Poland's cold winter - no deal with Gazprom in sight
While Poland is experiencing some of the coldest temperatures in decades and has started using some of its strategic reserves to keep up with the country's gas consumption (EEO no. 32), it remains uncertain if and when state-controlled Polish PGNiP and Russian Gazprom will be able to reach an agreement on the prolongation of the existing supply contract. More concretely, the two parties are negotiating a contract until 2037 that would increase supplies to Poland from 8 BCM to 11 BCM annually. The starting point of the discussion is a preliminary agreement reached in December.
One subject of the ongoing negotiations is the control over the company operating the Yamal pipeline, Europolgaz, in which Gazprom and PGNiG each hold a 48% share. The remaining 4% are owned by Gas Trading, a company controlled by PGNiG, which gives PGNiG a de facto majority share in Europolgaz.
Although official information about the negotiations is scarce, PGNiG reported on 20 Jan. that it had decided, together with Gazprom, to release Europolgaz' board members for three months. The official reason quoted in the PGNiP press release is a lack of cooperation between the board members.
This suggests that there is at least some sort of movement in the stalled negotiation process. PGNiG and Gazprom's initial intention was to squeeze out shareholder Gas Trading. Gazprom then demanded to administer Europolgaz on equal footing with PGNiG. The Russian Prime Minister Putin even determined this as a precondition for increasing gas volumes to Poland. Ernest Wyciszkiewicz, Coordinator of the Energy Security Program at the Polish Institute of International Affairs, told EEO that it remains unclear how Eurpolgaz will be reorganised, whether there will be a change in ownership and/or in the decision-making structures.
Gazprom's outstanding debt for gas transits through Poland's Yamal pipeline and the transit prices for 2010 are other stumbling blocks. A Moscow court recently ruled that Gazprom should pay $ 25 mln to Europolgaz for gas transits to Germany in 2006. Estimates concerning the actual size of Gazprom's debt vary, sums quoted in the Polish press range from $ 80-$100 mln to $ 350 mln. In addition, PGNiG claims another $ 60 mln from Gazprom for gas that was never delivered by RusUkrEnergo, a company largely owned by Gazprom. Last week, the Polish Minister of Economic Affairs, Valdemar Pavlyak, suggested that PGNiG might withdraw its claims in return for a more favourable future gas price.
Some Russian media suggested recently that Poland could be running out of strategic supplies this week. Ernest Wyciszkiewicz denies this and suspects that quotes by PGNiG were probably taken out of context. The amount of gas that Poland has actually stored is a secret only known to PGNiG, according to Wyciszkiewicz. He states that there is sufficient gas stored for the time ahead. There are speculations that Poland has stored enough gas for the coming months, up until spring.
The Polish debate on gas is highly politicised, especially when it concerns Russia. There are fears within the government that a deal with Gazprom may be regarded as unfavourable to Polish interests and subsequently cause internal political backlash from the opposition or other political forces, in particular in light of Poland's Presidential elections later this year. There are serious doubts within the opposition and forces within the government whether Poland should really commit itself to such a long-term contract, especially considering the developments on global gas markets, including LNG and lower spot prices. This obviously complicates matters even more, Wyciszkiewicz tells EEO.
Poland is actively planning to diversify its future gas imports. A major asset is a planned LNG terminal, which is due to come into operation by 2014. PGNiG already signed a 1.5 BCM contract with Qatar. By 2020, LNG should amount to 7.5 BCM annually, a bit more than a third of the amount that Poland is expected to need by this time. There also seem to be some developments around shale gas. As Wyciszkiewicz tells EEO, some American companies have been exploring the options for shale gas production in Poland. Recently, reports emerged that significant shale gas deposits had been located. However, much remains unclear about the options of shale gas in Poland, which is just in its early stage.
EEO Focus: Poland currently faces an annual deficit of around 2-3 BCM of natural gas as supplies by RusUkrEnergo stopped after last year's January gas crisis. Extremely low winter temperatures are pushing gas consumption in Poland to historical heights and putting Poland's negotiating position under pressure. In the foreseeable future, Poland will not have a alternative to Russian gas. The question is if Poland is able to bridge the winter without running out of reserves.
