Poland Prepares for Gas Market Liberalization

The roadmap for gas market liberalization in Poland is to be presented in mid-December.

Created after consultation with the gas monopoly PGNiG and future market players, the plan will list legal barriers blocking the emergence of competition within the internal gas market. The head of URE (Energy Regulatory Office) Marek Woszczyk says that the next step – deregulation of gas prices for industrial customers – will be possible in the third or fourth quarter of 2012.

URE has not set any dates for individual prices to be released. Unofficial sources suggest that this will be possible after 2014.

But how quickly will competition emerge?

PGNiG imports two-third of supplies from Russia, under a long-term agreement based on an oil-indexed price formula. As import prices are higher than regulated gas tariffs, the company effectively subsidizes imported gas with low-cost domestic production. The current difference between import and regulated prices pushed PGNiG into the red in Q3. (note: PGNiG has been seeking a reduction in the price of its imported supplies and has warned Gazprom that it is ready to resort to international arbitration.)

As required by EU regulation, the transportation system has already been separated from the PGNiG with Gaz-System S.A. designated as the national gas transmission system operator, handling task of transporting gas throughout the country to distribution networks.

However PGNiG provides upwards of 98% of gas supply.  While regulations allowing the sale of gas stored in other EU countries are already at place, PGNiG owns all of the gas storage capacity.

The Polish parliament is working on a new legislation that will create an operator similar to Gaz-System, to provide open access for storage facilities.

While EU-backed infrastructure plans (interconnectors, north-south corridor, other grid extensions), Poland's first LNG import terminal on the Baltic coast at Swinoujscie and emerging conventional and unconventional gas production will create room for some competition, that day appears far in the future.