5
LNG terminal in Świnoujście 2016**
(3.7 mtpa)
Mtpa – million tonnes per annum. 1 mt of LNG = 1.36 bcm of natural gas.
* See Note 3) for Figure 2.
** Commercial supplies.
Source: Own compilation based on data from Gaz-System.
base, which is to fill the 10 bcma capaci- book almost all of it [UPDATE 1-Poland’s
ty of the pipeline [Koblańska 2018; Elliott PGNiG 2017]14.
2018]. However, in addition to diversify- Future LNG plans/projects include not
ing away from Russian gas, there are two only the expansion of the regasification ca-
other main reasons for this project. First- pacity of the existing plant from 5 bcma to
ly, it is related to Poland’s presence on the 7.5 bcma15 and the construction of a sec-
Norwegian Continental Shelf, with plans ond quay (enabling trans-shipment, bun-
to produce 2.5 bcm of gas (compared to kering and developing inland waterway
about 550 mmcm in 2017) [Borkowska navigation), but also a floating storage and
2019]. Secondly, the pipeline might serve regasification unit (FSRU) in the Gdańsk
regional cooperation due to excess capac- Bay (Table 2). Only with the launch of the
ity and surplus supplies. Poland may per- Baltic Pipe would Poland be able to im-
haps become a gateway for gas supplies to port 17 bcma of non-Russian gas, which is
neighbouring countries, such as Slovakia, roughly equal to the 2017 gas demand. The
the Czech Republic and possibly Ukraine virtual reverse flow on Yamal is added on
[Gawlikowska-Fyk, Godzimirski 2017, top of the 17 bcma of capacity. Addition-
p. 5; Baltic Pipe 2018]. In January 2018, ally, even this would be supplemented by
PGNiG signed 15-year gas transmission (some of) the above-mentioned projects.
contracts for the Baltic Pipe for 2022– As of early 2019, among these seven plans/
2037. However, it has not made public projects, the Baltic Pipe and three other
how much of the pipeline’s capacity it has projects, the Polish–Slovakian and the Pol-
booked. Previously, PGNiG said it would ish–Lithuanian interconnections, as well
14 Stern claims that all capacity has been booked by PGNiG [Jonathan Stern, email communication, March 15, 2019].
15 The draft Polish Energy Policy until 2040 aims at extending the capacity to 10 bcma by 2030 [Energy Policy of Poland 2018, p. 24].
13OUTLINES OF GLOBAL TRANSFORMATIONS
as the LNG terminal expansion have final (interview with Jonathan Stern in [Simon
investment decisions. 2018]). Poland has been supplied by Ger-
The above projects have typically been many and the Czech Republic since the
supported by, or eligible for financial sup- 1990s16. The 1990s saw a stream of diver-
port from, the EU (e.g., as part of the Eu- sification announcements about bring-
ropean Energy Program for Recovery, the ing pipeline gas from Netherlands, Nor-
Connecting Europe Facility or other types way and Denmark. But despite nego-
of EU financial support). Further, both the tiations and even at times signed con-
European Bank for Reconstruction and tracts, only a small contract was imple-
Development (EBRD) and the European mented with Norway on the supply of a
Investment Bank (EIB) provided a loan to mere 0.5 bcma of gas for the period be-
the Polish LNG terminal. Different types tween 2000 and 2006 [Stern 2005, p. 116].
of financial support mechanisms also con- Russian gas was cheaper than Norwegian
stitute an important part of the (EU) insti- [PGNiG Signs Framework Deal 2006].
