[Premium] PGNiG Unhappy with Expected EC Ruling on Gazprom

[Update: clarifies the units in the contract]

Polish gas company PGNiG's chief executive Piotr Wozniak has told NGW that he would not be happy if the European Commission accepted Gazprom's proposed anti-trust settlement proposals without imposing a fine. It's been a consistent position of the CEO: he called on the EC to impose such a fine a year ago.

"Gazprom wrote the conditions for ending the probe itself, and this is not what we expect from the commission, which is meant to protect consumers; further it has taken the commission years to reach a decision," he told NGW on the sidelines of this year's Flame conference in Amsterdam on May 15. 

The decision about Gazprom could be published at the end of May or the start of June; press reports have said it will not contain a fine. PGNiG claims that, because of the duration of the EC probe, Gazprom has continued to profit from its ability to charge higher prices for its gas in some parts of Europe. 

"We want Gazprom to pay for those fat years," he told NGW  comparing the situation with other anti-trust cases where the competition commissioner has imposed hefty fines on US software companies after just a few weeks' consideration. If Gazprom were fined, the money would not go to PGNiG, but into the European Union budget, he said.

Regardless of how that case turns out, PGNiG is locked in a gas price dispute with Gazprom over a take-or-pay contract that does not expire until 2022 and is much higher priced than hub gas. The Stockholm arbitration ruling has already been postponed by many months owing to an illness on the Russian side, he said. All the evidence has been presented but there is no deadline for a ruling. 

The minimum annual take or pay is 9.3bn Russian m³ (measured at 20 degrees Celsius), or 8.7bn Polish m³ (measured at 0 degrees Celsius). The maximum annual contracted volume is 11bn Russian m³, or 10.2bn Polish m³. European cubic metres are measured at 15 degrees Celsius.

Some of this gas it was able to sell to neighbouring Ukraine, and has managed to export 1.1bn m³ between July 2016 and the end of 2017. It has since then sold a little more: when Russian gas deliveries did not start as agreed on March 1, Naftogaz Ukrainy rang up to arrange a quick deal, as it could not mobilise its underground storage fast enough to meet demand. Wozniak said the deal was done, but it was business, not an act of charity, and only amounts to 60mn m³/month.

PGNiG had a monopoly on gas supply within the country, but six or seven years ago it was fined for anti-trust behaviour. Since then, gas and power exchanges have facilitated a market development. Nevertheless the country has not implemented the gas directive as it was intended, and it has imposed strict requirements on gas importers to book storage capacity that have made it uneconomic to enter the market while some of those present have shut up shop.  This problem, raised by the European Federation of Energy Traders, is being examined by the European Commission which has also picked the brains of some European gas consultancies that NGW has spoken to, as it conducts its investigation.

Wozniak also said that Gazprom was not always a reliable supplier, delivering gas that was off-specification last July. It paid compensation for that, but Wozniak said PGNiG would rather have had the gas. For three days, PGNiG had to meet demand from its underground storage.

In March 2018, PGNiG said that, whereas 90% of total gas imports to Poland in 2015 were supplied by Gazprom, preliminary data for 2017 showed that had declined to about 70% as more LNG was imported.

PGNiG's chief executive Piotr Wozniak (Photo credit: the company)