Operations in 2021

PGNiG’s activities include the wholesale of natural gas produced from domestic fields and imported via pipelines and by sea. Through its specialised unit, the Wholesale Trading Branch, it trades in natural gas, LNG, crude oil, electricity, CO2 emission allowances, and property rights. The Wholesale Trading Branch is also responsible for the import policy and diversification of gas fuel supply sources to Poland.

As part of its business, PGNiG holds a licence to trade in gas fuels, trade in natural gas abroad, generate electricity, trade in electricity, liquefy natural gas, and regasify liquefied natural gas at LGN regasification plants.

In 2021, PGNiG purchased natural gas mainly under the long-term agreements and contracts specified below:

• Contract with PAO Gazprom/OOO Gazprom Export, for sale of natural gas to the Republic of Poland, dated September 25th 1996, effective until 2022 (the Yamal contract);
• Contract with Qatar Liquefied Gas Company Limited (3) for sale of liquefied natural gas, dated June 29th 2009, effective until 2034 (the Qatar contract), and supplementary agreement to the long-term agreement of March 2017 (effective from the beginning of 2018 to 2034);
• Contract with Cheniere Marketing International, LLP for sale / purchase of liquefied natural gas, dated November 8th 2018, effective until 2042.

Deliveries were also made under medium- and short-term grid gas and LNG supply contracts (including a five-year contract for nine shipments of liquefied natural gas from Centrica LNG Company Limited, which began to be performed in 2018).

In 2021, the imported gas volume was 176.9 Twh (16.1 bcm). Gas purchases from countries east of Poland rose by 9.9 TWh (approximately 0.9 bcm) on 2020.LNG deliveries went up from 41.2 Twh (3.8 bcm) in 2020 to 43.2TWh (3.9 bcm) in 2021.

On September 2nd 2021 the annexes to the liquefied natural gas supply contracts were signed by PGNiG with Venture Global Plaquemines LNG, LLC and Venture Global Calcasieu Pass, LLC. Signing of the annexes will cause increase in the volume of LNG supplies to PGNiG by a total of 2 million tonnes of LNG per year from planned liquefaction facilities:

• Calcasieu Pass LNG in Calcasieu Parish – increase in the deliveries from 1 to 1.5 million tonnes of LNG per year;
• Plaquemines LNG in Plaquemines Parish – increase in the deliveries from 2.5 to 4.0 million tonnes of LNG per.

As a result of conclusion of the annexes, total volume of LNG supplies from Venture Global Plaquemines LNG, LLC and Venture Global Calcasieu Pass, LLC will reach 5.5 million tonnes of LNG per year, i.e. approximately 7.4 bcm of natural gas after regasification.

Following the conclusion of long-term contracts for the purchase of LNG at U.S. terminals in previous years, in 2020 and 2021 the PGNiG Group company PST chartered four tankers from the Norwegian shipowner Knutsen OAS Shipping to collect LNG contracted on a free-on-board basis. The vessels, with a capacity of 174,000 cm each, will be placed in service in 2023 and 2024. The acquisition of the vessels will increase the flexibility of LNG purchases and sales and is another step towards developing the PGNiG Group’s trading activities on the global market.

PGNiG actively supports all efforts aimed at the construction of an infrastructural connection that would give Poland direct access to gas from North Sea fields. In January 2018, contracts were concluded for the provision of gas transmission services in the period from October 1st 2022 to October 1st 2037, as part of the 2017 Open Season procedure of the Baltic Pipe project, concerning gas transmission from Norway to Poland via Denmark. Conclusion of transmission contracts with transmission system operators, i.e. GAZ-SYSTEM and Energinet, with a total value of PLN 8.1bn, was the last stage of the Open Season 2017 procedure. For more information on the Baltic Pipe project, see Section 3.2.2.

PGNiG and Gazprom submitted the following requests for renegotiation of the Yamal contract price terms:

• PGNiG: on November 1st 2017, November 1st 2020 and October 28th 2021, requesting amendments to the earlier request for renegotiation submitted by the Company on November 1st 2020 by setting November 1st 2021 as the new effective date of the requested renegotiation under the Yamal contract; and
• Gazprom: on December 7th 2017 and November 9th 2020.

PGNiG remains in contact with the supplier as regards the submitted requests.

