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PGNiG signs agreements for LNG deliveries with two US companies

Warsaw — Poland's dominant natural gas producer and distributor PGNiG said lateTuesday it signed agreements with two US companies, Port Arthur LNG andVenture Global LNG, for long-term deliveries of liquefied natural gas as thecompany pursues its strategy of reducing its dependence on Russian pipelinegas supplies.

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Under the agreements, PGNiG will negotiate the provision of binding20-year contracts for the purchase of 2 million mt/year of LNG, equivalent to2.7 Bcm of gas, with each company, PGNiG said.

The agreements do not oblige PGNiG to sign final LNG purchase contracts,the company said. Under the deals PGNiG will be able to resell the deliveriesthat will be supplied on a free-on-board basis, meaning PGNiG is responsiblefor the transport of the cargoes.

PGNiG's CEO Piotr Wozniak said the deals allow PGNiG to reduce itsdependence on Russian pipeline gas, once the long-term 'Yamal' contractwith Gazprom expires in 2022, as well as increasing the company's potential totrade LNG on the global market.

"This is a very important step for PGNiG in the development of activityin the LNG market. Firstly, we want to diversify the structure of LNGimports to Poland, especially following the expiration of the Yamal contractin 2022," he said in a statement.

"Secondly we receive fuel from the US with a view to expanding ourtrading portfolio. The volumes our American partners will be able to offer usallow PGNiG to expand activity on the global LNG trading market," he added.

If PGNiG goes on to sign final purchase deals with the two US companies,deliveries will start in 2022-23 following the completion of LNGterminals being developed by the American companies in the Gulf ofMexico.

Port Arthur LNG is a subsidiary of Sempra LNG & Midstream, owned by theSan Diego-based Sempra Energy., that is developing the 11 million mt/yearPort Arthur LNG liquefaction facility, which is expected to be completedin 2023.

Bechtel was selected last week as the engineering, procurement,construction and commissioning contractor for the facility.

Venture Global LNG is developing the 10 million mt/year Calcasieu Passfacility, Louisiana, and the 20 million mt/year Plaquemines LNG facilityin Plaquemines Parish, Louisiana. Calcasieu Pass is expected to becompleted in 2022 and Plaquemines is expected to be ready in 2023.

PGNiG buys up to 10.2 Bcm/year of gas under its take-or-pay contract withGazprom. Poland consumes between 16-17 Bcm of gas annually.

Both the government and state-controlled PGNiG have been pursuing apolicy of diversifying gas supplies. In the first quarter of this yearGazprom supplied 78% of PGNiG's gas imports, down from 84% a year earlier.

Government and PGNiG officials have said they have no intention ofextending the Gazprom contract beyond 2022, although they do not rule outfurther purchases of Russian gas.

In mid-2016 the country opened a 5 Bcm/year LNG terminal in Swinoujscie.PGNiG receives gas through the terminal under a 20-year supply contractwith Qatargas as well as spot deliveries. Last November, PGNiG signed afive-year contract with Centrica for LNG deliveries from Sabine Pass inthe US. Poland plans to expand Swinoujscie's capacity to 7.5 Bcm/year by 2022.

Increasing LNG imports is one route Poland is taking to diversify its gassupplies, the other is the 10 Bcm/year Baltic Pipe project, that wouldconnect the Polish, Danish and Norwegian gas networks and allow Poland toimport Norwegian gas directly via pipeline by October 2022. An investmentdecision is expected by the end of this year. -- Staff,

-- Adam Easton,

-- Edited by Jeremy Lovell,