Trump-touted LNG deal hinges on Norway link for Polish PGNiG

By Maciej Martewicz and Marek Strzelecki on 7/10/2017

WARSAW (Bloomberg) -- After President Donald Trump’s exuberant visit to Warsaw last week, where he encouraged Poland and its east European neighbors to buy U.S. liquefied natural gas, it’s time for sober calculations by Poland’s gas company.

PGNiG CEO Piotr Wozniak said in an interview that the state-controlled company is already in talks with potential suppliers to fill the capacity of its LNG terminal in the Baltic Sea port of Swinoujscie as Poland diversifies away from its dominant supplier, Kremlin-controlled Gazprom. Before deciding on a long-term LNG agreement with U.S. suppliers, he also has to consider the feasibility of building a pipeline to Norway and expanding its LNG terminal.

“The market is well aware that we want to break away from Gazprom’s orbit, so there won’t any vacuum” in supplies to Poland, Wozniak said in Warsaw on Friday. The “breakthrough” moment for any LNG deal with the U.S. will come in late 2017, when companies submit their interest for Norwegian gas from the planned Baltic pipeline, he said.

Trump said at a news conference in Warsaw last week that the U.S. would be ready to sign a long-term LNG deal “within the next 15 minutes” if Poland had negotiators available. Polish President Andrzej Duda said it may come “soon.”

Hub plans

With global LNG production capacity set to rise in future years in part thanks to the U.S. shale boom, Trump offered to supply east Europe with the fuel, even if it will cost slightly more than PGNiG’s maiden U.S. LNG cargo, which docked at Swinoujscie last month.

Poland’s ambitions go beyond reducing its reliance on Russian energy. It wants to become a hub capable of re-exporting part of its imported gas and be in a position to walk away from Gazprom once the country’s long-term supply deal ends in 2022, Minister Piotr Naimski, who’s in charge of strategic energy infrastructure, said in May.

PGNiG shares rose 1.4% to 6.5 zloty in Warsaw on Monday, heading for highest close since June 29.

Gazprom clashes

In order to complete the Norway pipeline by the end of 2022, the final decision on whether to build it would have to be made this year, Wozniak said. Poland uses about 15 billion cmg per year, importing more than two-thirds of that amount from Gazprom via pipelines through Ukraine and Belarus.

PGNiG and Poland have been clashing with Gazprom over issues ranging from pricing under a long-term import deal to the Nord Stream pipeline in the Baltic. A recent halt of deliveries via the Yamal pipeline through Belarus added to worries for the Polish side.

Under a long-term deal, PGNiG is set to buy about 1.4 Bcm of LNG from Qatar this year and about twice that amount from next year. That will cover 60% of the terminal’s capacity, which may be doubled to as much as 10 billion cm if Poland decides to expand.

Asked whether PGNiG was aiming to sign LNG contracts with one or more suppliers, and if they would only come from the U.S., Wozniak said that the Polish state-controlled company seeks to “diversify its portfolio as a rule."

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