WOOD Flash – PGNiG: Russia halts the flow of gas to Poland
Russia has ceased the delivery of gas to Poland via the Yamal pipeline, as Poland has refused to pay in RUB, as demanded by Gazprom. PGNiG views the demand as a breach of contract, as the payment terms stipulate the currency to be paid. Without the delivery of Russian gas, Poland will need to find alternatives over the next few months, to prevent the market from running out of gas. From October, the Baltic pipeline should be capable of replacing all of the Russian gas. Although the situation is challenging, we do not believe that the problems are insurmountable. First, demand in the current season is low; thus, a total of 7 BCM of gas would usually be consumed in the next five months. Although the Polish LNG terminal is already running at close to capacity, additional volumes can be imported via Lithuania. Poland has good connections with its neighbours, and can import gas from Germany, Slovakia, the Czech Republic and Ukraine. Inventories are about 2.8 BCM currently, so stocks can cover some of the need, if necessary. We believe that the biggest risk is not the lack of gas, but further rises in prices, as PGNiG and its competitors scramble for alternatives.Polskie Gornictwo Naftowe I Gazownictwo SA Polish Oil & Gas Co (PGNiG) is an integrated natural gas company based in Poland. Co.'s core activity covers exploration and production of natural gas and crude oil as well as import, storage, trade and distribution of gas and liquid fuels. Co.'s scope of activity includes gas trading and commercial support, as well as operation, maintenance and expansion of its distribution system. Co.'s distribution networks comprises over 100 thousand kilometers of gas pipelines (high, upper-medium, medium and low pressure), which cover primarily industrialized and urbanized areas of the country.
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