Apart from its highest mountain being named after a Polish hero, Tadeusz Kosiuszko, Australia has limited connections with Poland, a situation that might change thanks to a worldwide hunt by European countries for future gas supplies.
The two countries are the best part of 9000 miles apart, as the crow flies and much further as the ship sails, but Poland is interested in buying Australian liquefied natural gas (LNG) as part of an attempt to break free from reliance on Russian gas.
A senior Polish government official told Australian media last week that the high cost of shipping LNG half-way around the world should “not be prohibitive” and Australian LNG exporters could use a gas import terminal scheduled to open on the Polish coast next year.
Poland Is Not Alone
Poland is not alone among European nations seeking to buy gas from Australia which will overtake the Middle East country of Qatar to become the world’s biggest exporter of LNG over the next few years as seven new projects are completed.
The European Union’s most senior energy official has also expressed interest in buying Australian LNG to feed into the regional gas pipeline system.
Dominique Ristori, the EU’s director general for energy, said the union was interested in pursuing “an Australian option” as a way of diversifying its gas supplies.
Asia Has First Claim
Currently, no Australian gas makes it as far as Europe. Japan, China and other Asian countries are the sole destination for Australian LNG exports which will rise by 42% a year for the next three years.
More than $100 billion has been invested in seven new LNG projects which will start production from later this year joining two currently in production.
Queensland LNG, a consortium led Japan’s Tokyo Gasand Britain’s BG group, is expected to start shipping in the next few months in what will be a world first because the gas is being extracted from coal seams along Australia’s east coast rather than from conventional gas deposits.
Two other projects based on “unconventional” coal-seam gas will start in 2016, while four based on conventional gas deposits will start from next year, led by the Gorgon project which is controlled by Chevron CVX -1.21% Corporation and co-owned by ExxonMobil andRoyal Dutch Shell .
LNG Displacing Coal
HSBC, a London-based bank, said in a report published last week that LNG would displace coal as Australia’s second biggest export by 2018 but in its research document no mention was made of selling LNG to Europe.
A separate research report by Macquarie, an investment bank, has also raised doubts about Europe being able to buy Australian gas which is earmarked for Asia.
Macquarie noted that overall Asian energy demand, despite increased efficiency, would rise by 37% by the year 2025, and energy imports would rise by 53%, “the equivalent of 436 nuclear power plants”.
“Asia will be increasingly tight energy and we expect regional energy prices to thus rise over the next decade,” Macquarie said.
Strong Asian demand for Australian LNG probably means that Europe will discover that it’s late to the party, even if it could afford the hefty transport bill.
