Zbigniew
Korzeb
Professor
Department
of Management, Economy, and Finance, Bialystok University of Technology
Bialystok, Poland
z.korzeb@pb.edu.pl
Paweł
Niedziółka
Professor
Banking
Institute, Warsaw School of Economics
Warsaw, Poland
pniedz@sgh.waw.pl
Although the importance of gas is expected to decline (REPowerEU programme), it still represents approx. 22% of EU's primary energy consumption. In the wake of Russia's aggression in Ukraine, Western European and CEE countries have been faced with the challenges of replacing gas supplies from Russia with deliveries from other directions and protecting the technical and IT gas infrastructure. These problems particularly concern the European NATO countries, as they support Ukraine militarily, economically and politically, and in recent months the increasingly real possibility of an escalation of the conflict between Russia and NATO has been indicated both in Germany and Sweden.
An alternative to Russian gas is LNG. First The LNG terminal in Poland (Świnoujście) commenced operation in 2015. It is currently in the process of being expanded. In addition, infrastructure for 2 FSRUs is under construction in Gdansk. In Germany, the creation of infrastructure for LNG required the adoption of a special law (May 2022). The first terminal was built in Wilhelmshaven, followed by Brunsbuettel and Lubmin. Terminals in Wilhelmshaven (II), Stade and Rügen are under construction. These projects will cover approx. 40% of Germany's gas consumption. Due to climate policy, the law set a deadline for the end of LNG imports and from 2044 only carbon-neutral energy carriers are to be brought to the gas terminals. Finland has LNG terminals at Pori, Tornio, Hamina (2022) and Inkoo (2023). Only the latter two have the potential to inject gas into the transmission system. In 2023 Finland imported gas from the USA and Norway (76% in total). Supplies from Russia amounted to about 10%. The Finnish government plans to stop such supplies from 2025. In the Baltic States, there is only one LNG terminal (FSRU) in Klaipeda (Lithuania) which came into operation in 2014. At the end of December 2023 an Open Season procedure was announced to test interest in additional terminal capacity. The failure of the Balticconnector pipeline in October 2023 connecting Finland and Estonia meant that the Baltic States (mainly Estonia) had to increase import through the Lithuanian terminal, whose capacity had not previously been fully utilised. The construction of LNG terminals is also planned in other NATO countries (Italy, France, Greece, Netherlands and Croatia). The expansion of infrastructure is accompanied by new gas supply contracts. However, the 2023 contracts signed by Qatar with Germany, Italy, the Netherlands and France for the period up to 2050 raise objections from environmental activists.
An important initiative for independence from Russian gas supplies is the construction of international gas pipeline connections. An example is the Gas Interconnection Poland-Lithuania launched in 2022 connecting the Baltic States and indirectly Finland to the Central Europe. Also in 2022 the gas systems of Poland and Slovakia were interconnected thus reducing Slovakia's dependence on Russia. A similar objective was pursued by Bulgaria, which connected its natural gas network to Greece. Bulgaria also signed a long-term gas supply contract with Turkey. The Baltic Pipe pipeline between Norway and Poland opened in October 2022. Given the above, its own gas production, and the capacity of LNG terminals, Poland is already independent of Russian gas, but the country is set to become a gas hub for CEE, hence the plans for infrastructure development.
At the same time, European NATO countries (Croatia, France, Greece, Italy, Portugal, Romania and Poland, among others) have announced plans to expand their natural gas storage facilities. The level of their utilisation grew significantly (to around 90%) following Russia's invasion of Ukraine.
While similar attacks on gas infrastructure as the Nord Stream 1 and 2 pipelines in September 2022 or attempts to disrupt supply using LNG carriers cannot be ruled out in the future, it seems that cyber attacks will become increasingly important. They did not start with Russia's invasion of Ukraine. For example in December 2015, an attack was carried out which resulted in approximately 700,000 households in the Ivano-Frankivsk region experiencing a blackout. A year later (also in December), around 20 per cent of the population of Kiev was left without access to electricity. Cyber attacks on critical infrastructure were found also in several NATO member states (US, UK, Poland and Türkiye).
It is therefore essential to monitor any disruption of the entire energy system, and any incidents (e.g. installation of physical equipment (hardware) within critical infrastructure (5G/Huawei) or the massive GPS disruption in the Baltic region in December 2023), should be identified early, carefully explained, and the infrastructure should be given special protection. Indeed, gas supply disruptions or gas price increases have important implications not only for the economy, but also for the political situation and the production capacity of the defence industry in NATO countries. Indeed, a growth of gas prices, which is also due to a reduction in its availability, contributes to a weakening of economic growth, which is a favourable environment for the rise of populist parties and a surge in the operating costs of the defence industry. In conclusion, the recommendation for NATO countries boils down to a focus on reducing the energy intensity of the economy, building infrastructure for gas import, transmission and storage, taking steps towards joint gas purchases and intensifying physical infrastructure protection and cybersecurity.