European Countries are Moving Away from Russian Gas
According to data from the European Commission, the EU imports 69% of its natural gas. Around 37% of that comes from Russia and about 33% from Norway, and 11% from Algeria. Russia’s dominant position in the European gas market is undeniable, but not exactly desired by some countries. Therefore, they’re looking for ways to wean themselves off Russian gas and LNG is looking to be the main key to reach this goal.
One of the most active advocates of breaking Europe’s dependence on Russian gas is Poland. While the country is still bound by the agreement with Gazprom for an annual supply of 10 bcm of gas until 2022, various initiatives for the future are in progress.
Already, the gas imports from Russia to Poland are shrinking. According to the state-controlled oil and gas company PGNIG the gas import amount fell from 70.4% in 2017 to 66.8% in 2018. Even less Russian gas supply is expected after 2022 following the launch of the Baltic Pipe interconnection, linking Poland to Norway via Denmark.
Another attempt to pivot from Russian gas is the rapid increase in LNG imports. A number of deals have been signed by Poland to infuse its energy mix with the super-chilled gas. They include the agreement with Qatargas signed in 2017 with the expectation to reach imports of 2.7 bcm after regasification after 2020, as well as a long-term deal with Cheniere Energy for U.S. LNG. The latter’s terms outline that in the period of 2019-2022, PGNIG will receive 0.52 million tonnes of LNG, expanding the amount to 29 million tonnes from 2023 to 2042.
LNG is becoming more and more prevalent not only in Poland, but in their neighbouring country of Lithuania as well. In October 2014, Lithuania commissioned a floating storage and regasification unit (FSRU) to diversify its energy mix. The FSRU has allowed the country to import LNG from various sources, lessening reliance on Gazprom supplied pipeline gas. However, the low utilisation of the terminal drove the terminal operating costs uncomfortably high. Nonetheless, the newly found freedom the LNG terminal provides, drove the Lithuanian government to approve the acquisition of the FSRU vessel after 2024.
In the short term, the decision will help reduce annual operating costs by €23-25 million a year as the costs will be distributed during the entire operational period of the LNG terminal rather than a ten-year lease term, Lithuania’s ministry of energy reports. The FSRU will help expand the country’s LNG imports thus moving away from the Russian gas supply.
Find out more about Lithuania’s LNG terminal by watching the Wisdom Events interview with Jurgita Silinskaite-Vensloviene, Head of LNG Services at Klaipedos Nafta at the Small-Mid Scale LNG Summit:
Russia is unlikely to be worried about energy diversification policies from these and other European countries, as plenty of them are still reliant on Russian gas. A report from the European Commission shows that 11 member states imported more than 75% of their total national natural gas imports from Russia in 2018. The county’s confidence is boosted by other developments like Russia’s active push into the LNG market with the giant Yamal LNG project and the looming Nord Stream 2 pipeline, linking Russia to Europe via the Baltic Sea, and the TurkStream pipeline across the Black Sea.
Most recently, Russia launched it’s very first FSRU in Kaliningrad that borders Lithuania and Poland. It would allow Gazprom to bypass pipeline gas deliveries via Lithuania in the event of any disruptions. While officially it’s a way for Russia to ensure energy security in its faraway area of Kaliningrad, could this be a way to threaten pipeline gas supply to Lithuania? And with all these projects ensuring the access of Russian gas to Europe, are Polish and Lithuanian efforts enough to eschew Russian influence in the gas market?