Poland's chems industry must brace for gas price hike - bank

12 April 2011 17:51  [Source: ICIS news]

PRAGUE (ICIS)--Poland's chemical industry should brace itself for a gas price hike, an investment bank said on Tuesday.

Prague-based Wood & Company noted an announcement from the Polish Energy Regulatory Office (URE) stating that a natural gas price rise would be justified due to market linkage to rising oil prices and concluded that the Polish chemical sector should ready itself for a hike on 1 June.

"Based on our current crude price assumptions for 2011-15, at least a 15% hike would be needed immediately [for Polish gas monopoly PGNiG] to avoid loss-making operations in the second half of 2011 and another 15% in 2012 to make the trading segment profitable next year," the bank said.

However, it is unlikely that the URE will permit such a steep tariff hike, Wood & Company added.

With natural gas demand at around 4bn cubic metres, which is almost entirely sourced from Russia via pipelines, the Polish chemical industry is PGNiG’s biggest industrial customer.

Throughout the past two years, the Polish Chamber of the Chemical Industry (PIPC) has complained that Poland's chemical sector is sometimes being forced to pay up to twice as much for natural gas as foreign competitors.

The situation exists because Poland has no pipeline links to bring in gas from countries other than Russia, meaning chemical companies can not obtain gas from the spot market but must instead rely on Russian gas provided via PGNiG at long-term contractual prices.

To tackle this dilemma, PIPC is calling for investment in a short interconnector pipeline that would link the gas grids of Poland and Germany.

However, it said it was encountering resistance to the project from the treasury ministry.

The treasury ministry did not respond to enquiries on why it had not backed the pipeline proposal.

By: Will Conroy
+44 20 8652 3214

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