PAO Gazprom/OOO Gazprom Export filed two petitions with the Stockholm Court of Appeals with respect to arbitration proceedings instigated by PGNiG against PAO Gazprom/OOO Gazprom Export concerning revision of the contractual price of gas supplied by the supplier under the Yamal contract as of November 1st 2014. The first petition, of October 2nd 2018, was for revoking the Arbitration Court’s ad hoc partial award of June 29th 2018. The Stockholm Court of Appeals, by its judgment of December 23rd 2020, dismissed the petition. The second petition, of May 29th 2020, for reversal of the final award issued by the Court of Arbitration. The case is pending.

In 2021, PGNiG received a total of 35 LNG shipments to Poland, with a total volume of 2.83m tonnes, i.e. approximately 43.21 TWh or 3.94 bcm of natural gas after regasification, including:

• 19 shipments under long-term contracts with Qatargas, with the volume of LNG imports from Qatar totalling 1.75m tonnes, i.e. ca. 26.58 TWh or 2.42 bcm of natural gas after regasification;
• 12 spot deliveries;
• 2 shipments under the PGNiG Group’s medium-term contract with Centrica;
• 2 shipments under a long-term contract with Cheniere.

Customers buy gas from PGNiG at market prices, in line with the formulas and pricing mechanisms set out in the contracts. Contractual prices are determined on a case-by-case basis using a uniform and objective pricing methodology.

In 2021, PGNiG successfully continued its sales strategy and retained the customer base. The largest amounts of natural gas are sold in Poland to industrial customers, including: PKN ORLEN S.A., Grupa Azoty, Grupa LOTOS S.A., PGE Polska Grupa Energetyczna S.A., KGHM Polska Miedź S.A., the ArcelorMittal Group, PGNiG Termika S.A. and Elektrociepłownia Stalowa Wola S.A.

In 2021, PGNiG’s sales of high-methane grid gas in Poland amounted to 198.5 TWh (ca. 18.1 bmc). Year on year, the sales grew by 7.5%, from 184.7 TWh (16.8 bcm).

In 2018, PST opened a branch in Poland to establish relations with gas supply customers in Poland and subsequently across Europe, building on the existing relationships with subsidiaries of international companies based in the country.

As at December 31st 2021, PST supplied gas (E gas) to 20 customers (41 points of delivery in Poland). The customers of the Polish Branch of PST are the largest private businesses from the glass, ceramic, automotive, non-ferrous metal, chemical, food and agricultural industries, receiving gas fuel for their in-house needs at physical points of delivery, as well as wholesale customers taking gas fuel at virtual or physical point of delivery for subsequent resale.

The Polish Branch of PST supports PGNiG OOH and PGNiG OD in the supply of SSLNG from the Klaipėda LNG FSRU terminal in Lithuania to the Polish border. In 2021, the total of 51 GWh was delivered.

In 2021, PGNiG continued to sell natural gas on the Ukrainian market, mainly in cooperation with the ERU Group and other leading traders on the Ukrainian market. Given the prevailing market conditions and high gas stock levels in Ukrainian storage facilities, gas was not imported into Ukraine from the west for a major part of the year and the Company’s trading activities in that country focused on transactions to purchase / sell gas held in Ukrainian underground storage facilities. In 2021, PGNiG’s sales to Ukraine totalled approximately 0.2 bcm (2.5 TWh) of natural gas. Gas was sold in the Ukrainian storage system under the Customs Warehouse Regime (CWR). The Company monitors growth opportunities on the Ukrainian market.

The volume of gas sold by PGNiG on POLPX in 2021 (sales with delivery dates in 2021) was 123.5 TWh (11.12 bcm), up by approximately 17.7 TWh year on year.

In 2021, PGNiG continued to develop its small-scale LNG business, where gas is sold in the form of LNG transported by road tankers to regasification facilities or stations with no access to the distribution network. The volume of fuel delivered to end users in the form of liquefied natural gas is growing steadily. In 2021, 5,699 LNG tankers were loaded in Świnoujście (2020: 3,385). The aggregate amount of LNG the Company placed on the market was 122.6 thousand tonnes, of which 100.9 thousand tonnes was sourced through Świnoujście and 21.7 thousand tonnes came from Odolanów and Grodzisk Wielkopolski. In total, in 2016–2021, the Company placed 401.3 thousand tonnes of LNG on the market, including 271.2 thousand tonnes from the LNG terminal in Świnoujście and 130.1 thousand tonnes from the Odolanów and Grodzisk plants. In addition, PGNiG has transhipped 13.7 thousand tonnes of LNG onto tankers at the small-scale LNG terminal in Klaipėda since April 2020.

