A wholly owned subsidiary of Russian state-controlled gas monopoly Gazprom has filed a claim against Polish oil and gas producer and importer PGNiG at an international arbitration tribunal in Stockholm, Sweden.

The subsidiary, Gazprom Export, said in a statement that it is seeking to revise retroactive price terms of a long-term gas sale and purchase contract — also known as the Yamal contract — that the companies signed in 1996 and which is due to expire on 31 December 2022.

The Russian company said it has used its contractual right to ask PGNiG to increase the price on two previous occasions — November 2017 and November 2020 — both times without success.

The Russian company’s action is expected to further worsen relations between Gazprom and Poland.

In recent years Poland has been looking to reduce its dependence on Russian gas pipeline supplies and has objected to Gazprom’s Nord Stream 2, which carries volumes from Russia to Germany via the Baltic Sea.

Poland has built its own liquefied natural gas import terminal and is also preparing to receive natural gas volumes by end of this year 2022 via the Baltic Pipe project, which will carry Norwegian gas to Denmark and poland.

PGNiG acknowledged Gazprom’s filing and said the Russian company’s request for an increase of the contract price “is absolutely unfounded”.

The Polish producer said Gazprom Export submitted both requests in response to requests from PGNiG — in November 2017 and November 2020 — asking the Russian company to start talks aimed at reducing, rather than increasing, the gas price.

Until now, PGNiG has succeeded in renegotiating long-term price formulas under the Yamal contract and, in 2011 and 2015, exercised its right under the Yamal contract to begin arbitration proceedings in Stockholm.

In March 2020, the tribunal revised the price formula, with Gazprom asked to make a retroactive payment of $1.5 billion that the Russian company paid to PGNiG in June 2020.

However, despite making that payment, Gazprom Export said it would continue to seek a reversal of the March 2020 award in the Appeal Court in Stockholm, with the next round of hearings scheduled for February.

Increasing reliance on gas spot purchases

When the Yamal contract expires at the end of this year, Poland will become reliant solely on securing gas supplies from Gazprom on a spot basis, rather than a term basis.

However, Gazprom last year halted operations at its spot gas sales platform for European buyers as it reduced gas exports to north-western Europe via the Nord Stream subsea pipeline to Germany, the Yamal pipeline — running across Belarus and Poland to Germany — and via Ukraine’s gas transmission network.

Gazprom’s supplies to Poland via the Yamal pipeline have been running at an average of just 5 million cubic metres per day since 12 January, against 113 MMcmd in mid-January 2021, according to the company’s disclosure notices.

Gazprom acknowledged in its latest statement that its total gas exports dropped by 41% to 5.4 billion cubic metres between 1 and 15 January, with total gas production averaging 23.1 Bcm during this period.

The monopoly said that gas deliveries to China increased by 150% in the first half of January against the same period last year.

However, it did not specify the exact volume sent to China via th Sila Sibiri pipeline, which runs from the Chayanda field in East Siberia.

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