PGNIG Doubles Qatargas Contract

Polish state-run incumbent gas supplier PGNiG announced March 14 it has signed a side agreement to its existing Qatargas long-term contract, whereby the latter will increase deliveries to PGNiG to 2mn metric tons/yr of LNG (2.7bn m³/yr) with effect from January 2018 until June 2034.

Neither side gave an explicit indication of pricing at time of going to press. The original Qatargas-PGNiG supply contract, signed in 2009, was oil-indexed.

However, all recent LNG supply deals to Europe have been priced off gas hubs such as the Dutch TTF or UK’s NBP, and it seems unlikely that PGNiG would have doubled its offtake without such pricing.

The LNG will be supplied by Qatargas 3, the joint venture of state Qatar Petroleum, ConocoPhillips, and Japan’s Mitsui, and will be delivered on board Q-Flex LNG vessels to Swinoujscie, Poland.  PGNIG received its first commissioning cargo from Qatargas in December 2015, and its first such commercial cargo under the contract only nine months ago in June 2016.

PGNIG CEO Piotr Wozniak said: “PGNiG is firmly committed to expanding its LNG portfolio and our active presence in the global LNG market. I’m very pleased that Qatargas and PGNiG have been able to achieve an agreement which contributes to the realisation of the long-term goals of both companies and supports the implementation of our strategy to diversify natural gas supplies to central and eastern Europe.”

New interconnectors with countries to the south of Poland, including Ukraine, mean that LNG regasified at Swinoujscie terminal can be supplied to such markets, competing with Russian gas.

QP CEO and Qatargas chairman Saad Sherida Al-Kaabi thanked PGNiG for its “trust in Qatargas” while Qatargas CEO Khalid Bin Khalifa Al-Thani said his company looks forward “to the prospect of building an even stronger relationship with PGNiG as we increase our deliveries of LNG to Poland.”

PGNIG executive vice-president Maciej Wozniak added that the new deal “reaffirms Qatargas’ commitment to supporting the development of an LNG hub in Poland” and “will also contribute to building the company's value for shareholders” – a hint that pricing from 2018 will no longer be oil-linked.

The Polish company, which expects its gas contract arbitration case against its main supplier Gazprom to be adjudicated in 2H2017, recently opened an LNG trading office in London and is hoping that some US spot LNG exports may be traded into Poland. It has recently expanded sales among industrial customers, but critics say it is benefiting from an increasingly less competitive Polish wholesale gas market. 

The Polskie LNG-operated Swinoujscie terminal has capacity to regasify up to 5bn m³/yr (3.6mn mt/yr) and may be expanded later to 7.5bn m³/yr.

Mark Smedley