November 7, 2011 / 12:06 PM / 8 years ago

UPDATE 2-Poland seeks arbitration over Russian gas prices

* Polish PGNiG files arbitration case in Gazprom row

* Seeks to cut gas import prices under long-term deal

* Follows other European customers in drive for lower import prices (Adds detail throughout)

WARSAW, Nov 7 (Reuters) - A dispute over gas import prices between Russia and its European customers escalated on Monday as Polish gas monopoly PGNiG filed an arbitration procedure against Gazprom to cut import prices under a long-term supply deal.

PGNiG, which holds full control over production, transmission and distribution of natural gas in Poland, said earlier this year it wanted at least a 10 percent discount and would turn to arbitration if was not successful.

“PGNiG is counting on reaching an agreement (in arbitration), which would allow for gas purchases at prices in line with conditions that are shaping the European gas market,” the company said.

Gazprom Export, the exporting arm of Gazprom, declined to comment.

The move comes a day before Gazprom is due to open its Nord Stream pipeline to Germany. The pipeline runs across the Baltic Sea, avoiding transit through Ukraine and by extension through Poland.

It also comes a week after Poland signed a contract with Gaz-System, a pipeline operator, to carry natural gas from German operators to Poland at a 15 percent discount to Gazprom’s import price.

Russia’s Alfa Bank said it treated the news “as mildly negative for Gazprom as the company’s key European clients seem to be successfully diversifying their gas importation routes”.

But the bank added that Poland’s heavy reliance on Russian gas also limited its leverage.

“We believe the country’s efforts to receive a gas price discount will not significantly impact Gazprom, although a minor price decrease is possible,” Alfa Bank said.

Poland relies on natural gas for around 13 percent (14 billion cubic metres), of its annual primary energy supply according to the Energy Delta.

The country imports around 10 bcm of gas each year, and around 90 percent, or 9 bcm, of that comes from Russia.

Diversification of supplies has for long been high on Warsaw’s agenda, with its focus lately turning to potential shale gas exploration.

Gazprom already reduced its gas prices for Poland last year, in exchange for exporting higher volumes.

ESCALATING ROW

Poland’s gas monopoly follows other European gas companies in seeking a better import price from Gazprom.

“PGNiG is just the latest of several of Gazprom’s European customers to launch or threaten arbitration over gas prices, with several having settled out of court with a reduced price agreement,” said Andrew Neff, senior energy analyst at IHS CERA.

In August, Germany’s E.On Ruhrgas (EONGn.DE) said it would seek arbitration in a prolonged row with Gazprom over long-term gas supply contract terms.

In an arbitration procedure, the price dispute is referred to an independent arbitrator, nominated by the parties to review the case.

Gazprom has also made concessions to Italy’s Edison SpA and Greek gas company DEPA. (Reporting by Pawel Bernat and Adrian Krajewski in Warsaw; Additional reporting by Vladimir Soldatkin in Moscow, and Henning Gloystein and Oleg Vukmanovic in London, editing by Jane Baird)

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