Author`s name Anton Kulikov

Russophobic Poland wants Russian gas so much it pays twice the price of it

During the second and third quarters of the year, Poland has been consistently importing over 900 million cubic meters of Russian natural gas per month. This volume corresponds to the maximum level of supplies under the contract with Russian gas monopoly Gazprom. At the same time, the Polish authorities have earned the reputation of one of the most consistent and harsh critics of Russian projects in the energy industry.

How Poland volunteered to buy gas at higher price

"In January-August 2021, Gazprom increased gas supplies to Poland by 12 percent," Interfax quotes Gazprom's message on production and supplies summarising eight months of the current year. 

Curiously, Poland's state-owned gas company PGNiG won an arbitration against Gazprom last year and succeeded in the endeavour to revise the price formula. According to representatives of the Polish company, the court made it possible to establish a direct link between the price formula and gas prices in European markets, which would lead to a significant improvement in the conditions of commercial activity.

Gas prices were very low last year. For example:

  • in May 2020, the price of gas at TTF hub collapsed nearly twice in comparison with late March of the same year – from $80 to $46-47 per 1,000 cubic meters;
  • natural gas then cost about $62 per thousand cubic meters at Baumgerten hub.

This price level did not cover Gazprom's transportation and tax costs, let alone any profit.

And, of course, against  such a background, the victory of PGNiG seemed extremely lucrative. However, gas prices in Europe have climbed over $600 per thousand cubic meters of gas. The average cost of a day-ahead contract at the TTF hub in the Netherlands for August amounted to $533.

If the Poles had not disputed the price and supply terms, the price would have been lower than 260 dollars per thousand cubic meters for them. Yet, Poland is eager to buy natural gas at the prices of European markets, and it is up for the Poles to decide that, of course. 

Poland unwilling to sign contract with Gazprom

Poland also eyes liquefied natural gas (LNG), even though all of its free volumes have been going to Asia for several months now, where the price of gas is much higher than in Europe. For some strange reason, the United States sell gas to Asian buyers, and shows no desire to supply "molecules of freedom" (as former Secretary of State Mike Pompeo said) to Poland. 

In August 2021, Poland reduced the intake of liquefied natural gas by 29 percent vs. August 2020. However, average LNG imports for 2021 are still showing an increase of five percent to the level of 2020.

Until 2022, the so-called Yamal contract remains in force letting Poland receive up to ten billion cubic meters of gas from Russia annually. In Poland, they refuse to renew the contract, hoping to compensate for the drop in gas supplies through LNG supplies and Norwegian shelf production.

Once again, freedom is for the free: if the Poles believe that it is profitable for them to pay twice for gas, then who can prevent this?

Topics