The Polish pride: First, defeat Gazprom, then ask to cut prices on gas

Poland's oil and gas concern PGNiG announced that it sent a letter to Gazprom with a request to decrease the price of natural gas supplied to Poland. The Polish company substantiated the request with an unprecedented surge in prices on the European wholesale market.

PGNiG's long-term agreement with Gazprom is valid from 1996 to 2022. In accordance with this agreement, the Polish company undertakes to annually take at least 8.7 billion cubic meters of gas on the take-or-pay basis. Earlier, Polish officials claimed that they did not intend to extend the contract with the Russian company. Poland looks up to purchasing liquefied natural gas while  building the Baltic Pipe gas pipeline, which is to connect the country with Norwegian gas deposits.

PGNiG CEO Pavel Maevsky announced an unprecedented rise in gas prices on the European wholesale market. 

"This emergency is the basis for revising the price terms, on which we buy fuel under the Yamal contract. In our opinion, there is room for a reduction in the price of gas that we receive," Maevsky said.

On October 28, the Polish company sent a letter to PJSC Gazprom and OOO Gazprom Export, which "modifies the PGNiG statement from February 2020 to change the price of gas supplied to Poland under the contract from September 25, 1996 (the so-called Yamal contract) downward so that the current market situation could be taken into account when making a revision."

There is a subtle aspect here, though. In March last year, PGNiG won an arbitration worth $1.5 billion against Gazprom and secured a reduction in gas prices. The Poles then noted that gas prices under long-term contracts were less favourable than current market prices.

PGNiG representatives then claimed that hub prices constituted the only relevant factor for pricing in long-term gas supply contracts. These are the prices that currently upset the Poles most now, and not only the Poles.

The PGNiG statement then said that the court enabled a more direct link between the pricing formula and gas prices in European markets, which would eventually lead to a significant improvement in the business environment.

Representatives for the Polish company were also opposed to both the construction and commissioning of the Nord Stream 2 gas pipeline. In September this year, German federal network agency Bundesnetzagentur granted PGNiG a right to participate in the Nord Stream 2 certification procedures.

The Polish company has no veto power in this matter. However, the Poles do not even conceal that they would make every effort to delay the certification of the gas pipeline for the longest possible period of time.