Gazprom Appeals Natural Gas Price Arbitration Ruling

PGNiG said it had been informed of the Gazprom appeal by the Court of Appeal in Stockholm.

SEATTLE (Oil Monster): Russian gas giant Gazprom has appealed a June ruling by the Stockholm Arbitration Court that Polish state gas company PGNiG was entitled to demand a lower price for Russian natural gas supplies, PGNiG said late Tuesday.

PGNiG said it had been informed of the Gazprom appeal by the Court of Appeal in Stockholm. 'The company does not know the content of the action as it has not been formally delivered to PGNiG,' PGNiG said in a statement.

In its June ruling, the arbitration court ruled that PGNiG was entitled to ask for a change in the contract price for gas supplies from Gazprom, but added that the Polish company's request for a new price formula was 'too far reaching.'

The court said the issue of determining a new contract price, which would apply retroactively from November 1, 2014, would be resolved at a later stage of the proceedings.

PGNiG said it would decide on further action once Gazprom's appeal had been delivered to it. 'The company believes that there are no grounds to demand setting aside the partial award,' PGNiG said.

PGNiG referred the dispute to the court in Stockholm in May 2015. Then in February 2016, it filed a statement of claim in order to bring its supply contract with Gazprom 'into line with the current conditions on the European gas market.'

The Polish company believes it has overpaid for gas from Gazprom for years and accused the Russian company of charging higher rates for gas sold in Central and Eastern European countries, which are often more dependent on the fuel than Western European countries.

PGNiG imports up to 10.2 Bcm/year of gas from Gazprom Export under a long-term, take-or-pay contract that expires in 2022. PGNiG is obliged to take at least 8.7 Bcm/year.

The contract remains partially oil-indexed with a nine-month lag. As a result of oil indexation and the take-or-pay clause, Poland pays more for its gas from Gazprom than Germany and Italy do, PGNiG said.

The company argues the dynamic development of the European gas market and increasingly liquid gas hubs have rendered Gazprom's insistence on oil indexation and take or pay unfair and outdated.

PGNiG is seeking to reduce its dependence on Russian gas by increasing LNG imports and booking capacity in the planned 10 Bcm/year Baltic Pipe project, which would connect the Norwegian, Danish and Polish gas networks.

 Courtesy: www.spglobal.com