„Buying on the short-term market is more lucrative than the expensive Russian gas, which is why we are replacing it in our purchasing portfolio with cheaper spot offers,” Maciej Woźniak Vice-President of PGNiG for trade told BiznesAlert.pl.
BiznesAlert.pl: What is the role of spot deliveries in PGNiG’s purchasing policy?
Maciej Woźniak: The advantage of spot contracts, which allow to purchase individual gas deliveries of, e.g. LNG, is that they are a simple operational transaction. Our traders at PGNiG’s London office receive news about an offer and its price, which is fixed for the entire load. If the price fits our current portfolio we simply carry the transaction out. These are very quick transactions, they are usually completed within a few or several hours after the offer was made. How does it fit into our purchasing portfolio? We simply keep our portfolio up to date by restocking it with the cheapest gas. The Russian gas offered to Poland is a lot more expensive than the gas on European markets, which is why we are doing our best to buy only as much as the 'take or pay’ clause forces us. We complement the portfolio with other beneficial offers. These are the possibilities of the spot market. We sign only those spot contracts, which fit our needs when it comes to the price. We monitor the market non-stop – a market that is becoming more and more liquid. We monitor indexes across entire Europe and we choose attractive offers only.
Spot deliveries play only an ad hoc role in a purchasing policy, because after all a contract is strategically necessary.
Of course we cannot run on spot contracts only. We are not just a trading company, we also extract gas and we have long-term agreements. It is not about us being whimsical, it is because we are responsible for deliveries to 7 million households in Poland and to industrial consumers. It would be irresponsible to expect that our entire demand could be covered by spot contracts. The point is to diversify our gas portfolio not only when it comes to the sources of deliveries, but also when it comes to the duration of contracts. This is because the contract duration impacts the price formulas and its other terms, which cover against each other. These are the basics of risk management.
There have been reports that it is possible to acquire a more beneficial price formula for Poland than the one on the German exchange. Is it possible that in the future the gas price in our hub would be lower than in Germany?
I think that the price will be close to that, but I am certain it will be impacted by similar trends. After all, liquid markets that are connected impact one another. The question is how deep the Polish gas market will be. This will determine whether it will become a benchmark for our region in Europe. This is a very ambitious vision which can be achieved in a period longer than 5 years. Today it is the size of the German, British and Dutch markets that impact the price trends on the European gas market… but the future is an open book!
Is the Yamal contract a liability for the Polish gas sector?
Undoubtedly the Yamal contract hinders the development of Poland’s gas market because it includes a high level take or pay clause; and secondly, it has a very unfair and outdated price formula, which is based mostly on the oil market. This is a legacy from 20 years ago when perhaps it was normal, but in the meantime the market has changed dynamically. When a company like ours sells gas at market prices, which are based on gas stock market indexes in Poland and Europe and those indexes are completely different from the indexes on the oil market, then we buy gas at a price based off of oil. In result, a difference between the purchasing costs and profits from sales appears, which either goes up or down and this is the difference we have to grapple with. We would rather avoid it and sell and buy gas in a predictable market environment.
It would seem that since Gazprom lost its direct deliveries to the Ukrainian market, is facing problems in Turkey, is backing off in Italy, then it should be more flexible towards Poland and PGNiG. Is that really the case?
We have entered a dispute with Gazprom on the Yamal contract’s pricing terms at the Arbitration Tribunal. And we are convinced we will win. The goal of the arbitration procedure, which was opened by us, is to restore European market terms in Gazprom’s offer to Poland. The arbitration is necessary because we have not noticed any actions taken by Russians, which would suggest that they want to abide by the market rules in Poland. And this at a time when Gazprom is capable of adapting to the market rules, but only in Western Europe.
Our disappointment when it comes to the trade cooperation with Gazprom is permanent. This is why we are determined and we continue our diversification projects that involve gas deliveries via the Lech Kaczyński LNG terminal and in the future – as of 2022/2023 imports from the Norwegian Shelf through Denmark. This is the only way for us to have guaranteed uninterrupted gas deliveries, but also to gain confidence that the gas will be sold at market prices and not at prices dependent on other factors, e.g. politics.
Interview by Wojciech Jakóbik