Content

Rafał Ulatowski, 5 Poland’s Energy Security and the Shale Revolution – A Case Study on Natural Gas in:

Wolfram Hilz, Rafal Ulatowski (ed.)

Energy Policy in Europe, page 63 - 80

Internal Dimensions and External Perspectives

1. Edition 2019, ISBN print: 978-3-8288-4388-2, ISBN online: 978-3-8288-7373-5, https://doi.org/10.5771/9783828873735-63

Series: Bonner Studien zum globalen Wandel, vol. 25

Tectum, Baden-Baden
Bibliographic information
63 5 Poland’s Energy Security and the Shale Revolution – A Case Study on Natural Gas Rafa Ulatowski 1 Introduction Poland, like many other European countries, has faced two main challenges to its energy security in the first decade of the 21st century. The first was rising natural gas and oil prices, which was a consequence of rising global demand and a slow increase in supply.1 The second was the ongoing gas conflicts between Russia and Ukraine, which led to disruptions in gas deliveries from Russia.2 The security of the gas supply became the most important dimension of Poland’s energy security. In 2014, the Polish Prime Minister Donald Tusk claimed that “gas security is a fundamental prerequisite of sovereignty”3. The literature on the energy security of Poland has grown substantially in the last two decades, with the discussion covering such important aspects as: Poland’s dependence on the supply of gas from Russia, the role of coal and the environmental dimension of Po- 1 See Canuto, Otaviano: The Commodity Super Cycle: Is This Time Different?, World Bank – Economic Premise, The World Bank, Issue 150, 2014. 2 See Kandiyoti, Rafael: Powering Europe: Russia, Ukraine, and the Energy Squeeze, New York, 2015. 3 Tusk, Donald cited in: Goldthau, Andreas & LaBelle, Michael: The Power of Policy Regimes: Explaining Shale Gas Policy Divergence in Bulgaria and Poland, in: Review of Policy Research, Vol. 33, No. 6, 2016, pp. 603-622, p. 609. 64 land’s energy policy, and the European context of that policy.4 Since the beginning of the shale revolution in the United States, the shale gas reserves in Poland have attracted growing interest. The prospects of developing shale gas in Poland, including the legal, tax, technical and political aspects of the issue, have been extensively discussed.5 The development of local shale resources should enable Poland to reduce its dependence on Russian gas, thereby improving its geopolitical situation and strengthening its economy. But the hopes of turning Poland into a shale gas producer have not materialized. As the opinion of Prime Minister Tusk indicates, Polish government, whatever party it is formed by, sees energy as a strategic good that is vital for state security. This reflects a global trend in the 21st century where political considerations play an important role in economic decisions in the energy sector. The main objective is to secure the uninterrupted availability of energy resources, resources that are viewed as a potential subject of interstate conflict or an instrument in such a conflict.6 4 See Nowakowski, Zdzis aw: Polityka bezpiecze stwa energetycznego Polski. Wp yw europeizacji i globalizacji, Warszawa, 2016; Gawlikowska-Fyk, Aleksandra et al.: Germany and Poland in the Energy Union. Moving from Controversies to Shared Interests? in: European Energy Journal, Vol. 2, No. 2, 2017, pp. 49-59. 5 See Baginski, Wojciech: Shale Gas in Poland – The Legal Framework for Granting Concessions for Prospecting and Exploration of Hydrocarbons, in: Energy Law Journal, Vol. 32, No. 1, 2011, pp. 145-155; Johnson, Corey & Boersma, Tim: Energy (In)security in Poland. The Case of Shale Gas, in: Energy Policy, Vol. 53, Issue C, 2013, pp. 389-399; Uliasz-Misiak, Barbara, Przybycin, Andrzej & Winida, Bogumila: Shale and Tight Gas in Poland – Legal and Environmental Issues, in: Energy Policy, Vol. 65, 2014, pp. 68-77; Lis, Aleksandra & Stankiewicz, Piotr: Framing Shale Gas for Policy-Making in Poland, in: Journal of Environmental Policy & Planning, Vol. 19, No. 1, 2017, pp. 53-71; Goldthau, Andreas: The Politics of Shale Gas in Eastern Europe Energy Security, Contested Technologies and the Social Licence to Frack, Cambridge, 2018, pp. 67-90; Burnett, J. Wesley, Jackson, Randall W. & Blobaum, Robert: The State of Play in Poland’s Unconventional Shale and Oil Development, in: Development Policy Review, Vol. 33, No. 4, 2015, pp. 395-414; Atkins, Justin P.: Hydraulic Fracturing in Poland: A Regulatory Analysis, in: Washington University Global Studies Law Review, Vol. 12, No. 2, 2013, pp. 339-355. 