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Polish PGNiG to be obliged to sell 70% of its natural gas

12 Oct 2012 10:05:05 | esgm

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Polish incumbent PGNiG will be required to sell up to 70% of its gas on the country's planned exchange in an effort to create a competitive wholesale market, the latest draft of the natural gas law suggests.

If fully approved, this proposition would equate to some 9.8 billion cubic metres of gas being offered to counterparties through the bourse.

PGNiG on Thursday said it would prefer the obligation to initially start at 15% and then gradually rise to 70% depending on market reaction.

Local media have suggested a sliding scale could be an option, with PGNiG at first required to sell 30% of its volume over the bourse in the first six months, then rising to 50% in the next six months. Only after one year would PGNiG then be required to market 70% of its gas through the platform.

But energy regulator URE has reacted by saying a 70% threshold would be optimal as this volume equates to all the gas consumed by industrial and commercial end-users. It is these customers that could have their regulated tariffs removed should URE be satisfied with market activity on the exchange, which is earmarked to being in December.

Market participants have recently been saying that an obligation on PGNiG is needed if the market is to become competitive. Without the gas, they have argued, there would be little access to volumes with which to trade.

Legislative process

Although included in the draft document released by the economy ministry, it is by no means a certainty all these rules will make it through the whole legislative process.

The bill first needs to pass through a governmental committee that focuses on EU matters before receiving the full backing of government itself. After that, it will head to both houses of parliament to be debated and approved.

On Wednesday, the economy ministry could only say that it wanted the draft to be legally approved as soon as possible.

The economy ministry has been working on a new gas law - along with similar documents on power and renewables - for almost a year. When consultations on all three documents took place at the start of the year, the ministry had hoped transposition would be completed by the middle of 2012.

All three documents form Poland's transposition of the EU's third energy package.

Gas release

To create a competitive market in Poland PGNiG, along with URE, had originally considered hosting a gas release programme, although this method of animating the market has essentially been abandoned. The release suggested that around 70% of PGNiG's gas be offered to the market through auctions.

Poland's gas exchange will be run by electricity bourse PolPX. It is expected to commence operation at the start of December when a new network code - which includes provisions for a virtual hub - enters into force.

Prior to Thursday, PGNiG has already committed to sell 100 million cubic metres every quarter via the platform. TMM

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