PGNiG Sells Hub-Indexed to Large Polish Buyer

State-controlled PGNiG has agreed to sell gas to its largest customer, another state company Grupa Azoty, on a hub-indexed basis, it said April 14. There is not a hub in Poland yet so it is likely to price off one in a neighbouring country, such as Germany.

PGNiG will sell gas to five of its sites between now and September 2019, “totalling as much as 4.5bn m³,” it said, valuing the deal at an estimated zloty 3.3bn (€770mn).

Grupa Azoty president Mariusz Bober said the contracts “not only guarantee reliable supplies, but also provide for market mechanisms ensuring that gas will be acquired at prices linked to exchange indices.” He also said it is “certainly not without significance that our co-operation, based on the arm’s length principle, involves creating stronger ties between two enterprises of key importance to the Polish economy.”

The vice-president for trade at PGNiG Maciej Wozniak said the “new, satisfactory terms of cooperation with Grupa Azoty for the next few years” would allow for "reliable and predictable terms of supplies,” and enable PGNiG to retain its leading position in the national gas market.

Poland’s finance minister Dawid Jackiewicz described the deal as an example of “economic patriotism” that would help to build a “strong and independent Poland.”

The upstream arm of PGNiG sells its Norwegian gas output at the NetConnect Germany (NCG) hub. Most of the country's gas however comes from Russian exporter Gazprom, which PGNiG has referred to international arbitration over contractual pricing, with a ruling due in mid-2017. Regular commercial LNG imports from Qatar are due to start in July, with the terminal at Swinoujscie now being commissioned. Earlier this month PGNiG acknowledged that it needs to renegotiate both Gazprom and Qatargas long-term contracts away from oil indexation and rebalance its import portfolio generally. 

William Powell