The Northern Gateway project pursued by the Polish gas transmission operator Gaz-System, is a key undertaking for the Polish gas market. Its implementation will diversify gas supplies not only in Poland, but also in Eastern and Central Europe and the Baltic States – more on this was discussed during a presentation “Northern Gateway and the Development of the Regional Natural Gas Market” on the 2017 Gas for Poland conference. The speaker was Paweł Jakubowski, head of Gaz System’s Development Division.
Surely, this is a complicated challenge, but it is also the only answer to the dangerous developments around Poland. The Northern Gateway is to be an effective counterbalance to the threats posed by Nord Stream 2 on the European gas market, and a protective measure against Russian gas monopoly. At the same time, the Gateway may be a response to CEE’s demands, as it will offer diversification of supplies and supply direction not only for Poland, but also for the entire region.
The Gate will be based on two foundations – the LNG terminal in Świnoujście and the Baltic Pipe gas pipeline. The first one was launched in July 2016 and needs to be expanded. The other, is a pipe that will transmit Norwegian gas. The Northern Gateway will ensure gas supplies from new, independent sources at the volume of up to 20 bcm annually.
The analyses on the Norwegian pipe assume that it will transport up to 10 bcm of gas a year from Norway to Poland and 3 bcm to Denmark. A compressor station will be located at Denmark’s Zealand Island. As part of the open season procedure and in accordance with legal requirements, the future market participants have been offered 90% of the capacity. The goal of the open season (a kind of open consultations) is to confirm how much the market is interested in the pipe’s transport capacity from a given direction.
When it comes to the LNG terminal, its current capacity is 5 bcm/year. Gaz-System is planning to significantly increase it. The cost of upping the capacity to 7.5 bcm a year would not be very high. A further increase to 10 bcm would be possible as well. These are Gaz-Systems’s assumptions that depend on the future demand and the expansion of the national transmission system. The Northern Gate also takes into consideration the floating LNG terminal in Lithuania’s Klaipeda with an annual capacity at 3 bcm.
The capacity of the terminal and the Baltic Pipe are one side of the coin, the other is about means of technical gas reception and distribution. The Northern Gateway will deliver gas to recipients in a part of Europe where regional gas market is immature, to say the least. In reality it consists of isolated national markets. This causes the region to be fragmented and makes it vulnerable to supply crises. It is necessary to develop a mature regional gas market in CEE. This is yet another objective pursued by Gaz-System. The Northern Gateway will facilitate infrastructural integration between national markets, and at the same time it will stimulate the development of a mature regional gas market.
At the moment we have a defined outline of the future market, which includes Finland, Estonia, Latvia, Poland, the Czech Republic, Slovakia, Hungary and Ukraine. The fact that Poland will transport more gas that it consumes, will be beneficial to those national markets. Currently the gas demand of those nine states is 81 bcm /year. By 2035 it will increase to 91 bcm. This is a huge number, which makes the market attractive. The demand will entail: increased competitiveness on the energy market (lower prices, ease of access); climate and environmental policy demands; production of electricity in gas power plants, as well as rail and road transport.
Naturally the integration of the regional market will be hampered by obstacles. I know that the Czech gas transmission system operator, Net4Gas, experienced regulatory difficulties form the Czech government, which is impacting the construction of the Polish-Czech connection. Also Hungary may be a problem. After Putin’s February visit, Budapest expressed interest in increasing supply of gas from Gazprom through the interconnector with Austria. However, the majority of the states in the region is interested in the Polish offer. The construction of the link with Slovakia is going smoothly. In November 2016, Gaz-System and the Slovak gas transmission operator Eustream, applied for EU funding for the interconnector from the Connecting Europe Facility. The Poland-Ukraine gas link is also gathering support. Currently Gaz-System is in the middle of a major investment – a pipeline from Lwówek to the remote village of Hermanowice, which runs across south-western Poland. The pipeline will transport gas to south-east Poland and eventually Ukraine. Kiev has to diversify its supplies and that opens up a lot of possibilities.
A mature and highly integrated gas market could attract other states in south-eastern Europe – Croatia with a third LNG terminal on the Island of Krk and Romania with its own gas deposits. The Northern Gateway project does not envision such a development. However, an integrated regional market will have as its southern neighbor the Trans Adriatic Pipeline, which gives a chance to open up to new diversified gas supplies from the south.