6 See Goldthau, Andreas: From the State to the Market and Back: Policy Implications of Changing Energy Paradigms, in: Global Policy, Vol. 3, No. 2, 2012, pp. 198-210; Dannreuther Roland: Geopolitics and International Rela- 65 This article is based on an analysis of documents, statistical data, and press statements by public entities and companies. It is supplemented by an analysis of the literature. There is a triple gap in the current literature on shale gas. Firstly, most research continues to focus on a limited group of countries, namely, the United States, other great powers such as China and Russia, and leading oil and gas exporters, with little attention paid to the shale gas role for midsized countries. Secondly, previous analyses of shale gas in Poland have concentrated on extraction. But these plans have failed. Although shale gas is not being produced in Poland, the shale revolution is still having an impact on the country’s energy security through international trade. Shale gas is currently flowing into Poland. But it is shale gas “made in the USA”. And thirdly, most analyses of shale gas in Europe were published during the period of the biggest hype in the early 2010s. Today it is well understood that, if shale gas is to be produced in Europe, it will not be any time soon. This article argues that, although Poland is not producing shale gas, the shale gas revolution is still relevant for it. Growing exports of American shale gas give Poland an opportunity to strengthen its energy security and to integrate with the emerging global gas market. A reduction in its dependence on Russia will not automatically eliminate Russia from Poland’s list of suppliers, but will provide an opportunity to achieve more balanced relations in the energy sector. The article consists of four parts. In the first part, I discuss the consequences of the shale revolution for the energy market. In the second part, I analyse the goals of Poland’s energy policy and the challenges the country faces in respect of energy security. In the third part, I raise questions about Poland’s experience with shale gas exploration. In the fourth part, I discuss the cooperation between Poland and the United States on energy security. 2 The shale revolution and the gas market For decades, the outstanding characteristic of the gas market was its fragmentation. In fact, there were four main gas markets with distinctive characteristics: the US market, the British market, the contions of Resources, in: Dannreuther, Roland & Ostrowski, Wojciech (eds.): Global Resources. Conflict and Cooperation, London, 2013, pp. 79-97. 66 tinental European market, and the Asian market. The European gas market was based on four principles: (1) a long-term supply obligation balanced by a long-term off-take obligation ensured by the minimum-pay concept; (2) gas pricing based on the concept of netback value – under which the price of gas is calculated on the basis of the value of competing energies, above all oil products; (3) price conditions could be reviewed at regular intervals (typically three years); and (4) in the case of a disagreement on a price adjustment it is possible to invoke arbitration. The rationale for linking gas prices to oil prices came to be questioned in the 21st century,7 but due to opposition from most suppliers to Europe, notably the largest of these - Russia - the transformation toward a system based on hub prices (gas-to-gas competition) has been gradual. The decoupling of gas prices from oil prices emerged in 2009-2010, and was a consequence of a surplus of gas on the market. Companies from Western Europe pushed suppliers to adjust contractual prices to the lower prices present on the spot market.8 Today, the entrance of US shale gas into Europe is weakening the already criticized rationale of oillinked gas prices (oil-indexation) and is supporting a change to gasto-gas competition driven by supply and demand for natural gas itself.9 7 See Stern, Jonathan: Is There A Rationale for the Continuing Link to Oil Product Prices in Continental European Long-Term Gas Contracts?, Oxford Institute for Energy Studies, No. NG 19, 2007, available at: https://www.ox fordenergy.org/wpcms/wp-content/uploads/2010/11/NG19-IsThereARational eFortheContinuingLinkToOilProductPricesinContinentalEuropeanLongTerm GasContracts-JonathanStern-2007.pdf (1 February 2019). 8 See Stern, Jonathan & Rogers, Howard: The Transition to Hub-Based Gas Pricing in Continental Europe, Oxford Institute for Energy Studies, No. NG 49, 2011, available at: https://www.oxfordenergy.org/wpcms/wp-content/ uploads/2011/03/NG49.pdf (1 February 2019); Komlev, Sergei: Pricing the “Invisible” Commodity, Gazprom Export, 11 January 2013, available at: file:///C:/Users/Admin/AppData/Local/Temp/2013-1-11-gazprom-paper-gaspricing.pdf (1 February 2019); Stern Jonathan & Rogers, Howard: The Transition to Hub-Based Pricing in Continental Europe: A Response to Sergei Komlev of Gazprom Export, Oxford Energy Comment, 2013, available at: https://www.oxfordenergy.org/wpcms/wp-content/uploads/2013/02/Hub-bas ed-Pricing-in-Europe-A-Response-to-Sergei-Komlev-of-Gazprom-Export.pdf (1 February 2019). 9 See Pearson, Ivan et al.: Unconventional Gas: Potential Energy Market Impacts in the European Union, JRC Scientific and Policy Reports, 2012, available at: file:///C:/Users/Admin/AppData/Local/Temp/reqnojrc70481unconve 67 The surplus of gas on the European market was a consequence of two developments. The first was a short-term factor: the economic crisis limited demand for gas. The second development was a structural factor. Shale gas in the United States became competitive thanks to improvements in two technologies: horizontal drilling and hydraulic fracturing (or “fracking”). The production of shale gas, and later also of shale oil, started to take off. The United States, which in the early 21st century has been seen as a country which gas and oil production was in permanent decline, became an Eldorado for gas and oil explorers and a new energy superpower. The gas reserves of