EU: Baltic States Must Compensate Poland for Gasline

The Baltic countries will have to compensate Poland for building a gas pipeline to link their isolated gas markets with the rest of Europe, the EU's energy agency said on Monday.

The overall economic benefits of the gas link from Poland to Lithuania are twice as high as its costs, but Poland would bear the brunt of the costs while Lithuania, Latvia and Estonia would gain a net benefit, the Agency for the Cooperation of Energy Regulators (ACER) has concluded.

"Therefore Poland will be compensated after the commissioning of the project with 85.8 million euros ($114.9 million), of which 54.9 million will be paid by Lithuania, 29.4 million by Latvia and 1.5 million by Estonia," ACER said in a statement.

The agency declined to divulge the full cost of the project, citing a confidentiality clause, but said the contributions would help to bridge any funding gap. The aim is to have the pipeline in place before the end of 2018.

Project developers, Polish and Lithuanian gas transmission system operators Gaz-System S.A. and AB Amber Grid, initially put the cost of the more than 500 km pipeline at 471 million euros. The estimate was later revised to 558 million euros.

The pipeline is expected to carry 2.3 billion cubic meters (bcm) of gas a year, with the possibility of increasing its capacity later to 4.5 bcm, close to the Baltic states' annual gas consumption.

The pipeline, which is included in the so-called list of EU projects of common interest (PCIs) to ensure smoother funding, is designed to enhance energy security, diversify gas supply and increase competition in the Baltic region, the agency said.

All three Baltic states totally depend on gas imports from Russia and have no gas links to other EU countries, but Lithuania plans to starts importing liquefied natural gas (LNG) in 2015.

Reporting by Nerijus Adomaitis