Denmark's Orsted agrees to sell Danish gas to trading arm of Poland's PGNiG

London — Denmark's Orsted has agreed to sell gas produced in the Danish part of the North Sea, which it buys under legacy long-term agreements, to the trading arm of Poland's PGNiG, the companies said Oct. 21.

Orsted -- formerly known as Danish Oil and Gas (DONG) -- no longer produces oil or gas, but buys some of the gas produced by the DUC offshore operating consortium.

The DUC group's main asset is the Tyra gas field that is currently being redeveloped by operator Total and is expected to resume production in mid-2022, having been closed in September last year.

"Orsted has entered into a multi-year agreement on the sale of gas to PGNiG Supply & Trading (PST)," it said in a statement.

Under the agreement, Orsted will resell some of the gas that Orsted receives from the Danish part of the North Sea to PST from Jan. 1, 2023 to Oct. 1, 2028, it said.

The volume over the period will be approximately 70 TWh (6.6 Bcm) of gas.

Surplus gas

Orsted said that once Tyra was back online, Danish gas production would exceed demand, making gas available for export.

"When the Tyra field resumes delivery to Denmark, the amount of gas from the Danish North Sea in the market will increase significantly, and with this agreement PST will offtake a substantial amount of the gas that Orsted expects to receive," Morten Buchgreitz, CEO of Orsted Markets & Bioenergy, said.

The supply-demand picture in Denmark is likely to be skewed further by falling gas demand -- expected to total 115 TWh in the period of the agreement -- and by rising biogas production in the country.

The Danish Energy Agency expects the country's North Sea production to be around 234 TWh in the period, while biogas production is seen at around 46 TWh, bringing total Danish gas production to 280 TWh in the 2023-2028 timeframe.

Poland is an obvious market for the surplus gas as it is building the 10 Bcm/year Baltic Pipe from Norway via Denmark to Poland, with some of the excess Danish gas likely to end up in the pipeline. It is expected to be completed by October 2022.

"After the commissioning of the Baltic Pipe, PGNiG will be able to deliver gas supplied by Orsted in Denmark to Poland as a part of its diversified gas portfolio," PGNiG President Jerzy Kwiecinski said in a separate statement.

The deal is the second in a week for PST after it also agreed to buy Norwegian gas from Aker BP on Oct. 16.

PGNiG said that with the latest agreement with Orsted, its trading arm "continues to grow and strengthens its position in Northern Europe and particularly in the Danish wholesale market."

Clean energy

Orsted said the agreement was based on existing gas purchase agreements that it is still party to.

"Today, Orsted invests exclusively in clean energy and no longer has any oil and natural gas production. Orsted does not enter into new gas purchase agreements and does not renew existing long-term gas purchase agreements," it said.

PGNiG sees the agreement as continuing cooperation between the companies. "The agreement between Orsted and PST provides a solid basis for a further strengthening of relations between both companies," Kwiecinski said.

"It also means more security and diversification in the European gas market," he said.