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    Gazprom to Settle $1.5bn Award to PGNiG by July 1


Gazprom and PGNiG have also signed an annex to their long-term supply contract adjusting the pricing formula.

by: Joseph Murphy

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Gazprom to Settle $1.5bn Award to PGNiG by July 1

Russia's Gazprom has agreed to pay Polish state gas importer PGNiG $1.5bn by July 1 in compensation for previously overpriced gas supplies, PGNiG said on June 15, drawing a line under a five-year legal dispute.

Gazprom was ordered by a Swedish arbitration court in March to refund PGNiG's overpayments for gas supplies since November 2014 and also to amend the pricing formula in the pair's long-term supply agreement, known as the Yamal contract. After some delay, Gazprom adjusted its invoices in late April based on a new formula that takes into account hub prices in Western European markets.

In a statement, PGNiG said the two sides had now signed an annex to the Yamal contract, adjusting the new pricing formula. It added that "the parties also agreed that by July 1 this year, Gazprom will pay approximately $1.5bn in overpayments for gas supplies in 2014-2020." Gazprom has not commented on the matter.

PGNiG is already benefiting from cheaper gas imports thanks to the pricing revision. Prices under the Yamal contract were previously oil-indexed with a time lag. This meant that despite the slump in oil and gas prices earlier this year, PGNiG was still paying a comparatively high price for supplies.

Meanwhile, Gazprom said in a report on June 15 that it had initiated arbitration proceedings in January against Italy's Eni over the interpretation of their three-year gas supply contract. Details of the dispute were not disclosed, although Gazprom said the pair were in the process of agreeing who would chair the arbitration tribunal. Eni is Gazprom's main customer in the Italian market, which took 4.07bn m3 of Russian gas in the first quarter.

Gazprom also noted it had ended arbitration proceedings with Germany's Uniper in late March. Uniper is a key buyer of Russian gas arriving in Germany and also one of Gazprom's partners in Nord Stream.