Baltic Pipe: How Poland is speeding up its exit from Russian gas | DW | 23.06.2022

About 100 kilometres (60 miles) east of Denmark and 75 kilometers north of Germany and Poland, two pipelines meet silently in the dark depths of the Baltic Sea. One is heading from Russia to Germany, the other from Norway to Poland.

Russia’s newly built Nord Stream 2 pipeline has been mothballed amid sanctions against Moscow over its war in Ukraine. Nord Stream 1 is still supplying gas to Europe but flows have been throttled by Russia in retaliation against the western boycott. Baltic Pipe , however, is on target to start pumping gas to Poland by October.

As metaphors go for Europe’s changing energy security priorities, this one is hard to beat.

Industry insiders widely expect Russian exports to Europe to fall from currently around 200 billion cubic metres (7. 7 trillion cubic feet) to between 50 billion cubic meters (bcm) and 75 bcm by 2030.

“Everyone wants to shift away from Russian gas, although we will still need to cooperate with Russia in the long term,” Torben Brabo, CEO of Energinet Gas TSO — the Danish national transmission system operator for electricity and gas — told DW.

In late April, Russia’s state-owned gas company Gazprom cut Poland off from its annual gas supply of 10 bcm — about 45% of Poland’s domestic demand — six months before its long-term contract expires. At nearly 96%, Polish gas storage tanks are the most-filled in the EU, but Poland has long said it was going to end the contract with Gazprom anyway.

Baltic Pipe is slated to become operational in October, alongside extensions to a liquefied natural gas (LNG) import terminal in Swinoujscie, northwest Poland. “In these severe times this is a very timely project,” Brabo said.

Baltic Pipe is a joint venture between Polish firm Gaz-System and Danish firm Energinet and estimated to cost between €1.6 billion and €2.1 billion ($1.9 billion and $2.5 billion). It will be an offshoot of the existing Europipe II pipeline from Stavanger in Norway to Dornum in Germany on the North Sea bed.

It then runs east of Europipe II on the bottom of the North Sea until landfall near the western Danish town of Varde. Then it will run through Denmark until going back underwater in the Baltic Sea near the island of Zealand before turning south for landfall in Pogorzelice in Poland, situated 60 km east of Swinoujscie, where Poland is extending its LNG import capacity.

Russian threats

Baltic Pipe comes amid mounting tensions over Russian gas deliveries to Europe. Russian gas giant Gazprom said last week that it was curbing supplies through the Nord Stream 1 undersea pipeline from 167 million cubic meters per day down to 100 million cubic meters. The company blamed the delayed return of equipment that had been sent to German company Siemens for repairs.

On Tuesday, Siemens Energy said the delay in returning the equipment to Gazprom was because they were taken to Canada for a scheduled overhaul and have not been returned due to Ottawa’s sanctions on Russia.

On Wednesday, Gazprom raised the stakes in its gas row with Europe, saying it would further reduce the capacity of gas supplies via the Nord Stream 1 pipeline to 67 million cubic meters per day.

Robert Habeck, Germany’s economy minister and vice-chancellor, said the move was intended to drive up prices. “It is obviously a strategy to unsettle and drive up prices,” he said, adding: “We can currently buy the necessary quantities from the market, albeit at higher prices.”

Two days later, Danish Defence Minister Morten Bodskov, told reporters that Denmark “must accept that the Baltic Sea is becoming a high-tension area.”

Issues to be resolved

One problem is that Poland’s state-owned monopolist, Polish Oil and Gas Company (PGNiG), has reportedly not been able to contract sufficient amounts of gas from Norwegian or Danish partners. It has reserved the majority of the Baltic Pipe capacity, and is now trying to finalize commercial contracts before the investment is launched.

Poland’s state-owned gas grid operator Gaz-System says the new pipeline’s capacity has been booked up to 80% and there is enough time to get that up to 100% before demand begins climbing back up in the cold season. Polish media reports put the figure at 50%.

By October 1 this year, about 75% of the full annual capacity of 10 bcm should be ready and 100% by January, Energinet’s Torben Brabo said.

Another issue is that PGNiG operates several exploration concessions on the Norwegian continental shelf and wants to pump up to 4 bcm of gas as part of the Baltic Pipe’s capacity it has booked. This has raised hackles in some parts of the Norwegian gas industry.

In a statement to DW, PGNiG said the group is “consistently and successfully striving to increase the volumes of its own natural gas production in Norway.” The company is aiming to achieve this with “acquisitions and investments in the deposits already owned.”

PGNiG has the goal of extracting 3 bcm of gas from Norway in 2022 — 112% more over the previous year — and 4 bcm in 2027. A recent investment in Norway’s Orn gas field is intended to secure an additional 0.25 billion cubic meters “in the coming years,” the statement said, as PGNiG is determined to ensure the booked capacity “is fully utilized.”

Alternatives

Albrecht Rothacher, an ex-EU diplomat from Germany, thinks it would be much easier for the EU to connect Baltic Pipe with the northeastern German town of Lubmin, where Russia’s Nord Stream 1 and 2 arrive.

Lubmin is just 62 km away from Poland and already the starting point for the Opal pipeline, which links Nord Stream 1 with onshore European gas grids, running from northern Germany to the Czech Republic and boasting an annual capacity of 36 bcm of natural gas. A second, smaller pipeline, NEL, also starts in Lubmin and already links Germany with Dutch gas fields.

“Both capacities are meant to accommodate for the Nord Stream 1 and 2 volumes,” Albrecht Rothacher told DW.

Edited by: Uwe Hessler



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