Jakóbik: Will PGNiG have to stop Gazprom’s expansion in Europe?

0
9

If Gazprom used European companies to steal PGNiG’s strategic clients perhaps they would receive a lower price, but Poland’s entire gas policy would be put at risk – Wojciech Jakóbik, BiznesAlert.pl’s editor in chief.

Fortum on Gazprom’s behalf in Poland? If not the Finns then someone else

„The possible sale of 46.65 percent of Uniper’s shares, a Germany’s E.on subsidiary, to Fortum would make the Finnish company Gazprom’s partner on the Nord Stream 2 project,” writes Kommiersant.

E.on is a financial partner of the Nord Stream 2 consortium, which wants to build a controversial pipeline with the same name. It will make it possible to transmit increased volumes of Russian gas to the Central and Eastern European markets. This, according to critics will cement Gazprom’s position, threaten market development, competition and economic stability of the main gas transit country – Ukraine. At the same time Kommiersant admits that the Federal Antimonopoly Service and Uniper itself are against the transaction.

Fortum is talking about buying Uniper’s shares. It offers EUR 22 per one share, which means E.on could be paid EUR 3.8 bn in total. After taking over E.on’s shares the Finns would be forced to take over the shares of the other shareholders for about EUR 8 bn in total. Uniper co-finances Nord Stream 2. European companies want to bankroll the project with EUR 950 m in total. Apart from the German company, other European firms including, Shell, OMV, Engie and Wintershall (BASF’s subsidiary) entered the agreement. Fortum would have to take over the responsibility from Germans. The company is under the supervision of the Finnish government, but its CEO Pekka Lundmark, quoted by Kommiersant informed the takeover had not been discussed with Helsinki.

Fortum is present on the Polish market as well. Las year it took over the Duon Group together with its sales staff that partially came from Poland’s PGNiG. The Group trades gas with special emphasis on the Yamal gas pipeline reverse flow. However, because of the Act on Mandatory Stocks of Fossil Fuels that the company is complaining about, Fortum has limited possibilities of using this tool to offer the raw material to clients in Poland. However, if Fortum did take over Uniper and became a shareholder of Nord Stream 2, its next natural step should be to start an expansion on the Polish market by using gas supplies from that direction, provided the gas pipeline is built.

A gas cartel?

In this scenario Fortum would fight for Polish clients with Poland’s monopolist PGNiG. From the point of view of the final consumer the price is what counts, so in their view better competition in Poland would be beneficial as it would increase gas supply and lower prices. However, from the point of view of PGNiG and Poland it could constitute a threat.

Increased gas deliveries from Nord Stream 2 via Germany to Poland, which could start by the end of 2019, if the pipeline is commenced according to schedule, would be taking place at the same time when PGNiG was still importing Russian gas one the basis of the Yamal contract. The agreement includes a take or pay clause, which forces the Poles to pay for at least 80 percent of volume regardless of their actual needs.

This could lead to a situation where Fortum would take over PGNiG’s clients thanks to Russian gas from Nord Stream 2 and would leave the Polish company with increasing gas volumes in its storage facilities. Since the gas prices on the German exchange are more competitive than the offer in the Yamal contract (according to PGNiG, as we can only estimate the contract price), the Finns would find it easy to take over the Polish company’s strategic clients. PGNiG would not be able to respond with a stable competitive price until 2022, which is when the Baltic Pipe will be commenced, i.e. the Norwegian Gateway which will provide gas that will constitute stable competition to the Russian offer, contrary to LNG’s volatile prices.

The Polish company would find it harder to promote non-Russian gas from its portfolio because the market would increasingly book Russian gas from Fortum. From the point of view of Poland’s energy security and the assumption that an increasing gas dependence on Russia deepens political dependence, such a scenario is dangerous. It would turn PGNiG into another Kompania Węglowa that needs to be bankrolled by the state to survive. Whereas the Polish market would be saturated with Russian gas regardless of the diversification policy pursued by Poland via PGNiG, which is possible thanks to the fact that the company’s statutes includes the obligation to pursue energy security. At that point fears about a gas cartel dependant on Nord Stream 2 could be justified. So far Poland’s Office of Competition and Consumer Protection (UOKiK) said no to the project, which forced its masterminds to leave 100 percent of the shares in Gazprom’s hands. European companies could not join the consortium because of UOKiK, which also warned that the project would again seal Gazprom’s position in Central and Eastern Europe via its European intermediaries, one of which Fortum could become. Even if the transaction does not take place because Uniper has officially refused to sell the shares to the Finns, the scenario could still be realized with the participation of other entities. I have previously written about this possibility.

