In many ways, the attack on Ukraine changed the architecture of the hitherto world. The Russian invasion and its consequences – economic sanctions, embargoes on raw materials and subsequent cuts in gas supplies to Europe they drastically disrupted the energy order and influenced the gas development plans of the countries in our region.
Both Poland and Germany wanted to become a new European gas hub. Each of these countries chose a different strategy and had different development opportunities. However, the energy crisis changed everything. The priority has been to ensure energy stability and security, both for individual economies and for the entire Community.
We are in a situation of gas supply shortages, prices on European stock exchanges are unstable. The EU is considering ever-reaching intervention measures on the market, such as reducing demand, price limits, etc., and for gas – especially LNG – it is necessary to fight on the global market against other economies, e.g. China – says money.pl Zuzanna Nowak, an analyst for . energy and climate at the Polish Institute of International Affairs (PISM). – The crisis situation will probably not end with the arrival of spring, but rather it will prolong for the following years – he adds.
As Dr. Krzysztof Księżopolski, Assistant Professor of the Warsaw School of Economics argues in an interview with money.pl, the current concerns about the availability of non-Russian gas are not justified – there is a lot of it around Europe.
– The problem for today is the availability of infrastructure, which is limited by the incorrect association of some countries and businesses with toxic Russian oil and gas suppliers – says Dr. Księżopolski.
Both Poland and Germany plan to develop this infrastructure. Poland by launching the Baltic Pipe and building a floating gas terminal in Gdańsk (FSRU). Our western neighbors, on the other hand, want to make up for the shortages of their own terminals, enabling the reception of liquefied natural gas (LNG). However, the ambitious strategy of Chancellor Olaf Scholz assumes that five FSRU units are to be created within the next four years. It is a big challenge.
Putin stabs the German gas plan
Vladimir Putin expected that Europe’s response to the attack on Ukraine would be limited, due to fear of cutting off gas supplies from Russia. Germany, on the other hand, will sabotage the effective actions of Europe. However, this did not happen. Both the lack of certification for Nord Stream 2 and the scale of economic sanctions surprised Russia.
Putin’s revenge was to cut off supplies to Europe also via Nord Stream 1, which largely powered the German economy. Both northern gas pipelines allowed the country to develop as an important gas junction in the central part of the continent. Infrastructure, large warehouses and a gas network gave a significant advantage over Poland, which was just aspiring to become a hub.
As the PISM analyst reminds us, two medium-sized German hubs – Gaspool and NCG merged last year to form the largest European physical hub THE (Trading Hub Europe), the development of which was to be largely based on the supply of Russian gas via the NS1 and NS2 pipelines.
The current crisis has had a strong impact on Germany’s hub ambitions. The gas sector in Germany has weakenedpositioning – at least temporarily – this country as a petitioner seeking gas assistance from other EU countries, including perhaps Poland. Moreover, due to the lack of LNG terminals, this market is cut off from direct supplies of liquefied gas and must trade it with neighbors who have access to LNG. This, in turn, limits the availability of capacity in German transmission lines – explains Zuzanna Nowak.
As he says, the FSRU terminals built in the short term will have a psychological rather than real impact on price shaping on the German market due to their small size compared to the needs (and now it is LNG that dictates prices). Like other European governments, the German one is also intervening in the gas market to protect consumers and traders by creating an imbalance.
Although Germany must now focus primarily on the security of gas supplies to meet its own needs, it is a much richer country, and through its capabilities it invests a lot of money in order to become independent of Russian supplies and open to other directions. Hence the construction of terminals, agreements with Norway and France in Europe, as well as further contracts with African and Asian countries.
As our interlocutor adds, despite the fact that the German gas hub development policy suffered temporarily due to the end of cooperation with the Russians, Germany will first think about meeting its own gas needs, and only then about regional ambitions. – However, their hub is a fact – he points out.
Polish investments are still in the sphere of plans
For Poland, cutting off Russian supplies was less important than for our western neighbors. For years, the policy of successive governments has led to the diversification of supplies. Already in 2019, Poland terminated the contract with Gazprom for gas supplies via the Yamal pipeline. Despite this, Russia cut off gas flow to Poland before the end of the contract. This complicated the plans to build a new gas hub, as it also forced Poland to secure the needs of the internal market in the first place.
