Poland slams Russia's Yamal-Europe gas pipeline plan

By bne IntelliNews April 5, 2013

bne -

The Polish government on April 4 offered a feisty response to comments from Russian President Vladimir Putin suggesting Gazprom should build a second line of the Yamal-Europe gas pipeline to carry gas across Poland to Europe. Warsaw, which is pushing to diversify its gas supplies, poured scorn on the idea and insisted any expansion of the route would need to be a solely Polish project.

"No one, except for the Polish company [PGNiG] and the Polish government is entitled to make decisions about transit via the Polish territory," Treasury Minister Mikolaj Budzanowski thundered, according to RIA Novosti. "That's why we would like to tactfully remind that we are not going to build a new gas transportation network to Poland or the European Union on instructions from anyone, especially from Gazprom."

Putin instructed Gazprom on April 3 to return to work on a plan to build the second pipeline to carry gas from the Yamal region. The first line, in operation since 1999, is jointly owned by Poland's state-controlled gas firm PGNiG and Gazprom, and was once an object of an ownership struggle.

"The decision on building a transit gas pipeline will be a sovereign decision made by the Polish government and the Polish pipeline operator," added Budzanowski, according to the Wall Street Journal. "The legacy of the Yamal pipeline provides evidence that mixed ownership structures for managing transit pipelines are not effective. Based on this experience, I believe the project for the construction of a new pipeline can only be implemented by an investors owned by the Polish state."

Poland has recently accelerated its efforts to diversify energy supplies in a bid to reduce its dependence on Russia, from where it currently sources around 67% of the gas it consumes. It is pushing to develop what it hopes are significant shale gas deposits, and plans to put an LNG platform into operation before the end of next year.

After finally securing a price discount from Gazprom in late 2012 after a long tussle which saw it take the issue to arbitration, Warsaw clearly feels that an aggressive stance towards Moscow is more likely to reap results - at least while the European gas market remains in the doldrums, exerting downwards pressure on Gazprom's high long term contract pricing.

The Russian company has been forced to lower prices and pay out billions to major customers in recent months, with the EU offering much encouragement by launching an investigation into its European practices.

Budzanowski sought to leverage that theme as he cast doubt on Putin's plan. "I treat media reports on the second line of the Yamal pipeline with much caution because the approval of the project or lack thereof should depend on the price of the resource, and on suppliers. Acceptance of European Union-based companies, potential recipients of Russian gas, for a further increase of imports from a single source is also key," the Polish minister said.

Plans for building a second Yamal-Europe line from Russia through Belarus and Poland to Germany have been discussed on and off for years. Poland previously insisted it should be built instead of the massive Nord Stream pipeline that connects Russia directly with Germany via the Baltic Sea, which went into operation last year.

However, not every Polish official was as antagonistic as Budzanowski. Although Economy Minister Janusz Piechocinski admitted to Polish Radio that the country should be "very careful" not to get involved in the ongoing gas spat between Russia and Ukraine - of which Putin's suggestion is clearly a part - he also argued that if Poland is a potential transit country, then Warsaw should "express a lot of interest, as we would earn on this." Piechocinski, leader of conservative junior coalition partner PSL, is due to meet the head of Gazprom in St Petersburg on April 5.

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