Poland's Growing Regional Energy Importance
May 1, 2012 | 1246 GMT
Summary
The Czech Republic and Poland announced April 30 that they will build an interconnector between their natural gas networks. The announcement came on the same day that Gaz-System, Poland's natural gas transit system operator, expressed a great deal of interest in purchasing Net4Gas, its counterpart in the Czech Republic, and the Czechs reciprocated. Net4Gas is the driver behind the Moravian interconnector and is being sold by Germany's utility giant RWE. These developments are among the first indicators that Poland is using its privileged economic position during the European crisis and its success in energy diversification to become a leading player in Central Europe's shifting energy markets.
Analysis
The planned Moravian interconnector would be relatively short -- approximately 100 kilometers (62 miles) -- and would have a capacity of 8-10 billion cubic meters (bcm) of natural gas per year. The only other link between the two countries is the recently completed Czech-Polish STORK Interconnector, which has a capacity of only 0.5 bcm per year since it was designed as a rapid emergency relief line. The project's price has not been made public, but the European Union has promised to pay 31 percent of the final cost.
The interconnector, on which construction is scheduled to begin in 2017, is the latest in a series of interconnector projects planned in Central Europe, including interconnectors linking Poland to Lithuania, Poland to Slovakia and Slovakia to Hungary, as countries in the region attempt to diversify their energy sources away from Russia. The natural gas flowing from Poland through the Moravian interconnector to the Czech Republic's northern storage facilities would come from different sources in order of importance: Russian gas transited via Nord Stream to Germany, regasified liquefied natural gas (LNG) from the upcoming Polish Swinoujscie terminal and Polish shale gas (only in the long term and if expectations are realized).
Gaz-System's planned acquisition of Net4Gas would be another step in integrating the European natural gas network. The purchase would make it easier for the Czech Republic to secure natural gas from diverse sources than if Net4Gas were purchased by Gazprom, another major contender in the bid for the Czech company.
One of the reasons the Czechs are eager to diversify their natural gas import routes and integrate more with Poland is the contentious relationship Russia has with Ukraine. Although Ukraine is currently the main eastern transit state for the TransGaz pipeline, which serves southern European markets and Germany, political problems have led Russia to try to change its natural gas export system in order to bypass Ukraine as a transit state. Nord Stream was the first piece in that plan -- it allows natural gas to reach Germany directly. Before Nord Stream, 80 percent of Europe's natural gas imports transited Ukraine. The South Stream project, whose construction is expected to start at the end of this year, would serve southern Europe and bypass Ukraine.
This is worrisome for the Czech Republic, which, after Slovakia, is immediately downstream from Ukraine on the natural gas line. If Russia curtails shipments through Ukraine, the Czech Republic will be left without its main source of natural gas. Thus, the interconnector between the Czech Republic and Poland is an important part of the Czechs' ability to secure natural gas supplies, given Moscow's plans to bypass Ukraine.
Another signifier of Poland's growing importance is Gaz-System's strong bid for Net4Gas. The proposal shows that Poland is becoming more aggressive in regional energy politics. This confidence stems in part from Poland's own successful energy diversification efforts, particularly in the construction of its own LNG terminal, the creation of an efficient natural gas buyback program with Germany and the ongoing development of a shale gas extraction industry.
Moreover, Poland has weathered the financial crisis better than any other country in the European Union, maintaining relatively high growth levels throughout the crisis. This gives Polish enterprises the financial stability to pursue expansive and profitable policies in neighboring countries that have been affected much more by the crisis. Poland's economic and energy success also earned it the backing of the EU Commission, which has prioritized the liberalization of the entire EU energy structure. The European Union both encourages and finances the construction of regional network links and the purchase of Czech energy assets to keep them from falling into Russian hands.
Slovakia already has expressed interest in linking its natural gas network with Poland's and the Czech Republic's. As Russia continues working to bypass potentially troublesome transit states like Ukraine and Belarus by accessing Western European markets more directly, Poland has the chance to lead the emergence of a more integrated and liberalized natural gas network in Central Europe.
Russia likely will push back; Moscow will not appreciate Warsaw's growing power in a region and industry that for so long has been under Moscow's influence. That Central Europeans would still mostly consume Russian natural gas in the short term gives Poland some leeway in increasing its leadership role in the region's energy sector -- as does the low profitability of Central European markets compared to Western European markets. Warsaw can use interconnector projects and distribution system acquisitions to gain a favorable position in anticipation of the upcoming diversification of energy supplies in Central Europe.
- -
| 