the United States not only proved to be enough to satisfy US demand, but also enabled American companies to become exporters. Thus, for the US gas market, the beginning of the 21st century meant an evolution from a shortage to an abundance of gas.10 Production in the United States went from 521.9 billion cubic metres in 2007 up to 734.5 billion cubic metres in 2017.11 The US shale revolution meant that traditional suppliers which invested in production capacity for exporting gas to the United States in the early 21st century suddenly had to look for new markets. During the early years of the shale revolution in the United States, there was a strong hope that the shale industries of other countries might develop along similar lines. Expectations were especially high in Europe, which depends on foreign gas suppliers. One of the first studies conducted on shale gas saw the commodity as a “game changer” for the European gas market, although it was also indicated that, due to two main challenges (land access and cost levels), no significant production should be expected before 2020.12 ntional%20gas%20potential%20energy%20market%20impacts%20in20the% 20european%20union.pdf (1 February 2019). 10 See Joskow, Paul L.: Natural Gas: From Shortages to Abundance in the United States, in: American Economic Review, Vol. 103, No. 3, 2013, pp. 338- 343. 11 See British Petroleum: Statistical Review of World Energy, London, 2018, p. 28. 12 See Gény, Glorence: Can Unconventional Gas be a Game Changer in European Gas Markets?, Oxford Institute for Energy Studies, No. NG 46, Oxford, 2010, available at: https://www.oxfordenergy.org/wpcms/wp-content/uploa ds/2011/01/NG46CanUnconventionalGasbeaGameChangerinEuropeanGasM arkets-FlorenceGeny-2010.pdf (1 February 2019). 68 The United States, understanding the profound consequences of the shale revolution for the global balance of power, has promoted shale gas exploration around the world. President Barack Obama suggested that, rather than relying on the American supply, the European Union should develop local reserves.13 In 2010, the Global Shale Gas Initiative (GSGI), later renamed the Unconventional Gas Technical Engagement Program (UGTEP), was initiated. Its goal is to promote shale gas technology and support countries interested in the US’s experience in shale technology. The Energy Governance and Capacity Initiative is another program that brings US technical expertise in the energy sector to other countries. It was discussed whether the United States could serve as a model for the development of the shale industry in Europe.14 Doubts arose because of the differences between the petroleum industry in the United States and that in Europe. As one of the most significant reports indicated: “In Europe the geology is less favorable, there are no tax breaks and the service industry for onshore drilling is far behind that in the United States. Finally, there is concern that disruptions caused by shale gas developments will not find public acceptance, especially in a context where the gas is the property of the state and thus the benefits accrue to governments and not local landowners.”15 Leonardo Maugeri, one of the biggest experts on the shale industry, argued that shale gas and shale oil production is simply an U.S. phenomenon.16 13 See European Parliament: Shale Gas and EU Energy Security, December 2014, available at: http://www.europarl.europa.eu/RegData/etudes/BRIE/20 14/542167/EPRS_BRI(2014)542167_REV1_EN.pdf (1 February 2019). 14 See Sakmar, Susan L.: The Global Shale Gas Initiative: Will the United States Be the Role Model for the Development of Shale Gas Around the World?, in: Houston Journal of International Law, Vol. 33, No. 2, 2011, pp. 369-417. 15 Stevens, Paul: The ‘Shale Gas Revolution’: Hype and Reality, A Chatham House Report, 2010, p. vi, available at: https://www.chathamhouse.org/sites/ default/files/field/field_document/r_0910stevens.pdf (1 February 2019). 16 See Maugeri, Leonardo: The Shale Oil Boom: A U.S. Phenomenon, Belfer Center for Science and International Affairs, Harvard Kennedy School, June 2013, available at: https://www.belfercenter.org/sites/default/files/legacy/fil es/draft-2.pdf (1 February 2019). 69 Because no shale revolution occurred in other countries, attention turned towards the development of shale gas exports, which was advocated contrary to the wishes of the consumer lobby in the United States. It was argued that the United States should not restrict exports, but should work on building a “transparent global gas market” that would be “beneficial to Washington and its allies”17. The International Energy Agency (IEA) makes prognoses of the growing role of natural gas in the global energy mix, and has forecasted a “Golden Age of Gas”. The United States is not the only country developing LNG export capacity. Australia is expanding its LNG export capacity, and so is Qatar.18 The IEA’s World Energy Outlook 2017 gives a sense of these changes. Its authors indicate clearly that “A new gas order is emerging, with US LNG helping to accelerate a shift towards a more flexible, liquid, global market. […] Gas supply also becomes more diverse: the amount of liquefaction sites worldwide doubles by 2040, with the main additions coming from the United States and Australia, followed by Russia, Qatar, Mozambique and Canada. Price formation is based increasingly on competition between various sources of gas, rather than indexation to oil.”19 And finally they summarize: “US LNG acts as a catalyst for many of the anticipated changes in the wider gas market.”20 3 The energy policy of Poland Poland’s energy mix has experienced a deep change in the last quarter-century. As the role of coal has declined, the role of all other energy sources (oil, natural gas and renewables) has increased.21 In the late 1990s, the government of Poland started to work on diversifying the country’s gas supply. Several attempts were made to 17 Deutch, John: The Good News About Gas: The Natural Gas Revolution and Its Consequences, in: Foreign Affairs, Vol. 90, No. 1, 2011, p. 90. 