As Russian Gas Production Drops Poland Turns to Qatari LNG

by Roman Kupchinsky

In June 2009 gas production by Russia’s Gazprom fell by 35.9 percent compared to June 2008. In May the drop was 34.5 percent. Gazprom officials told the Russian newspaper Vedomosti they remain optimistic and by year’s end the fall of production would only amount to 7-10 percent.

The conventional explanations for this rapid drop in production are both the world-wide economic crisis which has dampened demand for gas in Europe and Gazprom’s failure to invest in the development of new fields. There are, however other factors contributing to lower Russian exports. One example of how EU member states are diversifying suppliers is the recent contract signed by Poland to buy 1.5 billion cubic meters (bcm) of Qatari LNG for 20 years.
Poland currently produces 5 bcm of gas and imports 70 percent of its gas from Russia. Annual Polish consumption of gas is 15.6 bcm and is forecast to rise to 16.4 bcm next year.

Qatari LNG is scheduled to begin arriving in Poland in 2014 once the new LNG import terminal is built on the Baltic coast near the German border. However, liquefied gas will be transported to Poland on the new Q-Flex vessels and concern has risen in Poland that the Nord Stream Russo-German pipeline project could prove an obstacle to the workability of the Poland-Qatar deal. The current plan for Nord Stream imagines the pipeline being laid across the fairway leading to the ports of Szczecin and Swinoujscie. This will reduce its depth to 12.9 meters, while Q-Flex ships require depths of 14.3 meters to pass.

PGNiG, the Polish state-owned gas monopoly, hopes to eventually import 5 Bcm/ of LNG annually.

On June 29, 2009, PGNiG’s vice-president in charge of strategic projects, Radoslaw Didzinski, was reported as saying Gaz de France, Spain’s Gas Natural and the UK’s National Grid are potential partners in the LNG terminal. Meanwhile the company has signed preliminary agreements with Iranian and Algerian companies and held talks with Qatari companies as well as Gaz de France about supplies.

Polish Chamber of Commerce president Andrzej Arendarski summed up his country’s interest in LNG: “We would like to have other suppliers too, so that there is no over-dependence on Russian producers.”