PGNiG’s business on the electricity market primarily involves wholesale trading, to provide PGNiG Group companies with access to the market. Total sales of electricity to trading companies and on the Polish Power Exchange accounted for more than 90% of PGNiG’s total electricity sales in 2021. PGNiG provided commercial balancing services to PGNiG TERMIKA and PGNIG TERMIKA EP, as well as commercial and technical operator services to PGNiG TERMIKA.

Following the auctions organised by Polskie Sieci Elektroenergetyczne S.A. in 2021, PGNiG signed the following contracts:

• annual contract for deliveries in 2026, at a record-high price of PLN 400.39/kW/year (net capacity of 17 MW);
• quarterly contract for deliveries in the first quarter of 2022; (86 MW)
• quarterly contracts for deliveries in the first and fourth quarter of 2022; (140 MW)

In 2021, PGNiG actively participated in secondary trading on the capacity market.

Through PGNiG Supply & Trading GmbH, the PGNiG Group is developing its operations in Europe in three main areas: international LNG trading, access to the European gas market, including gas from the North Sea Continental Shelf, and wholesale on the markets of Central and Eastern Europe.

As part of its business, PST can trade in gas fuels in Poland, Germany, the Netherlands, Belgium, Austria, Norway (Gassled System), Denmark, the United Kingdom, France, the Czech Republic, Slovakia, Ukraine, Lithuania and Hungary. PST is an active player on organised markets (exchanges) and in OTC trading. It trades with over 150 counterparties under EFET (master agreements for trading in gas and electricity) or similar standardised contracts. In order to conduct trading activities on the global LNG market, the company has established a branch in London. In 2021, fourteen shipments with 13.4 TWh of LNG contracted by PST were received at the Świnoujście terminal.

In order to be able to start receiving gas from fields on the Norwegian Continental Shelf, PST was registered with the Norwegian Gassled system operated by Gassco (Shipper Agreement). PST is also registered as a shipper (gas intermediary) and a participant of the gas storage system in Ukraine. In 2021, in order to expand its presence in Central and Eastern Europe, the company became a member of the CEEGEX Hungarian gas exchange and the GET Baltic exchange for PGNiG’s Lithuanian market.

PST continues trading in futures contracts for Brent crude and gas in the US Henry Hub, through the following exchanges: ICE Futures Europe and ICE Futures U.S. It also sells electricity on the German market in exchange (EEX) and OTC transactions.

In 2021, PST sold 91.4 TWh of pipeline-supplied gas (including 20.6 TWh of gas from PGNiG UN and the LOTOS Group), 13.5 TWh of LNG and 1.9 TWh of electricity in exchange and OTC transactions. Poland was PST’s largest market for deliveries, where 44% of the volume was sold, while the German and Dutch markets accounted for 29% and 22% of sales, respectively.

In 2019, PST began to receive gas from LOTOS Exploration & Production Norge, under a contract for supply of gas produced in license areas located on the Norwegian Continental Shelf (NCS). The volume of gas received under the contract in 2020 was 6.2 TWh, and 5.0 TWh in 2021. PST also receives gas produced by PGNiG UN on the German coast. In 2020, PST signed three additional contracts for the supply of gas from the Norwegian Continental Shelf/Danish Continental Shelf (NCS/DCS) area. Gas deliveries from the new suppliers started in October 2020 (Aker BP) and December 2020 (DNO), and Ørsted will supply gas starting from 2023.

In the first six months of 2021, PST signed a gas supply contract on the German coast for the 2021 gas year. The company is continuing negotiations concerning a medium-term contract for gas supply from 2022 (with Total Energies Norge) In addition, PST won a tender for the sale of gas produced from the Duva and Nova fields. The gas will be transported to the United Kingdom (seller: Sval Energie AS).

On August 1st 2014, PGNiG OD was spun off from PGNiG to conduct retail sale of natural gas and provide retail customer services. PGNiG OD focuses on the sale of natural gas (purchased mainly on the POLPX), electricity, compressed natural gas (CNG), and liquefied natural gas (LNG). As part of its business, PGNiG OD holds a licence to trade in gas fuels and electricity.

High-methane gas is procured from three main sources:

• Pourchases of gas on the Polish Power Exchange (POLPX);
• Purchase of gas under a bilateral contract, with deliveries to a virtual trading point in the transmission network operated by GAZ-SYSTEM;
• Purchase of gas under a bilateral contract executed with PGNiG, with deliveries to a physical trading point in Słubice.

