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The potential of LNG bunkering – interview with Marcin Szczudło, VP of PGNiG Retail Branch

In November 2020, Polish oil and gas company PGNiG completed, together with integrated oil company Grupa Lotos, the first bunkering of a ship with liquefied natural gas (LNG) at the port of Szczecin. Another proof that the demand for bunkering services from shipowners at Polish ports is growing and LNG fuel in the Baltic Sea has a crucial role to play.

CEENERGYNEWS spoke with Marcin Szczudło, Vice President of PGNiG Retail Branch about the potential of LNG bunkering in Poland and beyond and the use of compressed natural gas (CNG) and LNG in the transport sector.

“Our analyses show that LNG bunkering has a great potential in Poland and wider – in the Baltic Sea basin, so for the last couple of years we have been working really hard to develop this segment,” he begins. “We had to start from scratch, but now there is no doubt that PGNiG Retail Branch is not only a pioneer but also the leader in terms of the LNG bunkering in Poland. So far we have performed several dozen LNG bunkering operations for 12 various vessels, which makes us one of the most experienced entities in that part of Europe.”

Mr Szczudło mentions the launch of the company’s commercial offer in 2019 providing bunkering services in four Polish harbours: Gdańsk, Gdynia, Szczecin and Police.

PGNiG
Gdańsk port.

“It is worth noting that Gdańsk has the third-largest port in the Baltic Sea and Polish sea harbours are among the biggest in terms of cargo handling,” he adds. “So you can see that the potential of our offer is really high.”

He also refers to the so-called Sulphur Directive which came into force on 1 January 2020, as a major determinant in the development of LNG-based shipping in the Baltic Sea.

“Thanks to that legislation support we can see that more and more LNG-powered ships start sailing in the Baltic Sea,” Mr Szczudło explains. “Major ship-owners such as TT Line, Containership are becoming more and more interested in that kind of vessels. Moreover, the Polish company Polskie Promy intends to build LNG ferries, which will sail between Polish and Scandinavian seaports.”

“We hope that in the upcoming years the number of LNG-powered ships will increase significantly and we are ready to provide them with eco-friendly LNG fuel.”

Another great potential is offered by CNG. Mr Szczudło tells us that the fleet of gas-powered buses in Poland has been growing steadily in recent years and at the moment already counts more than 800 vehicles. As of 2019, the share of new buses powered by gas fuels in Polish public transport remains stable – every fourth registered bus is powered by CNG or LNG. Out of 290 city buses registered in the first half of 2021, as many as 212 had alternative drives.

“In this group, gas-powered buses led the way, accounting for more than 50 per cent of new ecological vehicles and were more eagerly chosen than electric buses,” he underlines. “It is worth noting that natural gas-fuelled buses are very popular on the market, despite the fact that their purchase in most cases is not subsidised from external funds.”

“Nevertheless, the lack of financial support, similar to what is offered for electric and hydrogen vehicles, is one of the major challenges for further development of that segment.”

“Moreover,” he continues, “in our opinion CNG-powered buses are not getting enough support in the Law on Electromobility and Alternative Fuels. Another problem is the still insufficient number of CNG stations in Poland. At the moment there are fewer than 20 stations, but fortunately, the plans of PGNiG Group for 2021 include the construction of 23 new facilities. As part of this investment, L-CNG stations will be built in Koszalin and Zielona Góra.”

Also, LNG with the President Lech Kaczyński Terminal in Świnoujście plays an important role in the process of diversification of natural gas supplies.

“Thanks to it, our country gained wide access to competitively priced and environmentally friendly fuel, which can be successfully used not only in transport or industry but also for household heating,” Mr Szczudło points out.

In the long term, he reminds us that Poland has ambitions to become a local leader and a gas hub for the entire region. He hoes on saying that it is particularly important in the context of the current situation on global gas markets.

“As we can see, an alternative to Russia sources of gas supply is essential, so that countries such as Poland are not exposed to blackmail and the resulting sudden rise in prices or the suspension of gas supplies for political reasons,” Mr Szczudło says. “Europe should actively pursue diversification of gas supply sources and LNG terminals are one of the best solutions in this respect.”

At the end of May, the first small scale LNG reloading operation was carried out in the Mediterranean at the LNG Terminal in Omišalj, on the Island of Krk and Mr Szczudło is also looking at small scale LNG as a great opportunity for Poland.

PGNiG
Gdańsk port.

“LNG is a universal solution, which can be used in those places, which are not connected to the gas grid in Poland and unfortunately this is still a problem in some parts of our country, mainly in the east,” he emphasises. “The best way to provide gas for customers in those regions are LNG regasification plants with local gas grids. Therefore PGNiG Capital Group has carried out a major investment plan to deliver over 80 operational LNG regasification plants by the end of the year. As for the end of November 2021, it exceeded that number.”

LNG is also getting more and more popular in heavy-duty transport.

“It is also a very promising sector for us because Polish transport companies hold a dominant position in EU road transport,” he says. “Poland-Germany is the second most important route for the carriage of goods by road in the EU and since 2012 Poland has held the 1st place in terms of cargo transported in the EU. Polish companies provide transportation for 23 per cent of the EU road freight. All those heavy-duty vehicles need fuel and LNG is one of the best solutions for transport companies because it means a significant cost optimisation for the transport business, as well as an increase in the competitiveness of these entrepreneurs on the EU market.”

“To describe LNG market potential in Poland I will give you one number – the volume of LNG transported by tanker trucks in Poland from 2016 to 2020 increased by 536 per cent.”

For sure LNG can play a role in heavy-duty transport, but what are the limitations?

“The possible limitations are similar as in the case of CNG – the insufficient number of LNG stations and lack of legislative support for gas-powered vehicles in European countries,” he replies. “But there is no doubt that Europe is one of the leaders in the fight against harmful emissions from road transport, and the EU regulations in this area are becoming increasingly restrictive. This is a great challenge for transport companies that are actively looking for alternative fuels that guarantee positive ecological effects. At the moment the liquefied natural gas is the solution. According to the experts of Esperis, the demand for LNG in heavy-duty transport increased by 280 per cent in 2020.”

Heavy transport in Poland is also increasingly reliant on natural gas, which is reflected in the successively growing fleet of gas-powered vehicles and the development of a network of LNG refuelling stations.

“We are successively developing our sales which translate directly into our record results – in the first half of 2021 we – the PGNiG Retail Branch – have increased sales of liquefied natural gas by over 90 per cent compared to the same period in 2020,” he adds. “The LNG terminal provides us with concrete business opportunities, which we successfully use, as evidenced by the largest contract in the company’s history for the sale of LNG for transportation in Poland.”

“In June PGNiG Retail Branch signed the largest ever agreement for the sale of LNG fuel for transport purposes with the Bisek Purchase Group,” Mr Szczudło concludes. “Under the long-term contract, we will provide 30,000 tonnes of liquefied natural gas. What is interesting is that Bisek will use our fuel not only to run his fleet of 70 gas-powered trucks but will also sell fuel on his own refuelling stations.”

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