tutional context. In 2018, PGNiG claimed that the cost of
Nonetheless, as Stern argues, the Norwegian gas would not be higher than
problem is that interconnectors allow the gas sold to Poland by Gazprom [El-
gas importers to get hold of non-Russian liott, Easton 2018]. However, this expec-
gas, while the question appears wheth- tation is difficult to meet. Rather, Poland
er non-Russian gas will even be available will probably pay a very high price for
Table 2. P
lans/projects to increase cross-border pipeline gas and LNG import capacity in
Poland
Year of
Entry capacity Exit capacity
Status expected
(bcma) (bcma)
commissioning
Pipeline gas
Polish–Ukrainian interconnection 5 5 non-FID 2022
Polish–Czech interconnection II (STORK II) 6.5 5 non-FID 2022
Polish–Slovakian interconnection 5.7 4.7 FID 2021
Polish–Lithuanian interconnection (GIPL) 1.7 2.4 FID 2021
Baltic Pipe (Danish–Polish interconnection) 10 3 FID 2022
LNG
Expansion of the regasification capacity 7.5
FID (non-FID) 2022 (2030*)
of LNG terminal in Świnoujście (10*)
FSRU LNG in the Gdańsk Bay 4.1–8.1 non-FID 2021
FID – final investment decision.
* According to the draft Polish Energy Policy until 2040 [Energy Policy of Poland 2018, p. 24].
Source: Own compilation based on data from Gaz-System.
16 Import diversification is reflected as German (since 1993) and Czech imports (since 2012) in the IEA and Eurostat statistics
[Weiner 2016, pp. 17–18].
14WEINER CS. DIVERSIFYING AWAY FROM RUSSIAN GAS: THE СASE OF POLAND
Norwegian gas, partly because Norway the commercial operation of the two
is aware that Poland has no alternative to US LNG facilities from which the gas
importing through the Baltic Pipe, and is to be supplied is expected in 2022
also partly because of the very expensive and 2023, respectively.
new infrastructure. Therefore, accord- – In November 2018, a long-term con-
ing to Stern, the obvious solution would tract was signed with Cheniere Mar-
be not to build the Baltic Pipe and simply keting International for LNG supplies
to import gas through the Dutch/German from the USA, with a total volume of
network, but that would mean no guar- 0.52 mt between 2019 and 2022, and
antee that they would not actually be re- 29 mt between 2023 and 2042. Start-
ceiving Russian molecules, which would ing from 2023, PGNiG will purchase
be against “ideological physicality” [Jona- about 1.45 mtpa of LNG.
than Stern, email communication, March – In December 2018, another 20-year
15, 2019]. contract was concluded for the pur-
As noted, Poland began receiving chase of 2 mtpa of LNG from US Port
commercial LNG deliveries in June 2016. Arthur LNG, a Sempra Energy sub-
PGNiG has five long-term and one mid- sidiary, scheduled to start flowing in
term LNG supply contracts and it also 2023 from an LNG facility currently
buys gas on the spot market17: in development.
