A Greenpeace article based on reports from Denmark raised concerns about the security of gas supplies to Poland. This is another argument for signing new contracts to fill the Baltic Pipe to the brim – writes Wojciech Jakóbik, editor-in-chief at BiznesAlert.pl.
Greenpeace has recently reported that the redevelopment of the Tyra natural gas field was experiencing issues. The field is part of the PGNiG-Orsted contract, which will formally start on 1 January 2023, and which apart from PGNiG’s own output and contracts with Lotos and Aker BP, is to give Poland gas from outside Russia via the Baltic Pipe. This pipeline is expected to reach a capacity of 3 billion cubic meters in October and 10 billion cubic meters in the new year. In the past, I suggested that PGNiG should book about 8 bcm of its capacity, as that’s what it had paid for to the TSO Gaz-System.
Orsted is facing problems with acquiring gas from the Tyra field, because Total, the field’s operator, is experiencing delays, which the company had revealed back in November 2022. This could postpone the deliveries till mid 2023 . The recent news cited by Greenpeace suggests that the delay is more likely to last until the end of next year. Orsted reminds that such a delay was taken into account in the contract. „The agreement between Orsted and PGNiG Supply and Trading takes into account the possibility of such a delay,” the Danish company told BiznesAlert.pl. This means that the Danes may not replace the Tyra volume with another source, but only postpone the implementation of the agreement until the deposit’s redevelopment is complete.
„The recently announced delay that will postpone the project until the end of 2023 does not have any impact on ensuring gas deliveries to Poland in the coming heating season anyway,” PGNiG stated in response to a piece by the Newsweek weekly that warned about gas shortages in Poland caused by the issues at the Tyra field. The Climate Ministry informed BiznesAlert.pl that the demand for gas in Poland is expected to fall by 17 percent in 2022 that is, from 20 to about 16-17 billion cubic meters a year. Domestic production provides 4 bcm annually, the Baltic Pipe 3 bcm per year, which means in the last quarter of 2022 about 750 million cubic meters will reach Poland. The total LNG deliveries should yield 6.3 billion cubic meters. This gives about 14 bcm in total. Gas storage facilities hold about 3 bcm and they will cover the gap together with purchases from the exchange (provided Gazprom doesn’t limit gas availability) and new contracts for the Baltic Pipe, if they enter into force already in 2022. In 2023 the contract with Lotos will also come into play, which will add about 1 bcm a year, but it remains unknown how much will flow from Aker BP, because that volume has not been disclosed; however, it is probably about 1 billion as well.
There will still be free capacity in the Baltic Pipe. It’s been rumored that in the spring PGNiG had on the table agreements with Shell and Total, both present on the Norwegian shelf, for a total of almost 2 bcm a year. Now the company will be able to finalize them, so that the capacity utilization of the Baltic Pipe in 2023 reaches 6-7 bcm a year. Perhaps new acquisitions on the Norwegian shelf will increase this volume thanks to own production, because PGNiG is hoping to up its output from 3 to 4 bcm a year. However, it is not known how soon this will be possible. „Based on our data on our deposits and planned investments in developing the field, we expect that in the next few years, the volume will go up to 4 bcm a year,” PGNiG announced. To sum up, all of this means that Poland should have just enough gas thanks to reserves. Therefore, it must be taken into account that in order to maintain gas supply to households, at some point it will be necessary to introduce a degree of limitation of gas supply for the industry, which means gas flow to this sector will be lowered. This means that it makes sense to reduce gas consumption during the heating season in order to save the fuel, as recommended by the European Commission. We will be encouraged to do so by the record price, which has caused a drop in consumption referred to by the Ministry of Climate.
Before Greenpeace revealed the news, BiznesAlert.pl sources in the government asked rhetorically why the Baltic Pipe needed more gas contracts this year, if until its end the pipe’s capacity will be only 3 bcm, and Poland’s gas storage was almost full, so there would be no way to use the surplus. However, this is another area where diversification, i.e. a diversified portfolio, is important. Plenty is no plague, especially in a time of an energy crisis, and signing as many contracts as possible makes sense, and one of the reasons are random events, such as Orsted’s problems. Polish negotiators will finalize new Norwegian contracts in the era of record prices, which in the spring of 2022 reached EUR 100 per MWh on the TTF exchange and seemed high, but are now twice as high. This means that new contracts – with Shell or Total, for example, and perhaps with other companies as well – should ensure security of supply, but at a higher cost, paid by the whole of Europe because of its dependence on Russia’s Gazprom, which is deliberately fuelling the crisis.