Poland Plans to Stop Importing Natural Gas From Russian State Provider

Anatol Feygin (L), vice-President of Cheniere Energy, and the CEO of Polish oil and gas company PGNiG Piotr Wozniak (R) sign a 24-year US deal to deliver liquefied natural gas (LNG) to Poland as (standing L-R) US ambassador to Poland Georgette Mosbacher, US Energy Secretary Rick Perry, Polish President Andrzej Duda and Polands Energy Minister Krzysztof Tchorzewski look on, November 8,2018 in Warsaw. (Janek SKARZYNSKI / AFP via Getty Images)

Poland’s state gas company PGNiG said on Nov. 15 it would stop importing natural gas from Russia’s state-controlled Gazprom when a long-term contract expires in three years unless it can secure better commercial terms.

The announcement comes as Poland is working to reduce its dependence on Russian energy sources, which Moscow has sometimes used as a tool of political pressure on its partners.

Poland had said before that it did not plan to buy gas from Gazprom after 2022. However, the agreement signed in 1996, known as the Yamal contract, required that the parties formally submit declarations regarding future cooperation three years before the deal expires.

In line with the provisions of the deal, PGNiG had sent Gazprom, which is controlled by the Russian state, notice that it will terminate the contract as of Dec. 31, 2022.

The finance and development minister, Jerzy Kwiecinski, said the intention is not solely to stop imports from Russia but to get fair terms.

“Everything will depend on the financial terms, but we cannot allow for the gas that we are buying (from Gazprom) to be one of the most expensive in the world,” Kwiecinski said.

Poland has repeatedly said that the financial terms of the Gazprom contract were unfavorable and that it was paying a higher price than others in Europe.

Poland uses some 14 billion cubic meters of gas a year. Under the contract with Gazprom, a “take-or-pay” clause meant it was obliged to import some 10 billion cubic meters of gas from Gazprom per year.

Gazprom Export, the gas-exporting arm of Gazprom, confirmed in a statement to Reuters that it had received the notification from PGNiG.

“The option of sending such a notification is allowed by the contract,” Gazprom Export said, adding that it continued to supply Poland as per its contractual obligations.

Alternative Sources

The efforts to reduce dependency include striking long-term contracts for deliveries of liquefied natural gas (LNG) from the United States, Qatar, and other countries, as well as developing a new pipeline with Norway for deliveries from the North Sea. PGNiG holds shares in 27 exploration and production licenses on the Norwegian Continental Shelf. Poland also has some gas deposits of its own.

PGNiG said in a statement it’s contracted (LNG) supplies and acquisitions of gas deposits in the North Sea would guarantee the security of supplies after 2022.

The day before the announcement, the European Investment Bank (EIB) decided to stop financing fossil fuel projects, including natural gas projects, from the end of 2021. That’s in support of a Green Deal that favors renewable energy, according to Fortune. This decision may be unfavorable for Poland since Polish gas companies will have to look for loans at commercial banks. Such loans will very likely offer higher interest rates than EIB.

Reuters and The Associated Press contributed to this report.