Reduction in supply causes Poland to buy gas from Germany and Czech Republic

Gas hub

Following the reduction of Gazprom’s gas supplies to Poland, the country decided to purchase additional volumes from Germany and the Czech Republic – Polish portal Gaz Lupkowy reports. This was possible due to the reverse flow on the Yamal pipeline.

Russian giant Gazprom has admitted that it is currently able to supply Poland with gas only at the minimum level prescribed in the contract. From their side, the Polish energy company Gaz System, says that it does not ask for the maximum contractually promised volumes but that they are within their rights to to order quantities greater than the minimum.

At the same time the Russian side did not give reasons for the implementation of volumes at this level. Analysts say that Russia may deliberately limit the transmission of the fuel to the West, to discourage the European Union from imposing further sanctions against Russia for its role in the Ukrainian crisis.

Last week, PGNiG, Poland’s largest, state-owned gas producer and distributor, reported that gas flows from Gazprom diminished by 45 percent. To amend this situation the company decided to implement supplementary gas supplies from Germany and the Czech Republic. This solution was made possible by the fact that from April Poland is capable of implementing reverse flow on the Yamal pipeline. Before that only virtual reverse flow was possible, by which the gas would be purchased from Germany but had to be collected on the Polish-Belarus border.

Janusz Steinhoff, Polish Minister of Economics, believes that Poland is moving towards energy independence from Russia.

“We have extensive cross-border connectors to the West and to the South, two pipelines (Moravia and Lasow), virtual and physical reverse on the Yamal pipeline, and we are in the process of building an LNG terminal, which will have a capacity of 5 billion cubic meters per year. This is the third of our current gas consumption,” Steinhoff explained.

The availability of these alternatives does not mean a complete independence from Russian gas imports. The new LNG terminal should, however, strengthen Poland’s negotiating position with Gazprom.

“Once the LNG terminal is operational, its infrastructure will allow us to import gas from directions other than Russia. So far, our negotiators have been in a very weak bargaining position, because Gazprom knew that we had no alternative. The new terminal will present us with an alternative,” Steinhoff said.

The current disruptions in supply may be related to the upcoming trilateral talks between Ukraine, the European Union and Russia on gas supplies. Ukraine has not bought any gas from Russia since June, whereas normally it would purchase 35 billion cubic meters of gas per year. This is a serious loss in revenues for Gazprom so, at least theoretically, the company should be interested in resuming trading as soon as possible.

At present, Ukraine buys gas from Germany and other countries, while Poland, Hungary and Slovakia provide transit for the gas. The reverse flow from Poland is relatively small – at the level of 4 million cubic meters per day. The reverse flow from Slovakia and Hungary is much greater – at a level of about 15-18 million cubic meters per day.

Gazprom says that any reverse flow supplies constitute a breach of contract, while Ukraine says that they are in line with the European law. Both parties have taken the matter to the Stockholm Tribunal.

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