18.05.2018

Cross-Border Cost Allocation Agreement on Gas Interconnection Poland-Lithuania (GIPL) Project

The transmission system operators of the Baltic States and Poland concluded the process of executing the cross-border cost allocation agreement on Gas Interconnection Poland-Lithuania (GIPL) project on 11 May 2018.

The agreement executed between GAZ-SYSTEM, Amber Grid (Lithuania), Conexus Baltic Grid (Latvia), and Elering (Estonia) sets out practices of the implementation of the European Agency for the Cooperation of Energy Regulators’ (ACER) decision on the GIPL project’s cross-border cost allocation.

The concluded agreement governs mutual obligations between gas transmission system operators (TSOs) arising from the implementation of the ACER’s decision. It specifies the method for calculating and adjusting the compensations payable by the Baltic TSOs to the Polish transmission system operator – GAZ-SYSTEM. It also concerns the issue of the possible reimbursement for some or all of these compensations if the GIPL project on the Polish side generates revenues higher than those specified in the ACER’s decision on the basis of economic analyses of the project.

The signing of the agreement on the GIPL project’s cross-border cost allocation paves the way for concluding an agreement governing the legal, business, and technical aspects of the project implementation, which is also a joint commitment of the parties to implement the investment (Final Investment Decision, FID) between GAZ-SYSTEM and Amber Grid.

The first public tenders for construction works and piping are planned this year.

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On 13 May 2015, GAZ-SYSTEM and Amber Grid signed (and in January 2017 amended) a trilateral agreement with the EU Innovation and Networks Executive Agency (INEA) on the EU financial support for the project “Preparatory works for the Gas Interconnection Poland-Lithuania up to the building permission(s) obtainment.” Pursuant to the agreements, the project has also received EU funds of EUR 10.1 million under the Connecting Europe Facility (CEF).

The preparatory project work has been granted the highest possible amount of EU financial aid admissible for studies, i.e. 50 percent. Out of the total amount, EUR 2.5 million went to Amber Grid, while EUR 7.6 million was allocated to GAZ-SYSTEM.

On 15 October 2015, the companies signed (and in January 2017 amended) a trilateral agreement with the INEA on the EU financial support for the project action “Construction of the Gas Interconnection Poland-Lithuania (GIPL) including supporting infrastructure.” The agreement provides for the allocation of up to EUR 266.4 million of EU aid funds under the Connecting Europe Facility (CEF) for this project. Out of the total amount of funding, Amber Grid was allocated EUR 58 million, while GAZ-SYSTEM was allocated EUR 208.4 million as a maximum.

In accordance with the ACER decision as of 11 August 2014 on the cross-border project cost allocation, in addition to the EU financial support, the GIPL construction project will be co-financed by Lithuania, Latvia, and Estonia (TSOs), including a part of the GIPL infrastructure costs in the territory of Poland.

The GIPL project has been included in the list of projects of common interest of the European Union (PCIs), the ten-year development plan of the European Network of Transmission System Operators for Gas (ENTSOG), and the Baltic Energy Market Interconnection Plan (BEMIP) of transmission system operators.

The GIPL project aims to integrate gas markets of the Baltic States with the uniform gas market of the European Union, diversify gas supply sources, and increase the security of gas supplies. For this reason, the project has been recognised by the European Commission as one of the key infrastructure projects ensuring the security of supplies critical to the EU energy security in the short and medium term.

 

 

GAZ-SYSTEM is a strategic company for the Polish economy. It is responsible for the transmission of natural gas, manages the most important gas pipelines in Poland and owns the President Lech Kaczyński LNG Terminal in Świnoujście.

As part of the 2015-2025 investment programme, GAZ-SYSTEM is constructing over 2000 km of new gas pipelines in the western, southern and eastern parts of Poland. Over a dozen new gas pipelines are under construction within the North-South Gas Corridor and the compressor station in Kędzierzyn Koźle, as well as interconnections with Lithuania and Slovakia. Onshore gas pipelines are planned to connect the planned FSRU floating terminal in the Gulf of Gdansk with the national transmission system. The LNG Terminal in Świnoujście is also being extended, as a result of which the regasification capacity of this facility will be increased by more than a half.

The company is also implementing one of the most important infrastructural projects in the country - the Baltic Pipe project which consists in the construction of a two-way offshore gas pipeline connecting Poland and Denmark, expansion of the local transmission network and three gas compressor stations.

 


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