Energy GAS Infrastructure / Innovations LNG 5 December, 2023 7:35 am   

Chludziński: The FSRU is ready for ink (INTERVIEW)

FSRU-Hoegh-LNG Floating Storage Regasification Unit. Picture by Hoegh LNG.

“We have secured funding for the FSRU. The money is from the Polish government and EU projects, including REPowerEU. The only thing left is to sign the agreements,” said the President of Gaz-System Marcin Chludziński in an interview with Before becoming the President of Gaz-System, you managed KGHM. What is the difference between these companies?

Marcin Chludziński: The company that deals with gas transmission differs in some way from KGHM. Both are industrial companies related to energy, but Gaz-System is involved with Poland’s systemic security. This means it is engaged in the safety of everyone of us. These entities have completely different missions. However, they do share some traits, such as the necessity to have the right staff, responsible employees. And in both cases this aspect was a success. This is important in the technology sector. It’s easy to say you need to transmit gas or produce copper, but the process is more complex. For example, gas is transmitted over thousands of kilometers of infrastructure, there is an entire technological process associated with the pumping system, hydraulics. It is important to understand that an individual decision of a single employee determines whether someone will be able to cook a meal in the morning.

In both cases, we are dealing with large professional groups with an ethos: gas workers and miners…

The professional group in Gaz-System, colloquially called “gas workers”, are people with a work ethic. It is similar to the miners. Both groups know how important their work is and how much depends on their individual decisions, diligence or responsibility. Interestingly, at Gaz-System we also celebrate Barbórka (miners’ holiday celebrated in Poland on the 4th of December – ed.). Gas workers identify themselves with gas mining, thus with Saint Barbara.

How did you do at your new company?

I am a man of difficult tasks. This was the case at KGHM, where I was given the job of resuscitating the Sierra Gorda project in Chile. At that time the company was deliberating on what to do with it, whether to sell it with a huge loss or try to revive it. There were also other challenges at KGHM, including debt restructuring, rekindling productivity, new licenses. Whereas at the Industrial Development Agency, which I had managed earlier, I encountered challenges in the restructuring of industrial enterprises, such as Zakłady Cegielskiego in Poznań or Przewozy Regionalne. Gaz-System is not short on challenges either. It’s not about day-to-day activities – that works very well, but for example the FSRU project or challenges related to the physical security of infrastructure. It includes what is on the ground, such as the LNG terminal, compressor stations or gas pipelines, as well as underwater infrastructure. When I came to Gaz-System in both these areas there was not much beyond the conviction of the need to implement this venture. We have secured funding for the FSRU. The money is from the Polish government and EU projects, including REPowerEU. The only thing left is to sign the agreements. The FSRU project is very complex, we are talking with two entities about chartering the vessel. Recently, there were ten of them, so we are gradually closing in on the best partner. This is a complex issue that involves prices, the environment, getting all the approvals, and so on. We are now at a stage where the project is ready for implementation.

However, for the time being, we will not be investing in another FSRU, i.e. a second floating unit that could provide gas to our neighbors. Is this project lost?

The current market guarantee is enough for one ship only. Every business must be based in the market. We have a contract with Orlen to cover the first unit’s regasification capacity. We are in talks with neighbouring countries about a second unit. However, there is not enough formal interest in the market to cover the capacity of the second vessel, so we have not made a business decision yet on whether to invest in it. However, we will prepare the installation and system for this. If in the future there is be a need to transfer more gas, for example, to Ukraine, Slovakia or the Czech Republic, we will be ready. This may require infrastructure expansion, such as the Stork II project when it comes to Czechia. If there is a need to send much larger volumes, we will deliver a second ship. It takes two to tango. For our part, we have a project and a building permit, which can be implemented within a maximum of one and a half years. In that time, we can build a connection. We just need a business decision from the Czech side. Poland is ready to carry out the investment, but this is an investment, money, so we need a guarantee the project will be accepted. I understand the challenges on the Czech side. The operator was a private entity that sometimes had divergent systems than the government. This could be a source of uncertainty.

