WHY POLAND DOESN'T WANT A GAS INTERCONNECTION TO

C O N F I D E N T I A L WARSAW 002525 SIPDIS SIPDIS STATE FOR S/P, EUR/NCE, EUR/ERA, EB/ESC EUR/NCE FOR DKOSTELANCIK AND BPUTNEY EUR/ERA FOR DLIPPEAT AND LCATIPON EB/ESC FOR SGALLOGLY, RGARVERICK AND JLEWANDOWSKI S/P FOR SHELLMAN AND GMANUEL COMMERCE FOR 4232/ITA/MAC/EUR/OECA/MROGERS, JBURGESS, JKIMBALL DEPT OF ENERGY FOR LEKIMOFF E.O. 12958: DECL: 12/06/2016 TAGS: ENRG EPET ECON PL GM RS NO SUBJECT: WHY POLAND DOESN'T WANT A GAS INTERCONNECTION TO GERMANY Classified By: Econ Counselor Richard Rorvig, reasons 1.4 b and d ¶1. (C) EconOff discussed Poland's lack of enthusiasm for building a new gas interconnection to Germany with Pawel Konzal, PGNiG Board Advisor and Krzystof Rogala of the Office of Oil and Gas Supply Diversification in the Ministry of Economy. Konzal explained that Poland opposed the construction of a new gas interconnector with Germany now. The GOP will reconsider the issue once it reaches agreement with Norway on a dedicated gas pipeline to Poland and builds an LNG port. Once those two goals are achieved, Poland will consider increasing gas interconnections with Germany. ¶2. (C) The underlying reason for opposition to a gas interconnection with Germany appears to be fear of German competition for Polish gas customers. Konzal explained that PGNiG's gas infrastructure and resources are limited in northwestern Poland. PGNiG has existing contracts with customers that guarantee a minimum supply and have clauses allowing for additional purchases of gas as economic activity increases. Economic growth in Poland, and especially the northwest, has been so high that Poland may not have sufficient gas supply to meet more than PGNiG's basic contractual commitments in two to three years. This lack of supply would obviously inhibit economic growth. ¶3. (C) PGNiG is afraid that an interconnection with Germany will allow German gas companies to compete for its customers, according to Konzal. The company believes that the only reason German energy companies have not yet targeted Polish customers is the lack of a large interconnection between the two countries. Rogala added that even if an interconnection is built with Germany, the gas that would be supplied would be Russian gas, which the GOP is not interested in obtaining. When Econoff asked whether the proposal for a gas line from Norway to Germany, which would be shorter and less expensive than a dedicated line to Poland and serve both markets might make the German interconnection more attractive, both refused to consider the option. The GOP's position is that it needs a dedicated line from Norway to Poland, and that is the GOP's goal in negotiations with the government of Norway. ¶4. (C) Comment: The GOP's opposition to a new gas interconnection with Germany that would improve Poland's energy security is difficult to understand. In effect, PGNiG would be prioritizing holding onto existing customers over increasing the number of possible energy supply routes. PGNiG may also be constraining future economic growth by not seriously considering possibilities that could guarantee the ability to increase purchases and therefore supply. However, this discussion is consistent with all our previous exchanges with the Ministry of Economy and GOP-controlled energy entities -- the GOP is determined to increase energy diversity by diversifying suppliers. It is convinced that any gas molecule that comes from Germany will be tainted as it will undoubtedly be Russian. The argument that alternate pipelines might mean improved energy security continues to fall on deaf ears. ASHE