The present gas supply security strategy provides the national framework for a key strategic issue, serving as a point of reference in the gas sector. The overall objective is to harmonize gas supply security with political and economic strategies, and developmental plans to ensure sufficient, reliable and affordable gas supply for Polish domestic consumption in the following period. According to the Polish Energy Law Act (2005), the Polish Government is obliged to publish every four years a document on Energy Policy.The recent events of the international gas market, howwever, require Poland to develop her gas strategy within and in harmony with its Energy Policy, as a guidance to represent the country’s interests in an unified way.

Objective 1. Ensuring necessary volumes and reliable supplies Gas, being a significant energy source for the country and its economy, should be taken as a key strategic issue in international relations.The purchase of gas through the Yamal pipeline from Gazprom, Russia as well as the transmission of gas to Germany, the maintenance of the pipeline and management of sheduling, volumes and storage involves several companies and parties, firstly, EuRoPol GAZ, a joint venture of Gazprom and PGNiG, founding the most important long term partnership between Russia and Poland. Even though Poland is still relying heavily on other energy sources, for example coal, it is anticipated that Poland’s total demand for natural gas will increase from 10 billion cu m (353 billion cubic ft. to 22-27 cu m (777 to 954 billion cubic ft. ) by 2010[1] due to restructuring and increased demand.

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The sourcing of the present demand and the increased volume is subject of the present strategy. Diversification and Development of pipelines Since gas is expected to be used more widely both by industrial and domestic consumers, it is essential that transmission should be well organized. For this reason, Poland expects to expand its natural gas distribution system by adding 43,000 to 58,000 kilometers of new distribution pipelines by 2010.Diversification of Sourcing. The diversification of sourcing in case of more intensive gas reliance is preferable. It can assure long term independence and security, as well as cost efficiency and better bargaining position.

The following options should be investigated for this purpose: – source from cheaper Asian countries, eg: Kazakhstan, Turmenistan, Azerbaijan, etc, through existing pipeline. This option can be used to get cheaper supplies above the contracted Russian amount. For the delivery of the gas the existing Ukraininian, Belarussian pipelines are used, where transfer prices are payable. sourcing LNG from other countries, eg: Norway, Quatar or other Arabic countries. In order to receiveLNG transports, an LNG terminal, at Swinoujscie, at the northwestern tip of Poland’s Baltic Sea coast with a capacity of 5 billion to ultimately 7.

5 billion cubic meters of gas needs to be constructed by 2011. – Build connection to the Scandinavian gas pipe system If continuous transmissions with favourable conditions are contracted, the construction of a shorter link can be economical on the long run.Connecting pipes towards Germany, Denmark and Norway are to be built in order to make sourcing and transmission possible.

– Explore and exploit national reserves Domestic natural gas in Poland are used to cover approximately 22-30% of home needs. Gas reserves are estimated at 5. 1 trillion cubic feet (TCF).

In 1998, to meet her natural gas needs of 444 billion cubic feet (BCF), Poland produced 181 BCF and imported 281 BCF. Special attention should be paid in the near future to the coalbed methane, ie. shale gas reserves.Unfortunately, production costs are still relatively high and the full economic potential is yet to be assessed. However, further feasibility studies could provide more information on the possible exploration of these gas reserves. In the Upper Silesian Basin the estimated reserves reach 3. 4 TCF, while estimates for total coalbed methane reserves in Poland range as high as 35 TCF.

[2] Coalbed methane can represent a huge potential for Poland, however, the assessment and development of sites require foreign apital and know-how. If the exploration costs go near natural gas extraction costs, the possibility to involve foreign investors with liberalisation of the market is an option that can be favourable for the country, too. Increase Storage Capacity The present storage capacities have to be increased for several reasons.

First, effective EU regulations oblige Poland to possess storing capacity equivalent of 90 days consumption, which translates to a natural gas storage capacity of about 4. 5 bcm in Poland.Presently there is 1,6 bcm[3] storage available only, so the increase to 2,6 bcm by 2007, then 3,6 by 2010 and reaching 4,5 bcn by 2013 should be accomplished gradually. Second, storage capacities can increase the security of the energy supplies especially in cold season or in time of difficult purchasing.

Finally, storing can also help level off highs and lows in purchasing price, deposit cheaper gas and provides better negotiating power for future purchases. Objective 2. Manage shift from coal to gas The phasing out of domestic coal will finally take place according to plan as stated in the Polish Energy Strategy.Substituting coal with alternative but reliable supplies at similar prices will soon become a prevailing task, therefore managing the gas supplies and purchases can ensure safe transition. Objective 3: Increase Gas (energy) consumption efficiency Improvement of the efficiency of the Country’s more than 300 district heating companies (total heating capacity of 52,850 MW), 5,980 other industrial central boiler plants and 265 cogeneration plants[4] will represent real measures to act in a more conscious way and save significant amount for the country, ultimately, complying with the strategies in the Energy Policy.Objective 4: Develop competitive fuel and energy markets Competitive energy markets help reduce production costs and therefore dampen fuels and energy price increases. The solution for the problem of dependence on supply of natural gas and crude oil from one source, abolish the barriers when trying to switch the provider of gas, and introduce market methods for establishing the price of heat.

In addition, an independent professional Supervisory body is to be established for all the players in the gas market for the following fields: gas storage, transmission and trade. The Supervisory body’s main responsibility being, supervision of licensing, rights, monitoring activites and harmonizing operations of the market with national and Eu regulations as well as the ministry, with special attention to the preparation of the liberalization of the market. Summary.Poland wishes to realize the restructuring of energy sector by promoting gas consumption by measure in all levels.

The diversification of sourcing as well as transmission and trade, finally storing should be carried out by national companies. However, where necessary, market liberalization should take place to promote competitive and economical operations, ensuring efficiency and transparency in the sector with the supervision of a national-professional body.