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PGNiG is likely using
the low cost of LNG as
justification for getting
cheaper gas from
Gazprom.

PGNiG seeks price cut from Gazprom

POLICY POLISH state gas company PGNiG has asked for contracts has dropped much less, however, as
gas price talks with Russian supplier Gazprom, it gas prices are calculated against oil benchmarks
announced on November 3. with a time delay, typically of between six to nine
The request comes only months after Russia’s months.
Gazprom was forced to pay $1.5bn to PGNiG for Moscow-based Vygon Consulting estimates
previously charging the company too much for the cost of US LNG to Poland to be 20-30% less
gas, under a Swedish court order. than the cost of Russian piped gas. This is likely
PGNiG and Gazprom’s long-term contract to be the discount PGNiG is seeking, the con-
allows either side to ask for a revision in price sultancy said.
terms every three years “if it determines that they PGNiG’s contract with Gazprom runs out at
fail to reflect current market conditions,” PGNiG the end of 2022 and the company has repeatedly Vygon Consulting
said. said it will not renew the deal. It hopes to replace
The pair have often clashed on prices over Russian gas with LNG, mainly from the US, as estimates the
the years. PGNiG won a five-year legal dispute well as Norwegian gas via the planned Baltic
in March after the Stockholm Arbitration Tri- Pipe. cost of US LNG
bunal ruled that it had been paying too much The Polish company announced on Novem-
for Russian gas since 2014. And earlier this year, ber 3 it had chartered two LNG carriers to to Poland to be
Gazprom said it would seek a retroactive price carry US gas. The vessels provided by Norway’s 20-30% less
change since 2017. Knutsen will begin serving PGNiG in 2023,
The two companies entered their current coinciding with the launch of Venture Global than the cost of
contract back in 1996, covering 10bn cubic LNG’s Calcasieu Pass LNG export terminal in
metres of annual gas supply. The contract, which Louisiana. Russian piped
is partially oil-indexed, includes a take-or-pay PGNiG is contracted to take some 1mn
clause that means PGNiG must pay for at least tonnes per year of LNG from the Calcasieu Pass gas.
8.7 bcm per year of gas even if it does not take facility and a further 2.5mn tpy from Venture
that much. Global’s Plaquemines terminal, although a final
PGNiG is likely using the low cost of LNG investment decision (FID) is yet to be taken on
as justification for getting cheaper gas from the latter project. Its overall import portfolio for
Gazprom. LNG prices were falling before the US gas comes to 9.3 bcm per year.
coronavirus (COVID-19) pandemic hit and The Knutsen vessels can each carry some
have slumped to historic lows since lockdowns 174,000 cubic metres of LNG, or 100mn cubic
were first imposed, although they are now begin- metres in gaseous form. PGNiG has chartered
ning to recover. The cost of gas in oil-indexed them for 10 years.™

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