Polish gas giant wins EUR 1.3 bn case against Russian Gazprom

Poland's gas monopolist PGNiG has won an arbitration hearing against Russia's Gazprom cutting the contract price for gas supplied by Gazprom under the 1996 Yamal Contract.

A final decision in the arbitration proceedings brought by PGNiG against Gazprom was issued by the Arbitral Tribunal in Stockholm on Monday, the company wrote in a press release.

According to the provisions of the Yamal Contract and the final award, the new contract price determined by the Arbitral Tribunal should apply retroactively from November 1, 2014, i.e., from the date of the submission by PGNiG of its price revision request, a major breakthrough for the company, which had seen profits drop significantly in the last quarter of 2020.

According to the company’s preliminary assessment, the retroactive settlement under the final award results in a price difference payable by Gazprom to PGNiG of approximately EUR 1.3 billion for the period from November 1, 2014, to February 29, 2020.

The Arbitral Tribunal revised the price formula for the purchase of gas supplied by Gazprom in line with the European market price of natural gas.

According to PGNiG, the change of the price formula gives greater compatibility between indexation of the price that impacts the cost of sourcing imported gas, and the market gas sale pricing policy.

PGNiG is contracted to import a minimum of around 8 bcm from Gazprom directly through the Yamal pipeline every year. In recent years the company has been purchasing LNG from Qatar and US as well as planning the Baltic Pipe to bring gas from Norwegian oil fields. The diversification was to ensure it could exit the Gazprom contract when it comes up for renewal in 2022.

In the meantime it has been purchasing significant amounts via Germany, who have better terms of trade with the Russians than Poland.

The verdict will be a major support for the Polish company, bearing in mind market gas prices now are so low. The final amount they will win will still need to be determined. Both companies are making estimates of the final number. But the significance for the Polish company is that an arbitration deal cannot be appealed against.

source: