Poland has given up Russian gas ahead of schedule

The Polish authorities have decided to terminate the contract for the supply of Russian pipeline gas to the country, which could continue until the end of 2022, said on May 23 the representative of the government’s strategic energy infrastructure Peter Naimsky on Polish Radio.

“After 30 years, we can say that relations in the gas industry between Poland and Russia cease to exist,” he said (quoted by TASS). Naimsky added that the Polish section of the Yamal-Europe gas pipeline will be used for gas transit through Polish territory, as well as for gas supplies from Germany to Poland.

Gazprom exports gas to Poland under a so-called Yamal contract signed in 1993. The last time it was extended until the end of 2022 was in 2010. Under its terms, Gazprom through the Yamal-Europe gas pipeline (capacity – 32.9 billion cubic meters per year) can supply up to 9.8 billion cubic meters to Poland annually. m of gas, of which at least 8.7 billion cubic meters. m Polish oil and gas company PGNiG is obliged to buy on a “take it or pay it” basis. In 2019, PGNiG informed Gazprom that it would not renew the Yamal contract, which it later repeatedly reminded. Warsaw also stressed that it expects to replace Russian gas with supplies from Norway via the Baltic Pipe pipeline with a design capacity of about 10 billion cubic meters. m, the launch of which is scheduled for October 1, 2022

ACRA estimates that Poland consumes about 19 billion cubic meters annually. m of gas, of which own production covers about 5 billion cubic meters. m. Due to PGNiG’s refusal to pay for Russian gas supplies under the new scheme in rubles, Gazprom has already stopped supplying to Poland since April 27, 2022 (Vedomosti wrote about this on April 26). Also in late April, Poland put Gazprom on the sanctions list, blocking its ability to exercise rights to shares and other securities of Europol Gaz, which owns the Polish Yamal-Europe stake (48% owned by Gazprom), and to receive from it dividends.

As a counter-sanction, Moscow put Europol Gaz on Russia’s sanctions list, banning payments to the company. As a result, on May 11, Gazprom lost the opportunity to use Yamal-Europe for gas exports.

Until May 2020, in addition to the Yamal contract, there was a long-term contract for the transit of Gazprom’s gas through Poland. But at the initiative of the Polish side, it was not extended, and transit began through the auction mechanism in the presence of applications from European consumers. In 2021, due to the lack of applications against the background of record high spot gas prices in the EU, Yamal-Europe often operated in reverse mode, in which gas was pumped from Germany to Poland.

In addition to the lack of pumping through “Yamal – Europe”, Russia has difficulties with pumping through the gas transmission system (GTS) of Ukraine. Since May 11, the GTS Operator of Ukraine has been rejecting Gazprom’s applications for transit through the Sokhranovka gas metering station (GIS) on a daily basis, pumping only through the Sudzha GIS. According to Gazprom spokesman Sergei Kupriyanov, transit amounted to 43 million cubic meters on May 23. m (the contract provides for pumping up to 109 million cubic meters of gas per day). At the same time, at the beginning of May, the Yamal-Europe gas pipeline was under 100 million cubic meters. m per day.

According to the International Energy Agency (IEA), in 2021 Gazprom supplied about 140 million cubic meters to the EU. m of gas, which accounted for about 45% of total EU gas imports. In the first four months of this year, gas supplies to the EU fell by 30% compared to the same period in 2021 (“Vedomosti” wrote about it on May 3).

Maria Belova, Vygon Consulting’s director of research, notes that the physical supply of Russian pipeline gas to Poland is no longer underway and stopped immediately after Warsaw’s refusal to pay for energy in rubles. But she calls the Polish side’s statement about the premature termination of the contract an “unprecedented step”, which Gazprom has never encountered before. According to the expert, Warsaw is probably not going to challenge the transfer of gas payments in rubles to the courts. “Perhaps Poland has realized that the scheme proposed by the Russian Federation is not a breach of contract, so it will not be possible to challenge it in court. It is also possible that PGNiG fears that Gazprom will sue for compensation for undelivered gas, as the contract stipulates a “take or pay” condition, she added.

At the same time, Belova stressed that the transit of Russian gas through Poland is not affected by the termination of the Yamal contract in itself, as the pumping has not been carried out since the beginning of May.

The physical transit of Russian gas through Poland has been declining and virtually nullified in the autumn of 2021, when Gazprom first refused to book the transport capacity of the Polish section of the Yamal-Europe gas pipeline, said Alfita Bank senior analyst Nikita Blokhin.

Poland’s withdrawal from the Yamal contract does not in itself mean the cessation of gas transit through Poland, but it marked the severance of long-standing relations between Russia and Poland in the gas sector, he said.

At the same time, Blokhin says that against the background of reduced supplies through Ukraine, there is a general decline in supplies of Russian pipeline gas to Europe. According to the analyst, this may be due to increased production of renewable energy sources (renewable energy sources), which, in turn, leads to a decrease in applications from European consumers. Thus, in particular, the increase in wind generation in Italy contributes to reducing the share of gas in the country’s energy balance, which is directly reflected in the volume of supplies on the Ukrainian route, the expert said.

The dynamics of demand for Russian gas is also particularly affected by changes in the price situation on the European market, which leads to the replacement of pipeline gas with free volumes of LNG. Blokhin reminded that spot quotes at the TTF hub fell below the psychological mark of $ 1,000 in May, while April prices with a month ahead delivery, set in Gazprom’s contract prices, traded above $ 1,175 per 1,000 cubic meters. “Together, these factors could have led to a drop in Gazprom’s exports this month,” Blokhin said.

Despite the restrained dynamics of supplies for the first five months of 2022, Alfa-Bank does not expect that the export of Russian pipeline gas to foreign countries will fall significantly below 150 billion cubic meters by the end of the year. “Nevertheless, further reduction of export capacity utilization (in particular, maintaining low pumping in the direction of GIS” Sudzha “in Ukraine) creates additional risks for our forecast,” – concludes the expert.

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