Both PGNiG and the Polish government are concerned this might happen. The latter unequivocally supports the former, even at the cost of criticism from private suppliers who accuse Poles of trying to shape the market so that it fits the expectations of the Polish monopolist. This is how they see the Act on Mandatory Stocks of Fossil Fuels. The regulation forces the companies to book storage capacity and thus makes it impossible for smaller entities to book reverse capacity on the Yamal pipeline, which is an entry point for gas from Nord Stream and the planned Nord Stream 2.

Currently PGNiG buys cheaper gas on the German exchange to enhance its competitiveness. The Act on Mandatory Stocks limited the access of other companies to such deals. On the other hand, it obligated everyone to secure reserves in case of a crisis. There is a dispute on the subject that is taking place in the country and at the EU level. Still, from the point of view of the Polish government the Act is a bulwark that protects the market from inundation by Russian gas from the west and from the process against UOKiK warned about. The European Commission is another institution which claims that Nord Stream 2 will increase the saturation of the German market with Russian gas.

Croatian precedent

An opportunity to verify whether such a scenario is possible has recently appeared, as Gazprom signed an important gas agreement with a private Croatian supplier Prvo Plinarsko Drustvo (PPD). The contract ensure deliveries of up to 1 bcm of gas annually for 10 years from 1 October 2017 to 31 December 2027. In the fourth quarter of the current year Gazprom will deliver 0.25 bcm. Elena Burmistrova from Gazprom Export said she was sure the contract was an „important step [that] will strengthen the mutually beneficial partnership between the two countries.” „Our cooperation with a strong, reliable partner will ensure the Croatian market is secure and has a stable gas supply,”  assessed Pavao Vujnovac.

Words matter. Burmistrova talked about cooperation between the two countries despite the fact that PDD is a private company. The state-run LNG Croatia wants to install an LNG FSRU, which is supposed to be ready in 2019 and which is co-financed by the European Union, but may be left without clients already booked by Gazprom via PDD. Therefore, one could assume that introducing an intermediary to the Croatian market for gas deliveries from Russia may undermine the profitability of the terminal at the Krk island. It remains to be seen how Croatia’s politicians will react to this problem as they are divided on the subject of the future of the LNG project despite the fact it is part and parcel of the North-South Gas Corridor just like the LNG terminal in Świnoujście. The source of this political dispute may be in Russia. Our editor Teresa Wójcik wrote more on the subject previously.

The Croatian precedent may be a case study for Poles who are arguing over the impact of deliveries from Nord Stream 2, which may not necessarily be provided by Gazprom, which instead can use its intermediaries such as Fortum, or any other company that has a contract to receive gas in Greifswald where the second gas pipeline from Russia to Germany will have its exit point. Increased gas deliveries via the reverse flow on the Yamal gas pipeline may have a similar impact on the Polish LNG terminal as Gazprom’s deliveries to PDD in Croatia. It remains unknown how it would influence PGNiG’s position. PDD’s portfolio already encompasses Croatia’s biggest industrial clients. We also do not know whether Fortum or a different intermediary used by Gazprom, would be able to take over, e.g. an agreement with the state-owned Azoty Group, or the private company Boryszew. The Croatian case study needs to be closely watched to find out whether the invisible hand of the free market is enough to ensure cheap gas and energy security for Poland and Central and Eastern Europe’s clients. If not, then it may turn out that tools such as PGNiG and the Act on Mandatory Stocks will be necessary to put a stop to Gazprom’s expansion in our part of the continent.

ZOSTAW ODPOWIEDŹ

Proszę wpisać swój komentarz!
Proszę podać swoje imię tutaj