Builders’ woes could hit Poland LNG terminal

The terminal’s operator plans to bring in LNG from Qatar as part of a 20-year deal by Polish gas monopoly PGNiG to buy around 1.5 bcm of gas annually from Qatargas

Potential bankruptcies of Polish builders may delay construction of the first liquefied natural gas (LNG) terminal on the Baltic Sea, the head of the terminal’s operator said, a project that is meant to curb central Europe’s reliance on Russian gas.
The 2.1bn zloty ($642mn) terminal in the Polish port of Swinoujscie is expected to open in the second half of 2014 to handle 5bn cu m (bcm) of gas annually. Operator Polskie LNG, a unit of state-owned gas grid Gaz-System, could eventually raise its capacity by a further 2.5 bcm.
The terminal would give Poland and its land-locked neighbours access to the global LNG market and reduce their reliance on gas imports via pipelines from Russia’s Gazprom
Poland, which consumes around 14 bcm of gas a year, buys more than half of its supplies via a long-term contract from Gazprom.
The terminal’s operator plans to bring in LNG from Qatar as part of a 20-year deal by Polish gas monopoly PGNiG to buy around 1.5 bcm of LNG annually from Qatargas. The contract assumes first deliveries in 2014.
But Polish builder PBG, a member of the consortium tapped to construct the terminal alongside Italy’s Saipem and Argentine’s Techint, has been in bankruptcy protection since June.
Many Polish construction companies, including top firms such as PBG and Polimex, are struggling financially after getting caught up in bidding wars for projects for the recent Euro 2012 soccer tournament, which cut their margins.
“We are concerned about problems in the construction sector, which more and more often end with bankruptcies,” Polskie LNG’s chief executive Rafal Wardzinski said in an interview. “We are very interested about what will happen with PBG and Polimex. Bankruptcy of a large construction group will result in bankruptcies of other, smaller firms.”
Wardzinski estimated that the terminal’s construction was 25% complete.
The timeline for a 2014 launch has not changed yet, but bankruptcies of Poland’s big builders could create a domino effect that hurts dozens of smaller companies working on the project as subcontractors.
Earlier this week, Hydrobudowa Polska, a unit of PBG, lost two small contracts, part of work on the terminal, due to financial problems, forcing the consortium to search for a replacement.
“We are happy that the problems with Hydrobudowa have been conclusively resolved,” Wardzinski said. “This opens the path to finding another subcontractor in its place.”
Treasury Minister Mikolaj Budzanowski said earlier this year Poland needed to analyse whether the LNG terminal could be expanded to include an exporting facility due in part to the country’s potential shale reserves.
Wardzinski said that even if Poland drills a vast amount of shale gas and becomes an exporting nation, the cost of building a terminal to do so would probably be too high to make the investment worthwhile.
“Building a terminal for liquefying gas is three to four times as expensive as a regasifying terminal,” he said. “It might be a better idea to further expand inter-connectors linking Poland with neighboring countries.”
Pipeline operator Gaz-System also has said it would like to more than quadruple the capacity of an existing gas link with the Czech Republic to between 2.5 bcm and 3 bcm before the end of 2016.
It also wants to build a connection with neighbouring Slovakia and is considering new links with Germany and Lithuania.