18 See Thierry, Bros: Oxford Quarterly Gas Review, No. 4, 2018, p. 4. 19 IEA: World Energy Outlook 2017. Executive Summary, 2017, p. 6. 20 Ibid. 21 See IEA: Energy Policies of IEA Countries. Poland 2016 Review, 2017. 70 secure gas from Norway and Azerbaijan, but with only very limited success, and even today natural gas is still only a relatively modest part of Poland’s energy mix. Poland’s dependence on Russia as its sole foreign supplier of gas (part of the legacy of the Cold War), has been broadly interpreted as one of the main threats to Poland’s security. Russia is also considered an expensive supplier, with Poland having paid higher prices for Russian gas than Western European countries.22 The reason for this is Poland’s current energy mix, where hard coal and lignite play a central role, while the EU energy policy questions the future role of coal as a fuel in the EU. To achieve a reduction in greenhouse gas emissions, renewables and natural gas will have to play a bigger role in the near future in the energy mix of Poland. The security and economic aspects of Poland’s dependence have been seen in European initiatives by Polish diplomacy, such as the ‘Musketeers’ Pact’ proposal in 2006 or the Energy Union in 2014.23 The shale revolution began in the United States at the end of the first decade of the 21st century and in 2009 the government of Poland approved a new strategic document on the country’s future energy policy: “Energy Policy of Poland to 2030” (Polityka energeticzna Polski do 2030 roku).24 In this document, no mention is made of shale gas exploration or shale gas. The interest shown in the subject by government and public opinion has changed in the 2010s, as evident in the Energy Security and Environmental Strategy prepared by the Ministry of the Environment in 2014. In the strategy, shale gas is presented as offering Poland meaningful economic and geopolitical opportunities.25 The Polish authorities and the Polish public 22 See Mikulska, Anna: Try Harder, Gazprom. Why Poland could choose LNG, Baker Institute, 2018, available at: https://www.forbes.com/sit-es/thebaker sinstitute/2018/12/21/try-harder-gazprom-why-poland-could-choose-lng/#2ad 8c0c11537 (1 February 2019). 23 See Szulecki, Kacper et al.: Giving Shape to the Energy Union: Evolution, National Expectations and Implications for EU Energy and Climate Governance, in: Climate Policy, Vol. 16, Issue 5, 2016, pp. 548-567. 24 See Ministerstwo Gospodarki: Polityka energetyczna Polski do 2030 roku, Warszaw 2009, available at: https://www.gov.pl/documents/33372/436746/ DE_Polityka_energetyczna_ost_2030.pdf/78b689ec-62ec-af88-b0d7-decf95a bdb70 (1 February 2019). 25 See Ministerstwo Gospodarki & Ministerstwo rodowiska: Strategia Bezpiecze stwo Energetyczne i rodowisko perspektywa do 2020 r, Warszaw 2014, 71 saw an opportunity in shale gas to “liberate” Poland from its dependence on Russian gas. One of the most important steps on the way to improving the security of the supply of gas to Poland was the decision to build an LNG terminal allowing maritime imports of liquified natural gas. This terminal should allow access to non-European gas suppliers using technology other than pipelines. In 2007, the company Polskie LNG S.A. was founded, with the goal of building and managing the LNG terminal in the city of Swinouj cie in northwestern Poland. Work on the technical design was completed in 2009. On 19 August 2008, the government passed a resolution classifying the investment in the LNG terminal as a strategic one. The construction plan foresaw two phases. In the first phase, the terminal would achieve a capacity of 5 billion cubic meters of natural gas per annum. The second phase would allow its enlargement up to 7.5 billion cubic meters of natural gas per annum. In 2010, an agreement was signed with a consortium of engineering companies and construction began in 2011. The first delivery of LNG took place in December 2015. As the Polish foreign minister at that time, Radoslaw Sikorski, indicated, “the LNG terminal may not be profitable but at least it will fly a Polish flag.” The strategic aspect of this project was crucial.26 On 19 December 2018, the government of Poland and Polskie LNG S.A. announced a tender for a contractor for the expansion of the capacity of the LNG terminal in winouj cie up to 7.5 billion cubic meters of natural gas per annum. The first partner of PGNiG, the Polish national gas company, was Qatargas, the biggest supplier of LNG in the world, with which PGNiG has signed two agreements, in 2008 and 2017. The first contract came under criticism for the price of gas it established. Subsequent to the first contract, PGNiG’s strategy was to enlarge the volume of gas imported and simultaneously reduce the price. PGNiG wanted to renegotiate the first contract, which was signed when gas prices were at a record high. That strategy failed, as the first contract was not changed, but only an additional one signed. available at: http://kigeit.org.pl/FTP/PRCIP/Literatura/008_3_Stra te gia_Bez pieczenstwo_Energetyczne_i_Srodowisko_2020.pdf (1 May 2019). 