Gazprom Says US LNG Is No Panacea as Poland Shuns Russian Gas

Gazprom Says US LNG Is No Panacea as Poland Shuns Russian Gas
Poland will struggle to replace all the natural gas it gets from Russia's Gazprom, including with US supplies, as it bids to lower dependence on its eastern neighbor, according to the Moscow-based company.

(Bloomberg) - Poland will struggle to replace all the natural gas it gets from Russia’s  Gazprom PJSC, including with U.S. supplies, as it bids to lower dependence on its eastern neighbor, according to the Moscow-based company.

“Of course, everybody is free to choose how to purchase his gas and to ensure the competitiveness of his economy," Gazprom Deputy Chief Executive Officer Alexander Medvedev told reporters in Moscow Tuesday. “There is a well-known fairy-tale about an old woman who asked a golden fish to turn her into a Sea Empress but in the end she found herself back with her broken washtub in front of her," he said, referring to a story by Alexander Pushkin.

Poland, which relies on Russian gas for two-thirds of its needs, has sought lower prices from Gazprom amid political tensions between the nations over President Vladimir Putin’s policies in eastern Europe. The European Union nation will get its first shipments of liquefied natural gas from Qatar and Norway into a new terminal next month, and has proposed doubling its capacity and building a pipeline to Norway to completely cut its reliance on Russia.

Poland was Gazprom’s fifth-biggest EU customer last year, buying about 9 billion cubic meters (320 billion cubic feet) worth more than $2 billion. It is one of the most vocal opponents of a push by Putin to expand a natural gas link to Europe that circumvents Ukraine.

Gas Contracts

Poland seeks to end state-controlled Polskie Gornictwo Naftowe i Gazownictwo SA’s long-term gas deals with Gazprom after their current contract expires in 2022, Reuters reported  Monday, citing Piotr Naimski, the deputy minister in charge of energy security. Polish Energy Ministry spokesman Mariusz Kozlowski couldn’t immediately comment when contacted by Bloomberg.

“The strategic goal of PGNiG, in line with the politics of Poland’s government, is the true diversification of gas sources and routes,” the Warsaw-based company said by e-mail. “In the near future, PGNiG plans to base its import portfolio on LNG deliveries as well as supplies from western and northern Europe.”

The current price outlook shows that Europe isn’t the most lucrative market for LNG from the U.S., which won’t be a “panacea” for those looking to switch away from Russia, Medvedev said. Poland and other EU states can’t rely on “charity” supplies, he said.

Price Agreement

Gazprom still sees room to reach an out-of-court agreement on pricing with PGNiG, Medvedev said. While papers for a deal were ready last year, they weren’t verified because of elections in Poland and changes in PGNiG’s leadership, he said. Now both sides just need to continue talks to adjust their positions, he said.

Russia has been supplying gas to Poland since 1948 and “we’ve always found compromises,” Gazprom Export head Elena Burmistrova told reporters Tuesday. Statements by government officials are often too strong and don’t "always reflect the situation, the discussion" between energy companies, she said.

To contact the reporters on this story: Elena Mazneva in Moscow at emazneva@bloomberg.net ;Maciej Martewicz in Warsaw at mmartewicz@bloomberg.net To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Rob Verdonck

Copyright 2016 Bloomberg News.

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