The largest share in the global volume of high-methane gas purchases was attributable to transactions on POLPX. In addition to high-methane natural gas, PGNiG OD’s purchase portfolio also includes nitrogen-rich gas and liquefied high-methane natural gas (LNG). Nitrogen-rich gas is purchased under a bilateral contract with PGNiG S.A., while LNG is sourced under bilateral contracts with PGNiG S.A. and PGNiG Supply & Trading GmbH sp. z o.o. (Polish Branch).

PGNiG OD’s customer base includes consumers and non-consumers (including in particular small and medium-sized enterprises). Customers are classified into tariff groups based on the following criteria:

• Type of gas fuel received: high-methane gas or nitrogen-rich gas;
• Contracted capacity;
• Annual contracted volume – for customers with contracted capacity of not more than 110 kWh/h;
• Billing system – as per the billing frequency applicable to customers with contracted capacity of not more than 110 kWh/h.

Group 1-4 retail customers purchase gas used mainly for cooking and for water and space heating, as well as in shop-floor processes. Households are subject to a gas tariff approved by the President of URE. In 2021, PGNiG OD applied the following gas fuel trading tariffs:

In addition, by a decision of December 17th 2021, the President of URE approved Gas Fuel Trading Tariff No. 11 of PGNiG Obrót Detaliczny sp. z o.o., effective from January 1st 2022 to December 31st 2022 on the grounds of amendments introduced under the Act of December 2nd Amending the Energy Law which introduced the possibility for gas providers for household clients to utilize a mechanism that uses only the portion of gas purchase costs and to gain costs not yet reflected in the current tariff through subsequent tariffs or through prices and fee rates in three years period since the end of the validity of the tariff approved on the basis of these regulations.

As at the end of 2021, PGNiG OD served the total of approximately 7.144 million customers in tariff groups 1–4 (both high-methane and nitrogen-rich gas) and over 31 thousand gas delivery points in tariff groups 5–7. Business customers buy gas both for the purposes of their industrial processes and for heating, and are billed at prices set in the business tariff and in special offers. The company’s commercial policy results in a stable market share, which is due, among other things, to the level of customer satisfaction, a broad product portfolio and the service quality.

An important factor determining the company’s retail gas sales policy is the obligation to have its tariffs approved by the President of URE. The abolition of this obligation under current legislation is planned for January 2024.

Seeking to meet customer expectations and strengthen its market competitiveness, the company is gradually expanding its offering to the retail base of more than 7m accounts through sales of add-on products.

In previous years, the offering was expanded by adding the following services:

• 24/7 ‘Pomocna Ekipa’ handyman service;
• ‘Na Zdrowie’ package, offering easy and quick access to medical services;
• ‘Doradca Prawny dla Ciebie’ and ‘Doradca Prawny dla Firmy’ legal service packages, which provide access to legal advice and reimbursement of lawyer fees;
• ‘Pełnym Oddechem’ financial service, offered in partnership with BOŚ Bank;
• ‘Fotowoltaika dla domu’ product.

The gas offering is based on special term-plans with fixed prices or variable prices indexed to selected stock exchange indices. Customers who do not wish to be bound by a fixed-term contract can opt for gas supplies based on the standard 'Gas for Business’ price list used in open-term contracts.

The development of product offers and pricing plans is based on segmentation analyses (with particular emphasis on price elasticity) and customer demand communicated through the sales network. An important element of the process is the monitoring of competitors’ activities and offers.

Ramping up the sales of add-on products, such as ‘Fotowoltaika dla Firm’ (contracts covering PV design and installation), energy audits, energy efficiency audits and energy consultancy services, plays an important role in expanding the company’s product mix.

PGNiG OD acted as a ‘stand-by supplier’ and ‘supplier of last resort’ (in accordance with the Act Amending the Energy Law and Certain Other Acts of November 9th 2018).

In 2021, following discontinuation of gas fuel supplies by ONICO S.A., Beskidzka Energetyka Sp. z o.o., ONE S.A., Polski Prąd i Gaz Sp. z o.o. and Konerg S.A., PGNiG OD ensured uninterrupted supply of gas fuel to customers of those energy companies, acting as an emergency supplier or supplier of last resort. Those customers were billed according to the existing gas tariff or ‘Gas for Business’ price table (non-consumers).