– A long-term contract with Qatar’s
Qatargas was signed in 2009 for the Consequently, until 2018, the LNG
supply of 1 mtpa of LNG for 20 years portfolio consisted of long-term LNG sup-
to be delivered as of 2014. The con- plies from Qatargas, mid-term LNG sup-
tract was amended in 2014 and 2015 plies from Centrica and spot purchases
to divert LNG supplies destined for from Norway, the USA and Qatar. As of
Poland to other clients in 2015 and 2019, this will be supplemented by long-
the first half of 2016 because of delays term LNG supplies from Cheniere. Long-
in the LNG facility’s operation start- term LNG deliveries from the two Ven-
up time. However, in 2017, an agree- ture Global LNG subsidiaries would en-
ment was reached to double volumes ter the portfolio in 2022 and 2023, re-
to 2 mtpa. spectively, while Port Arthur LNG would
– In November 2017, a mid-term LNG be added in 2023. PGNiG data suggest
supply contract was signed with the that LNG purchases would equal around
UK-based Centrica to receive nine 3.5 bcm of natural gas following regasi-
LNG shipments which were to be fication in 2022, around 8 bcm in 2023,
sourced from the US Sabine Pass and roughly 10.5 bcma from 2024. Such
LNG Terminal between 2018 and LNG amounts cannot not be regasified, as
2022. the regasification capacity of the LNG fa-
– In October 2018, long-term contracts cility will be expanded to only 7.5 bcma
were signed with two subsidiaries of by 2022, and 10 bcma capacity might be
Venture Global LNG, Venture Glob- reached only by 2030. However, PGNiG
al Calcasieu Pass and Venture Glob- does not intend to unload such quantities
al Plaquemines LNG, each for the either. The contracts with Qatargas, Cen-
purchase of 1 mtpa of LNG from the trica and Cheniere as well as the spot deliv-
USA over 20 years. The initiation of eries are on a delivered ex-ship (DES) ba-
17 All the following contractual data are derived from PGNiG’s website.
15OUTLINES OF GLOBAL TRANSFORMATIONS
sis, while the contracts with Venture Glob- tive gas market in Poland because of the
al Calcasieu Pass, Venture Global Plaque- dominant market player belonging to the
mines LNG and Port Arthur LNG should state, PGNiG. For competitive gas prices,
be carried out under free-on-board (FOB) Poland has to allow for many sellers and
terms. This means that whereas DES de- buyers, i.e., to open its gas market to com-
liveries are dedicated to the Polish market, petition (interview with Jonathan Stern
the FOB formula gives the opportunity for in [Koblańska 2018]). Peters [Peters 2018]
trade, which PGNiG will enact [Fiftieth claims that like the Czech Republic, Po-
LNG Cargo Arriving to Poland 2019]. land could achieve price convergence with
Yet, as emphasized, availability is on- the North-West European traded mar-
ly one dimension of security of supply. kets, but instead it maintains barriers to
There are serious questions about the price free cross-border trade and free trade at
or affordability dimension of LNG sup- the Polish wholesale market (the Polish
plies. “PGNiG agreed a contract with Qa- gas hub, the Virtual Point Gaz-System or
tar for one of the highest prices seen in any VPGS). In such a situation, security will
gas contract anywhere in the world” [Jon- come at a very high cost [Jonathan Stern,
athan Stern, email communication, Jan- email communication, March 15, 2019].
uary 14, 2013]. A 2009 source stated that Therefore, based on the current cross-bor-
LNG supplies from Qatar might be 30-50 der capacities and the benefits of integrat-
per cent more expensive than Russian gas ed traded markets, Peters [Peters 2018], in
[Gas Firm PGNiG Has Contract 2009], agreement with Stern, questions the com-
while another source from 2013, with pre- mercial sense of both the Baltic Pipe and
cise numbers, suggested more than 50 per the LNG terminal expansion. Using vir-
cent higher prices [Vukmanovic, Bartecz- tual reverse flow capacity on Yamal–Eu-
ko 2013]. However, low(er) oil prices ex- rope and adding capacity at interconnec-
perienced since the mid-2010s have con- tions can be achieved at a fraction of the
tributed to a decrease in Qatari LNG pric- cost [Jonathan Stern, email communica-
es. In 2015, a Polish expert even went as far tion, April 3, 2019].
as saying that Qatari LNG could be com- A certain type of diversification was
petitive when comparing with Russian gas achieved from the east by introducing gas
import prices [Denková 2015]. Similar- imports from Ukraine’s Naftogaz and from
ly, price-competitiveness problems are al- Central Asia through intermediary com-
so encountered in US LNG imports due panies. Naftogaz was selling a very small
to opportunities to sell US LNG at high- quantity of gas to satisfy local needs under
er prices in other markets outside Europe a long-term gas supply contract, signed in
[Koblańska 2018]. Nevertheless, PGNiG 2004 for the period until 2020, but Ukraine
has argued that the contract with Cheniere permanently suspended deliveries in 2010.
would most probably be over 20 per cent Intermediary companies first included Eu-
cheaper than pipeline gas from Russia [El- ral Trans Gas, which was registered and
liott, Easton 2018]. The problem is that we operated in Hungary as an offshore busi-
do not know how this figure should be in- ness entity, and then the Swiss-based Rus-
terpreted. sian–Ukrainian Rosukrenergo, which
A further important problem regard- functioned until end-200818. Contrary to
ing affordability is the lack of a competi- the listed intermediaries, Gazprom’s Gaz-
18 In fact, these were trilateral contracts. PGNiG, Naftogaz and Eural signed a contract in October 2003, while the contract
between PGNiG, Naftogaz and Rosukrenergo was concluded in February 2005.
