June 30, 2018 / 9:21 AM / 3 months ago

Arbitrators say lower gas prices from Gazprom justified for Poland's PGNiG

WARSAW (Reuters) - A Swedish arbitration court ruled that Poland’s dominant gas company, PGNiG (PGN.WA), can demand a lower price for gas it buys from Russia’s Gazprom (GAZP.MM), PGNiG said on Saturday.

PGNiG buys from Gazprom most of the gas it resells, and it had often said it pays more than its western European peers.

PGNiG filed for arbitration of its complaints in May 2015 to the Arbitration Institute of the Stockholm Chamber of Commerce, a neutral body that resolves international commercial disputes. The arbitrators initially agreed with PGNiG.

PGNiG also said that while the arbitrators ruled that it could seek to change the contract price within the range of its claim, its request regarding a new price formula was “too far- reaching”.

New prices to be determined by the arbitrators should apply retroactively from Nov. 1, 2014, when PGNiG asked that the prices be revised, PGNiG said in a statement. The decision does not rule out PGNiG’s reaching agreement with Gazprom over pricing, the company also said.

“We are satisfied with the Tribunal’s ruling, which confirms PGNiG’s right to demand a reduction of the contract price and we await the reduction of the contract price to the level of market prices at a later stage of the proceedings,” Piotr Wozniak, PGNiG’s chief executive, said in a statement.

Poland wants to reduce its reliance on gas from Russia and does not plan to extend its deal with Gazprom when it expires in 2022. Under the contract’s take or pay formula, PGNiG has to buy 8.7 billion cubic metres of gas annually.

PGNiG has been buying more liquefied natural gas via a terminal at the Baltic Sea to replace gas from Russia. Poland also plans to build a gas link to Norway, which would give it access to gas from the North Sea.

The Stockholm arbitration court ordered Gazprom in February to pay more than $2.5 billion to Ukrainian energy firm Naftogaz - a ruling meant to conclude a long legal battle that has run alongside Ukraine’s broader political standoff with Russia.

That ruling is being challenged by Gazprom in the same court. It also lodged a filing seeking to terminate contracts with Ukraine on gas supplies and transit.

Reporting by Agnieszka Barteczko and Anna Koper, editing by Larry King

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