Why Poland isn't panicking after Russia shut off the flow of gas

A pressure gauge is pictured at a gas compressor station in Warsaw, Poalnd. PHOTO: REUTERS

WARSAW (BLOOMBERG) - Poland relies on Russia for about half of its natural gas needs, yet when Gazprom PJSC halted flows to the country and Bulgaria this week, a defiant Premier Mateusz Morawiecki said it will not have an impact.

"Not only will we not bow to this blackmail, but I would like to assure my countrymen that this action on the part of Vladimir Putin won't affect households, it won't affect Poland," Mr Morawiecki told lawmakers in Parliament on Wednesday (April 27).

Mr Morawiecki's confidence is likely rooted in more than a decade of Polish efforts to diversify away from Russian energy sources, a process accelerated by the looming end of a long-term supply contract with Gazprom.

But whether his prediction comes through will depend on the timely completion of infrastructure projects and if Poland's neighbours will have enough to help cover any gaps.

Poland currently burns about 20 billion cubic metres (bcm) of natural gas per year, including between 8.5bcm and 10bcm it gains through the Yamal pipeline from Russia, which was shut off on Wednesday.

The rest is covered by an LNG terminal capable of importing 6.5bcm and domestic production of about 3.8bcm.

Poland's gas storage facilities, now 76 per cent full, currently hold another 2.4 bcm.

The country has a way to cover the impending shortfall in the form of a Baltic pipeline from Norway.

But its full annual capacity of 10bcm will not come online until 2023.

There are also smaller links to central European allies, including Lithuania, Slovakia and the Czech Republic. And Warsaw can reverse Yamal's flow to receive gas from Germany.

That might not be enough, though.

While Norway produces the gas it intends to pump to Poland, other would-be suppliers also rely on imports that have become increasingly expensive and uncertain as the stand-off over Mr Putin's invasion of Ukraine escalates.

In the scenario of a tight European gas market and an inability to physically swap US LNG gas to Germany or to the Baltic Pipe, Poland could come up 3bcm short, according to MBank analyst Kamil Kliszcz.

The European Union's most coal-dependent economy, Poland is also building gas-fired power plants to help it cut its carbon emissions.

That could boost annual gas needs to 30bcm in a decade, further straining supplies and, possibly, slowing its exit from the dirtiest fossil fuel.

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