Czech energy regulator doubts viability of EU-backed gas corridor

A north-south pipeline to connect a liquid natural gas (LNG) sea terminal in Poland with the Czech Republic and Slovakia has been labeled a priority energy project agreed by the EU’s energy ministers. The Czech Energy Regulatory Office (ERÚ), however, says the project may not be viable and even says it’s possible the projected LNG terminal in Poland will not be completed.

The planned construction of reverse-flow pipeline sections to connect the LNG terminal now under construction in the Polish port of Świnoujście with the Czech and Austrian gas networks won approval as a priority project by energy ministers from the Visegrad 4 countries — Poland, Czech Republic, Slovakia and Hungary — and also Romania and Bulgaria, on Nov. 23.

The Czech section of it would run from the Polish border with Northern Moravia to the Slovak and Austrian borders in south Moravia and would be built and operated by the Czech gas pipeline network operator Net4Gas, currently owned by RWE of Germany. Net4Gas has named the project “Moravia.”

Plans are also on the table to connect the Czech gas network with the major hub in Baumgarten near Vienna and the WAG transit pipeline, which, if the EU-backed Nabucco pipeline is built, would be a major supply to the CEE region of non-Russian gas from the Caspian and Near East regions.

Effectiveness of investment

The ERÚ warns the LNG terminal in Świnoujście may not be completed.“Of course it’s necessary to support the building of cross-border gas pipelines, but in relation to the economic effectiveness of investment. For this reason it’s not evident to place an emphasis on Poland and Austria,” the ERÚ said in a report submitted to the Ministry of Industry and Trade (MPO) and obtained by the business daily E15. The energy regulator also noted that the capacity of the Czech gas network already outstrips domestic consumption.

Citing the ERÚ report, the daily said is possible that the LNG terminal in Świnoujście, which is in the early stages of construction, may not be completed. Polish state-owned gas network operator Gaz-System S.A.’s subsidiary Polskie LNG is building the terminal.

In October, the European Commission approved a non-returnable grant of €211.1 million for the project from the EU’s Infrastructure and Environment Operational Program (IaEOP). Last month, the project received another €55 million from the EU’s European Energy Program for Recovery, meaning that around 45 percent of the €550 the terminal will be financed by the EU.

Shale could threaten LNG plans

The Świnoujście LNG terminal, which will regasify liquid natural gas imported largely from North Africa and the Persian Gulf, is projected to supply up to a third of Poland’s gas requirements, reducing dependence on Russian imports.

However, according to a US Department of Energy report, Poland has the largest shale gas reserves in Europe with up to 22.45 trillion cubic meters, which would be more than enough to supply Poland’s gas requirements for many years to come. Though still in the exploration phase, with the resources being invested in research, the reserves are all but certain to be exploited commercially, which would threaten the viability of relatively expensive LNG imports.The Russians will certainly welcome the ERÚ’s negative assessment

Net4Gas head Thomas Kleefuss recently announced that the pipeline operator would strive to receive EU funding for a planned bi-directional, 64-kilometer interconnection between the major Czech transit pipeline at Lanžhot, souteast Moravia, and the Austrian gas hub in Baumgarten.

RWE is making no secret that it is contemplating selling Net4Gas — if the price is right — and there has long been speculation Russian giant Gaszprom is interested in buying the Czech pipeline operator. As E15 points out, the planned north-south gas connections between Austria, Czech Republic and Poland would not be in the Gazprom’s interests, thus the Russians will certainly welcome the ERÚ’s negative assessment.

Net4Gas currently transmits around 30 billion cubic meters (BCM) of gas a year for foreign customers and around 10 BCM for Czech consumption.