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Poland and Denmark take FID on Baltic Pipe natural gas project

Highlights

Project to deliver up to 10 Bcm/year of Norwegian gas to Poland

Operational date scheduled for October 2022

Warsaw — Poland and Denmark said Friday they had taken the final investment decision to build the Baltic Pipe project aimed at delivering up to 10 Bcm/year of Norwegian natural gas directly to Poland and enabling the country to end its traditional dependence on Russian gas.

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The chief executives of the Polish and Danish transmission system operators, Gas-System and Energinet, announced the decision at the office of the Polish prime minister in Warsaw. Piotr Naimski, the Polish government's adviser on strategic energy infrastructure, told a news conference that applications for environmental and construction permits for the project would be sent to the appropriate authorities in Poland, Denmark and Sweden in the first quarter of next year.

"The Baltic Pipe gas pipeline is being implemented in accordance with the adopted schedule," Tomasz Stepien, Gaz-System's CEO said. "The adopted decisions by Gaz-System and Energinet opens a new chapter in our cooperation," he added. "The creation of Baltic Pipe will be beneficial for both Poland and Denmark and it's consumers.

The new interconnection system will further strengthen and integrate the natural gas market in Europe. In addition, Baltic Pipe can contribute to the achievement of European climate goals," Thomas Egebo, Energinet's CEO said.

The two TSOs signed a construction agreement for the project's infrastructure on November 16. Energinet has also already signed an agreement with the Norwegian TSO Gassco for the construction of a pipeline connecting the Danish and Norwegian gas systems.

Baltic Pipe is designed to increase both Poland's security of supply and gas market competition, give Norway direct access to both the Polish and wider Central and Eastern European markets, as well as allowing Denmark to earn transit fees.

The project is a major part of Poland's plans to diversify its gas supplies. The other key component is increasing LNG deliveries to the 5 Bcm/year terminal in Swinoujscie.

The pipeline infrastructure is scheduled to be operational in October 2022, when Polish state gas company PGNiG's long-term supply agreement with Russia's Gazprom is due to expire.

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Under the partially oil-indexed Yamal agreement, PGNiG imports up to 10.2 Bcm/year of gas. PGNiG says its traditional lack of gas supply options has enabled Gazprom to charge it unfair and exploitative prices since 2006.

PGNiG is seeking to change the contract pricing formula at the Arbitration Court in Stockholm.

Baltic Pipe has five major components. Energinet is in charge of building a 105-110 km offshore pipeline from Denmark to Norway's Europipe II pipeline in the North Sea, as well as 210-230 km of new pipelines in Denmark to accommodate additional gas volumes. The TSO will also build a compressor station in the southeastern part of Zealand. Gaz-System is responsible for the construction of a 275 km offshore pipeline between Poland and Denmark, as well as 250 km of transmission pipelines and three compressor stations in Poland.

Energinet estimates the total cost of the project at DKK12-16 billion (Eur1.6 billion-2.14 billion).

--Adam Easton, newsdesk@spglobal.com

--Edited by Maurice Geller, newsdesk@spglobal.com