26 See Weaning Poland of Russian Gas, in: The Economist, 4 April 2014, available at: https://www.economist.com/eastern-approaches/2014/04/04/weaning -poland-off-russian-gas (1 February 2019). 72 Although the price remains a trade secret, PGNiG indicated in a statement accompanying the signing of the second contract that it will have a positive impact on the financial results of the company, which suggests that the price is now probably much more attractive than in the first contract.27 4 Shale gas development in Poland Poland’s experience with shale gas can be divided into two subperiods. The first started in 2007, when the first licences for shale gas exploration were issued. Big hopes for transforming Poland into a shale gas producer were awakened by a report by the US Energy Information Agency in 2011 that estimated the shale gas reserves in Poland at 5.3 billion cubic meters.28 Poland went into a state of “shale-gas euphoria”29, but this was cooled down by the Polish Geological Institute, which estimated the size of Poland’s shale gas reserves in Poland at only 346-768 million cubic meters.30 In spite of this, oil and gas majors like ExxonMobile, ConocoPhillips Eni, Total, Chevron, mid-sized companies like Talisman, and Polish oil and gas companies (PKN Orlen, Lotos, PGNiG) all invested in shale gas exploration in Poland. But after a few years of disappointing drilling results, they started to pull out of the country. The highest number of valid concessions for prospecting and exploration (111) was in force in July 2012.31 The Ministry of the Environment, which is 27 See Maci ek, Piotr: Drugi kontrakt katarski zamiast aneksu do pierwszej umowy, in: Energetyka 24, 2017, available at: https://www.energetyka 24. com/drugi-kontrakt-katarski-zamiast-aneksu-do-pierwszej-umowy-komentarz (1 February 2019). 28 See U.S. Energy Information Administration: World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States, Washington D.C., 2011, available at: https://www.eia.gov/analysis/studies/worldshalegas/ archive/2011/pdf/fullreport_2011.pdf (1 February 2019). 29 Wyciszkiewicz, Ernest: Path to Prosperity or Road to Ruin? Shale Gas Under Political Scrutiny, Report of the Polish Institute of International Affairs, 2011, p. 46, available at: https://www.pism.pl/files/?id_plik=8613 (1 March 2019). 30 See Rutkowski, Miros aw: Gaz pojawia si i znika, czyli krótka historia szacowania zasobów w glowodorów niekonwencjonalnych w Polsce, in: Przegl d Geologiczny, Vol. 61, No. 6, 2013, pp. 331-334. 31 See Ministry of the Environment: Shale Gas in Poland Prospering and Exploration 2007-2015, 29 February 2016, available at: http://lupki.mos.gov. 73 responsible for shale gas exploration in Poland, suggested in 2014 that gas would start to flow by 2020.32 At the beginning of the second decade of the 21st century, Poland was a country looking very optimistically toward the development of its own shale gas exploration. Press reports were overwhelmingly positive and concentrated on the geopolitical benefits: the most popular refrain was “shale gas is geopolitically game-changing”. And the economic dimension was also highlighted, to the tune of: “shale gas is economically viable” and “shale gas is commercially viable”33. These views were mainly put forward by politicians, economists and experts. Much less was said about shale gas as a risk, and mainly only by the communities where exploration was to take place and by civil society organizations. After several big companies withdrew from Poland in 2013, the Polish government changed the legal framework, presenting an even more business-friendly face and emphasizing the economic dimension of shale gas development over security issues.34 As Andreas Goldthau and Michael LaBelle have summarized, “it is the interplay of a convincing policy narrative, a comprehensive institutional process, and the inclusion of pivotal stakeholders that established a strong policy regime around Polish shale”35. Despite all this, within a few years those hopes for transforming Poland into a big shale producer had been dashed.36 According to data of the Ministry of the Environment, on 30 November 2017 there were 20 current concessions for prospecting and/or exploring for hydrocarbon resources, including shale gas, but the owners of those pl/pliki/broszura/shale-gas-in-poland-prospecting-and-exploration-2007-2016 .pdf (1 February 2019). 32 See Foy, Henry: Poland’s Shale Gas Dreams put on hold, in: Financial Times, 16 November 2014, available at: 33 Jaspal, Rusi, Nerlich Brigitte & Lema cyzk, Szczepan: Fracking in the Polish Press: Geopolitics and National Identity, in: Energy Policy, Vol. 74, 2014, pp. 253-261. 