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    Poland Squeezed by High Oil, Cheap Gas


The company sold more than in the same period last year but less profitably.

by: William Powell

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Poland Squeezed by High Oil, Cheap Gas

Polish state-run oil and gas company PGNiG reported  August 22 lower profits in the first half of 2019 compared with the same period last year, blaming it mostly on higher oil prices and lower gas prices.

Revenue was up 8% year on year at zloty 22.63bn ($5.7bn), as it sold more gas and electricity. But pre-tax earnings (Ebitda) and net income were both down: zloty 3.1bn down from zloty 4.3bn; and zloty 1.3bn, down from zloty 2.27bn, respectively.

Nevertheless CEO Piotr Wozniak said it was a satisfactory performance, explaining that Q2 2019 saw declining gas prices and rising crude. "Lower gas prices directly affect our revenue from sales of this fuel. On the other hand, in 2019 we paid higher gas procurement costs under the Yamal contract, which are pegged to the prices of crude oil and petroleum products, and they were much higher than in 2018," he said.

Revenue for trade and storage grew 13% year on year, to zloty 17.88bn but the cost of gas rose by 14%, mainly owing to Russian gas pricing: the nine-month lag pushed up prices by 23%, although they will fall again with oil too, later this year.  

In the first half of 2019, day-ahead prices  on the Polish power market fell on average by 20.8% year on year. Even greater dynamics of falling prices had been observed on key European markets, where the natural gas spot price fell by 23.5%, it said.

Upstream revenues were zloty 2.99bn, down 18% year on year, as gas prices were lower and it sold 23% less crude. The average day-ahead price of gas on the Polish Power Exchange fell 19% year on year. Gas production remained stable, at about 2.22bn m³.

PGNiG distributed 6.31bn m³ in the first half , down 1% year on year. In the second quarter of the year, it distributed 14% more but there was no 'beast from the east' this winter, so the Q1 sales were lower. Revenue from distribution services fell 5% year on year owing to the lower distribution tariff in force from February 15 2019.

Power generation saw revenues rise 11% year on year, to zloty 1.41bn. Output rose 6% year on year, to 2.26 TWh, while sales of heat went down 2% year on year, to 23.01 PJ.

Poland has been sourcing LNG, mainly from Qatar and the US, to help it manage without Russian gas when that contract expires in a few years. Welcoming financial close of Venture Global's Calcasieu Pass LNG project August 20, Wozniak said that similar funding decisions are expected in the coming months also for the Plaquemines and Port Arthur LNG projects.