PGNiG's big splurge

Polish gas concern PGNiG will spend around zł.30 billion through 2015 as a move to diversify its gas supply in international markets and offset the cost of gas imported from Russia, the company announced on Thursday. 

According to the company, the largest impact on the company's financial results are the fact that the transactions are conducted in US dollar, with prices reflecting roughly a nine-month delay, meaning that the cost of gas which PGNiG purchased in Q3 2008 reflect prices of Q4 2007 and Q2 2008, so the recent slide in oil prices is unlikely to ease the pressure on the company. To offset the costs, PGNiG was allowed to increase gas prices for its consumers twice this year, by 14.3 percent in mid-April and another 11 percent as of November 1.

To lessen its reliance on Russia, PGNiG has decided to spend zł.30 billion to diversify its supply lines. According to the statement released by the company, PGNiG intends to boost domestic gas extraction to around 6.2 billion cubic meters, increase crude oil extract to 1.8 million tones in the coming years and tap into deposits in foreign markets by 2011.

PGNiG CFO Sławomir Hinc told a news conference that the company expects its debt to rise to zł.10 billion due to financing the planned investment by 2015.