Polish TSO to auction Yamal pipe capacity as transit deal ends

LONDON (ICIS)–Polish grid operator GAZ-SYSTEM will offer capacity for the Polish section of the Yamal pipeline at its annual auction on 1 July for the first time.

The capacity will become available as the long-term transit contract between Russian producer Gazprom and Europol Gaz, the owner of the Polish section of the pipeline, expires in May 2020. Europol Gaz is co-owned by Gazprom and Polish state-controlled incumbent PGNiG (48% each) and Polish trader Gas-Trading (4%). GAZ-SYSTEM is the pipeline operator.

Interested shippers will be able to book annual capacity for up to 15 gas years, while quarterly, monthly, daily and within-day products will be available as well, in line with the EU regulation, GAZ-SYSTEM said on Tuesday.

The EU rules require TSOs to offer standard products at every interconnection point with other transmission systems.

However, this is the very first time that GAZ-SYSTEM offers the Yamal capacity previously tied up in the long-term contract.

Capacity on offer

The Polish section of the Yamal pipeline runs around 680km across the country between the Kondratki border-point with Belarus to the Mallnow at the Polish-German border.

As the long-term transit contract between Europol Gaz and Gazprom expires on 16 May 2020, in the middle of the gas year 2019, GAZ-SYSTEM will offer capacity for the 17 May – 30 September 2020 period as quarterly, monthly, daily and within-day products.

“The remaining capacity of the Kondratki TGPS entry point and the Mallnow TGPS exit point will also be made available as part of the quarterly product auctions on 5 August 2019, and possibly at subsequent auctions if all available capacity is not sold,” the company said.

Transit fees to rise?

The expiry of the long-trem transit contract between Europol Gaz and Gazprom could signal changes in Russian gas transit to western Europe via Poland.

According to Agata-Loskot Strachota, energy analyst at the Warsaw-based Centre for Eastern Studies, the main question will be how much capacity Gazprom will book and for how long and also whether market participants from other countries also seize this opportunity and buy capacity on the pipeline.

Additionally, the end of the transit contract could affect GAZ-SYSTEM as well, as despite it being the operator of the Yamal pipeline, it has not been able to fully execute its operator rights due to the Europol Gaz ownership structure and its transit contract with Gazprom, said the analyst.

The fact that the Yamal pipeline was built before the liberalization of the Polish gas market is likely behind the struggles of GAZ-SYSTEM to exercise its operator power.

However, that set to change following the end of the transit contract.

“Until now, due to conditions EuropolGaz-Gazprom contract, transit of Russian gas via Poland was cheap, probably below market prices. Poland has been profiting on gas transit via Yamal around €5m/year.

I believe this will change from next year as the old contract expires and there will be one tariff structure applied by GAZ-SYSTEM to Yamal and other Polish network entry/exit points, which is calculated according to EU network codes on tariffs,”Loskot Strachota told ICIS.