Swinoujscie LNG Gas Terminal, Baltic Coast, Poland

Since 2006 Poland has been in talks with various LNG producers to allow it to diversify its gas supply and not rely solely on Russian gas provided by Gazprom.

The Polish were caught up in a row between Russia and the Ukraine which resulted in a reduction of gas supplies to Poland, Hungary and Austria. The Polish government is anxious to avoid a repeat of this and is building an LNG terminal as well as investigating the possibility of a pipeline from Norway, Ukraine, Denmark or Germany.

The terminal will be constructed at Swinoujscie near Szczecin in the western part of Poland's Baltic coast (West Pomeranian region). The advantages of this placement is that the costs to receive big ships and freight is lower than in Gdansk and also there are large gas consumers (power station and chemical plant) in the immediate vicinity.

ANNUAL DEMAND

The annual demand for gas in Poland is expected to increase from 15.6 billion cubic metres in 2008 to over 16.4 billion cubic metres in 2009. Domestic production accounts for five billion cubic metres (30%) and the remainder is provided by Russian imports.

The new Nord Stream line from Russia to Germany (missing out Poland) may have an effect on the amount of gas available for Poland from Russia. Poland is therefore nervous about Russian gas. Gaz de France (GDF) has previously expressed an interest in helping Poland to build and establish an LNG terminal.

POLISH LNG TERMINAL

In January 2008 after a long period of consultation the Canadian LNG engineering specialist SNC-Lavalin was chosen by the Polish natural gas distributor Polskie Gornictwo Naftowe i Gazownictwo (PGNiG) to carry out the FEED (Front-End Engineering and Design) contract for Poland's first LNG import terminal (contract was signed on 10th January 2008).

The site chosen for the new facility is on the Baltic coast at Swinoujscie. The FEED contract is worth zl26m (C$10.6m, €7.2m) and SNC-Lavalin were chosen as the preferred contractor over five other bidders in the tender process including Suez-Tractebel of France.

The design stage of the project is expected to take around nine months to complete (by October 2008) but construction permits have been applied for and they will be passed by the start of the final quarter of 2008 allowing the start of building.

TECHNICAL

The Polish gas distributor PGNiG hopes to complete construction of the new terminal and bring it on-stream by the end of 2011.

The new terminal will be expected to initially receive 2.5 billion cubic metres of liquefied gas a year as part of the Polish strategy to limit its dependence on imports from Russia.

The LNG terminal will be fully equipped with unloading jetty for large LNG tankers (with boil off and recondensing facility), two storage tanks and regasification train to produce gas at the correct pressure for the grid. Supply contracts for LNG have yet to be negotiated (in discussion with Algeria's Sonatrach).

FINANCIAL AND EXPANSION

The capacity will be enhanced in subsequent expansion phases of the project depending on demand to five billion cubic metres and then to 7.5 billion cubic metres.

The cost of the project is estimated to be (based on current prices of steel and other materials), around €350m to €450m, but this is expected to go as high as €500m by the time construction is given the go ahead towards the end of 2008. PGNiG expects to fund 45% of the cost from its own coffers and to raise the remaining finance from European grants and institutional debt and Polish Government grants.