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Wednesday, March 21, 2018

Poland demands from Russia for cheaper gas and from Qatar – more expensive

Polish gas company PGNIG are unable for six months to negotiate with Gazprom about the second in two years, the discount on gas and decided to claim it through the courts. It is ironic that Warsaw is ready to buy Qatari gas at a price twice more expensive than the Russian, but the discount requires from Doha, and from Moscow.

Polish PGNIG is the largest gas distributor in the country – has addressed yesterday with a lawsuit in the Stockholm arbitration to Gazprom and Gazprom export” about the price of gas, says the company.

“If the poles are willing to pay for Qatari gas is twice more expensive than for Russian gas, then what kind of discount can we talk?”

The size of the claim and date of decision cannot be specified at this stage of the debate, according to the Polish side.

The subject matter of the dispute were long-term pricing terms of the contract, valid up to 2022. Under the agreement, Russia supplies to Poland 10.2 billion cubic meters of gas per year. The total annual consumption of Poland is 14 billion cubic meters.

The poles filed a lawsuit to arbitration six months later, once addressed a demand to Gazprom and Gazprom export to renegotiate the price of gas. However, the negotiation process has not led to a solution that satisfies both sides. The negotiation period ended in early may. However, the appeal of a Polish company to arbitration does not preclude the continuation of bilateral negotiations, the report said. This also confirms the previous statements of the head of the Polish company Mariusz Zavisi (Mariusz Zawisza).

As have informed RIA “news” a source in “Gazprom export”, “sensation is not here, the arbitration provided for standard contracts, but negotiations usually are ongoing.” Officially in “Gazprom export and Gazprom not comment on the situation.

The failure of negotiations can be explained by the fact that Gazprom has offered a discount, probably no more than 5-15% (these discounts are usually given to the Europeans in recent years), but the Polish company wanted more. Another option: Gazprom does not agree with the arguments PGNIG on the need to provide her with a new discount.

Given that in November 2012, i.e. two years ago, Gazprom has lowered the price of gas for Polish companies by 10-15%. And in 2013, the average gas price for Poland was comparable to the prices for the Czech Republic and Italy, and Lithuania was paying even a little more. So, Poland in 2013, purchased gas at an average of 423 dollars, Italy and the Czech Republic – at 421 and 430 dollars (data of the Institute of economy and energy). Lithuania paid a little more Polish – 466 dollars per thousand cubic meters.

According to the newspaper “Evrosmi”, in the Polish company said that Gazprom has offered Poland the “special conditions”, however, the company PGNiG has not come for them. Probably, the Polish company tries to use the claim to negotiate for more favorable terms.

PGNIG as the cause of revision significant changes observed on the European energy market in recent years.

Gazprom has repeatedly provided the discount to its European customers, including after litigation. So, in the summer of 2013 by the decision of the Vienna international arbitration got a discount company RWE Supply&Trading CZ (the former name – RWE Transgas) for the supply of gas to the Czech Republic.

However, the requirement of poles unconvincing. “The poles – a rather strange audience. They signed a contract for the purchase of Qatari LNG on the price of oil, whereas in recent years, gas in Europe costs about two times cheaper than oil. And then they ask for a discount from Gazprom”, – says the newspaper VIEW Deputy Director of the national energy security Fund Alexei Grivach.

According to him, the contract with Qatar spelled the same rules that the contract with Gazprom: “take-or-pay, oil binding, etc. the price of Qatari gas is 80-100% higher than the average imported gas in the European market, including Russia. “The arbitration will show, but the argument is obvious. If the poles are willing to pay for the Qatari gas is twice as expensive than the Russian, then what kind of discount can we talk?” – says Grivach.

Warsaw, however, omits this point. But, demanding a discount from Gazprom, draws attention to the fact that Poland pays for Russian gas more than Germany. The poles now have the opportunity to obtain about 20% of imported gas at the expense of his revers from Germany. This is the main argument of Poland in favor of a discount from Gazprom. The cost of gas to Poland is actually higher than that for the largest economy in Europe. In 2014 the Russian gas price for Poland was 420 USD per thousand cubic meters, Germany, $ 360, experts say “1Капиталь” Dmitry Solonnikov.

However, in Germany the gas prices are traditionally lower. First, it is the largest buyer of Russian gas. “Germany has a diversified portfolio of supply, a high level of inter-fuel competition, and Germany have invested a lot of money. Poland is only invested in the LNG terminal, and this has led so far only to a substantial increase in the cost of gas,” – says Grivach.

Finally, running reverse gas from Germany to Poland is virtual rather than physical. Transit through the territory of Poland in Germany is the Russian gas. And, most likely, part of this gas remains just in Poland, and on paper goes to Germany and comes back.

The ability to buy cheaper gas than Gazprom’s, and in the volumes supplied by Gazprom, in Poland there is, says an expert. The real diversification of gas supplies in the country.

Historically, the energy system of Poland ground under a stand of gas from the East, i.e. from Russia. However, the Brussels no one bothered to build new pipelines to connect Poland (and the Baltic States) with the rest of the European grid. But the EU is spent on is not in a hurry. Poland, like Lithuania, with an eye on the United States took a different path – the construction of LNG terminals to receive liquefied natural gas. He’s just twice as expensive as Russian, and large volumes on the market for Europe is not.

For Poland the contract with Qatar already backfired. Warsaw was supposed to finish building a terminal for receiving LNG in the last year, but didn’t. While the contract in Qatar was to start deliveries of blue fuel to Poland. In the end the parties have agreed as follows: Qatar sells for Poland contracted LNG to other buyers at a lower price, but Warsaw compensates for the price difference, says Grivach. Poland can not physically take Qatari gas, but pays for it.

Another option for the diversification of gas supplies in Poland is even more elusive. Warsaw has long been dreaming about the shale gas revolution – as happened in the United States. But not yet obtained. ExxonMobil became the first oil and gas company, curtailed its shale operations in Poland. Her in 2013 was followed by Marathon Oil and Talisman Energy. Then in January 2014 and the Italian Eni did not renew two of the three licenses for the development of shale gas in the country. In April, France’s Total SA also said that it will not renew a license to develop its only shale gas deposits in Poland, as the development of the field in the Eastern part of the country, on the border with Ukraine, is not economically justified.

To extract shale gas in Poland was economically feasible. Although the Polish authorities did not leave the American dream, which is actively supported by Washington. Last summer, PGNiG signed a cooperation agreement for the exploration of shale gas deposits in the South-East of the country with a subsidiary of the American Chevron.

Gazprom remains the only real supplier of cheap gas to Poland. He can make concessions, but the discount Poland can only be provided in exchange for an increase in the volume of purchases of Russian gas, says Alexey Grivach. “But if they want a discount, and at the same time to reduce the volume of purchases of Russian gas, that is nonsense. But inside the country there is a political setting that PGNiG should reduce the purchase of Russian gas. This is the official Directive,” – said the interlocutor of the newspaper VIEW. Therefore, Gazprom can expect to increase gas supplies to Poland is not necessary, and thus Poland is at a discount from Russia.

In any case, the proceedings in the Stockholm arbitration court might last for several years. Although it should be understood that the dispute examined by the European court that may initially predetermine the outcome of the case, does not exclude Solonnikov.

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