Poland's LNG Terminal Likely to Hit Full Capacity by 2018

Poland's first liquefied natural gas (LNG) terminal should finally be ready for commercial use next May and is likely to reach full capacity by 2018, its operator said on Wednesday.

The terminal, being built in the Baltic city of Swinoujscie, is Poland's flagship project to diversify gas supplies and reduce dependence on Russia. It had originally been scheduled to open in 2014 but has been delayed several times.

Jan Chadam, head of state-owned Polskie LNG, which will operate the terminal, said he is confident of securing more supply contracts to push the terminal to close to its full capacity of 5 billion cubic metres by 2018.

The terminal is being built at a cost of 2.4 billion zlotys ($642 million).

Chadam acknowledged it would be a challenge to surpass usage rates of around 40 percent to 60 percent seen at other LNG terminals in the European Union but he said increasing regional gas links would help eastern Europe's biggest economy achieve its goal.

"This is a big site in a strategic location," Chadam told Reuters in an interview. "Additionally it will be used not only to take gas directed to the Polish market, but to the entire central and eastern European region."

Poland, which also plans to build a gas link to Lithuania to allow it to re-export gas to the Baltics, has said it plans to build 2,000 km (1,250 miles) of pipelines criss-crossing Poland over the next 10 years.

Countries in the region, including the Czech Republic, Slovakia and Hungary, have all made strides in recent years to connect their systems and find new sources of supply to ease their heavy reliance on Russian gas.

Poland consumes nearly 16 billion cubic metres of gas a year, most of which is imported from Russia's Gazprom via pipeline.

So far only one supply contract has been agreed for the LNG terminal - for Qatargas to supply Poland's biggest gas distributor PGNiG. The deal assumes gas deliveries of 1.5 bcm annually via the terminal for 20 years starting from 2014 when the facility was initially set to open.

The terminal operator -- which is in talks with a number of companies -- will also need to offer competitive regasification prices to attract potential users, Chadam added.

"We see significant interest especially from our partners in the U.S. and Canada," he said. "I assume we will sign the first agreements in the second half of 2016."

Polskie LNG will also decide in the second half of 2016 on whether to expand the terminal to increase capacity to 7.5 bcm -- nearly half of Poland's annual demand.

Chadam said the first ship will take delivery of 200,000 cubic metres of gas needed for cooling and ramp-up at the end of this year, followed by another in the first quarter of 2016. Almost all of these initial deliveries will supply the Polish grid.

(By Agnieszka Barteczko and Anna Koper)