PGNiG Turns to International Arbitration Against Gazprom

PGNiG, the Polish gas monopoly, has filed a procedure in the international arbitration court in Stockholm against OAO Gazprom and OOO Gazprom Export.

Three weeks ago, PGNiG warned that it was ready to seek arbitration on its half-year long price discussions with the Russian gas giant over gas import prices.

The Polish importer argues that prices of the long-term contract are disproportionally above the spot prices. The firm indicated that it was seeking a minimum 10% discount to current prices.

PGNiG provides 98% of 14 bcm/year of gas supply in Poland, importing 9bcm/year of this volume from Gazprom.

The long-term gas supply contracts between producers such as Gazprom and its European customers including PGNiG are linked to the price of oil, but that pricing formula has attracted increasing criticism since crude peaked at over $140 a barrel in 2008. 

The higher pricing forced PGNiG into red in Q3.  The company has filed with the URE (Energy Regulatory Office) an application for “significant, double-digit” price hike to be implemented in 2012.

Last week PGNiG announced that it would commence the import of Russian gas from Germany to take advantage of pricing about 15 percent less than it costs for imports directly from Gazprom.

PGNiG is one of several European customers of Gazprom that have sought price reductions from the Russian export monopoly. In August, E.On Ruhrgas said it would also seek arbitration over long-term gas supply contract terms.

Gazprom has already provided pricing concessions to Italy's Edison SpA and Greek gas company DEPA.