PGNiG OD’s customer base includes consumers and non-consumers who have concluded comprehensive service contracts for the supply of electricity or contracts for the sale of electricity. As at the end of 2021, the company supplied electricity to more than 102.5 thousand delivery points.

The option to sell excess renewable energy (from installations with a capacity of up to 500 kW) attracted interest from 60 customers.

Additionally, in the third quarter of 2021 business customers were given the option to buy electricity with Guarantees of Origin.

Growing prices of electricity on wholesale markets (POLPX) may diminish the attractiveness of PGNiG OD’s offering, especially for consumers. The fact that prices for this market segment continue to be regulated and that it is difficult to compete with suppliers from large energy groups is also an important factor.

An offering for prosumers is planned to be introduced as sales in the photovoltaic business grow.

Gas Storage Poland (GSP) is engaged in storage of gas fuels in the following facilities owned by PGNiG: Husów UGSF, Wierzchowice UGSF, Strachocina UGSF, Swarzów UGSF, Brzeźnica UGSF, Mogilno CUGSF and Kosakowo CUGSF.

Source: In-house analysis based on data from the Geology and Hydrocarbon Production Branch and Gas Storage Poland.

As part of its business, GSP holds a licence to store gas fuel in storage facilities. Settlements of gas fuel storage services were subject to the following tariffs:

• amended gas fuel storage Tariff No. 1/2020, effective from 6.00 am on January 1st 2021 to 6.00 am on June 16th 2021;
• gas fuel storage Tariff No. 1/2021, effective from 6.00 am on June 16th 2021 to 6.00 am on September 1st 2021;
• amended gas fuel storage Tariff No. 1/2021, effective from 6.00 am on September 1st 2021 to 6.00 am on October 15th 2021;
• Amendment 2 to gas fuel storage Tariff No. 1/2021, effective from 6.00 am on October 15th 2021 to 6.00 am on January 1st 2022.

Short-term peak fluctuations in demand for natural gas are balanced by supplies from the Mogilno and Kosakowo CUGSFs, where gas is stored in worked-out salt caverns. The capacities of the Wierzchowice, Husów, Strachocina, Swarzów and Brzeźnica UGSFs are mainly used to balance out changes in demand for natural gas in the summer and winter seasons, to meet the obligations under take-or-pay import contracts, to ensure the continuity and security of natural gas supplies, and to meet the obligations under gas supply contracts with customers.

As the storage system operator, GSP provides gas fuel storage services to storage facility users under standardised procedures, on a non-discriminatory, equal-treatment basis, to ensure the most efficient use of the storage capacities. Storage services are provided under standard storage service agreements (SSSA).

The product offering is based on the Storage Facilities (SF) and Storage Facility Groups (SFG), i.e.:

• Kawerna SFG (comprising Mogilno UGSF and Kosakowo UGSF),
• Sanok SFG (comprising Husów UGSF, Strachocina UGSF, Swarzów UGSF and Brzeźnica UGSF),
• Wierzchowice SF.

As at December 31st 2021, under long-term SSAs, GSP provided a total of 172,200 long-term storage capacity packages, including 70,300 packages of storage services provided on a firm basis, and 101,900 packages on an interruptible basis. As part of short-term storage services provided on an interruptible basis as at December 31st 2021, GSP allocated 474 flexible storage capacity packages.

As at December 31st 2021, GSP had a total working storage capacity of 3,174.8 mcm, of which a total of 3,139.6 mcm was made available, on a TPA basis and to GAZ-SYSTEM, as part of long-term services; 18 mcm, out of 30.0 mcm, of working capacity was made available as part of short-term services, on an interruptible basis, due to technical conditions. In addition, GSP allocated 5.2 mcm of working capacity for the needs of the Mogilno CUGSF’s and Kosakowo CUGSF’s technological units.

PGNiG offers a ticketing service which allows gas importers and traders to meet their gas-stocking obligations in accordance with the applicable Polish regulations. The Company performed ticketing service contracts concluded for the gas year 2020/2021 with six energy companies; in the gas year 2021/2022, the services are provided to nine energy companies. The total volume of gas stocks held by PGNiG for other entities was over 310 GWh of natural gas in the 2020/2021 gas year and over 315 GWh of natural gas in the 2021/2022 gas year.

As part of the ticketing service, PGNiG maintains gas stocks in gas storage facilities operated by GSP.