A burning concern
By : Bogda Zukowska
Poland's dependence on Russia for natural gas is forcing government ministers and bulk users to reconsider ways the country can diversify its gas supplies.
Ministers have reacted angrily to last month's revelation that Russian gas giant Gazprom had carried out a secret deal with Western partners to construct a second arm of the Yamal pipeline to run through Poland without first consulting the pipeline's would-be host country. In addition, news that Gazprom is preparing to make commercial use of a high-capacity fiber-optic cable that is part of the exisiting Yamal pipeline in Poland has led ministers to charge that the gas company's moves pose a threat to the country's sovereignty.
Bronislaw Geremek, the former minister of foreign affairs, likened the telecom-line negotiations to "a gangrene that suddenly appeared and could spoil our opportunities and security."
Under the terms of Poland's agreement with Gazprom to construct a pipeline across the country, Poland will be allowed to tap up to 14 billion cubic meters of gas from the pipeline annually. This will comprise 30-45% of domestic demand by 2010, considerably less than the 70% of demand now met by Russia.
That figure would be in line with European Union (EU) energy-safeguard standards, which stipulate that no more than 30-40% of supplies should come from any one source. As such, Poland has started to look around for alternative suppliers of gas and all eyes are currently on Norway.
According to Andrzej Karbownik, undersecretary of state in the Economy Ministry, by the end of this year an agreement with Norway's Statoil is expected to be signed following a joint declaration between the prime ministers of Poland and Norway on the construction of a Baltic gas pipeline.
"We aim to conclude the deal by the end of 2000, but it is also up to Statoil," said Igor Wasilewski, head of marketing and PR at the Polish Oil and Gas Co. (PGNiG), Poland's natural gas monopolist.
For the pipeline to be profitable, Norway has to sell at least 10 billion cubic meters of gas a year to Poland. While this amount exceeds demand in the country, Statoil has agreed on a re-sale of 50% of deliveries to third markets, such as Germany. Given Gazprom's 30% proposed price hike last month, the Norwegian offer is an attractive one for the government.
Even before the recent surge in fuel prices on world markets, the average prices for natural gas charged by Statoil and Gazprom were about the same at $100-$105 per 1,000 cubic meters. In long-term contracts with Russia, gas rates are tied to oil prices, said one PGNiG source.
Norwegian gas would also be more attractive for bulk customers, such as the Dolna Odra power plant and Police, a fertilizer producer in northwestern Poland where the planned pipeline is to reach the country's coast. These companies will have immediate access to gas supplies and no longer have to pay transit fees.
Andrzej Lipko, president of PGNiG, said that failing to conclude the deal with Norway would not be an option for him. If the company fails, "there will be a new company president," he said.
Also in favor of diversifying gas supplies is Zachodniopomorski Terminal LNG, a consortium of seven companies, mostly from northwestern Poland, which aims to build its own liquid gas terminal. The consortium plans to import gas from producers in Algeria, Libya, Nigeria and Norway.
"It will be a real diversification because we have no plans to bind ourselves to any single supplier," said Grzegorz Parzynski, director of Polimex-Cekop, a Warsaw-based construction company and member of the consortium. He said the consortium would move forward with plans for the terminal after it completes two feasibility studies and finds a contractor, a process that could take a few more months.
Parzynski said there would be no problem financing the project. The terminal, with a capacity of 2 billion-5 billion cubic meters, would supply gas to consortium members Dolna Odra and Police. The latter company supplies about 5% of the domestic gas consumed.
"Reliable and diversified gas supplies are vital for us, and the stake in the terminal might be an asset," said Piotr Wachowicz, spokesman for Police, which is scheduled for privatization next year.
Poland's own gas resources are estimated at 146 billion cubic meters, the equivalent of 12 years' supply at present consumption levels. PGNiG covers some 33% of the country's gas needs and output is expected to grow to 4.2 billion cubic meters by 2010. "We want to reduce risk; the fields might be difficult to explore," said PGNiG's Wasilewski, referring to the possible limitations to boosting domestic output.