There is already a capacity reservation for the first FSRU, but Greenpeace claims that we do not need it. What do you think?

I understand the different opinions in the discussion about energy security in Poland. However, I believe that such a discussion should also include arguments, but instead more and more often we are only talking about emotions. I understand gas is a transitional fuel. That’s why we are preparing for blending gas with hydrogen. We are preparing technologies and projects for transferring hydrogen. However, in the near future, natural gas will be needed. Forecasts speak of more than 10 billion cubic meters of demand in the energy industry. When new investors appear in a given location, one of the first questions they ask is whether gas can be connected to their investment. This is important for production. More and more often we return to gas to generate power. Natural gas will definitely be replaced, but it will not happen instantly. The same goes for neighbouring countries. Green hydrogen can, of course, replace natural gas, but with prices rising as a result of Russia’s invasion of Ukraine, the West’s willingness to convert energy to hydrogen is waning. Today industry representatives are asking who will pay for the modernization of infrastructure. They can’t afford it. In addition, the floating gas port is a dual-use installation. If there is a need it can provide hydrogen. Such a unit is chartered for 15 years, it can then be bought back or sent back. In the latter case, the infrastructure can be used for other purposes.

How are things at the LNG terminal? Gaz-System is finishing up the construction of the third gas tank…

We are concluding hydrostatic testing. It showed that the tank is sealed. We are also completing installations for mooring ships. According to our assumptions, in the second quarter of next year, the investment project will be completed, which will result in the commissioning of the installation. This means Gaz-System regasification capacity will increase to over 8 bcm. It will allow us to secure not 30 percent, as before, but about 40 percent of domestic demand. This is important in the context of abandoning gas supplies from Russia. Germany has laws allowing it to restrict gas supplies to Poland if doesn’t have enough gas to meet domestic demand. In such a crisis situation, the LNG terminal and Baltic Pipe will become the main source of gas supplies to Poland, and in the future the FSRU in Gdańsk will contribute as well.

How has the past year affected the safety of critical infrastructure under your care?

Protecting the terminal and the Baltic Pipe is our priority. This involves cooperation between a number of services. Our entities, such as security, are able to do a lot, but they have their limitations. Hence the need for cooperation with the police, the Border Guard, the Internal Security Agency and the Navy. We managed to meet this need. A lot has changed, but it would be useful to expand this cooperation. The area around the LNG terminal has been restricted. It caused some controversy, which I understand, but it raised the security level of the facility. We are currently choosing an antidrone system to help us. We are also completing the process of obtaining electronic protection, unfortunately I cannot reveal more details. The Border Guard is stationed in the facility and they are helping us with security. We are building headquarters for them, it is actually located in the sea at the end of the breakwater.

What are the lessons learnt from the Nord Stream 1 and 2 sabotage and the strange incident with the Balticconnector?

The fact that the Baltic Sea was, is and will be, the subject of influence. This is not an internal NATO lake. Of course, with the exception of Russia, all the Baltic states belong to the Alliance. By working together, we can significantly increase the level of protection. This is necessary. Let’s look at the Balticconnector – someone accidentally or not lowered anchors and damaged the pipeline. Are there ways to prevent such an event? We can certainly reduce the risk, but not to zero. The act of damage itself takes about a minute, we do not always have time to react. However, we should prevent threats using intelligence, counterintelligence and advanced electronics. All institutions in the Baltic Sea basin and within a given country need to cooperate. We’re learning how to do this. However, there is still a lot to do.

What do you wish the gas sector for Christmas and 2024?

I wish every employee to work safely and achieve their goals. To supply gas to homes, institutions and industry. Of course, life is not just about work, so I wish you all prosperity, happiness and a sense of meaning in family life, personal development outside of professional work. And, of course, the protection from Saint Barbara.

Interview by Wojciech Jakóbik