September 4, 2014 / 2:07 PM / 5 years ago

REFILE-INTERVIEW-Poland may expand new LNG terminal to equal half its market

(Refiles to remove stray characters from headline)

* LNG comes at a high price

* Boost to wean off of Russian supplies

* Would take 3-4 years to build new storage tank

By Anna Koper

WARSAW, Sept 4 (Reuters) - Poland may expand storage at a new liquefied natural gas import terminal to equal half its annual consumption after finding enormous interest in the market, the head of its gas grid said, as it moves to slash dependence on Russian imports.

Jan Chadam, chief executive of state-owned Gaz-System, said initial market screening showed enough interest in the 3 billion zloty ($934.7 million) terminal to potentially warrant adding a third storage tank after the plant is slated to open and to start importing LNG from Qatar next year.

The market query was carried out before the latest gas crisis between Russia and Ukraine, but the dispute is likely to increase Poland’s push to find new sources to help power Eastern Europe’s biggest economy.

“Interest was huge. It exceeded the re-gasification possibilities of the terminal,” Chadam told Reuters in a recent interview.

“If binding agreements are signed, a decision about building the third container might be made. We might come back to that topic next year.”

The terminal in the port city of Swinoujscie on Poland’s Baltic coast will initially be able to accept 5 billion cubic metres per year. Building a third storage tank could boost capacity to 7.5 bcm, Chadam said.

A spokesman for Polskie LNG, the Gaz-System unit that will operate the terminal, said demand for the added storage capacity came from local and foreign traders, who would probably seek to route the gas through cross-border pipelines to higher-priced markets such as the Czech Republic.


Poland and other central and southeastern European countries receive most of their gas from Russia and are eager to reduce dependence on their former Soviet master, especially since the current crisis between Ukraine and Russia could threaten deliveries this winter.

Russia has halted gas flows to Ukraine three times in the past decade - in 2006, 2009 and since June this year - because of price disputes with Kiev, although this year gas intended for EU customers has so far continued to flow through Ukraine.

“Building of the third container would be much less complicated,” Chadam said, adding that it would take three or four years to construct the extra storage tank.

The government approved the terminal in 2008, and construction started in 2011. The project’s original timeline has been pushed back several times, but Chadam said the facility should open in the first half of 2015 without further delays.

“The current deadline for launching the terminal in 2015 is on track, and the facility is 90 percent finished,” he said.

“In the first half of 2015, commissioning of the installations, its cooling and first deliveries of liquefied gas for technical purposes will take place,” Chadam said. “After that the terminal will be ready for commercial regasification services.”


Poland’s bid to boost its energy security by building the LNG terminal comes at a cost. It has contracted to import 1.6 billion cubic metres of gas per year from Qatar for 20 years, a deal that could saddle Poland with some of the highest prices in the world.

Based on LNG spot prices, the Qatari imports would cost up to a third more than what Russian exporter Gazprom charges for deliveries to Europe.

Poland also may struggle to secure additional LNG supplies above the amount already committed because supply is expected to be tight for the next few years. Most LNG cargoes currently go to Asia, where LNG prices are higher than in European gas hubs.

By 2018, however, a number of new Australian and North American LNG export plants should boost global supply and potentially free more cargoes for European buyers, including Poland.

Gaz-System has plans to invest more than 7 billion zlotys by the end of 2018 to build new pipeline links in central and eastern Europe to carry gas from the terminal north and south into neighbouring countries, Chadam said.

The investments are also a step toward more fully integrating the European gas market to further ease dependence on Russian gas flowing across Ukraine, he added.

“Pipelines, which will create that corridor, will allow Poland to achieve connections with the Czech Republic,” Chadam said. “Regulators of both countries have already made decisions on so called cross-border allocation of costs.” (1 US dollar = 3.2097 Polish zloty) (additional reporting by Oleg Vukmanovic in Milan; Editing by Michael Kahn and Jane Baird)

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