Page 11 - FSUOGM Week 13

FSUOGM POLICY FSUOGM
Poland’s PGNiG declares victory in Gazprom gas price dispute
POLAND
Gazprom has to pay PGNiG $1.5bn under the award.
POLISH gas firm PGNiG has reported victory in a five-year legal dispute with Russia’s Gazprom over the price it pays for Russian gas.
The Stockholm Arbitration Tribunal has ruled that the price paid by PGNiG under its long-term contract is too high and must bet- ter reflect market rates. The binding verdict means that the pricing formula has now been linked to hub prices in Western Europe. Pre- viously the contract was indexed to oil prices only.
“The Arbitration Tribunal has sided with PGNiG, thus confirming that the price of gas in the Yamal contract failed to reflect the price level on the market and was overstated,” PGNiG CEO Jerzy Kwiecinski said in a statement on March 30. “The Tribunal changed the calculation for- mula by tying it very closely to the price level on the European market, which for PGNiG means a huge improvement in the terms of our gas imports.”
The change in formula will be backdated to November 1, 2014, with PGNiG estimating that Gazprom will have to pay $1.5bn to settle the dif- ference. According to Kwiecinski, the company plans to use the funds to acquire new hydrocar- bon reserves in order to help diversify its sources of supply. It has recently made a series of acquisi- tions in the Norwegian North Sea.
PGNiG intends to commission a 10bn cubic metre per year pipeline in 2022 connecting its
North Sea fields to the Polish market, known as Baltic Pipe. Poland has also issued contracts to expand the capacity of its LNG import terminal in Swinoujscie from 5.0 to 7.5 bcm per year, and has mooted plans to build a second terminal in Gdansk.
“We will also invest in new business areas related to the integration of the domestic heat market and the development of a zero-emission energy source system,” Kwiecinski explained.
Gazprom is yet to comment on the arbitration ruling.
PGNiG receives gas from the Russian sup- plier under a supply agreement signed in 1996, known as the Yamal contract. The contract, which encompasses the annual delivery of 10.2 bcm of gas, includes a take-or-pay clause, mean- ing that PGNiG must pay for at least 8.7 bcm of gas each year regardless of whether it needs that much.
The share of Polish gas imports covered by Russia has fallen from 87% in 2015 to only 60% last year, as PGNiG has steadily increased its purchases from LNG suppliers and neighbour- ing countries. According to Gazprom figures, the company took 9.73 bcm of Russian gas in 2019, down from 9.86 bcm the previous year.
PGNiG’s contract with Gazprom expires at the end of 2022, and PGNiG has given the Rus- sian firm official notification that it does not intend to extend the deal. ™
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