Poland in talks on further LNG supplies from US

Poland in talks on further LNG supplies from US
By bne IntelliNews July 4, 2017

Polish state-controlled oil and gas company PGNiG is in talks with the US on more LNG shipments to follow the first supply from Cheniere Energy that arrived in Poland in early June, a presidential aide said on July 4.

Poland, which relies on Russia for most of its gas supplies, is in the midst of a push towards diversification. Warsaw has a long-term LNG supply deal with Qatar and received a first shipment from the US a month ago.

PGNiG is already talking with US partners on further purchases, Krzysztof Szczerski, a senior adviser to President Andrzej Duda, told a press conference, according to Reuters. "The first shipment of the US LNG proved that there are technical possibilities and an economic justification to such negotiations," he claimed.

President Donald Trump will visit Poland on July 5 and is expected to discuss gas supplies to Poland and other countries in Central and Eastern Europe. The region is wary that Russia’s planned Nord Stream 2 gas pipeline to Germany will give Moscow added leverage over its energy markets.

The US provoked fury from Germany and Austria last month as the Senate approved new sanctions that will stipulate restrictions against EU companies involved in energy projects with Russia, should they become law. Gazprom joined Berlin and Vienna in claiming that Washington's real goal is to boost its LNG exports to Europe.

Meanwhile, the EU is mulling its response to the pipeline project. Lithuania, the only EU challenger to Poland for its hawkish stance towards Russia, announced late last month that it has signed a contract with Cheniere.

"We are interested in gas supply diversification, but we also would like the talks to be beneficial for Poland from the economic point of view," Szczerski said.

The US only approved gas exports recently, as shale has boosted production. Poland’s LNG terminal in Swinoujscie is already taking in gas under a long-term contract with Qatargas that expires in 2034, but still has excess capacity to accept cargos from other directions. The terminal can handle 5bn cubic meters (cm) of gas annually, with plans for expansion to 7.5bn cm. Qatargas supplies around 2.7bn cm.

Poland consumes around 16bn cm per year; Russia currently supplies around 70% of that volume under a long-term agreement. However, the deal expires in 2020.

Warsaw appears increasingly confident it could source enough alternative supply to do without Russian supplies after 2020 when PGNiG's contract with Gazprom ends. However, Warsaw is also clearly hoping to raise its leverage for talks over a new deal with the Russian gas giant.

Apart from growing LNG imports, Warsaw is also working to build a pipeline to transmit gas from Norway – where PGNiG has production assets – via Denmark to Poland. A floating LNG terminal in the Gdansk Bay is under consideration as well.

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