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Full suspension of Russian gas supply to Poland, Bulgaria expected April 27


PGNiG says reason for halt is refusal to pay in rubles

Bulgaria sees “significant risks” from new payment mechanism

Both countries say they have sufficient alternative supply

  • Author
  • Stuart Elliott    Rosemary Griffin
  • Editor
  • Alisdair Bowles
  • Commodity
  • Natural Gas
  • Topic
  • Europe Energy Price Crisis War in Ukraine

Poland and Bulgaria expect Russian gas supplies to be completely suspended April 27, after receiving notification from Russian gas supplier Gazprom April 26.

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The suspension comes after Russian President Vladimir Putin signed a new decree March 31 requiring EU buyers to pay in rubles for Russian gas via a new currency conversion mechanism or risk having supplies suspended. This move added to existing concerns that supplies to Europe may be disrupted following Russia's invasion of Ukraine Feb. 24.

Poland's state-controlled PGNiG said April 26 that Gazprom Export will completely suspend supplies from April 27 after the Polish company refused to settle its bills in rubles.

In a statement, PGNiG said it had been informed by Gazprom Export on April 26 that supplies under the long-term Yamal contract would be halted from 0800 Polish time (0600 GMT) April 27.

"PGNiG believes that the suspension of deliveries of gas is in breach of the Yamal contract," it said. "Therefore, the company will take adequate action to reinstate the execution of deliveries of gas under the contract."

"Moreover, the company reserves the right to claim damages on account of the suspension of deliveries of gas and will exercise all of its contractual rights as well as all the rights it has under the law."

Separately April 26, the Bulgarian energy ministry said that Gazprom notified Bulgargaz that it will suspend natural gas deliveries on April 27.

"The Bulgarian side has fully fulfilled its obligations and has made all payments required under this agreement, in a timely manner, strictly and in accordance with its clauses," the statement said.

It added that the new two-stage payment procedure proposed by Russia "is not in line with the existing contract up to the end of this year, and poses significant risks to Bulgaria, including making payments without receiving any gas supplies from Russia."

The Bulgarian energy ministry said that currently no restrictions on consumption in the country are necessary.

"The Energy Ministry, Bulgarian Energy Holding, Bulgargaz and Bulgartransgaz have taken steps to make alternative arrangements for supply of natural gas and to deal with the situation," the ministry said.

European gas prices spiked in late trade April 26 after Polish media outlet Onet published a first report on the suspension in supplies to Poland.

The TTF month-ahead price jumped 18% on the report, hitting an intraday high of Eur107/MWh at 1500 GMT, according to ICE data, before dropping back.

The contract was trading at Eur99/MWh at 1600 GMT.

Gazprom said April 26 was the deadline for PGNiG to pay for gas under the ruble system.

"Today Poland is obliged to pay for gas supplies in accordance with the new payment procedure," it said.

Polish 'security'

Later April 26, Polish climate minister Anna Moskwa said the country had enough gas in storage and supply options to ensure gas security.

"Poland has the necessary gas reserves and sources of supply that protect our security," Moskwa said in a tweet posted to the ministry's website.

"We have been effectively independent from Russia for years," Moskwa said. "Our gas stocks are 76% full. There will be no shortage of gas in Polish homes."

Speaking to reporters later April 26, Moskwa said that she did not see any need to draw down storage given that Poland had been contracting more LNG cargoes since the war started.

She said "LNG alone" would meet most of Polish gas demand and that storage may be used in the event of any potential deficit.

PGNiG imports Russian gas under a long-term import contract due to expire at the end of 2022, and officials have repeatedly said they would not extend it.

Last year, PGNiG imported 9.9 Bcm of Russian gas, meeting around 63% of demand.

Its imports from Gazprom accounted for around 53% of consumption in Q1, according to the latest PGNiG data.

Speaking to reporters late April 26, Poland's commissioner for strategic energy infrastructure, Piotr Naimski, said 3 Bcm/year of the Russian gas supplied under the Yamal contract was delivered via the Yamal-Europe pipeline, with the remainder sourced via interconnectors with Belarus and Ukraine.

Other sources of gas ahead

Poland has said it will be able to replace Russian gas imports with Norwegian gas once the 10 Bcm/year Baltic Pipe pipeline connecting the Polish, Danish and Norwegian gas networks comes online in October.

As well as imports from Russia, Poland is supplied with LNG via its onshore import terminal and can also take gas from Germany in a west-east direction.

In addition, an interconnector linking Poland and Lithuania -- giving Warsaw access to LNG imported into Lithuania for the first time -- is due to begin operations May 1.

Naimski said Polish gas demand could also be met from its own domestic gas production.

S&P Global Commodity Insights analyst James Huckstepp said the remaining volume under the Yamal contract for the current gas year now is unlikely to be delivered.

"It also sets a precedent making it more likely that other contracts are canceled over the coming months," Huckstepp said.

He said S&P Global Commodity Insights still assumed, however, that the majority of contracts would remain in place through 2023 because of a lack of alternatives.

New sanctions

Earlier April 26, Poland's interior ministry implemented restrictive measures impacting the stake held by Gazprom in EuroPolGaz -- the owner of Poland's part of the Yamal-Europe gas pipeline -- including a freeze on funds related to the stake.

According to a new sanctions list in response to Russia's invasion of Ukraine dated April 25, the ministry said it would freeze funds related to dividends payable to Gazprom from its EuroPolGaz stake and "other income" generated by the asset.

Gazprom has a 48% stake in EuroPolGaz, with Poland's state-controlled PGNiG holding 48% and Gas-Trading SA the remaining 4%.

EuroPolGaz owns the 684-km (424-mile) Polish part of the Yamal-Europe gas pipeline, which traditionally carries Russian gas to Germany.

However, Russian flows into Mallnow on the Poland-Germany border via the Yamal-Europe line have been erratic since late 2021 and flowing mostly at zero, with reverse flow more regular.