Page 102 - RusRPTDec20

between Poland and Gazprom over gas supplies, prices and transit will not be resolved for years, but the latest initiatives are in favor of Gazprom.
Gazprom demands gas price increase, RD Shell appeals Nord Stream-2 fine. Interfax and Vedomosti reported. In recent months, various bodies in Poland have been actively pursuing Gazprom on various fronts. Now Gazprom and others with aligned interest are responding to some of these actions. These events are positives for GAZP sentiment, but small, as the legal process will likely run for years.
In October, Poland’s antimonopoly body (UOKiK) fined Gazprom for $7.6bn and 5 European companies $100mn for failing to receive its approval for the construction of Nord Stream-2. The outsized fine – about 75% of the total capital cost of the project – made the action seem political rather than legal in nature, and unlikely to stick.
As a reminder, Gazprom almost immediately appealed that fine, and now a major European company is entering the fray. We expect this to eventually be decided in Gazprom’s favor – at the very least, the fine will be reduced by a factor of 10x-50x, we think, if not dismissed entirely.
On 1 November, Poland’s state-owned oil company (PGNiG) filed an official request to reduce the price it paid for Russian gas in the 2017-20 period. This is a normal process within Gazprom’s export contracts and could eventually lead to the Stockholm arbitration court, which only in March awarded Poland $1.5bn in awards for overpaying for Russian gas in 2014-2017, which Gazprom has paid. However, Gazprom also has a right to demand a price review in its favor (around 2006 it won such an increase), which it is now doing. As with the previous claims, this one appears headed to arbitration, which means we will not know the answer for about 3 years. Meanwhile, this contract expires in 2022, and Poland has made it clear it has no intention of extending it.
The Russian government pushes to speed up LNG development. ​Interfax has reported that Russia's Energy Ministry is preparing a new strategy for LNG development, which targets annual LNG production of 140mn tonnes. The draft of the strategy aims to accelerate LNG development and project launches and to have key projects and LNG hubs launched by 2030. It stresses that there is a narrow window of time to monetize the reserve base, as gas consumption and LNG demand is projected to slow after 2040 due to rising competition from renewables.
The strategy aims to ringfence Gazprom's Tambey group of fields, the South Tambey group and Novatek's Utrennye, Geofizicheskoye and North-Obskiy fields for LNG development. The document estimates Tambey group LNG potential at 40mn tonnes per annum.
102 ​RUSSIA Country Report​ December 2020 www.intellinews.com