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The Warsaw Voice » Business » February 20, 2008
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Gas Dilemmas
February 20, 2008 By Michal Jeziorski   
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Central Europe will remain dependent on natural gas for quite a few years yet. The key pipelines snaking across this part of Europe make the region important to both Brussels and Moscow.

Plans to connect Poland to the Baltic Pipe pipeline which is to supply gas to Poland from Norway via Denmark have proven contentious, as have plans to build a liquefied natural gas (LNG) regasification terminal in Świnoujście. The former has a planned annual capacity of 3 billion cubic meters per annum while the latter has an initial capacity of 2.5 billion and a target capacity of 7.5 billion. The Polish Oil and Gas Extraction Company (PGNiG) has consistently said it wants to extend the Yamal pipeline which supplies gas to Germany from the Yamal peninsula in North-West Siberia. The company says that it is only Russia's decision to invest in the Nordstream pipeline under the Baltic that has prevented the project from pressing ahead.

Krzysztof Laskowski from Gas Trading, which has a share in the Polish section of Yamal, speaking at the Eastern European Natural Gas Summit 2008 held Feb. 11-12 in Warsaw, said that PGNiG would have to purchase an extra 11 billion cubic meters of gas if Yamal actually opened up a second pipeline. "How would we manage to put gas from other sources onto the market in this situation?" he asked.

"It's true that we'd have a gas surplus if the Russians suddenly decided to go ahead with this project," admitted PGNiG strategic director Rafał Oleszkiewicz before adding, "but we had to do something to ensure alternative deliveries for Poland as we couldn't wait for a decision indefinitely."

Experts believe that the amount of natural gas used in the Polish economy will continue to grow. Sales have been climbing at an average annual rate of 3 percent since 1997 to exceed 13 billion cubic meters today. The Polish market is nowhere near saturation and so its developmental prospects are substantial. This is confirmed by the glaring imbalance of Poland's energy model vis-a-vis that of other EU countries. Polish consumption indices remain disproportionately low despite the yearly increase in sales.

Natural gas accounts for just 11 percent of Poland's energy. Poland's annual per capita consumption is 300 cubic meters compared to the 1,250 cubic meters consumed in the EU prior to its 2004 enlargement.

Long-range forecasts predict an average annual growth of 5 percent in gas consumption in Poland until 2020. This will mostly be driven by Poland having to adjust its energy balance to meet EU standards. EU directives do not allow the share of any single energy source to exceed 30 percent. Coal is still king in Poland with more than 55 percent of the primary energy balance. Complying with EU directives will mean cutting coal consumption in favor of other fuels, including natural gas.

Natural gas is a favorite because it is one of the cheapest, cleanest and most efficient energy sources on the market. Legal restrictions on older energy sources like mazut and heavy oil can only boost its popularity even more. Generating power by burning natural gas is one of the most promising cogeneration technologies around today, their long suit being substantial savings on primary energy consumption. Car fuel is another promising use for natural gas.

Liquefied natural gas (LNG) may be the fuel of the future. It is made by removing impurities such as carbon dioxide, nitrogen and heavy hydrocarbons from natural gas and then liquefying it by cooling it to -160°C. The cooling process shrinks it about 630 times which comes in handy for storage and transport. The Świnoujście gas port is a viable and much needed project, even if LNG is not all that widely used here yet.

Poland's only independent LNG distributor is CP Energia, which has a Russian partner. The company, which made its first deliveries in 2006, has given LNG pride of place in its development strategy.

LNG is also an alternative solution for remote locations. The national natural gas grid has some gaps unlikely to be filled anytime soon due to the technical or financial infeasibility of doing so. LNG is an economically attractive energy source for both commercial and domestic users in this situation. LNG can also cover short-term peak demand on those markets supplied via a pipeline network.
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