Diversification of gas supply sources and integration of gas infrastructure in the Three Seas Region

Diversification of gas supply sources and integration of gas infrastructure in the Three Seas Region with the implementation of the altic Pipe project and cross-border interconnections Republic of Poland-Slovak Republic and Republic of Poland-Ukraine

Report:

Year registered: 2018

Type:

Energy

Status:Substantial Progress

3SI countries proposing the project:

Poland

Participating 3SI countries:

Poland, Slovakia

Partner countries:

Denmark, Norway, Ukraine

* not part of the 3Seas Initiative

Main objectives:

Baltic Pipe

Baltic Pipe is a part of the Baltic Energy Market Interconnection Plan (BEMIP). Pipeline connects Poland with the Norwegian Continental Shelf through Denmark. The Baltic Pipe is one of the key sources of natural gas for Poland with perspective of serving also the Baltic Sea and Central Eastern Europe (CEE) region markets, constituting an alternative to gas supplies from the eastern direction. In this context, Baltic Pipe is one of the most important successes of the BEMIP initiative. After completion, the CEE including inter alia Poland, Slovakia, Ukraine and the Baltic region (Lithuania, Latvia, Estonia and Finland) gained the opportunity of receiving gas from the Norwegian Continental Shelf. Diversification of gas supplies to both regions alleviates the dependency on a single, external supplier. A secure supply of gas improves the framework conditions for developing a more sustainable energy system by switching from coal to gas.

FSRU project and LNG Terminal in Świnoujście Expansion Program

FSRU project in Gdańsk Bay and LNG Terminal in Świnoujście Expansion Program aim at meeting an increasing demand for natural gas in Poland and to guarantee additional import capacities on a regional level. Both investments are expected to provide an efficient and cost-effective way to enhance diversification and security of gas supplies and to foster competition on regional gas markets. Both projects may in the future also realize functionality for Baltic Sea transportation of LNG such as reloading and bunkering.

Republic of Poland –Slovak Republic Interconnection.

Republic of Poland – Slovak Republic Interconnection is a part of North-South Gas Interconnections Corridor in Central Eastern and South Eastern Europe ("North-South Gas Corridor"). It is a gas infrastructure allowing for regional connections between the areas of Baltic, Adriatic and Aegean Sea regions, the eastern part of the Mediterranean and the Black Sea, as well as within these regions, also increasing diversification and security of gas supply. The above mentioned initiatives are an alternative to the historically well-established direction of supply on the East-West axis and create opportunities for the emergence of regional markets covering at least several neighbouring countries. Republic of Poland – Slovak Republic Interconnection is important not only from the perspective of increasing security and diversification of supplies, but also to counteract the divergence of gas prices between the countries of Central and Eastern Europe and South-Eastern Europe as well as for strengthening the solidarity between the EU Member States.

Republic of Poland – Ukraine interconnection.

Realization of the project may increase the level of the diversification of gas supplies for Ukraine by wider access to the new sources of natural gas, including the LNG as well as the gas from Norway).It may increase the level of integration of regional gas markets through a transmission corridor, which may also enhance the gas solidarity among EU and Energy Community. The main objective of the Project is to establish a flexible transmission infrastructure, which will allow for connecting northern and western gas markets as well as the global LNG market with the Ukraine market. It should positively influence the competition and attractiveness of the region for market participants. In the long-term prospect, the Corridor should provide the construction of the unified market of gas in the region and enhance the energy security. Integration of the regional gas markets (securing access to the EU gas market) will lead to the formation of effective competition mechanisms that would improve the efficiency of business performance to the benefit of natural gas consumers and should ensure an adequate level of wholesale gas prices.

Short description:

The Baltic Pipe

Project consists of completed new and upgraded infrastructure. On the Polish side the main elements are: bi-directional offshore gas pipeline connecting PL and DK through the Baltic Sea (capacity of approx. 10 bcm/y; length of approx. 275 km); DN1000 onshore gas pipeline connecting the offshore gas pipeline with the national transmission system including the Receiving Terminal (length of approx.. 40 km); DN 1000 Goleniów – Lwówek pipeline (PL) of approx. 192 km; compressor station in Gustorzyn and extended compressor stations in Goleniów and Odolanów.

Republic of Poland-Slovak Republic Interconnection

Infrastructure consisting of following, completed pipelines in Poland: Strachocina - Łupkowska Pass (PL-SK border) pipeline (DN 1000, 58 km); Pogórska Wola - Tworzeń (DN 1000, 168km); Strachocina – Pogórska Wola (DN 1000, 98km); Tworóg – Tworzeń (DN 1000, 56 km); Gas node in Strachocina.

