Jakóbik: Something ends (Yamal), something begins (Baltic Pipe)

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Construction of the Baltic Pipe gas pipeline. Source: Gaz-System
Construction of the Baltic Pipe gas pipeline. Source: Gaz-System

2023 was marked by the continuation of changes following the termination of gas supplies from Russia to Poland. The Yamal gas pipeline’s eastern entry point will be closed, while the Baltic Pipe is upping supply from Norway – writes Wojciech Jakóbik, editor-in-chief at BiznesAlert.pl.

A pipe that was supposed to be empty

According to an unforgettable quote from one of Andrzej Sapkowski’s books „something ends, something begins”, the end of one story is the beginning of another. And so the end of the story about Poland’s over a decade long efforts to become independent of Russian gas, which culminated when Russia stopped supply after invading Ukraine, is the beginning of a story of the Baltic Pipe, which is pumping more and more gas from outside of Russia to Poland.

The pipe was built after years of deliberations about its relevance and at the third attempt initiated in 2015 when the Polish government had started talks with Denmark on building it. The final investment decision on the Baltic Pipe was made in November 2018 after a market study showed demand for such a pipeline on both sides. It was also included on the EU’s list of Projects of Common Interest (PCI) and could count on EU funding. While the Danes looked at the Baltic Pipe mainly as a tool for transporting biomethane, a renewable gas desirable from the point of view of climate policy, Warsaw and Brussels stressed the value of this project in the context of reducing the dependence on gas from Russia. The launch of the Baltic Pipe, scheduled for the end of 2022, was coupled with the end of the Gazprom-PGNiG Yamal contract valid until the end of that year, although it had been eventually terminated by Russia under the pretext of a dispute over payments in rubles in April 2022.

The companies responsible for the implementation of the Baltic Pipe are operators from Poland (Gaz-System) and Denmark (Energinet.dk). Adversity did not stop the construction, although at the very beginning of the energy crisis fueled by Gazprom and before the Russian invasion of Ukraine, there was a discussion in Poland about the availability of gas for the needs of the Baltic Pipe. Some even claimed it would stand empty because of the need to share Norwegian gas with Germany. No such thing happened, and deliveries started even despite the sabotage of the nearby Nord Stream 1 and 2 pipelines the day before the opening ceremony of the Baltic Pipe. However, the construction was hindered by problems with an environmental decision in Denmark, which was suspended, delaying the construction on the Danish side, but not the date of commissioning of the gas pipeline, which is important from the point of view of energy security.

Finally, the Baltic Pipe began operations on September 30, 2022. „In 2022, 608.4 million cubic meters were sent to Poland via the Baltic Pipe. In 2023, until December 21, 2023, 6,339 million cubic meters of gas were transferred through Baltic Pipe to Poland,” informs Gaz-System in a comment for BiznesAlert.pl. This means that last year the Baltic Pipe used about 6.3 out of 10 billion cubic meters of its capacity. It helped Poland abandon supplies from Russia when it turned off the gas tap after the invasion of Ukraine, and its use should continue to grow.

Deliveries via the Baltic Pipe (6.3 billion cubic meters) in combination with a fully used LNG terminal (6.2 billion cubic meters) and the Poland-Lithuania gas pipeline that taps into a Lithuanian FSRU, where Polish PGNiG reserved 2 billion cubic meters, provide 14.5 billion cubic meters of gas annually in total. Together with domestic production reaching 3.7 billion cubic meters this infrastructure provides 18.2 bcm a year. This means Poland has a surplus as in 2022 it used 17 bcm of natural gas, but in 2023 that might have gone up thanks to solutions that lowered gas prices despite the energy crisis. This means that the capacity of the Baltic Pipe can be used to an even greater extent in the future. It should not drop too much thanks to a series of futures contracts with the largest package of PGNiG-Equinor contracts for 2.4 billion cubic meters a year for a decade until January 1, 2033 on top of the list.

This means that the Baltic Pipe ends 2023 with a passing grade for a test in energy security. It ensured the security of gas supplies when the Russians turned Poland’s gas tap off, in a way prompting Warsaw to part with the Russian fuel quicker that originally planned. Its use is likely to grow as Poland’s combined heat and power plants are in the process of replacing coal with gas. Together with the planned FSRU in the Gulf of Gdańsk (6.1 billion cubic meters) it is to provide greater access to this fuel, and in the future it can also be used to supply renewable gases, such as biogas in Denmark or hydrogen promoted in the EU climate policy.

The cherry on top is that the Baltic Pipe project has been settled by the European Climate, Infrastructure and Environment Executive Agency (CINEA), which summed up the contracts for co-financing the construction and settled them on 18 December 2023. „(…) thus the project was closed and fully settled in this respect,” reports Gaz-System. The value of the grant reached 214,920,000 euros, and according to Gaz-System, it was one of the highest grants awarded under the entire CEF Energy Program in the last decade.

Poland closes the eastern gateway

The thing that is ending with the dawn of 2023 is the Yamal-Europe gas pipeline as a transmission route for gas from the east. Following the acquisition of the owner of EuRoPol Gaz by the Polish state through Orlen, the so-called Yamal pipeline’s Polish section becomes a regular part of the transmission infrastructure in line with the idea of polonizing Yamal’s capacity. In response to Poland imposing a compulsory administration over EuRoPol Gaz after the invasion of Ukraine, Russia imposed its own counter-sanctions that block gas transmission via this pipe. Meanwhile, Poles are rebuilding the Kondratki compressor station to replace gas-compression turbines with generators that will generate electricity. This is an introduction to the closure of Yamal from the East, and the relevant decisions have already been made.