Perry Visits Warsaw, Miller Goes to Berlin

Energy alliances in Europe were underscored by two separate meetings in Warsaw and Berlin on November 8.

US energy secretary Rick Perry and Polish energy minister Krzysztof Tchorzewski (pictured above, Perry on left, courtesy of the latter's ministry) signed a joint declaration on enhanced co-operation in the field of energy security, which Poland said would help reduce its energy dependency on Russia by bringing in new sources of gas. Polish Radio said this was a follow-up to a declaration on strategic partnership signed by both nations’ presidents September 18

Cheniere earlier November 8 became the latest US firm to contract to supply Poland’s state-run PGNIG with LNG, following in the wake of Global Venture, plus a preliminary deal by Sempra. Perry was scheduled to visit Poland’s Swinoujscie LNG import terminal November 9. Both countries also discussed co-operation on cyber-resilience with particular reference to Poland’s power sector. Furthermore, Tchorzewski and Perry discussed possible Polish-American co-operation in the development of a Polish nuclear project.

In Berlin meanwhile, Gazprom CEO Alexei Miller met German economy and energy minister Peter Altmaier for talks. Although there was no statement from the German side, Gazprom said a wide array of issues related to co-operation in the gas sector. It also noted that the Nord Stream 2 (NS2) project was discussed, that offshore pipelaying is underway in German territorial waters and Finland’s exclusive economic zone (EEZ), and that NS2 was justified by “growing demand for Russian gas in Europe.” Denmark though has yet to permit NS2 to be laid through its territorial waters; Gazprom has tabled an alternative route through the Danish EEZ instead. It is unclear if the issue of Denmark figured in the November 8 Berlin meeting. Altmaier’s ministry declined to comment about the talks to NGW.

Perry reiterated US opposition to the NS2 project at his November 8 meeting in Warsaw, just as a US State Dept official had in London a month earlier.  But Gazprom close ally, OMV CEO Rainer Seele, told an event organised by German business newspaper Handelsblatt earlier this week again repeated his view that US opposition to NS2 is motivated by its wish to market US LNG to Europe. Seele said that US LNG cost “a third more” than Russian gas, he told the newspaper: "We cannot afford to buy expensive natural gas in Europe and lose competitiveness through higher energy prices."

Gazprom can deliver gas to Europe for $3.50/mn Btu, which is only a little more than the cost of feedstock gas in the US, where the Henry Hub is valued at $3/mn Btu for years to come. Liquefaction and shipping costs come on top of that, taking the cost comfortably above $5/mn Btu for US Gulf free on board.

Gazprom's wholesale pricing in eastern Europe though has become much more competitive as a result of the introduction four years ago of even small volumes of non-Russian LNG to the region, as well as European Commission probing of the Russian giant's pricing policy.