Polish Briefing 11 May, 2018 9:00 am   
Editorial staff

Polish Briefing: Mysterious fluctuations in gas prices in the past quarter for Grupa Azoty

What goes on in Poland on the 11th of May.

Mysterious fluctuations in gas prices in the past quarter for Grupa Azoty

– Beginning of 2018 was difficult if we look at what was happening with gas prices. We have contracts that are comparable to those of competitors on the market. What happened in February and March with gas prices requires analysis and consideration of how it was possible that there was such a sinosid in gas prices. The difference between the highest and the lowest prices of the raw material amounted to 300 percent – said Wojciech Wardacki, CEO of Grupa Azoty.

– We had to react and reduce production, because at such gas prices it would be impossible to sell – he added. – We counted on gas prices to stabilize. There were big frosts, mining was limited. Someone played great because these prices jumped like firecrackers. The prices did not facilitate functioning.

– The first wave of frost in early March, the second a bit lighter. Temperatures have dropped to -20 degrees throughout Europe. This meant that farmers could not apply fertilizers. Field work that normally takes place in March could not be implemented, which caused delays. The second effect was that Europe was not prepared for such waves of cold, so the gas storage facilities were heavily exploited. There has been an increase in the speculative price that has not been seen before – said Paweł Łapiński, vice-president of Grupa Azoty’s management board.

As Wardacki pointed out, the contract with PGNiG enabled Grupa Azoty to obtain comparable market prices with its competitors. – The prices that PGNiG also offers result from global market prices. Apart from the competition, there are Russian producers. Here, no rules and price formulas apply – he said.

He also did not rule out price negotiations with PGNiG. – If we look at the results of PGNiG, which we are the largest customer, then there is some room for maneuver to find other prices – he added.

Completing his statement, Vice President Łapiński reminded that previously gas prices were based on tariff, and now there is a link to European exchanges.

The Rawa Mazowiecka-Wronów pipeline enters the design phase

Gaz-System has concluded an agreement on developing design documentation for the construction of the Rawa Mazowiecka – Wronów section of the Gustorzyn – Wronów gas pipeline. The design will be prepared by the consortium of ILF Consulting Engineers Polska Sp. z o.o. and PGNiG Gazoprojekt S.A., selected in a public tendering procedure.

The responsibilities of the consortium will include obtaining environmental decisions, decisions determining investment location and the building permit. Completion of the design documentation and obtaining the project implementation permit is planned for the end of 2020.
Gaz-System continues to expand the transmission network in Poland. The company’s Investment Plan for 2018–2020 covers over 160 tasks with the total value of PLN 7.7 billion. The key projects include a gas pipeline connecting the gas transmission node in Gustorzyn (Kujawsko-Pomorskie Voivodeship) with the Compressor Station in Wronów (Lubelskie Voivodeship).

The longest section of the pipeline, with the length of ca. 156 km, runs from Rawa Mazowiecka to Wronów. For the two other sections, i.e. Gustorzyn – Leśniewice (ca. 60 km) and Leśniewice – Rawa Mazowiecka (ca. 100 km), the company plans to initiate a tendering procedure at the end of Q2 / beginning of Q3 of this year.

The investment project is consistent with the company’s development strategy, whose aim is to ensure the flexibility of operations of the entire transmission system and to connect new individual and industrial customers. The completion of the project will increase the security of gas supply, in particular to the Warsaw, Łódź and Radom metropolitan areas and to the south-eastern regions of Poland.

The project will be implemented under the Act on investment projects related to the Świnoujście LNG regasification terminal (Journal of Laws No. 84, item 700, as amended), known as the “special purpose gas act”.