LNG Supplies to Poland on the Rise

2018 marked the first time in history that the share of Russian gas in PGNiG import structure had fallen below 70 percent. Meanwhile, the volume of liquefied natural gas (LNG) imports from Qatar, USA and Norway to Poland is growing; the share of LNG in total imports portfolio has already exceeded 20 percent and is set to increase even further, following the recent closure of new multiyear deals with US partners.

PGNiG is successfully pursuing a strategy to ensure that Poland is not be dependent a single, dominant gas supplier. In the whole of 2018, PGNiG imported around 13.5 billion cubic meters of natural gas to Poland. Supplies from the East amounted to 9 billion cubic meters and constituted around 67 percent of total import volume. The quantity of LNG imports reached more than 2.5 billion cubic meters, up by 58 percent y/y, which represented more than 20 percent of the entire PGNiG import structure. Domestic output remains at the level of nearly 4 billion cubic meters a year.

“We we have been consistently reducing natural gas imports from the East, which results from the implemented strategy of diversifying Poland’s gas supply sources and directions. Under the ‘take or pay’ clause, effective until the end of 2022, we are obligated to pay Gazprom for at least 85 percent of contracted gas volume a year. Our aim is to accept only those minimum quantities imposed by the contract and to build an alternative, long-term procurement portfolio based on market terms”, said Piotr Woźniak, President of PGNiG SA Management Board.

The Russian supplier is unable to offer such market terms and has also proven to be an unreliable and unstable business partner. For instance, there were seven cases of disruptions in gas deliveries to Poland from Gazprom since Poland’s EU accession in 2004. This is why PGNiG has concluded new agreements with partners that operate in a transparent and reliable manner.

Liquefied natural gas is shipped to Poland from Qatar, Norway and USA to Poland. The four deals signed by PGNiG with American LNG producers in 2018 will guarantee a total annual volume of around 8 billion cubic meters (after regasification) of US natural gas starting from 2023. Together with the Qatar agreement, the company’s entire LNG portfolio will approach 10 billion cubic meters. Such volume will cover a large share of Poland’s demand for natural gas, whose consumption continues to grow. The first deliveries of American LNG to Poland are scheduled for this year already, under a contract with Cheniere Energy.

While the current regasification capacity of the LNG terminal in Świnoujście is 5billion cubic meters, a decision has already been made to expand it to 7.5 billion cubic meters by 2023. Some of the purchased LNG will be sold by PGNiG, in line with its strategy to build capacity on international markets. Three of the four contracts made with US companies are based on the FOB (Free-On-Board) standard, under which PGNiG assumes title to the cargo at the port of loading in the USA and can then freely dispose of the goods: ship them to Poland or resale them on other markets.

PGNiG has imported more than 50 LNG cargos to Poland since the opening of the President Lech Kaczyński LNG terminal in Świnoujście in June 2016. On average, two methane carriers with liquefied natural gas arrive in Świnoujście every month. Apart from its long-term and mid-term contracts, PGNiG also concludes so-called spot transactions. So far, there have been 11 spot deliveries of LNG: from Qatar, Norway and USA.

“Spot deliveries are the responsibility of our trading office in London. Our employees seek to identify favourable market opportunities to enhance our LNG portfolio. We had a strong start into the year 2019, with an unexpected winter decline in LNG prices in Asia, so that large quantities of attractively-priced LNG were redirected to Europe. We are taking advantage of this situation. The share of liquefied natural gas in PGNiG import structure is increasing year by year. In 2018, it exceeded 20 percent, but our ambitions for 2019 are even greater than that”, said Maciej Woźniak, Vice-President of the PGNiG SA Management Board for Commercial Affairs. “The expansion planned by the LNG terminal operator will allow us to make good use of the contracted volumes”.

After regasification at the LNG terminal, most of the liquefied natural gas is sent to the Polish gas network and then distributed to households, industrial users or power plants, used to power buses or exported to Ukraine. Some of the gas, in liquefied form, is reloaded onto tankers that take it to the most remote locations in Poland, without access to the national gas network. Then, the gas is transported to off-grid system recipients using regasification stations, which operate in a way similar to the LNG terminal, but on a smaller scale. More than 4 thousand tankers have been loaded since the opening of the LNG terminal in Świnoujście, of which 1794 in 2018 alone. LNG from Świnoujście has even been shipped to Estonia and Bulgaria.

Apart from the expansion of its LNG portfolio, the company is preparing to provide the Polish market with gas extracted on the Norwegian Continental Shelf, which is to be transported through the Baltic Pipe via the North Sea, Denmark and Baltic Sea starting from the end of 2022