Poland, Russia closer on gas deal

Talks between Poland and Russian energy giant Gazprom could soon yield a revised gas supply deal, as progress on other gas-related fronts appears to have set the stage for compromise. The breakthrough stems from the most recent in a series of meetings last week among Gazprom head Aleksei Miller, Prime Minister Leszek Miller and representatives of domestic gas monopoly Polskie Górnictwo Naftowe i Gazownictwo (PGNiG). While lean on specifics, government spokesman Michał Tober was quoted by Reuters as saying the Russians have now placed renegotiation of gas supplies on the bargaining table. "There's a good opportunity for compromise here," said Bidzina Bejuashvili, fuel analyst with Raiffeisenbank in London. While Poland seeks a new gas supply agreement - possibly extending the contracted delivery timeframe - the Russians are pressing Miller's government to open the way for another gas pipeline.

Soon after the Democratic Left Alliance's (SLD) victory last fall, Poland sought to renegotiate a supply contract signed with the Russians in 1996 that secured the delivery of some 250 billion cubic meters (bcm) of gas per year through 2020. The government, citing lower than expected economic growth, has slashed Poland's near-term gas consumption forecasts nearly one quarter to 12.7-13.7 bcm by 2005. Domestic demand is now estimated at 11 bcm; some 70% imported from Russia. Critics have called for diversification of gas imports; a notion that spurred a deal signed last year between the previous Solidarity Election Action (AWS) government and a consortium of Norwegian producers. The $11 billion pact, which SLD has eyed skeptically since winning elections in September, calls for Poland to receive some 74 bcm of gas between 2008 and 2024.

But fuel analysts, pointing to stronger Russian ties under SLD and the government's lowered demand projections, look for Poland to walk away from the deal. Poland has until the end of this year to decide whether to do just that. "We're waiting for (PGNiG) to come back to us," said Kristin Nebben, spokeswoman with Statoil, which leads the Norwegian gas consortium. "For the time being we have this contract and until someone tells us something different, we're working toward that." Meanwhile, Gazprom remains non-committal on the construction of a second Yamal pipeline - which would run parallel to the existing east-west transmission line that supplies some 130 bcm of gas annually to 15 countries. Instead, Gazprom has proposed an alternative route, connecting Belarus via Poland to Slovakia. Polish approval of Gazprom's proposed route would be needed before gas supply terms are settled, analysts said. At least one of Gazprom's key demands from Poland - increasing capacity in the existing Yamal pipeline via two additional compressor stations - appear to have been met.