16WEINER CS. DIVERSIFYING AWAY FROM RUSSIAN GAS: THE СASE OF POLAND
prom Schweiz, which re-exports Central to divide the EU leading to economic and
Asian gas to CEE, is not present in Poland. geopolitical disaster. They regarded Nord
The final type of diversification is tran- Stream as economically absurd, referring
sit or route diversification. As indicated, to the costs of constructing and financing
Poland imports its Russian gas via diver- the pipeline, future tariffs and Gazprom’s
sified import routes. Poland would have growing dominance [Cameron 2007, p. 3].
had the possibility of further diversifying They feared that with the construction of
its transit options through the trans-Bal- Nord Stream, Gazprom would turn off the
tic Sea Nord Stream gas pipeline (between gas tap to Poland without violating West
Russia and Germany) but it did not ask for European (German) interests. Fears were
that opportunity. The German government also expressed not only because of Po-
invited Poland to the Nord Stream project, land becoming more vulnerable to black-
but Warsaw refused. Wingas – then a Rus- mailing, but also due to a potential transit
sian–German joint venture, now a whol- revenue drop20. While Gazprom’s growing
ly owned subsidiary of Gazprom – also dominance could be a problem, and Nord
offered to link the Polish gas grid to the Stream 2 could bring further negative con-
OPAL gas pipeline, a European onshore sequences, the above accusations have so
connecting pipeline of Nord Stream, but far not been confirmed.
Poland did not accept [Cameron 2007, Gas transit via Ukraine will continue to
p. 3]. Poland has shown strong opposition be necessary in sizeable volumes until Nord
to Nord Stream. It argued unsuccessful- Stream 2 and the trans-Black Sea Turk-
ly in favour of other plans, and projected Stream (between Russia and Turkey) are
catastrophic consequences. Likewise, Po- launched. However, thanks to Nord Stream
land has also tried to block Nord Stream 2 and its European onshore connecting
2. Instead of building Nord Stream, Po- pipeline EUGAL, gas transit via the Ukrain-
land first supported Yamal–Europe 2 and ian–Slovakian cross-border point is expect-
then the idea of the Amber pipeline, with ed to fall considerably, while gas transit via
the latter planned as crossing EU coun- Poland through the Yamal–Europe pipeline
tries, from Russia through Latvia, Lithu- is likely to continue. On the other hand, the
ania and Poland to Germany19. Howev- launch of TurkStream’s first line will result
er, Russia’s goal was to circumvent (unre- in a substantial decline in gas transit via the
liable) transit states. Above all, Poland at- Ukrainian–Romanian cross-border point
tacked Nord Stream on the grounds of due to the diversion of gas destined for Tur-
its environmental consequences (a po- key to the Black Sea corridor away from
tential ecological disaster) [EP Rappor- Ukraine, Moldova, Romania and Bulgaria.
teur 2008]. Former Polish Defence Minis- Nonetheless, even though Ukraine will per-
ter Radek Sikorski and others complained form a smaller role, it will not be completely
that Germany had not consulted with Po- eliminated and it will remain an important
land before the decision was made on the player. The major issue is the commercial
pipeline, and considered the project to be viability of maintaining a large gas trans-
President Putin’s most outrageous attempt mission system with multiple exit points for
19 Previously, another plan was called Amber, a joint plan involving Poland’s PGNiG, Denmark’s DONG (now Ørsted) and Lithu-
ania’s Lietuvos Dujos (later merged into Lithuania’s Energijos Skirstymo Operatorius), which would have delivered gas to Lithu-
ania through Poland. However, other plans also exist that have been referred to as Amber.
20 In January 2008, Russian Foreign Minister Sergei Lavrov tried to assure Poland that Russia would not reduce transit through
Poland [Nord Stream Will not Reduce 2008].
17You can also read
