PGNiG confirms termination of Russian gas imports from end 2022

Poland's PGNiG has notified Gazprom of its intention to terminate imports of Russian pipeline gas from the end of 2022.


This will now increase the country's reliant on US LNG (which at this time many US Gulf Coast LNG projects still have to be sanctioned and not guaranteed to come online) and the long awaited Baltic pipeline to take Norwegian gas to Poland.


The move is not a big surprise and is completely consistent with all the messages the Poland has been giving over the past few years including aggressively signing up US LNG volumes.


Poland consumes around 17 bcm of gas annually, more than half of which comes from Gazprom under a long-term contract that expires at the end of 2022. It has used the upcoming expiry as an opportunity to diversify its gas supply ahead of time and has consistently stressed that Gazprom is charging Poland too much for the gas noting that Russia has taken advantage of the historic lack of other sources of gas which is now rapidly changing with the advent of LNG.


Related links:

• Nov 2018: PGNiG shuns Russian gas
• Nov 2018: PGNiG expands footprint in Norway
• Jun 2019: PGNiG acquires Total's 22.2% stake in King Lear
• Jun 2019: Tommeliten Alpha Project passes important decision gate towards production in 2024

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PGNiG shuns Russian gas

PGNiG is increasingly boldening its signals on shunning Russian gas as it turns to the west. The Polish state has historically been dependent on gas imports from its eastern neighbour but is looking to loosen its reliance to the communist state.

Poland consumes around 17 bcm of gas annually, more than half of which comes from Gazprom under a long-term contract that expires in 2022. It is seeing the upcoming expiry as the opportunity to diversify its gas supply ahead of time and has consistently stressed that Gazprom is charging Poland too much for the gas noting that Russia has taken advantage of the historic lack of other sources of gas which is now changing with the advent of LNG.

Poland has also vehemently opposed plans by Russia to build a new gas pipeline across the Baltic Sea which is aimed at strengthening its dominant market position into Europe. Instead Poland is looking to sanction the Baltic gas pipeline later this year or beginning of 2019 which will bring gas directly from Norway.

The last month has seen a flurry of newsflow around PGNiG’s activity in sourcing new gas.

In mid-October, PGNiG finalised terms with Venture Global for 2mtpa of LNG. It will buy LNG for 20 years on a FOB basis with supplies commencing under two contracts for 2022 and 2023. The FOB contracts are deemed attractive for PGNiG as it can choose to take the LNG to Poland or use it in its trading portfolio. The terms are not disclosed but understood to be in line with other Gulf Coast LNG contracts being 115% x Henry Hub plus a toll of c.USD2.50/mmbtu. Venture Global is currently developing the Calcasieu Pass LNG terminal on the US Gulf Coast.

This has been followed by a 24 year LNG deal with Cheniere Energy at the beginning of November. PGNiG has signed up a 1.45mtpa deal with LNG supplied by Cheniere’s Sabine Pass, Louisiana and Corpus Cristi, Texas liquefaction plants. The contract is for delivery on a DES basis directly to the 5Bcm/year Swinoujscie terminal in Poland. Poland is also looking to expand the import terminal to 7.5Bcm/year in part of the countries grander ambitions to become a LNG and gas trading hub.

PGNiG also farmed-in to the Tommeliten Alpha in the Norwegian North Sea on the upstream side at the end of October. See PGNiG expands footprint in Norway.

#PGNiG #LNG #Russia #Gazprom #VentureGlobal #Cheniere

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