Polish gas firm goes to arbitration over Gazprom contract

Poland's gas monopoly PGNiG has turned to an arbitration tribunal in Sweden following deadlocked talks with Russian energy giant Gazprom on gas price cuts, business daily Kommersant reported on Tuesday. PGNiG's decision follows similar moves by other European gas consumers such as Italy's Edison and Germany's RWE and E.On, which have appealed to the Stockholm Arbitration Tribunal for a ruling on gas price discounts and a switch to gas spot prices. So far, only Edison has been successful, obtaining a 200 million euro discount from Gazprom. Poland has been seeking a renegotiated formula for calculating the price of Russian natural gas since April this year. It wants to revise the formula introduced in 2006 which is pegged to international oil prices, which have risen significantly since then and pushed up the cost of gas imports. Under the current contract with Gazprom, Poland may apply to an arbitration tribunal if the two sides fail to settle differences within six months. "The talks with our Russian partner have not yielded results which would be acceptable to PGNiG," the company announced in a statement. "Therefore, like other European companies, PGNiG has decided to exercise its rights under the contract." PGNiG added, however, that commercial negotiations with Gazprom would continue despite arbitration proceedings. Gazprom Export, the export arm of Gazprom, told Kommersant that the company had not yet received notification of the launch of arbitration proceedings Kommersant quoted Mikhail Korchemkin, head of East European Gas Analysis, as saying that the Polish company's demands for gas price cuts were fair. PGNiG paid $333 per 1,000 cu m of Russian natural gas in 2009 or $40 more than German companies for example, increasing to $65 in 2010, he said. However, Gazprom is unlikely to revise its long-term gas contracts before the arbitration tribunal makes any judgment, as time is a factor that plays in favor of Gazprom, with PGNiG currently paying about $500 per 1,000 cu m, he said. Gazprom was unavailable for immediate comment to RIA Novosti.