02.10.2018 Gazprom Plays for Time as it Challenges Partial Award of the Arbitration Court in Stockholm Issued in Favour of PGNiG
Arbitration Court in Stockholm informed that Gazprom challenged its partial award from 30 June, in which it agreed with PGNiG that the Company has contractual grounds to request a change in prices charged by Gazprom for natural gas supplied to Poland under the Yamal Contract.
PGNiG is confident that the challenge is groundless and will not hold up in the Arbitration Court. This raises concerns that Gazprom may be purposefully prolonging the procedure, which, after partial award in favour of PGNiG, appears to be nearing a positive outcome for the Polish company.
PGNiG informed that at the end of July the Arbitration Court in Stockholm agreed with PGNiG that the Company has contractual grounds to request prices that are lower than those stipulated in the long-term contract. Gazprom has been rejecting these requests for years, and in effect the contractual price is now high above prices paid on European markets.
The contractual price paid by PGNiG is not aligned with the market price, and in 2014 PGNiG exercised a price renegotiation clause included in the Yamal Contract. Once the negotiating period expired in May 2015, the Polish company opted for settling the dispute at the Arbitration Court in Stockholm, which was followed by a suit against Gazprom in February 2016.
PGNiG’s strategy envisions a steady diversification of sources and directions of supply, strengthening its competitive position while ensuring security of natural gas supplies. Recently PGNiG has been focusing on completing the Baltic Pipe which will come online in 2022 and supply Poland with natural gas extracted in Norway, where PGNiG has been running its own extraction operation for 10 years and has shares in 20 licences. PGNiG also imports LNG which accounted for 18 per cent of PGNiG’s imports in the first half of 2018. Poland sources LNG from Qatar, Norway, and the USA under long- and medium-term contracts as well as spot contracts.
Under the Yamal Contract, signed in 1996, Poland receives annually ca. 10 bcm of natural gas. The contract expires in 2022 and includes a high-level take or pay clause and a price formula indexed to the price of oil.