Politics Ahead of Profit: Poland Inks 5-Year US LNG Deal, Sidelines Russia


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Warsaw is ready to pay more for imported US gas and plans to sell it to other EU countries. However, Poland’s EU partners might opt for cheaper gas supplies from Russia, National Energy Institute’s director Sergei Pravosudov has told Sputnik.

The gas, sourced from Sabine Pass liquefaction plant in Louisiana, will be supplied to Poland and other Central European countries, Piotr Wozniak, CEO and President of Poland’s state-owned gas company PGNiG said, explaining the decision by the need to “increase the energy security of this region, which has historically been dominated by Russian gas.”

The LNG will be delivered on a DES (delivered ex-ship) basis and the supplies will start in 2018, a whole four years before Poland’s current contract with Russia’s Gazprom expires in 2022.

When asked if the nine tankers to be delivered during the contract’s term will be enough to meet the energy needs of Poland and other EU countries, Sergei Pravosudov said that Lithuania had earlier leased an LNG terminal to buy more expensive natural gas from the US, instead of a cheaper, piped, variant from Russia.

“Poland wants to sell this gas to other EU countries, including Ukraine. I’m not sure that consumers in the EU will want to pay more though,” Pravosudov told Sputnik Poland.

He added that Warsaw might even ask the European Commission to subsidize its LNG supplies from the United States, but this would hardly work.

“The Americans want to phase Russian gas out of Europe, but they do not have enough LNG and what they have costs more than what is offered by Russia. Therefore, I don’t think they stand a chance to snap up the European energy market. Poland wants Gazprom to sell for less and could threaten not to sign a new long-term contract if it doesn’t. But even in this case, the Poles will ink a short-term deal, which is less profitable, because energy prices depend on market fluctuations,” Sergei Pravosudov noted.

“Ukraine refused to buy gas from Russia and, as a result, it is getting reverse gas from Slovakia for a steeper price,” he added.

Mentioning Polish President Andrzej Duda’s stated desire to become “a special partner for the US”, Pravosudov said that the decision to buy LNG from the US was primarily a political one, putting the commercial side on the back burner.

READ MORE:Poland to Pay for it All: Gas, Missile Systems, Even Melania’s Outfits

“In any case, Russia will continue to honor its contractual obligations for natural gas deliveries from Siberia to Poland. Each of us has enough time until 2022 to weigh all the pros and cons of various cooperation formats between us. Let’s wait and see,” Sergei Pravosudov concluded.

In June the US began exports of liquefied natural (LNG) gas to Eastern Europe with first LNG cargo arriving in Poland on June 8.

According to Bloomberg, PGNiG opened a LNG trading office in London in February, aiming to make Poland “a gateway for American LNG to Central and Eastern Europe.”

However, Russia’s supplies of natural gas are far more “convenient” and cheap in comparison with America’s LNG. It is no secret to the Europeans that the cost of transportation and regasification of the American LNG is rather high.

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Source: Sputnik News

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