Energinet submits Baltic Pipe application to Minister
Energinet’s Supervisory Board has approved the business case for the Danish part of the Baltic Pipe gas project and is submitting an application for investment approval to the Danish Minister for Energy, Utilities and Climate.
Energinet’s Supervisory Board has approved the business case for the Danish part of the Baltic Pipe project, and Energinet will therefore now submit an application to the Danish Minister for Energy, Utilities and Climate. In pursuance of the Danish Act on Energinet, the investment requires approval by the Minister.
The Baltic Pipe is a possible new gas pipeline connecting the existing Norwegian gas network in the North Sea with the Danish and Polish gas transmission networks. A new pipeline will be established in the North Sea from the Norwegian Europipe II pipeline to Nybro in Western Jutland. According to the proposal, a new underground pipeline with a length of approximately 220 km will be dug across Denmark, and a new submarine gas pipeline will be laid across the Baltic Sea to Poland. Energinet will be responsible for pipes in the North Sea, the new pipes across Jutland, Funen and Zealand as well as a compressor station on Zealand, whereas the Polish partner, GAZ-SYSTEM S.A., will be responsible for submarine pipes in the Baltic Sea and new gas facilities in Poland.
Benefits for both Denmark and Poland
- The Baltic Pipe will benefit both Denmark and Poland. One of the benefits for Denmark will be a tariff reduction for gas consumers of between DKK 1.9 and 2.9 billion. A new pipeline link will also strengthen security of supply and result in sharper competition on the European gas market. We are therefore now submitting an application for investment approval to the Minister, says Lars Barfoed, Chairman of the Supervisory Board in Energinet.
Provided that the Minister approves the investment, Energinet expects to make a final investment decision on the Baltic Pipe project, together with GAZ-SYSTEM S.A., towards the end of 2018.
With an interconnection of the Norwegian, Danish and Polish gas infrastructures, the annual gas volumes transported in the Danish transmission pipes may increase to ten billion cubic metres. The current annual Danish gas consumption amounts to approximately 2.5 billion cubic metres.
The Baltic Pipe will thus be an extra source of supply, thus increasing the security of supply for Danish consumers; also, the cost of operating the gas transmission network will be distributed on more suppliers. At a time characterised by a general decline in gas consumption and pro-spects of increasing tariff costs for individual consumers, the Baltic Pipe means that tariffs for companies and households will not increase in the future.
A new cross-border link will also result in sharper competition on the European gas market.
Poland wants new supply sources, and gas can replace coal in Polish power stations, and thus reduce emissions of CO2 and other greenhouse gases.
Great interest in invitation to tender
In 2016, Energinet performed a feasibility study, together with the Polish gas transmission company GAZ-SYSTEM and, in 2017, the companies held a so-called Open Season procedure in which transport customers in the gas sector could reserve rights to gas transmission capacity in a Baltic Pipe link. Both the feasibility study and the Open Season procedure showed that there is great interest in the Baltic Pipe and that the pipeline will be of benefit to the two countries. The gas companies have subsequently signed 15-year contracts on gas transmission from Norway to Poland.
The Danish part of the Baltic Pipe project will cost approximately DKK 6 billion and is expected to generate a socioeconomic profit.
The calculated current value of the tariff reductions is DKK 1.9-2.9 billion, corresponding to a return on investment of 4.3% to 4.8% per annum, adjusted for inflation. The tariff reduction for a typical household with a gas-fired boiler is expected to be DKK 100-125 per annum, whereas, for a company with a consumption of 300.000 cubic metres, the tariff reduction will amount to approximately DKK 15.000-19.000 per annum.
In 2013, Energinet inaugurated a new gas transmission pipeline between Egtved near Kolding in Jutland and the Danish-German border. The work is similar to the work envisaged in the Baltic Pipe project. The underground pipes are laid more than one metre below ground, and the construction work typically takes 2-3 months before the machines move on to the next area. The holes are subsequently refilled with earth, and the field may again be used for cultivation. Photo: Bent Sørensen.
Once the ground has been reestablished, the gas pipe is only visible through yellow marker posts at roads and boundary marks. Photo: Mohsen Safarkhanlou