Infrastructure in Slovakia includes Łupkowska Pass (PL-SK border) - Velké Kapušany pipeline (DN 1000, 103 km) and modifications of the existing compressor station located at Velké Kapušany.

Republic of Poland-Ukraine Interconnection

The scope of the Project in Republic of Poland includes the construction of: Hermanowice node pipeline to the border crossing point including the additional gas infrastructure; Hermanowice – Strachocina pipeline (DN700, 72 km - already completed); Compressor station in Strachocina, Wronów – Rozwadów pipeline (DN 1000), Rozwadów – Strachocina pipeline (DN 1000). The scope of the Project in Ukraine includes the construction of Gas pipeline DN1000 from border crossing point (GMS Drozdovychy) to the Western part of Ukraine's GTS in the area of UGSF “Bilche-Volytsya” and construction of additional gas infrastructure. The implementation of the project may start after receiving commitment by network users to book the respective capacities and if the results of the economic tests are positive.

LNG Terminal in Świnoujście Expansion Program:

Additional regasification installation – increasing the nominal regasification capacity of the terminal to 8.3 billion Nm3/year.

Third LNG storage tank – increasing the operational flexibility of the LNG terminal installation and ensuring the optimum natural gas process storage capacity.

The second jetty - for loading and unloading of LNG carriers, LNG transshipment and handling LNG bunker vessels and providing bunkering services.

FSRU Gdańsk

Capacity 6.1 billion Nm3/year with the planned commissioning date in 2028. Project encompasses FSRU unit, breakwater and several transmission evacuation pipelines: Gdańsk – Kolnik, Kolnik- Gardeja, Gardeja-Gustorzyn.

Contact persons:

Mr. Radosław Sobczak, Ministry of Climate and Environment; radoslaw.sobczak@klimat.gov.pl,

Mr. Michał Homenda, Office of the Plenipotentiary of the Government for Strategic Energy Infrastructure; michal.homenda@mfipr.gov.pl.

Calendar of implementation:

6.2020 - 10.2022
Completed
Baltic pipe - completed
10.2019 - 05.2022
Completed
POLAND-SLOVAKIA GAS INTERCONNECTION - completed
2022 - 12.2027/1.2028
Design
FSRU – 2022 - 12.2027/1.2028 – Design and Permitting phase – Open Season procedure (FSRU unit, capacity 6,1 bcm/y) completed. The planned date of starting commercial operation is 1st January 2028. For the onshore part (250 km pipelines) investor obtained all necessary permits.
07.2020 - 04.2024
Construction
LNG Terminal in Świnoujscie Expansion Program - 07.2020 - 04.2024- ongoing
– First stage of LNG Terminal Expansion Program - upgrading regasification capacity is completed. Current send-out capacity is 6,2 bcm/year.
– Second stage of LNG Terminal Expansion Program – third storage tank and jetty increasing send-out capacity up to 8,3 bcm/year.
2023-2031
Planning
POLAND-UKRAINE GAS INTERCONNECTION – Planning 07.2023 – 2030/2031
Planned capacity of 3 bcm/y towards Ukraine
4Q/2022 - Design contracts signed
3Q/2025 - Building permits obtained
1Q/2030 - Commissioning of the project

Budget:

EUR 1,562,556,000

€1.563B100%
secured

Financing sources:

CEF

National funding

Other EU funding

EIB

Baltic Pipe:

Total: 716 400 000 €

% of total has secured financing - 100%

CEF - 214 920 000 €

National Funding - 501 500 000 €

Republic of Poland-Slovak Republic Gas Interconnection:

Total: 134 156 000 €

% of total has secured financing - 100%

CEF - 54 089 900 €

National Funding - 80 066 100 €

EIB has granted a common credit line to GAZ-SYSTEM for projects: Poland-Slovakia Gas Interconnection and Gustorzyn-Wronów pipeline.

LNG Terminal in Świnoujście Expansion Program

Total: approx 425 000 000 €

% of total has secured financing - 100%

National Funding - the rest of the cost (own resources of the owner and a loan granted by the Polish TSO - mother company of the owner)

Other EU funding - maximum 128 000 000 €

FSRU in the Port of Gdańsk

An estimated total value of CAPEX for the FSRU on Polish Baltic Sea Coast is 988 mln EUR (data based on 2022 ENTSO-G The Ten-Year Network Development Plan TYNDP)

Republic of Poland-Ukraine Interconnection

An estimated total value of CAPEX for the PL-UA Project in Poland (interconnector and expansion of the Polish transmission system including compressor station) is 376 mln EUR for the pipeline section + EUR 8 million for the metering station allowing for 3 bcm/year capacity towards Ukraine.