Poland based its dreams of a hub on the so-called Northern Gate. These are investments that give us a “window to the world” – LNG gas terminal in Świnoujście, Baltic Pipe, i.e. a gas pipeline connection with Norway and a floating gas terminal under construction in Gdańsk. The problem is that each of these investments is still not finished. The LNG gas terminal has not been expanded, the amount of gas contracted for the Baltic Pipe raises doubts, although the pipeline is waiting for opening, and the FSRU – like the German one – has still not been built.
– Good location and efforts to diversify supplies through the construction of the Baltic Pipe, LNG imports, as well as the expansion of the interconnection infrastructure, for example towards Klaipeda or to the southern neighbors without access to the sea, provide Poland with grounds for aspiring to become a regional gas hub – believes Zuzanna Nowak.
As he emphasizes, the most capital-intensive part of hub development – infrastructure construction – has been largely achieved. But Poland faces other problems.-
The Polish gas market is moderately liquid and diversified, the volume of gas needed by our southern or northern neighbors is rather limited – these are small markets and so far they satisfy their needs with gas from other sources – and it is still too early to include the Ukrainian market requiring reconstruction. – notes the PISM expert.
Cooperation is additionally hampered by the ongoing crisis and manual control of regional economies. – The biggest problem, however, is the issue of credibility, i.e. predictability of regulations, institutions, offers, settlements and the certainty of technical solutions to support the hub. Market participants must have confidence in gas trading procedures, and it takes a long time to achieve this, emphasizes our Nowak.
There is room for parallel gas hubs?
Currently, there are over a dozen gas hubs in the European Union, but the Dutch TTF and the NBH in Great Britain are considered mature. Portugal also has great aspirations, as it wants to be a transhipment port for LNG. The port of Sines would handle large gas carriers and pump the liquid raw material to smaller vessels, which would then be easier to handle in other Central European ports. In this way, the gas would also go to Germany and Poland.
With such competition, is there still room for more hubs in Poland and Germany? According to Zuzanna Nowak, of course. As he points out, the Polish hub still remains in the sphere of plans, and its creation and consolidation of the role requires time and calmer times, and even if it does, it will be a completely different hub than the German one.
However, there is certainly room for these two (and other hubs) in Europe. If the EU draws conclusions from the current crisis, the efficiency and liquidity of hubs will be a very important tool to guarantee the security of gas supplies to the EU in the future – as long as it is needed in the energy transformation. And it is important that Poland actively participates in it – adds the PISM expert.
Is the construction of a gas hub still a strategic project?
As Zuzanna Nowak reminds us, gas hubs, understood as a distribution and trade center for gas with infrastructure, as well as physical and virtual trading mechanisms, are to favor the liquidity of gas trading and improve its security.
Their success depends on the variety of available gas (multiple sources), the multitude of recipients (various categories of consumers), the availability of infrastructure (warehouses, pipelines, etc.), as well as the stability of regulations – adds the PISM analyst.
However, does it still make sense to put huge resources into the development of gas installations, construction of warehouses and infrastructure? Or maybe the energy crisis, like the oil crisis of the 1970s, will ultimately accelerate the transformation processes towards completely different energy sourcesdespite the reactionary, and therefore rather temporary, return to fossil fuels?
– It should also be remembered that in accordance with the assumptions of the European Green Deal and the accompanying regulations and strategies, The EU treats gas as a transition fuel on the way to decarbonise the EU economy – reminds Zuzanna Nowak.
So the question arises, is the construction of a gas hub still a strategic project?? – For today, no tomorrow – says Dr. Krzysztof Księżopolski, assistant professor at the Warsaw School of Economics.
The role of gas as an intermediate fuel has become compromised. Today, one should invest in renewable energy technologies, energy storage, energy efficiency and grid management. A real race is taking place here. If the project of building a gas hub for future years is tight for business, it can be implemented, it is important for energy security today, but only technologies in the future – emphasizes Dr. Księżopolski. – They will give us complete security.
Przemysław Ciszak, journalist at money.pl
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