Supreme Audit Office report proves Russian gas contract expiry reasonable

Poland’s Supreme Audit Office’s (NIK) report continues to prove that discontinuing the Yamal gas contract with Russian Gazprom is a better idea than the one the Civic Platform (PO) - Polish People’s Party (PSL) government made in 2010 to sit at the negotiating table without any substantive preparation to extend the contract.

Poland’s monopoly gas provider Poland Oil and Gas (PGNiG) officially gave 3 years’ notice to Russian Gazprom on Friday that it does not intend to continue to buy gas from them through the Yamal pipeline after the contract expires in December 2022.

The 2013 NIK report, declassified in 2018, continues to prove that discontinuing the contract is a good decision. The report reads that “the negotiations… were undertaken without any substantive preparation on the part of Poland.”

“Irregular actions at the initial and the negotiation stages, a lack of proper cooperation between parties participating in the negotiations and the failure to benefit from the arguments at hand decreased the possibility of an efficient negotiation of gas delivery conditions. Possibilities were already limited by Gazprom’s monopoly on gas import to Poland,” reads the NIK report.

“When approaching the negotiations with the representatives of the Russian government aimed at negotiating intergovernmental agreements on cooperation in the gas sector, Poland had no negotiation strategy ready. The Economy Minister responsible for the negotiations did not prepare such a strategy and did not attempt to propose to the Russian side that the negotiations be conducted at the level of enterprises,” continues the report.

“The preparations for the negotiations were undertaken by the Economy Ministry only in the face of Russia stopping the deliveries of gas to Poland in January 2009. That is when works on a negotiation position began, however, the details were prepared in an insubstantial way… instructions were composed based on the proceedings of ongoing Polish-Russian talks, however, they did not specify the strategy for the Polish delegation nor the range of possible agreements…,” the report found.

“The weak negotiating position of Poland also resulted from Poland being dependent on gas deliveries from the East due to the years-long lack of investments in pipeline connections with Western Europe – an opportunity that the Russian side successful seized…,” the NIK report reads.

Unless better conditions are offered, no space for Russian gas: expert

Jakub Wiech, an energy expert, has commented on the negotiations, writing that “the Polish negotiators did not use their trump card, which was the ratio of the size of purchase to the concession on the price.” Nevertheless, the expert did not rule out that Russian gas may be purchased after 2022, however, if anything, on rules different from those dictated by the Yamal contract signed in 1996 and prolonged twice, first in 2006 and again in 2010.

“Taking into consideration the forecast gas delivery portfolio that includes the Baltic Pipe and the LNG terminals, the fact that Russian gas will find little space on the Polish market in 2023 must be noted,” concluded Mr Wiech.

The Baltic Pipe will link Poland to supplies from Norwegian fields in the North Sea via Denmark and is due to open before the end of 2019. The LNG terminal in Świnoujście which is currently being extended has been receiving US gas.