Poland’s state-controlled oil and gas producer PGNiG saw its consolidated net income decline in 2021 as higher import prices for natural gas and rising distribution costs wiped out growth in revenues.

According to its latest financial statement, PGNiG’s gross revenues hit 70 billion Polish zloty ($16.7 billion) last year, up 78% against 2020, but net income declined 18% over the same period, totalling 6 billion zloty.

With operating expenses more than doubling to 54.4 billion zloty in 2021, PGNiG reported earnings before interest, taxes, depreciation and amortisation of 15.6 billion zloty, up 20% on the previous year.

PGNiG’s exploration and development division has become a top performer, with an Ebitda return of 13.5 billion zloty in 2021, up from 1 billion zloty in 2020.

A decline in hydrocarbon output in Poland was offset by strong growth at the company’s assets in the Norwegian North Sea, where four more licences were acquired in January.

On the other hand, unprecedented volatility on the gas spot market in Europe negatively impacted PGNiG’s trade and storage division, which reported an Ebitda loss of 1.7 billion zloty last year compared with earnings of 9.6 billion zloty in 2020.

PGNiG said that during the past year, demand for natural gas in Poland surged 7% as Covid-19 restrictions eased, helped by accelerating business activity and a colder winter in the fourth quarter.

The company reported that reduced volumes of gas from Russian giant Gazprom — the main supplier of pipeline gas from across Poland’s eastern border — led PGNiG to import additional liquefied natural gas cargoes from the spot market.

Even with Gazprom’s refusal to supply additional gas under an existing long-term contract, imports from Russia grew by 10% to 9.9 billion cubic metres in 2021, according to the PGNiG’s report.

Meantime, LNG imports and pipeline gas sourced from sources other than Russia, rose by just 6% to 6.2 Bcm, because of capacity restrictions at alternative import routes.

Expansion of alternative routes

According to the PGNiG report, works are under way to expand the annual regasification capacity of Poland’s LNG import terminal in the Baltic port of Swinoujscie to 6.2 Bcm this year, with further work planned for 2023 for the terminal’s capacity to rise to 8.3 Bcm per year in 2024.

Last year, some 3.9 Bcm of gas was imported using the Swinoujscie terminal.

PGNiG also expects the start-up of the Baltic Pipe project later this year bringing capacity to deliver up to 10 Bcm of gas per year from the Norwegian North Sea via Denmark.

These two initiatives will permit the PGNiG to meet demand while allowing its agreement with Gazprom to expire in December, the company said.

Further ahead, PGNiG expects a second LNG regasification terminal to begin operations in the Baltic Port of Gdansk in 2027 to add over 6 Bcm of additional import capacity.

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