Poland’s energy firm PGNiG won £1,2 billion from Gazprom

April 2, 2020

The Polish energy firm, PGNiG won in arbitration its dispute with Gazprom over the price of long term gas supply. It is an important decision which may notably change the energy markets in Central and Eastern Europe. The decision means that Poland will pay less for gas from Russian Gazprom and hamper the use of resources as a political weapon. The Arbitration Tribunal changed the price formula for the purchase of gas supplied by Gazprom under the Yamal Contract. The court ruled that a gas pricing formula in PGNiG’s long-term deal with Gazprom should be changed. The new, lower price will be directly linked to the natural gas market quotations on the European energy market.

PGNiG complained that the price scheme varies across the countries and PGNiG pays for gas much more than the other clients in Western Europe.   PGNiG initially calculates that Gazprom should pay back around £1,2 billion. The application of the changed pricing formula will mean for PGNiG a significant improvement in the conditions of commercial activity due to greater consistency between price indexation affecting the cost of gas imports and the market price policy of gas sales.

The new contract price, as set by the Arbitration Tribunal in the final judgment applies to gas supplies that took place from November 1, 2014, this is from the date when PGNiG submitted a request for renegotiation of the contract price.

Poland argued that it had fallen victim to political blackmail. First when Gazprom disrupted energy supplies or reduced the amount of gas delivered to Eastern European countries. Second, the questioned prices were significantly higher than the prices available to other European countries. Thanks to the favourable court ruling the unfair market practices will be limited.  

Regardless of the court decision Poland already decided to reduce its reliance on gas supplies from Russia. Moreover, the country does not plan to extend its deal with Gazprom when it expires in 2022. PGNiG is now buying LNG, liquefied natural gas from the USA and other countries. Poland and Croatia have built the LNG terminals and through the direct supplies via terminals are slowly replacing the supplies from Russia. Poland diversifies its gas deliveries also by building a gas pipeline to Norway, which would open up a new way to access gas from the North Sea.

Author: Alicja Prochniak

Sources: money.pl, reuters.com

Picture: Twitter @GK_PGNiG

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