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Poland's PGNiG in talks on short- to mid-term LNG contracts
August 7, 2017 / 10:03 PM / in 2 months

Poland's PGNiG in talks on short- to mid-term LNG contracts

WARSAW (Reuters) - Polish gas firm PGNiG expects to sign short and mid term contracts for liquefied natural gas by mid 2018 to take advantage of an expected supply glut, Vice-president Maciej Wozniak has told Reuters.

Liquefied natural gas LNG terminal is pictured in Swinoujscie, Poland June 8, 2017. Picture taken June 8, 2017. Agencja Gazeta/Cezary Aszkielowicz via REUTERS

U.S. President Donald Trump’s visit to Warsaw last month, which focused on security and energy, has boosted expectations of more U.S. LNG supplies for Poland.

Poland opened its LNG terminal at Swinoujscie on the Baltic Sea last year to reduce its reliance on Russian gas supplies.

“For a few months we have been in talks with our partners on further LNG supplies to Poland. Of course we are talking not only to American contractors,” Wozniak, PGNiG’s vice-president responsible for gas trade, said in an interview.

PGNiG’s sole LNG supply deal so far is with Qatargas, which in March agreed to double deliveries to Poland to 2 million tonnes (2.9 bcm) per year until 2034.

Swinoujscie’s annual capacity is currently 5 billion cubic metres (bcm) which is to be expanded to 7.5 bcm.

“We are also planning mid and short term contracts,” Wozniak told Reuters, referring to deals for up to two years and others for around seven years.

“We’d like to enter the second half of 2018 with a supply portfolio constructed in this way,” he said.

PGNiG has also become active in buying LNG on the spot market.

Earlier this year it received LNG cargoes from Norway and the United States.

One or two more LNG spot purchases are still possible this year, Wozniak said.

“We see more and more clearly that when it comes to LNG we are dealing with a buyer’s market. According to forecasts this could last until 2020 and we want to benefit from it,” Wozniak said.

FILE PHOTO: The LNG tanker "Clean Ocean" is pictured during the first U.S. delivery of liquefied natural gas to LNG terminal in Swinoujscie, Poland June 8, 2017. Agencja Gazata/Cezary Aszkielowicz via REUTERS/File Photo

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PGNiG buys most of its gas from Russia’s Gazprom through a deal locking in supply of up to 10.2 bcm annually until 2022, when it will be allowed to expire given Gazprom’s reluctance to revise terms, he said.

PGNiG wants to diversify its gas supplies to cut reliance on Russia but also to boost sales to clients in Poland and neighboring countries.

“They need more and more gas and we will round out our portfolio with the cheapest gas available. It is hard to imagine this would be Russian gas, as it is the most expensive among what is offered in Poland,” Wozniak said.

He added that the spot LNG shipment offered by Cheniere Energy to PGNiG earlier this year was “much more advantageous” than gas piped from Russia.

PGNiG expects to keep boosting gas sales this year, Wozniak said. Sales rose 14 percent in the first half of the year after reaching 24.4 bcm in 2016.

“We want to achieve a strong position in our neighboring markets,” Wozniak said.

PGNiG plans to double gas exports to Ukraine to 0.7-0.8 bcm this year.

The company is also in LNG sales talks to one of its partners in the Visegrad Group, which includes Poland, the Czech Republic, Hungary and Slovakia, Wozniak said.

Apart from more LNG, PGNiG also plans to receive 8-9 bcm of gas from Norway via a planned gas link called the Baltic Pipe, which is expected to start operations in October 2022.

By that time, PGNiG wants to increase its own gas output in Norway to 3 bcm from 0.6 bcm currently through acquisitions.

“Our analyses do not imply that we will have to reduce our dividend due to our upstream investment,” Wozniak said. PGNiG spends up to half of its annual profit on dividends.

Editing Oleg Vukmanovic and Jason Neely

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