GAS LNG 11 September, 2020 10:00 am   
COMMENTS: Tomasz Stępień

Stępień: the capacity of the floating LNG terminal will be determined by the market (INTERVIEW)

“We need to start with business parameters. We want to have the most up to date knowledge about the market to make our plans. For instance, if the demand will be at 7 bcm a year, then I will offer such capacity from the get go,” Tomasz Stępień, CEO of GAZ-SYSTEM, said about the plans to set up a Floating Storage Regasification Unit (FSRU) in the Bay of Gdańsk. Why the FSRU will be set up in the Bay of Gdańsk and how much gas will it be able to process?

Tomasz Stępień: We have already decided to construct the unit. There are a few reasons behind this. The most important one is the conclusion we came to since launching the LNG terminal in Świnoujście. We have been observing a dynamic increase in demand for natural gas across all sectors in Poland, which I believe confirms customers trust gas supply will not be disrupted. In other words, if big capital and business decide to invest in natural gas, it means there is confidence that there will be no more stoppages of gas supplies.

These disruptions were related to the reliance on one main gas supplier.

Yes. Initially the terminal in Świnoujście was designed according to specific parameters, but we did everything we could to expand them. Two kinds of expansions are taking place: a small one, which will add to the market a doubled capacity; and a large one, which involves the construction of a new LNG tank, that will make handling possible, and a second berth for road and marine transport. We cannot expand this installation with adequate, marginal input anymore, because it was initially designed according to specific parameters. This pertains to the location and the kind of harbor. The second reason for building the FSRU is that from the point of view of the security of transmission, and the fact that the gas market in Pomerania is growing, it is wise to place the source of gas understood as an entry point there. The port in Gdańsk is already deep enough and adapted to large vessels. Gigantic investments are not needed there. The power generation system in Pomerania is indicating that it wants to switch to gas. The local refinery also voiced demand for gas, and there is a CHP plants market. This is all local, but the FSRU will be connected to a gas pipeline and a gas compressor station in central Poland.

Which one?

The Gustorzyn gas compressor station, which is constructed as part of the Baltic Pipe project. The station will enable transmitting gas in a gaseous form to the eastern border. This means we will be free to provide gas to all our customers without being burdened by decisions made outside of our business area, e.g. by Russia, even if the demand will continue to grow for years.

Will it be possible to transmit the gas even further, abroad?

Of course. I believe interconnectors have two functions. The first one, which we are fulfilling since GAZ-SYSTEM is a state company and has to ensure security, is being a safety valve. Once it is safe, the gas will follow the price. The situation for consumers in the country will improve, because the more connections to companies that extract or deliver gas there are, the faster the cost of gas will go down.

The FSRU’s capacity will be 4.5 bcm or more. What customers are interested in gas from the unit?

We offer three services. We have 167 transmission agreements, but the number of regasification contracts is a lot smaller because it is a new technology. It has not been paid off or amortized yet. We also have an offer from Świnoujście. The response from the market may vary, as we will be dealing with entities that only want to trade on the exchange, with individual customers, or companies that have been buying gas, but want to complete their order portfolio. It is 4.5 bcm because that is the technical capacity of the regasification unit. However, we are able to arrange a bigger one. We may also decide on a smaller unit and more regasificators, or a second tank. We have to start with business parameters. We want to have the most up to date knowledge about the market to make our plans. For instance, if the demand will be at 7 bcm a year, then I will offer such capacity from the get go

Will this be a Polish unit, or a lease?

When it comes to the vessel and the technology, everything depends on its functionalities, demand and the moment at which it will be necessary to procure it. Every procurement option is taken into consideration. There are vessels available for lease or for rent. We don’t know whether they will meet the requirements of our market. Such a vessel can be ordered at a shipyard in a standard or a bespoke version. We may either handle it on our own, or pass this project to someone who already deals with such orders. However, it’s too early to make that decision. Arranging an FSRU does not take as much time as building a gas pipeline.

Once the FSRU is made available, will a new operator manage it, or will your company administer it directly?

The government has decided that the best way to handle this in Poland is to focus all operating activities in the GAZ-SYSTEM group. Every service of this type has to have an operator and that operator already exists. Creating competition with regard to operating on this market in the same group of assets is not the wisest strategy, so we want to focus the operation of gas transmission in one hands – the GAZ-SYSTEM Group.

When will the market research be ready?

The initial results will be here already in the fall, the final and binding ones will be ready next year.

When will the public opinion learn about them?

We will definitely communicate what decision we will make, and it will have its impact on the research. We will not reveal the results of the research, nor will we divulge any aspects that constitute a trade secret, because we have limitations in this regard. Whereas, once the details on the investment parameters will be announced, it will be possible to deduce the market research results, unless the company that will take place in this process reveals them itself.

Interview by Wojciech Jakóbik