Poland LNG terminal remains on course despite cost dispute

By MACIEJ MARTEWICZ and PIOTR BUJNICKI
Bloomberg

Poland’s plan to have an LNG terminal ready by mid-2015 to cut its reliance on gas imports from Russia won’t be derailed by a dispute over costs, one of the project’s contractors said today.

The terminal at the northwestern port of Swinoujscie, originally scheduled for completion last June, will allow Poland to import as much as 5 billion cubic meters of gas by sea, or about a third of its annual usage. The country now imports about 10 billion cubic meters from Russia.

It’s speeding up development of domestic shale gas deposits and expanding links to other neighbors to further diversify supply before its contract with OAO Gazprom expires in 2022.

The project has suffered cost overruns since a group of companies led by Italy’s Saipem, which also includes Poland’s PBG, won the contract in 2010. Poland agreed to pay 13% more than originally budgeted last year, bringing the terminal’s cost to 2.37 billion zloty ($762 million).

“The terminal will be ready by mid-2015,” said Jacek Balcer, head of corporate communications at PBG. “Changes in the law have increased construction costs and we’re in talks with the investor to resolve the problem.”

The Saipem-led consortium wants to “earn more” on the terminal and realizes the government “has its back to the wall” on the high-priority project, said Deputy Prime Minister Janusz Piechocinski.

The Ukraine crisis shows that Europe must restructure its gas-supply networks to reduce dependency on Russia, according to a May 21 speech in Brussels by Prime Minister Donald Tusk.

Import Contract

PBG has no plans to stop work before the facility is completed, Balcer said. Saipem’s press office didn’t have an immediate reply to a phone call and e-mailed questions.

Polskie Gornictwo Naftowe i Gazownictwo SA, the state-controlled company that imports almost all gas to Poland, has signed a 20-year contract with Qatargas to buy about 1.5 billion cubic meters annually through the terminal, with the first deliveries scheduled for the end of this year. The delay has forced PGNiG to enter negotiations with Qatargas on a new delivery schedule and pricing.

“Completing this investment is rational, but giving in to economic or political blackmail is less so,” Piechocinski said. “We need to be exceptionally tough here, especially because gas from Qatar is more expensive than the gas we buy from different suppliers.”

Copyright © 2019. All market data is provided by Barchart Solutions. Futures: at least a 10 minute delay. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. To see all exchange delays and terms of use, please see disclaimer.

FEATURED COLUMNS

	Editorial Comment -Lee Nichols The gas processing/LNG sector is investing in new technologies to mitigate carbon emissions from both operations and its supply chain.
	Industry Focus: Maximizing the performance of your ETRM system -Teresa Kroh, Brad York Energy trading and risk management (ETRM) systems are vital for the support of business processes associated with trading energy commodities such as crude oil, refined products, natural gas, natural gas liquids (NGLs) and electric power, as well as facilitating the movement and delivery of those energy commodities and associated risk management activities.
	Sustainability -Oz Rodriguez, Catriona Penman More than 100 participating countries at the 26th UN Climate Change Conference of the Parties (COP26) signed the Global Methane Pledge, in which they agreed to take action to reduce methane emissions at least 30% by 2030 vs. 2020 levels.