In the case of LPG (liquefied petroleum gas), Poland was the largest importer in the entire European Union. About PLN 3 billion was paid for Russian LPG, according to an analysis by Forum Energii (FE).
As indicated by FE in its analysis, the EU embargo on Russian fuels did not cover LNG and LPG. It was added that this “was caused by problems in the rapid diversification of gas supplies due to the dependence of Central and Eastern Europe on supplies via gas pipelines”.
“For natural gas Russia successively reduced supplies to European recipients, provoking an energy crisis and trying to force EU countries to make concessions to the attack in Ukraine. However, this strategy failed – thanks to the increase in LNG imports and mandatory gas reserves, the EU survived the most difficult heating season in history.
Import of Russian LNG and LPG to the EU and Poland
According to analysts, only in 2022 EU countries paid as much as EUR 16 billion for Russian LNG, which was a record result. FE pointed out that although “the value of the European LPG market is definitely lower than that of the LNG market”, “the sale of this fuel still generates significant revenues for Russian producers”, and “in 2022 alone they amounted to about EUR 1.1 billion”.
“The vast majority, about 2/3 of this sum, went to Russia from Poland. Since Russia invaded Ukraine in February 2022, about PLN 3 billion flowed from Poland for Russian LPG. On average, we spent PLN 280 million monthly for LPG, but its purchases have not been limited after the Russian invasion, and have even increased and continue uninterruptedly (as of March 2023). A similar phenomenon is also observed in the Baltic States, the Forum pointed out.
It added that “Poland’s exceptional situation in Europe is mainly due to four factors”, and “the distinguishing feature of the Polish LPG market is the dominant role of autogas”. “About three-quarters of liquid gas is used by cars (about 3 million vehicles)” – indicated in the commentary.
Poland condemned to LPG imports
It was explained that “in order to meet the demand for LPG, Poland is doomed to import” because “domestic refineries do not have sufficient production capacity and there are no prospects for a significant increase in extraction from deposits” and “as a result, only 16 percent of consumption of this fuel in Poland is satisfied with domestic production, which is the worst result among all liquid fuels (compared to petrol and diesel).
“An important factor, specific to Poland, are the existing supply chains. About 55 percent of LPG that comes to Poland from abroad is delivered by rail, less than 29 percent by sea and over 16 percent by road. Historically, land terminals dominate in Poland LPG, located in the east of the country and intended for receiving fuel from Russia and Belarus. For years, this determined that the cheapest route of import in terms of logistics was this direction.
It was added that “Poland has three LPG sea terminals with a total reloading capacity of less than 1 million tons per year”, so “with annual imports of 2.1 million tons, it is impossible to completely replace deliveries by rail from the east with sea imports.”
“For this reason, although a tendency to move away from Russian LPG has been observed in recent years, it is a very slow process. Without political intervention, Russia’s dominant position on the Polish liquefied gas market will remain unthreatened,” FE said.
“A special feature of the Polish LPG market is also the small storage capacity. In total, Polish warehouses have a capacity of 105,000 tonnes and are located mainly in transshipment terminals. Only 1/3 of them are located in sea terminals. This means that the storage capacity corresponds to only 4 percent of the domestic annual consumption of liquefied gas.As a result, the Polish LPG market is dependent on the continuity of supplies (mainly from Russia) and is very sensitive to possible fuel shortages” – it added.
LNG imports from Russia to the EU
“Despite a significant decrease in the share of Russian gas in the EU market, the share of LNG has started to grow. This changes the geography of dependence on Russia, because until the Russian invasion of Ukraine, Central and Eastern European countries were the most dependent on supplies from Russia. They imported gas from Russia via pipelines, often with no alternative to the east. In 2020, more than half of the gas used in many EU countries came from Russia, the Forum reported.
It explained that “Russia’s restriction of natural gas supplies via pipelines has led some EU countries to increase LNG imports from this country”, and “this phenomenon mainly concerns FranceSpain, the Netherlands and Belgium“.
More importantly, “across the EU, imports of liquefied gas from Russia increased from 14.2 bcm in 2021 to 19.3 bcm in 2022”.
“The LNG market, unlike supplies via pipelines, is globalized and allows purchases at the market price of individual supplies from around the world. France or Spain are therefore able to eliminate Russian gas in a relatively easy way (depending only on supply). No sanctions on Russian However, LNG enables completely legal import of this raw material, which these countries do not want to give up for economic reasons.
According to Forum Energii, “the argument for importing LNG from Russia has so far been the gas deficit that could threaten Europe in the winter of 2022/23”. However, “with the arrival of spring, with relatively high gas storage capacity, gas prices fell to only 40 EUR/MWh (approx. 350 EUR/MWh at the peak of the crisis), which reflects positive market sentiment”. The FE noted that “it is therefore a good time to take action to tighten the sanctions”.
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