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EU Energy Security: Poland Calls For Shale Gas & Rehabilitation Of Coal

The Economist

Going against Germany’s green ideals, Poland is keen on rehabilitating coal as a way to improve energy security.

THOUGH still very dependent on Russian gas, Poland is starting to become much better at looking after its energy needs. Last year the country imported 60% of its gas from Russia. As of April 1st Poland can import significantly more gas from Germany, thanks to the expansion of a pumping station at Mallnow on the border. The gas in the Yamal pipeline, which brings Russian gas to Germany (via Belarus and Poland), can, for the first time, be pumped from west to east.

Like all pipelines built by the Soviet Union to supply gas to its satellites, they were designed to flow in one direction only, from Russia to the West. Gaz-System, a firm that operates the Polish section of the Yamal pipeline, said up to 2.3 billion cubic metres of gas per year can now be imported through it from the West. “In the case of emergency (the suspension of supplies from Russia to Germany), it will be possible to receive 620,000 cubic metres per hour (i.e. approximately 5.5 billion cubic metres per year),” said Gaz-System.

That amounts to more than one-third of the gas sold in Poland last year. If you add to that domestic gas production, increased capacity in interconnector pipelines with Germany and the Czech Republic, and a soon-to-be-completed liquefied natural gas (LNG) terminal, which will start importing gas on tankers from Qatar next year, then Poland can meet its own gas needs entirely.

That’s a tremendous change for a country that for years talked about the need to reduce its dependence on Russian gas, but did very little about it. It was the pricing dispute between Russia and Ukraine, which halted gas supplies to western Europe in 2009, that led Poland to fast-track the construction of the LNG terminal.

This does not mean that Poland can simply stop importing gas from Russia. Poland’s state-controlled natural gas company, PGNiG, has a long-term supply contract with Russia’s gas monopoly, Gazprom, until 2022. Like most of Gazprom’s contracts with European customers, it’s a take-or-pay contract. Pipeline gas from Russia is also currently cheaper than LNG imports. But as Poland’s foreign minister, Radoslaw Sikorski, once told this correspondent, the LNG terminal may not be profitable but at least it will fly a Polish flag.

Having alternative gas sources means PGNiG is now in a better position to negotiate with Gazprom a price for its gas imports when the next round of discussions starts in November. The lack of alternative sources in the past means Poland pays more for Russian gas than its wealthier counterparts in western Europe.

Increasing purchasing power is one of the six pillars of a new EU energy union being pushed by Warsaw. Poland’s prime minister, Donald Tusk, has revived an idea about the EU jointly purchasing its energy from Russia to provide the bloc with more bargaining muscle. “The experience of the last few weeks shows that Europe needs to have much more solidarity when it comes to energy,” said Mr Tusk at the launch of a new energy project in Tychy on March 29th.

Poland also wants to create a mechanism for Europe to share gas in the event of supply disruption.  Mr Tusk said the EU should raise its participation in funding energy projects, such as gas-pipeline interconnectors and storage facilities, to 75%, especially for investments in eastern Europe where dependence on Russian oil and gas is much higher than in the West.

Going against Germany’s green ideals, Poland is keen on rehabilitating coal as a way to improve energy security. Poland sits on Europe’s largest coal reserves and produces about 90% of its electricity from hard coal and lignite. Lignite or brown coal remain the cheapest way to produce power in Europe, but they are also by far the most polluting energy sources.

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