April 6, 2017 / 2:33 PM / a year ago

Poland's plans to replace Russian gas will cut prices - operator

WARSAW, April 6 (Reuters) - Poland’s drive to replace gas imports from Russia with supplies piped from Norway and shipments of liquefied natural gas (LNG) in five years will reduce prices, an official at gas network operator Gaz-System said.

Warsaw, which has faced disruptions in Russian supplies in the past, does not plan to extend a long-term delivery deal with Russia’s Gazprom on expiry in 2022.

Instead, Poland wants to increase LNG supplies and build a pipeline from Norway through Danish territory and under the Baltic Sea to replace the annual Russian gas imports of up to 10.2 billion cubic metres.

“The diversification of gas supplies directions and sources will definitely have an impact on a fall in prices for the market participants,” Pawel Jakubowski, director at Gaz-System’s development division, told Reuters in an interview.

He did not give specific price estimates.

A representative at state-run gas firm PGNiG has previously said Gazprom’s prices for Poland were not competitive. PGNiG does not release figures for the cost of its purchases.

Gaz-System, which is working with Denmark’s Energinet.dk on building the 300-km Baltic pipeline, expects to sign binding agreements by the end of the year with firms taking the gas.

This would follow a procedure to be launched in the first half of this year known as “Open Season”, which gauges market interest in the pipeline and its capacity, Jakubowski said.

Gaz-System, which is responsible for the construction of the Baltic Pipe, wants to finance it partly with European Union funds, Jakubowski said.

If the pipeline does not go ahead, Gaz-System would consider building a new, floating LNG terminal.

“At the moment this is our plan B,” Jakubowski said, adding growth in demand was not likely to be enough to support a pipeline and two LNG terminals working simultaneously.

“The horizon of 2019 and 2022 is coming. Since we are facing an area of uncertainty after these dates, Gaz-System has to be prepared for any possibility,” Jakubowski said.

Before Poland’s supply deal with Russia expires in 2022, a deal for Russian gas to transit Polish territory to Germany expires. Officials have not said if that deal will be renewed.

Gaz-System is considering other cross-border connections with its neighbours to allow it to become more of a regional hub for gas supplies.

Editing by Edmund Blair

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