Poland’s gas maneuvers: not to stop buying but to buy cheaper

Poland is not going to prolong its long-term contact with Gazprom after 2022. According to the Polish government plenipotentiary for energy infrastructure Piotr Naimski, Poland already has a 5bn c m LNG terminal and by 2022 is going to build a 10bn c m gas pipeline from Norway. Today the Pole consume 15bn c m. The Russians were surprised to hear such news.

“Each country is free to choose how to buy gas and how to make its economy competitive. Quite recently the Poles asked us to enlarge gas supplies (by 42% in Q1 2016 – edit.). We will not take any steps. We have a contract and will act according to it,” Gazprom’s Deputy CEO Alexander Medvedev said.

Experts see nothing strange in Poland’s wish to “get rid” of Russian gas but they are sure that the Poles are playing cunning: they don’t want to stop buying Russian gas, they just want to buy it cheaper.

“When Mr. Naimski said that Poland is not going to prolong its contract with Gazprom, he noted that they will buy Gazprom’s gas if its price is competitive. This is exactly their motive. The Poles have seen the example of the Ukrainians and their reverse supplies. For the Ukrainians re-exported Russian gas is more expensive but for the Poles it may be cheaper,” says Igor Yushkov, senior analyst at the National Energy Security Fund.

Today Germany enjoys the lowest price, so, the Poles can well buy Russian gas cheap from German traders. Poland’s advantage is that it neighbors on Germany, where in 2022 there will already be Nord Stream 2 pipeline. If the Poles buy the gas on the Belorussian border, they will not pay transportation costs. But the problem here is that they will have to buy the gas on spot markets, where prices are low in summer and high in winter. Poland’s underground gas storages are small, so, the Poles will not be able to buy all of the gas in summer.

One more motive here is that the Poles seek to reduce the current price. But some two years ago the price was even higher. Gazprom’s price is tied to oil prices and today it is as low as never before. The Poles may simply wish to pay the price paid by the Germans or the Italians. They have already appealed to courts but perhaps they now wish to settle things ex curia.

Experts doubt that Poland can do without Russian gas. When the Poles made a deal to buy LNG from Qatar, that gas cost $800 while Russian gas cost just $400. They admitted that the price was high but they had to diversify their gas imports. Today they are buying just 1.5bn c m of LNG. One more tanker will soon arrive from Norway. As regards the plans to lay a pipeline from Norway, they don’t seem very practicable. The point is that gas production in the North Sea is declining. The Poles suggest that the Norwegian build the pipeline on their own. The Norwegians wonder why they should do this and suggest that the Poles build their own pipeline or use existing infrastructure.

In 2015, Poland consumed almost 15bn c m: 10bn cm from Russia and 5bn c m own gas. The Poles hoped to enlarge own production due to shale gas but their hopes crashed when ExxonMobil, Chevron and Total left their country. In May, PGNiG said that it is ready to stop its shale projects if it sees that they are not promising enough.