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25/08/2016

Poland receives first LNG delivery from Qatar

Energy

Poland receives first LNG delivery from Qatar

The new LNG terminal in ?winouj?cie. [LNG world news]

Poland is finishing preparations for liquefied natural gas deliveries which should go into fully commercial regime next year. EurActiv Czech Republic reports.

Today (11 December), the LNG terminal in ?winouj?cie is receiving its first testing supply of gas from Qatar. 

The Al Nuaman tanker, with 210 thousand cubic meters (tcm) of LNG from Qatar, will arrive at the terminal in ?winouj?cie, in the northwestern part of the country.

After almost five years construction, the port facility for re-gasification is getting to the final phases of its commissioning before going into full commercial operation next year.  

>>Read: LNG terminal set to redraw Poland’s energy map

With 5 billion cubic meters (bcm) annual capacity, which equals one third of the country’s consumption, it is supposed to strengthen Poland’s energy security and diversify gas supplies. More than 60% of Poland’s gas is imported from Russia.

So far, state-controlled oil and natural gas company PGNiG has signed a twenty year contract with Qatari gas producer Qatargas, which should deliver 1.2 bcm of gas per year via the terminal.

Good time for diversification

It remains a question, however, whether LNG becomes a viable alternative to Russian gas, as its price is generally expected to be significantly higher than the price of gas coming through pipelines.

“The price of Qatari gas contracted for supplies at (the) LNG terminal in ?winouj?cie, (and) was indeed looking bad when the oil price was high,” Agata ?oskot-Strachota, senior fellow at the Centre for Eastern Studies (OSW) in Warsaw, told EurActiv.

Yet, the situation looks different at the moment because of low oil prices, which started to fully feed into oil-indexed prices in long-term gas contracts this year.

“Right now, due to lasting low oil prices, the contract price for Qatari gas should be rather low, perhaps even competitive when comparing with Russian gas import prices,” the analyst explained.

Therefore, it may really be a good time to start importing LNG from Qatar, she thinks – although it is important to bear in mind that the first supply will serve technological purposes. 

Testing delivery

The 315 metre Qatari LNG tanker, which needed three weeks for its voyage, has brought gas that will be used for testing and cooling-down pipes and storage tanks at the terminal. Another pilot supply is expected to arrive in February.

In November, there was a test delivery of nitrogen, which is used for cleaning the facility out and drying it up, to avoid the formation of ice pieces inside, as the temperature of LNG is extremely low (minus 162 degrees Celsius).

Finally, commercial supplies should start at the beginning of the summer of 2016. 

Better bargaining position

With an operational LNG terminal, Poland could hope for a better negotiating position vis-à-vis Gazprom. Lithuania, for example, obtained a 20% discount for Russian gas after it launched its floating LNG terminal in Klaip?da last December.

>>Read: Lithuania breaks Gazprom’s monopoly by signing first LNG deal

“It is a big change in the Polish bargaining position,” ?oskot-Strachota said. Not only the diversification, but also the competitive pricing of Qatari LNG could help to decrease the price of Russian gas, she added.

However, ?oskot-Strachota also said that new question marks appear. One of them concerns current Gazprom strategy.

“The company is facing more and more challenges in Europe and beyond it, among them decreased demand and low prices environment. There is a question of what it is aiming for right now. Is it willing to allow some changes when it comes to conditions of this or other contracts – and what kind of changes exactly?”

According to ?oskot-Strachota, there are several options. Gazprom could, for example, relax the take-or-pay formula, offer price discounts, or loosen the oil-indexation of gas price and introduce links to spot market prices, as a hedge against prolonged low oil pricing.

In February, the European Commission will present legislative proposals for security of supply, including the Energy Union LNG strategy.

>> Read: Commission outlines Energy Union legislative path