The Lech Kaczyński LNG terminal in Świnoujście will have a second quay. It is good news because it means Poland wants to fight for the small scale LNG market on the Baltic Sea. It has not been so obvious until recently – writes Wojciech Jakóbik, BiznesAlert.pl’s editor in chief.
Gaz-System’s strategy says that its goal is to not only include its infrastructure in the gas markets integration process and to construct a Polish, physical gas hub, but also to increase the company’s operational and organizational efficiency. This will be done through associated services. Poland’s LNG terminal will be used to enter the small scale LNG market, which entails bunkering and reloading LNG into smaller vessels.
The fate of this concept hanged in the air till the end because Marek Drac-Tatoń who took over the leadership of Polskie LNG, Gaz-System’s subsidiary responsible for the terminal, was skeptical about it. He replaced Jan Chadam, but not for long. He was removed from the post in August. In July Gaz-System announced he would perform his CEO duties as of the 1st of August, which means he worked there for a week.
On 19 September Gaz-System revealed that the Maritime University of Szczecin has been analyzing the expansion of the LNG terminal through adding a new quay. This part of the facility is used to receive and unload ships. The first quay enables the reception of LNG deliveries as part of the PGNiG-Qatargas agreement and spot contracts made by the company, which is currently the only user of the facility in Świnoujście.
The second quay will enable transshipment, i.e. reloading to smaller vessels and LNG re-export to other Baltic Sea markets. This is an important service because both Lithuanians and Russians want to offer it on the Baltic Sea. There is a reason why Moscow started to talk about the Baltic LNG project again. Poland needs the second quay to fight for the Baltic Sea. Bartosz Bieliszczuk from the Polish Institute of International Affairs, who is also a frequent guest at BiznesAlert.pl, wrote an interesting analysis on the topic.
The new investment will also enable bunkering, i.e. supplying LNG to ships for their own use. This kind of fuel is becoming more competitive in comparison to mazut, which is increasingly hounded by EU’s sulphur limits for marine fuels. Additionally, there is a plan to use the second quay to develop inland waterway navigation, for instance through the Odra Waterway, which was mentioned by Paweł Jakubowski, Gaz-System’s Head of Development.
It remains unknown how the construction of the second quay will impact the plans to install a Floating Storage and Regasification Unit in the Gdansk Bay, a project that is still being analyzed. This solution, which would be obviously used to service the small scale LNG market, could be an alternative in case the Baltic Pipe plans fail. If the pipeline from Norway is constructed, then the FSRU in Gdańsk would be redundant once the second quay in Świnoujście is completed.
The plan is to complete the quay in 2021. It is a good thing that this decision has been made despite the turmoil. However, this is not the final part of the project’s expansion. The installation may develop road and railway deliveries. A small CHP installation could also be built on its premises to provide services to local clients. This is how the profitability of the terminal could be increased, after all it is bearing the burden of diversification with PGNiG.
Perhaps this is why Andrzej Szczęśniak an analyst famous for his lack of sympathy for Poland’s plans to break free from dependence on Russian gas has recently suggested that the program had been ordered by the USA and that LNG terminals were unprofitable, which was proven by Lithuania’s struggles with the profitability of its FSRU.
A similar optimism when judging the relations with Gazprom should be applied to the assessment of Polish and Lithuanian efforts. If access to the LNG market gave Lithuania a 25 percent gas discount, then perhaps it is worth to continue investing in the terminal? If there is a chance to increase its profitability then it is good this opportunity is used.
You can read more on the expansion of the Polish terminal in my scientific article entitled The Lech Kaczyński LNG Terminal. It was written on the basis of study tours and document analyses in cooperation with the experts from Polskie LNG, Gaz-System and the Maritime University of Szczecin as well as other institutions engaged in the project at different stages of its implementation.