Preparation for bidding: why Poland announced its intention to completely abandon Russian gas after 2022

Warsaw plans to completely abandon Russian gas by the end of 2022. This was stated by the Plenipotentiary of the Government of Poland on issues of strategic energy infrastructure Pyotr Naimsky.

On the air of Polish Radio, he said that at the moment the country is still receiving most of the gas from Russia, but soon this situation will change.

According to him, Russian fuel should replace the supply of liquefied natural gas from the United States and Qatar through the terminal in иноwinoujцеcie, as well as Norwegian blue fuel via the Baltic Pipe gas pipeline.

“Both this gas pipeline and the expanded terminal are our strategic way out of the situation of subordination to the Russians. After 2022, this problem will be solved, all gas imports to Poland will come from a different direction, ”Naimsky’s words are quoted on the website of the radio station.

First Deputy Chairman of the State Duma Committee on Energy Valery Seleznev in an interview with RT noted that with the help of such statements, Warsaw is trying to bargain for itself a more favorable price for Russian gas.

“Such statements are common in a country that is interested in changing gas prices. But the fact is that alternative ways of supplying gas to Poland, especially LNG, will be much more expensive. They do not withstand price competition. Nevertheless, Poland, like any other country, wants to bargain for itself favorable conditions, ”the deputy said.

He also suggested that for many years Warsaw will continue to purchase Russian gas.

“Political statements are one thing, and the economy is another,” Seleznev emphasized.

Political decision

It is worth noting that Poland is not the first time has declared a reluctance to extend the gas contract with Russia. So, in early September, the head of the Polish state oil and gas company PGNiG Pyotr Wozniak announced the same position.

• Peter Naimsky
• Reuters
• © Peter Andrews

He explained then that Warsaw was not satisfied with the allegedly overpriced price of Russian gas, as well as the take-or-pay system (take-or-pay) agreed upon in the contract, according to which the maximum amount that the supplier should provide and the minimum amount that the buyer must purchase, regardless of how much he actually purchased in the agreed period.

In April, Polish President Andrzej Duda also refused to buy gas in Russia. He announced this at the ceremony of signing an agreement on the allocation of funds for the expansion of the LNG terminal in the Baltic port of иноwinoujцеcie. Work that will increase the terminal's capacity to 7.5 billion cubic meters of gas per year by 60% will be funded by the European Union. Duda stressed that a significant portion of this gas will come from the United States.

Experts note that the course towards a complete rejection of Russian gas is politically motivated and was taken with the coming to power in Poland of the Law and Justice party, Jaroslav Kaczynski. Between 2007 and 2015, when the country was ruled by the Civil Platform, Warsaw planned to extend the contract with Gazprom until 2037.

According to Anna Kokoreva, senior analyst at Coface international insurance company, the political motivation for this step is indicated by the fact that the infrastructure for receiving American LNG in Poland began to be built when prices were high.

“Warsaw’s decision to build LNG terminals was political, because then the prices for liquefied gas were quite high ... If Russia offers its gas to Poland at a competitive price in 2022, and Polish receiving terminals refuse and will only accept US or Qatari gas, then this will indicate a politicized decision, ”she said in an interview with RT.

At the same time, experts did not rule out that, despite the political situation, Poland will try to renegotiate the contract with Gazprom on more favorable terms for itself. This point of view, in particular, is shared by the head of the analytical department of the National Energy Security Fund Alexander Pasechnik.

“Poland declares the possibility of rejecting Russian gas, because by 2022 it is ending a long-term contract with Russia for the supply of pipe gas, respectively, now it is trying to get some kind of preferences in this way, to influence the possibility of concluding a new contract. I think that until 2022 several rounds of negotiations will be held, ”he said in an interview with RT.

Energy request

Each year, Poland consumes more than 15 billion cubic meters of gas, of which less than half is produced independently (approximately 5 billion cubic meters). Most of this volume has to be imported, mainly from Russia. Under the contract, Gazprom annually supplies to Poland up to 10.2 billion cubic meters of gas.

• Tanker Clean Ocean in the port of иноwinoujсьcie
• Reuters
• © Agencja Gazata / Cezary Aszkielowicz

In 2012, Moscow reduced the gas tariff for Polish consumers by 10%. Despite this, in 2015 PGNiG appealed to the Stockholm Arbitration Court with a request to review tariffs, which, according to the Polish side, did not correspond to the market ones.

In June 2018, the Stockholm Arbitration Court issued a preliminary decision in favor of the Polish company, deciding that Warsaw may require a review of contract tariffs.

A few months later, in October 2018, PGNiG entered into a 20-year contract with the American LNG supplier Venture Global LNG, which provides for the supply of 2 million tons of liquefied natural gas annually.

According to Pasechnik, energy from Russia for any scenario will be cheaper than American.

“Perhaps Poland will switch to LNG from the United States by 2022. However, Russian pipe gas will be cheaper in any case, ”he stressed.

According to Bloomberg, for Gazprom, gas sales will remain profitable even at prices ranging from $ 125 to $ 142 per cubic meter, while for US LNG supplies to Europe this figure is almost twice as high - from $ 213 to $ 266.

He also believes that Poland in vain has such high expectations with the Baltic Pipe gas pipeline, since its construction will still have to be coordinated with Russia.

“The Baltic Pipe project will still have to be coordinated with Gazprom, as it will cross the Nord Stream 2 gas pipeline. In addition, Russian gas may pass through this pipeline under European law. However, Poland is confident that the project will be implemented and, accordingly, it will be able to buy Norwegian gas, ”the expert explained.

In turn, Kokoreva noted that the creation of infrastructure for receiving LNG from the United States and Qatar would require significant costs.

“If the costs of building and maintaining LNG terminals are transferred to consumers, then such energy for Polish citizens will rise in price, which Polish consumers will clearly not be delighted with,” she explained.

Experts also emphasized that Poland’s intention to stop the purchase of Russian gas would not cause serious damage to Gazprom, which could offset Warsaw’s share at the expense of other markets.

“Gas supplies to Poland make up 5% of Gazprom’s total exports to Europe. I am sure that the Russian company will compensate the Polish market by increasing the supply of blue fuel to Germany or Turkey, ”concluded Anna Kokoreva.