34 See Lis, Aleksandra & Stankiewicz, Piotr: Framing Shale Gas for Policy- Making in Poland, in: Journal of Environmental Policy and Planning, Vol. 19, No. 1, 2017, pp. 58-60. 35 Goldthau, Andreas & LaBelle, Michael: The Power of Policy Regimes: Explaining Shale Gas Policy Divergence in Bulgaria and Poland, in: Review of Policy Research, Vol. 33, No. 6, 2016, p. 603-622, pp. 618. 36 See Trusewicz, Iwona: Gaz upkowy, czyli stracone z udzenia, in: Rzeczpospolita, 17 October 2018, available at: https://www.rp.pl/100-lat-polskiej-g ospodarki-ropa-naftowa-i-gaz/180419853-Gaz-lupkowy-czyli-stracone-zludz enia.html (1 February 2019). 74 concessions were actually looking for conventional gas or oil, or were not actively carrying out any work.37 The collapse of the expectations of transforming Poland into a significant shale gas producer took place along with a broader failure of shale gas development in other EU countries. The current literature shows that the reasons for this were not only structural in nature (geology, geography, economic, technology), but were equally due to the role played by agencies (policy makers, industry, social groups).38 In most countries in Europe, weak pro-shale networks can be seen as a reason for shale industry’s failure. There are no shale supporters in EU institutions; those institutions actively support renewable energy sources and measures for tackling climate change.39 But in Poland, the failure of the shale gas industry has occurred despite strong governmental support – probably the strongest in Europe. Structural reasons were key. 5 United States–Poland gas contracts With the failure of the development of the shale industry in Poland, the interest of the Polish authorities turned towards imports of LNG from the United States. The entrance of the United States to the group of LNG exporters opened up new opportunities for Poland to improve its energy security. Since the beginning of the shale revolution, the United States, a strategic partner of Poland, has also been seen as a promising partner in the energy sector. Both countries have a common interest. The United States are interested in finding markets for gas exports and in reducing the dependence of its allies on Russian gas supplies. LNG exports have become an instrument of US foreign policy. Russia is seen as the main victim of the US’s 37 See PB: San Leon gasi wiat o gazowi upkowemu w Polsce, in: Biznes Alert, 1 December 2017, available at: http://biznesalert.pl/san-leon-gaz-lup kowy-polska/ (1 February 2019). 38 See Uliasz-Misiak, Barbara, Przybycin, Andrzej & Winida, Bogumila: Shale and Tight Gas in Poland – Legal and Environmental Issues, in: Energy Policy, Vol. 65, 2014, pp. 68-77, p. 69. 39 See Bomberg, Elizabeth: Fracking and Framing in Transatlantic Perspective: A Comparison of Shale Politics in the US and European Union, in: Journal of Transatlantic Studies, Vol. 15, No. 2, 2017, pp. 1-20. 75 new energy might, since the US is challenging Russia’s position on many gas markets.40 Since April 2016, the US has been a supplier of LNG gas to Europe, which should help the EU to diversify its sources of gas and increase its energy security.41 An offer of close cooperation between the United States and Poland in the energy sector was proposed during the visit of President Donald Trump to Poland in July 2017. In his public speech at Krasi ski Square in Warsaw, Trump said, “we are committed to securing your access to alternate sources of energy, so Poland and its neighbours are never again held hostage to a single supplier of energy.”42 Although the “single supplier” was not called by name, it is clear that it was Russia Trump had in mind. Some experts were sceptical about the results of the visit, indicating that no contract had been signed, although that could still change in the months to come. In 2018 the close cooperation between the United States and Poland in the energy sector was developed. On 18 September 2018 the President of Poland and the President of the United States announced the “Poland-U.S.-Strategic Dialogue on Energy”. On 8 November 2018 the “Joint Declaration between the Ministry of Energy of the Republic of Poland and the United States Department of Energy concerning enhanced cooperation on energy security” was signed and on 9 November 2018 the “Memorandum of Understanding between the Republic of Poland and the United States of America on a Poland-U.S. strategic dialogue on energy” was signed.43 40 See Blackwill, Robert D. & O’Sullivan, Meghan L.: America’s Energy Edge: The Geopolitical Consequences of the Shale Revolution, in: Foreign Affairs, Vol. 93, No. 2, 2014, pp. 102-114. 41 See European Commission: Joint U.S.-EU Statement following President Juncker’s visit to the White House, Press Release, 25 July 2018, available at: http://europa.eu/rapid/press-release_STATEMENT-18-4687en.htm (1 March 2019). 42 White House: Remarks by President Trump to the People of Poland, 6 July 2017, available at: https://www.whitehouse.gov/briefings-statements/remarks -president-trump-people-poland/ (1 February 2019). 43 See Memorandum of Understanding between the Republic of Poland and the United States of America on a Poland-U.S. Strategic Dialogue on Energy, 9 November 2018, https://www.premier.gov.pl/files/files/memorandum_of_un derstanding_en_0.pdf (1 February 2019). 