April 17, 2019 (01:47)

Construction of the “Baltic Pipe”

On April 15, 2019, Vice-President of the European Commission for Energy, Maroš Šefčovič, announced the allocation of another EUR 214.9 million by the European Commission to Poland for the construction of the “Baltic Pipe”.

The Prime Minister of Poland, Mateusz Morawiecki, took part in the ceremony of signing of the grant agreement with the European Commission in Brussels. The funds will be credited to the account of the Polish GTS operator, “Gaz-System”   on behalf of the EU program “Connecting Europe Facility” (Infrastructure uniting Europe). When signing the agreement, M. Morawiecki noted that the “Baltic Pipe” with the capacity of 10 billion cubic meters of natural gas per year, also called the “Norwegian Gas Corridor”, aims to create a new gas transit route that will decrease the energy dependence of the European Union on imports of Russian gas. According to M. Morawiecki, now Poland consumes about 14 billion cubic meters of gas per year. The new gas pipeline will be commissioned in 2022; it will deliver Norwegian gas directly to Poland, which will then be transported to other countries of the Baltic region. Along with the modernization of the Polish LNG terminal in Świnoujście to the capacity of 7.5 billion cubic meters per year, Poland will provide transportation of about 17.5 billion cubic meters of gas of non-Russian origin per year to the EU gas market. According to the Prime Minister, some Norwegian gas will be transported to the Czech Republic, Slovakia, Hungary, the Baltic States and Ukraine in case of their interest. In conjunction with the Polish LNG terminal, in the reverse mode the “Baltic Pipe” will be able to provide the transportation of regasified liquefied gas to Denmark and Sweden.

According to Bartłomiej Sawicki, the editor of the Polish analytical portal  «BiznesAlert», the total cost of the “Baltic Pipe” project is about EUR 1.6 billion. The Polish side on behalf of “Gaz-System” gas operator, should raise an investment of EUR 784 million, while the Danish side on behalf of “Energinet”, should attract investment in the amount of about EUR 821 million. At the same time, 70% of the required investments, the Polish “Gaz-System” plans to attract at its own expense and only 30% – at the expense of foreign investors. 

In July 2018, A. Duda,  the President of Poland signed a special law passed by the Sejm of Poland, which stipulates that funds for the construction of the Polish part of the gas pipeline will be budgeted in  the “Gaz-System” tariff  as gas transportation services.

The allocation of the European grant significantly reduces the risk of delay in attracting investment funds for the construction of the sea part of the gas pipeline between Poland and Denmark and for financing the work related to the modernization and expansion of the Polish GTS. In 2015, the European Commission has already allocated EUR 400 thousand for Poland to prepare the feasibility study for the construction of the “Baltic Pipe”, EUR 33 million in 2017 and EUR 18.3 million in 2018 for the launch of construction of the sea and land sections of the gas pipeline. According to B. Savitsky, significant political and financial support of the project on behalf of the European Commission allows the participants of the “Baltic Pipe” project to keep future tariffs for gas transit at a rather low level of competition, which will guarantee full filling of the gas pipeline, high demand and competitive price for gas for the consumer market.

Consequently, the European Commission’s allocation to the Polish GTS “Gaz-System” GTS operator of another grant of EUR 215 million demonstrates the political and financial support on behalf of the EU in the project for the construction of the “Baltic Pipe” between Norway, Denmark and Poland.

 The substantial financial support of the project by the European Commission allows project participants (the Polish “Gaz-System” and Danish “Energinet”) to create attractive and competitive tariffs for the transportation of gas from Norway to the Central Europe in the future.

 Demonstration of the multi-level support of the “Baltic Pipe” project by the European Commission promotes a positive investment climate around the project and is an indication of the interest of the official Brussels in completing the project on time (by the end of 2022).

Subsequently, the pace of the “Baltic Pipe” project and the risks of attracting additional investments will depend to a large extent on the effectiveness of organizing and conducting all necessary tender procedures by the Polish “Gaz-System” and the Danish “Energinet”.

« A key element in the Baltic Pipe Project is a compressor station on Zealand in Denmark. Picture of Baltic-pipe.eu »

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