Coherence with EU Priorities and Policies

Relevance of the project for the region

The Baltic Pipe project is a key component of the Baltic Energy Market Interconnection Plan and the North-South Gas Corridor. Baltic Pipe brings a new source of supply to the CEE and 3SI regions that are dependent on one dominant gas supplier. The Baltic Pipe have a significant impact on the security of supply in the Baltic and Central European regions through diversification of supply sources, routes and counterparts. The project facilitates the market integration and market functioning in the Baltic region and Central-Eastern Europe. Is ensures access to the new source of gas (Norwegian, Danish gas for the 3SI region) and allow for enhanced competition on the regional markets in this part of Europe.

FSRU in Gdańsk and LNG Terminal in Świnoujście Expansion Program

The global LNG market is constantly developing. There are new LNG exporters entering the market. Global LNG trade is expected to increase significantly in the upcoming years. In this case the FSRU in Gdańsk and expanded LNG Terminal in Świnoujście in Poland will allow to receive LNG from the most economically advantageous source of supply under given conditions on the market. It is expected to provide an efficient and cost-effective way to enhance diversification and security of gas supplies in the Central and Eastern Europe and the Baltic Sea region. The projects will also contribute to strengthening energy solidarity between the EU member states located in both regions.

The trends on the global LNG market in conjunction with implementation of the projects under full TPA rule will foster competition in the region, translate into lower prices for gas customers and better align them with those available in North-West Europe (synergy effect in the form of lower prices due to a high level of competition on the LNG supply side and attractive LNG prices).

The additional benefit for consumers arising from the LNG market is vast flexibility when it comes to building a natural gas supply portfolio based on different suppliers and the length of contracts. The terminals will also allow market participants to purchase gas from the spot markets and thus benefit from favorable pricing relationships.

Enhanced access to diversified sources of supply will also help EU to completely abandon Russian gas supplies by 2027 as foreseen in RePowerEU Plan.

The projects give rise to the development of new interlinked businesses emerging around LNG services, especially in the maritime and land transport sectors (feeders, cruisers and etc.). In this context, it should also be noted that the LNG bunkering infrastructure in the Baltic Sea is negligible at present. However, the emergence of such investments will incentivize fleet owners to convert ships to LNG.

The projects are also expected to positively influence sustainability with the reduction of pollutant emissions into the air. This concerns emissions coming from high sulphur marine fuels emitting sulphur dioxide and solid particles that are harmful to human health, the environment and responsible for acidic rains. The projects meet the objectives of the so-called sulphur directive.

Republic of Poland-Slovak Republic and Republic of Poland-Ukraine Gas Interconnections

PL-SK and PL-UA Interconnections allow for transmission of gas from LNG Terminal in Świnoujście, Baltic Pipe and FSRU in the Port of Gdańsk to other countries in 3SI region.

In line with the EU North-South Gas Corridor both projects allow the CEE countries and Ukraine to benefit from the direct access to different gas supply sources from the North, such as LNG terminals in the Baltic Sea (Świnoujście LNG, FSRU in the Gdańsk, Klaipeda LNG via Gas Interconnection Poland – Lithuania – GIPL) and Norway (through the planned Baltic Pipe Project connecting Poland with Norway via the Danish transmission system).

Thanks to reaching such a level of complementarity with other projects the interconnections will assure diversification of sources and routes, as well as security of gas supplies in the CEE region. They will also enhance the competitiveness on the gas market. Particular attention should be paid to the fact that the interconnections significantly increase the level of security of supply not only in the directly concerned countries (Poland, Slovakia, Ukraine), but in the whole CEE region, covering most vulnerable eastern EU Member States and Ukraine, especially in light of the current gas crisis.

The projects address the need of enhancing security of supply and promoting market integration through diversification of sources and routes of supply in the region and solidarity among the EU Member States and Energy Community. In case of supply disruptions, PL-SK and PL-UA interconnections will assure natural gas supplies to the CEE countries which will be potentially affected by such interruption.

Whether innovative, safe and sustainable new technologies are to be used

Description of entities involved