76 Energy relations between Poland and the United States have developed very rapidly. The first delivery of US LNG to Poland took place in June 2017, under a short-term contract.44 Subsequently, PGNiG moved towards long-term contracts. In October 2018, two twenty-years contracts were signed, one with Venture Global Calcasieu Pass LLC (delivery from 2022) and another with Venture Global Plaquemines LNG LLC (delivery from 2023). The contracts foresee a delivery of 1.35 billion cubic meters of gas per year each, meaning a total of 2.7 billion cubic meters gas per year (2 million tonnes of LNG). Each contract includes the formula free-on-board, which means that the gas will become the property of PGNiG in the port of loading. PGNiG will be free to decide about the place of delivery; the gas does not have to be delivered to Poland. During a press conference, the PGNiG authorities announced that the price of LNG in the contracts is based on the American Henry Hub index together with the costs of condensation. These were the first longterm contracts signed by a company from Central Europe for gas delivery from the United States.45 They were welcomed by the Polish authorities. Prime Minister Mateusz Morawiecki said that the two contracts will strengthen the “sovereignty” and “competitiveness” of Poland’s energy sector.46 In November 2018, PGNiG concluded another contract with a gas producer from the United States – Cheniere Marketing International LLP. The contract foresees a supply of 0.52 million tonnes of LNG (approx. 0.7 billion cubic meters) in the period 2019-2022. As from 2023, the supply volume will be much larger. In the period 2023- 2042, Cheniere Marketing International LLP will supply 29 million tonnes of LNG (ca. 39 billion cubic meters). This means that the average supply in this period will be 1.45 million tonnes of LNG 44 See Pierwsza dostawa LNG z USA dotar a do Polski, in: Biznes Alert, 7 October 2017, available at: http://biznesalert.pl/pierwsza-dostawa-lng-usadotarla-polski/ (1 February 2019). 45 See PGNiG: PGNiG i Venture Global LNG og osi y podpisanie kontraktów na zakup 2 milionów ton rocznie skroplonego gazu ziemnego (LNG), Press Release, 17 October 2018, available at: http://pgnig.pl/aktualnosci/-/news-list /id/pgnig-rosnie-zainteresowanie-usluga-bileto-1/newsGroupId/10184?chang eYear=2018¤tPage=2 (1 February 2019). 46 See Shotter, James: Polish State-Run Energy Company signs 20-year Deal for US Natural Gas, in: Financial Times, 17 October 2018, available at: https: //www.ft.com/content/5272ba76-d1df-11e8-a9f2-7574db66bcd5 (1 February 2019). 77 (1.95 billion cubic meters). The contract includes the formula “delivered ex-ship” (DES), which means that the American company is obliged to supply the gas to the LNG terminal in winoujscie. The CEO of PGNiG indicated that the price of the contract is “competitive”. The presence of the President of Poland, Andrzej Duda, and the US Secretary of Energy, Rick Perry, at a press conference underlines the importance of the contract for both sides.47 In December 2018, another contract for the long-term supply of LNG was concluded between a gas company from the United States and PGNiG. This time, PGNiG’s partner is Port Arthur LNG, a sister company of Sempra Energy. According to the contract beginning in 2023, PGNiG will buy 2 million tonnes of LNG per year (2.7 billion cubic meters). This is a 20-years contract with the FOB formula. The offtake of gas will take place at the Port Arthur LNG terminal in Texas. PGNiG will be free to determine the final destination of the gas. As the CEO of PGNiG summarized: “From 2023, PGNiG will have at least 7.45 million tonnes of liquefied gas, which accounts for over 10 billion m³ of natural gas after regasification. Such quantities of LNG will strengthen the company’s position on the market for this fuel, and will contribute to an increase in the security of the gas supply to Poland.”48 The successful construction of the LNG terminal in winouj cie has increased interest in purchases of LNG. Apart from the expansion of the terminal in winoujscie discussed above, GAS-System is analysing a project for a Floating Storage and Regasification Units 47 See PGNiG: 24-letni kontrakt z Cheniere podpisany – dostawy amery ka skiego LNG do Polski rusz w 2019 roku, Press Release, 8 November 2018, available at: http://pgnig.pl/aktualnosci/-/news-list/id/pgnig-24-letni-kontrakt -z-cheniere-podpisany-dostawy-amerykanskiego-lng-do-polski-rusza-w-2019 -roku/newsGroupId/10184 (1 May 2019). 48 PGNiG: PGNiG: kolejny wieloletni kontrakt na LNG z USA podpisany, Press Release, 19 December 2018, available at: http://pgnig.pl/aktualnosci/- /news-list/id/pgnig-kolejny-wieloletni-kontrakt-na-lng-z-usa-podpisany/news Group Id/10184?changeYear=2018¤tPage=1 (1 February 2019) [Org. Od 2023 roku PGNiG b dzie dysponowa co najmniej 7,45 mln ton gazu skroplonego, co stanowi ponad 10 mld m³ gazu ziemnego po regazyfikacji. Takie ilo ci LNG ugruntuj pozycj spó ki na rynku tego paliwa i przyczyni si do wzrostu bezpiecze stwa dostaw gazu do Polski.] 