Second FSRU terminal needed faster than expected

In 2028, the floating gas terminal FSRU (Floating Storage and Regasification Unit) will start operating in Gdańsk. This investment will significantly strengthen Poland's energy security. However, in the coming years, we should not stop on one project. If Poland wants to become a real regional gas hub, it will be necessary to build a second unit.

In the Gdańsk Port, in the vicinity of Baltic Hub, construction of infrastructure accompanying the first FSRU is underway. The unit itself is built in a shipyard in South Korea. This will be a huge floating LNG storage and regasification terminal, which will receive liquefied natural gas charges from methane ships after mooring in port, regasify them and send them to national system transmission.

However, the fundamental question is: will one unit provide Poland with sustainable supply stability in the context of growing gas demand?

Surplus as part of the strategy

The construction of the second FSR should be considered not only in terms of safeguarding domestic demand but as part of a strategy for building a sustainable surplus supply. Only then can Poland become an infrastructure gas hub in the region.

Overcapacity means the possibility of exporting gas to neighbouring countries and active participation in the regional LNG market. It is crucial to move away from thinking that full use of terminal power is a prerequisite for its legitimacy. Many LNG terminals in the European Union were contracted in less than 50% at the initial period of operation, yet they provided the foundation for safety, flexibility and diversification.

The second FSRU should perform a similar function – be a strategic tool rather than just a commercial project calculated in short-term usage indicators.

Complement to existing investments

Over the last 16 years, Poland has allocated over PLN 30 billion to diversion projects: the LNG terminal in Świnoujście, Baltic Pipe, interconnectors with the Czech Republic, Slovakia and Lithuania, the expansion of the national transmission system and gas warehouses, and now also FSRU in Gdańsk.

These investments have created a solid infrastructure foundation. The second FSRU would be a logical complement to it. Infrastructure expenditure remains disproportionately low compared to gas fuel costs and potential losses due to supply shortages.

The example of the Lithuanian FSRU terminal in Klaipeda shows that infrastructure can change market conditions. After it was launched, Russian gas prices for Lithuania fell by more than 30%, and the investment itself returned in a very short time, despite previous criticism.

Scale matters

When designing a second unit, there should be no temptation of apparent savings. The analysis shows that the FSRU by 40% more regasification power would be only about 10% more expensive. Greater power will be particularly important in winter, in peak demand.

This importance is growing in the context of the planned dynamic growth of gas power in power plants and CHP plants, which are expected to increase by up to 200% in the coming years.

The unit should also be adapted to operate large methane vehicles, including Q-Flex type units from Qatar, which will increase its operational and commercial flexibility.

LNG trade – unused potential

The development of import infrastructure should go hand in hand with active trade policy. In the span of several years Poland may have a LNG terminal in Świnoujście, FSRU 1 and FSRU 2. This is a potential that could make us one of the key LNG players in the Baltic.

Meanwhile, in the field of marine LNG trade in the Baltic Sea basin Poland is virtually not participating. A segment of small LNG units – bunkers and feeders – are developed by Denmark, Sweden, Finland or Estonia. Both national LNG bunkers and infrastructure are missing to enable theCargo LNG from FSRU to auto tanker.

As a result, the infrastructure remains on our side, while the commercial and operating margin – on the side of the neighbours.

Role of the Gas-System

Investor of FRSU State-owned Gaz-System. The gas system is a tool in the hands of the government to ensure security in the gas sector. For several years, he was directed to a wide stream of EU grant cash that this entity learned to use efficiently. Additionally, the Polish State co-financed the company (i.e. recapitalisation) with PLN 5 billion in two instalments – PLN 3 billion and PLN 2 billion.

It should also be pointed out that the State, for 20 years of operation of the Gas-System, had virtually no dividend on it. The Polish state should know what it wants and use the tool to carry out its strategic interests even if not all excel cells shine green.

Schedule

The construction of the FSRU takes about three years, but the real process – including negotiations, contracting and reception – is 3.5-4 years. At the same time, account should be taken of the time required for the implementation of port and land infrastructure, which may be between four and eight years, depending on the scope of the work and the field conditions.

Lithuanian experience shows that a properly designed terminal can provide full coverage of national demand and strengthen the position of the state in the regional market.

Author: Aleksander Zawisza, expert of the Ignacy Łukasiewicz Energy Policy Institute, author of reports, analyses and strategic documents. In the past, a government official and manager in logistics and energy companies.