Deutsche Welle (English edition)
Baltic Pipe delay to push Poland back into Russia's arms
Copenhagen's decision to withdraw a permit for the Danish section of the Baltic Pipe gas pipeline from Poland to Norway could mean Warsaw remains a buyer of Russian gas. That was not part of the plan.
The Danish Environment and Food Appeals Committee on May 31 revoked an environmental permit for the Baltic Pipe project, due to fears over damage to local bat and mice populations. The permit was issued in July 2019 for the 210-kilometer (125-mile) onshore section of the Baltic Pipe gas pipeline on Danish territory.
The pipeline is planned to link Norwegian gas fields with Polish customers from October 2022. The move is a setback for Poland's long-term and crossparty plans to shift away from dependence on Russian gas.
The longer and more controversial Nord Stream 2 gas pipeline that would bring Russian gas to Germany — the main reason
why Warsaw has pushed so hard to finish the Baltic Pipe project — also struggled to gain permis
sion to lay in Danish waters.
Observers say the delay also potentially gives Moscow leverage in future gas contract negotiations or could be used in talks about the construction of a so-called energy bridge linking any future nuclear production in the Russian exclave of Kaliningrad and the EU electricity market.
"Russia will use the delay as leverage and could seek to push ahead with a project to build a nuclear plant in Kaliningrad and an energy bridge, linked to the EU electricity markets," Robert Tomaszewski from Warsaw-based think tank Polityka Insight told DW. "Poland could be urged to join as a way of inducing preferable gas contracts," he added.
Looking away from Russia
The section of the pipeline is one of five intended to enable the transport of gas from Denmark's west coast to the island of Zealand in the southeast.
The Baltic Pipe project 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 includes a 275 km-long Baltic Sea pipeline between Poland and Denmark and a connection to Norway's Europe II pipeline in the North Sea.
The pipeline has a capacity of 10.2 billion cubic meter (bcm) per year and is planned to be completed by October 2022 — just before Poland's statecontrolled oil and gas company PGNiG will see its long-term import contract with Russia's Gazprom expire.
Supply diversification away from Russian gas has been Poland's long- stated aim, prompting it to develop LNG (liquefied natural gas) terminals and other interconnections.
At the start of 2018, PGNiG signed agreements with GazSystem and Energinet for gas transmission services between 2022 and 2037 worth 8.1 billion zloty (€1.8 billion, $2.1 billion).
Poland has an annual consumption of about 20 bcm of gas, a figure that is growing as the country shifts from coal to gaspowered power plants. PGNiG bought 9 bcm of Russian gas in 2020.
PGNiG pivots
PGNiG CEO Pawel Majewski stressed that PGNiG is ready to continue buying gas from the
East. "If the price is attractive, we can buy gas from that direction," he said.
Piotr Naimski, the government's point man in the energy sector, is politically responsible for the pipeline and has for years made assurances that gas from Russia will not be needed in Poland after 2022.
Russia, in the meantime, remains open to continue supplying Poland. "Poland is our reliable counterparty with which we cooperate a lot," Elena Burmistrova, the export chief of Russian gas giant Gazprom, said last month.
The delay to the pipeline has caused concern among some observers, including the United States. "We were disturbed to see the stoppage to that [Baltic Pipe] project on environmental grounds," Matthew Boyse, deputy assistant secretary at the US State Department, said during a recent webinar organized by US nonprofit Atlantic Council.
Anna Mikulska from the Center for Energy Studies at Rice University thinks the issue could be resolved sooner rather than later. "The expectation is that the permits will be back on track and there will only be a 3-month delay," she told DW, adding that additional costs will likely be around €80 million.
But Marian Kaagh, vice president of projects at Energinet, believes the decision by the Danish environment authority may take 7 to 8 months.
Boosting LNG supply
According to S&P Global Platts Analytics, Poland would need other pipelines to operate at full capacity or would likely be in the market for more Russian gas in the event that the Baltic Pipe project is delayed.
"LNG was already in our forecast model as being well used and the other routes' current firm capacity is not an equal replacement for the Baltic Pipe," it said in a recent report, referring to existing flows from Germany, the Czech Republic and Ukraine.
Katja Yafimava from the Oxford Institute for Energy Studies thinks that any delay in the Baltic Pipe project "would contribute to Polish gas balance tightness post-2022." But this was not the only factor, she told DW. "Even if the pipe were to start as planned only 2 bcm is understood to have been contracted to flow through it, that is just onequarter of the booked capacity of 8 bcm."
An option open for Warsaw would be the acceleration of the expansion of Poland's LNG terminal at the nortwest Baltic port of Swinoujscie, whose current regasification capacitiy is around 5 bcm per year.
Mixed supplies
But thanks to a diversified natural gas supply infrastructure, Poland will be able to substitute for potentially lost supply from the Baltic Pipe by buying spot, or on a basis of short-term contracts, including with Gazprom.
Anna Mikulska said that those options would be "much more palatable for Poland," because prices would be "much more competitive than those Poland experienced under the Yamal contract," — a reference to the existing terms for gas purchases from the Yamal pipeline linking Russia and Germany via Poland.
Mikulska argued the additional infrastructure would give Poland bargaining power and make contracts reflect the realities of a competitive market better than contracts negotiated under Gazprom's position as a dominant supplier.