78 (FRSU)49 terminal, to be localized in the Gulf of Gda sk. Another project being discussed is the Baltic Pipe, a pipeline to connect Poland with gas fields in Norway. The Baltic pipe is currently a priority that could enable Poland to stop relying on Russian gas after the expiration of the Jamal contract in 2022. As PGNiG’s CEO has stated, Russian gas is “extremely expensive”, and gas from Norway should have a much more competitive price.50 It is worth noting two statements made during the conference entitled “Bezpiecze stwo energetyczne – filary i perspektywa rozwoju”. Secretary of State Piotr Naimski, argued: “By 2022 at the latest, with the launch of the Baltic Pipe, Poland will be able to import – from outside Russia – 17 billion cubic meters gas per year, which is how much it consumes today.” On the price aspect of the gas supply diversification, PGNiG Vice President for Trade, Maciej Wo niak, argued “The delivery terms from the supplier from the East do not correspond to market conditions. Russian gas price is non-market oriented, it is sold to us too expensively. Until there is a full alternative, it will be like that.”51 Political and economic interests have to coexist, though Foreign Minister Jacek Czputowicz sought to underline the economic aspect when he said, “we will buy where it is the cheapest”52. 6 Conclusions This study shows that, even though the shale revolution is a US phenomenon, other countries can also benefit from it. Poland is one 49 See Songhurst, Brian: The Outlook for Floating Storage and Regasification Units (FSRUs), Oxford Institute for Energy Studies, No. NG 123, 2017, available at: https://www.oxfordenergy.org/wpcms/wp-content/uploads/2017 /07/The-Outlook-for-Floating-Storage-and-Regasification-Units-FSRUs-NG- 123.pdf (1 February 2019). 50 See Jakóbik, Wojciech: PGNiG chce zast pi kontrakt jamalski dostawami z Baltic Pipe, in: PGNiG, 10 September 2018, available at: http://biznesalert. pl/pgnig-kontrakt-jamalski-baltic-pipe/ (1 February 2019). 51 Krzyczkowski, Wojciech: Naimski: Najpó niej w 2022 r. spoza Rosji – 17 mld m sze c. Gazu rocznie, in: PAP, 26 September 2018, available at: https: //www.pap.pl/aktualnosci/news%2C1374189%2Cnaimski-najpozniej-w-2022 -r-spoza-rosji-17-mld-m-szesc-gazu-rocznie.html (1 February 2019). 52 Ministerstwo Spraw Zagranicznych: Redaktor Witold Jurasz manipuluje wypowiedzi szefa MSZ nt. Nord Stream 2, 7 October 2018, available at https:// www.msz.gov.pl/pl/aktualnosci/wiadomosci/redaktorwitoldjurasz_manipuluj e_wypowiedzia_szefa_msz_nt_nord_stream_2 (1 February 2019). 79 such country. After investing in an LNG terminal, it gained access to an emerging global market. The shale revolution in the United States opened up new opportunities for Poland. In the first longterm contract signed with Qatar, gas is expensive. But the entry of American companies onto the global market has opened new opportunities. The current American administration was determined to support US companies in their winning access to the global market. It was also determined to weaken Russia’s position on the European gas market and give US allies a chance to diversify their sources of supply. These economic and geo-economic interests of the United States corresponded well with the national interest of Poland, which was determined to find a supplier of gas offering a stable supply at competitive price. In this, the interests of Poland and the United States are convergent, with the result that, in 2018, a number of contracts between PGNiG and American gas producers were signed. Although American gas cannot fully replace Russian gas in Poland’s energy mix, it will become an important element of it, diversifying Poland’s sources of supply and strengthening its energy security.

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Abstract

After two decades of rather moderate interest in European energy issues, the awareness for this policy area began to grow again in the early 21st century. This is due to several changes in the energy market. Firstly, the great powers increasingly compete for access to energy resources. Secondly, the second biggest exporter of energy resources, Russia, started to develop its energy diplomacy by trying to transform resource wealth into political power. After several gas crises in Ukraine, the effectiveness of Russia’s “energy weapon” became only too clear. Finally, the impact of climate change on energy policy became a current topic in international politics, since the energy sector is the largest producer of greenhouse gases. The European Union as organization and international player has significantly gained importance in the field of energy policy. At first, it concentrated on creating a single market for energy goods and services, but subsequently became an important player on the international energy market: building institutions, promoting norms and transforming into a “realist” actor interested in improving its own energy security. Today, the EU’s climate policy strongly affects its energy policy, driving a transformation from fossil fuels to renewables. The goal of this volume is to contribute to the ongoing discussion on energy in international relations by covering different aspects of energy policy in Europe. The analysis focuses on the national perspectives of three EU members – Germany, France and Poland – as well as on the perspective of the EU. Mit Beiträgen von Hubertus Bardt, Florian Engels, Wolfram Hilz, Timo Karl, Shushanik Minasyan, Maciej Ras, Rafał Ulatowski