Norwegian Corridor 20 February, 2018 10:00 am   

Brussels skimps on Baltic Pipe? A handful of speculation in a bucket of misinformation

Russian media repeats worn-out and untrue theses on the Polish policy of gas supply diversification with the use of the Baltic Pipe project like a mantra. It is worth once again to resist them before they get into the media in Poland.

Consensus around Baltic Pipe

The Russian agency RIA Novosti asked for a comment on the profitability of the Baltic Pipe gas pipeline project. In the introduction, it puts forward the thesis that the ruling party Law and Justice announced the need to build the Baltic Pipe gas pipeline. – It’s more a political matter and the government will decide on the fate of the project – we read in RIA. The agency does not mention that there is consensus on the gas pipeline from Norway on the Polish political scene, and opposition MPs articulate support for this project, as Włodzimierz Karpiński, former Minister of Treasury considered to be the Minister of Energy in the shadow office of the opposition Platforma Obywatelska. Similar consensus prevails over the criticism of the Russian project Nord Stream 2.

RIA reminds that in June 2017 Poland and Denmark signed a memorandum on the joint construction of the Baltic Pipe. The project was implemented by Gaz-System and, that is operators of transmission gas pipelines in both countries. The gas pipeline is to be ready in October 2022. The agency indicates that this is not an accidental date, because then the Yamal contract for the delivery of Russian gas to Poland ends, contract named after the import tool, the Yamal gas pipeline from Russia, through Belarus, to Poland. – Poland wants to replace Russian gas with Norwegian gas and American LNG supplies – indicates the Russian medium. In fact, such declarations are made by government representatives and PGNiG.

Baltic Pipe has the support of the European Commission

The cost of the Baltic Pipe gas pipeline is estimated at € 1,7 billion. Half of is to be covered by Gaz-System, and 400 million euros will be provided by the European Commission. RIA Novosti puts forward the thesis that Brussels “suddenly lowered support”. – The latest data shows that the sum ready to be transferred by the European Commission has decreased more than ten-fold to 22 million euros – said Maria Belova, director of research at the Russian Vygon Consulting. There is no official confirmation of these revelations. The reason is, according to RIA, the lack of a technical gas pipeline project, which makes the investment estimates “abstract and almost certainly exceed the initial calculations”.

The costs are calculated according to official estimates

– Initial estimates of the costs of the offshore gas pipeline always increase 1,5-2 times due to a number of conditions, such as pipe-laying conditions, additional equipment costs, and so forth – RIA Professor Yuri Szczerbanin from the Russian State Oil and Gas University Gubkin. It is not known whether this means that the cost of the controversial Nord Stream 2 gas pipeline from Russia to Germany will increase by 1,5-2 times from currently estimated € 9,5 billion. However, the technical conditions for the implementation of the Baltic Pipe have been specified in the feasibility study of 2017 and it is based on the estimates of Poles. The operators have already divided them. Any additional costs will be covered jointly. The Russian professor undertook pure speculation.

There is demand for the Baltic Pipe

Meanwhile, RIA is continuing its discrepancy, putting forward the thesis that “limiting the Commission’s support for the promised investment to a symbolic value can be explained by the lack of demand for the project. Apart from Poland and Norway, who do not want Russia on the gas market of Central and Eastern Europe, hardly anyone is interested in it. ” It is worth noting that deliveries to Poland are the main goal of Baltic Pipe. The Polish market currently needs about 10 billion cubic meters of natural gas imports annually, and by 2022, they may rise to around 15 billion cubic meters, assuming maintaining the level of extraction in the country amounting to approximately 4,5 billion cubic meters annually. There will therefore be a market for gas from Norway, and with an attractive offer there may be interest from Poland’s neighbors. Something new is the fact that the Russians confirm Norway’s interest in the project. Although this is a venture with the participation of the Norwegian operator Gassco, the Russian media consistently argued that Oslo is not interested.

The gas pipeline is provided with a raw material base

The agency gives a false thesis that although the planned capacity of the gas pipeline is 10 billion cubic meters annually, it will be filled in only one fifth, because Polish PGNiG has reserved only slightly more than 2 billion cubic meters per year of this gas pipeline. The fact is that Poles have purchased a capacity of over 8 billion cubic meters annually. Only from their own resources they want to pump 2,5 billion cubic meters through Baltic Pipe annually, and buy the rest of the gas from suppliers like Statoil. RIA recalls the statement of the Government Plenipotentiary for strategic energy infrastructure Piotr Naimski, who admitted that only PGNiG applied in the open season procedure.

The gas pipeline aroused the interest of the market

The agency does not show the context. In an interview with, the main competitor of PGNiG in Poland, Hermes Energy Group, admitted that it participated in the first phase of the procedure, but withdrew from the second due to the amendment to the Act on gas stocks introduced, among others Naimski’s request, which imposes additional costs on importers for collecting raw material reserves. The new law would force HEG to secure supplies by Baltic Pipe with appropriate storage capacities in the country. The PGNiG competitor decided that it did not pay off. There was therefore interest in gas from Norway. Meanwhile, it was limited by the law in line with the government’s energy policy plans, which assumes that PGNiG will maintain the position of the main gas supplier to Poland and, if necessary, will import over 8 billion cubic meters through Baltic Pipe, which means the (unchecked) possibility of abandoning supplies from Russia.

The gas pipeline is interesting for Denmark

RIA gives another unconfirmed thesis that the Baltic Pipe on the reverse was supposed to carry LNG from Świnoujście to Denmark. “Denmark did not mind receiving the Russian gas through this gas pipeline.” However, according to RIA Novosti, thanks to the perturbed Nord Stream 2 gas pipeline, the Danish will be able to import gas from Russia through Germany and will not be interested in Baltic Pipe. Meanwhile, in the strategy, this gas pipeline is indicated as a potential source of LNG supplies.

Poland is not interested in transmission through the Yamal gas pipeline

The Russian agency once again interprets Poland’s resistance to the Nord Stream 2 gas pipeline as a battle for profits from the transit of Russian gas through its territory, which the Polish government repeatedly refuted, saying that in its opinion a poorly negotiated transit agreement provides Poland with insignificant revenue in PLN 20 million per year. Warsaw declares that it does not care about this money. – The negative attitude towards Russian gas, the greater amount of which will soon flow through Poland to Germany, is caused not so much by the maintenance of Western unity, but by the merchant interests from which there is reluctance to lose revenues from Russian fuel transmission – we read in the agency.

The RIA puts forward a thesis that Baltic Pipe may remain only on paper, and European companies will lose interest in it. Meanwhile, without long-term contracts, banks will not give loans for the construction of the gas pipeline – Belova claims. At this point it is worth emphasizing again that PGNiG is able to independently provide contracts for approximately 8 billion cubic meters gas pipeline, and the remaining amount will be offered on the stock exchange.

Last shrieks

The final investment decision is to be made by the end of this year, and the depreciation of Baltic Pipe may be one of the last attempts to stop the investment, which is the closest to the third time in history. The facts are the opposite of what RIA Novosti portrays. The Baltic Pipe pipeline is on the verge of resolution, it is interested in European companies from Poland, Denmark and Norway, and it has the support of the European Commission. However, further disinformation should be expected for the final investment decision, which will discourage, above all, Poland’s partners striving for credibility, to take it.