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LNG deal hinges on Norway link for Polish gas company

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LNG Industry,

Bloomberg are reporting that after US President Trump’s visit to Warsaw, where he encouraged Poland and its east European neighbours to buy US LNG, it is time for PGNiG SA to make some careful considerations.

PGNiG SA Chief Executive Officer Piotr Wozniak announced in an interview that the state-controlled company is already in talks with potential suppliers to fill the capacity of its LNG terminal in the Baltic Sea port of Swinoujscie as Poland diversifies away from its dominant supplier, Gazprom PJSC. Before deciding on a long-term LNG agreement with US suppliers, he also has to consider the feasibility of building a pipeline to Norway and expanding its LNG terminal.

With global LNG production capacity set to rise in future years in part thanks to the US shale boom, Trump offered to supply east Europe with the fuel, even if it will cost slightly more than PGNiG’s maiden US LNG cargo, which docked at Swinoujscie last month.

Poland’s ambitions go beyond reducing its reliance on Russian energy. It wants to become a hub capable of re-exporting part of its imported gas and be in a position to walk away from Gazprom once the country’s long-term supply deal ends in 2022.

PGNiG shares rose 1.4% to 6.5 zloty in Warsaw on 10 July, heading for highest close since 29 June.

In order to complete the Norway pipeline by the end of 2022, the final decision on whether to build it would have to be made this year. Poland uses about 15 billion m3 of gas per year, importing more than two-thirds of that amount from Gazprom via pipelines through Ukraine and Belarus. 

PGNiG and Poland have been clashing with Gazprom over issues ranging from pricing under a long-term import deal to the Nord Stream pipeline in the Baltic. A recent halt of deliveries via the Yamal pipeline through Belarus added to worries for the Polish side.

Under a long-term deal, PGNiG is set to buy about 1.4 billion m3 of LNG from Qatar this year and about twice that amount from next year. That will cover 60% of the terminal’s capacity, which may be doubled to as much as 10 billion m3 if Poland decides to expand.

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