The poles created a “miracle.” The present. They managed to bypass all the laws of the market economy, successfully overcome the limitations of economic geography and “win” over the main geopolitical rival – Russia. In any case, if you believe the loud as a mountain echo statements of Polish officials.

On October 17, 2018, news agencies reported that the Polish state-owned company PGNiG and the American company Venture Global LNG had signed an agreement on the annual supply of two million tons of American liquefied natural gas for twenty years. PGNiG CEO Peter Vozhnyak marked this result as a huge strategic victory of Warsaw in the international market. In particular, calling it a proof of Poland’s ability to completely free itself from gas dependence on Russia. In addition, according to him, the Americans offered conditions “twenty-something percent cheaper than the conditions of Gazprom.”

The result looks like a miracle that violates not only the principles of the market economy, but also directly contradicts the elementary economic geography. Pipeline gas from a close source was a third more expensive than liquefied gas from overseas? Calculator with this agree resolutely refuses, and as show gradually emerging new details, not without reason.

Under the terms of the agreement, the us side undertook to ship about 25 gas tankers per year on a Free on Board (FOB) basis from its two Calcasieu Pass and Plaquemines plants on the coast of Louisiana. Based on the prices of 2018, for one million British thermal units (a universal value that leads to a common denominator of any fossil fuel that can burn with the release of heat) there take 6.46 dollars. The terms of the contract mean that the Polish gas becomes immediately, as soon as it is pumped from the coastal storage to the ship’s tanks, crosses, so to speak, the ship’s handrails.

Then there are the freight costs of the vessel, crossing the ocean to the port of destination, port and other fees, services of the crew, insurance and regasification (i.e., conversion of product back to the ordinary gas), which (attention!) does not assume the seller and the buyer. The American companies with the sale of LNG in Europe did not come out because with all of the above its total cost (!) at the European terminal, it did not fall below $ 7.63 per MBTU, while the average market price of gas in the European market fluctuated between $ 6.7 and $ 7.5.

Although there were three terrible weeks last winter, when there was a large deficit with gas and spot prices jumped to 11.1 dollars in the short term, during which the Americans even managed to sell as many as three tankers, in General, the EU gas market is quite stable and predictable.

If we consider more familiar measures “per thousand cubic meters”, the gas there costs an average of 220-230 dollars. Russian or Norwegian. Qatar – up to 260 dollars, but it is not in Europe, because the middle East prefers to work with Asia, where the same thousand cubes reaches 370 dollars. Us LNG is coming out about 275 – 285 dollars.

That is, about any 20% cheaper than Gazprom’s gas and there can be no question. Given the absence of Warsaw’s own gas transport ships, as well as the possibility of obtaining any decidedly huge discounts on freight, it is difficult to think of what the poles could so decisively save money that the deal was so profitable. So, lying? As if Yes, but strictly speaking, no. Simply, as usual, say not the whole truth.

To begin with, there is no firm contract with PGNiG at the moment. And can not be due to the absence in nature of the plants themselves. Applications for a construction permit Calcasieu Pass and Plaquemines formally filed, but to this day are in limbo due to the lack of them even an elementary investment decision. Translated into Russian, in addition to the name of these projects no longer have any clear parameters. Including production facilities.

Under US law, in such conditions, no firm contracts can be concluded

However, Venture Global LNG does not violate anything. Just as Peter, Wozniak some rushed to call the result of contracts. In fact, the parties have signed a non-binding Protocol of intent to no effect. Yes, 2 million tons of LNG are present in it, but not today, but from the moment when the construction of plants is completed, theoretically in 2022 (Calcasieu Pass will supply 1 million tons per year) and in 2023 (Plaquemines, also for 1 million tons). Accordingly, any prices stated there are absolutely speculative. Moreover, the specific figures are not disclosed by the parties.

However, the curiosity of the transaction does not end there. Legally, PGNiG is a strictly state-owned company, but this does not mean a strict obligation to supply the purchased gas strictly only to cover the country’s own needs. As mentioned in the sources, and even confirmed by Mr. Vozhnyak, the agreement allows the buyer to determine the future of the goods.

That opens three options development events. The first is netting. Poles can supply this gas, for example, under Norwegian obligations to South America in exchange for the shipment of Norwegian gas to Poland. The parties significantly save on logistics costs. Theoretically possible, but almost utopian. Such transactions are carried out on a parity basis, which means that instead of 270 Warsaw can get gas for 250, but not for 190, as under the current contract with Gazprom.

The second-commercial. American LNG will not go to any Europe at all, but will be immediately directed to the Asian market, where its sale is economically profitable.

The third option implies that no practical action is envisaged at all. Simply both sides pursue their own goals.

The poles need history as a possible lever of pressure on Gazprom in order to get additional discounts on the contract after 2022. Otherwise, hydrocarbons will have to be bought from Germany. And it will be the same Russian gas, but also with an additional German cheat. And so you can try to pretend that there is a workaround. At least make an appearance.
The position of Venture Global is a little better

The trade war with China brought the matter to the complete refusal of China from gas purchases from the United States. This closes 2/3 of the Asian market. In Europe, the product is uncompetitive. The fate of South America is unclear. That makes it unpredictable prospects with sales as a whole. And since according to the American scheme, the owners of LNG plants themselves do not trade anything, only providing a liquefaction service, investors still do not understand – who will buy the services of new plants? And if no one, then why build them at all?

The presence of a” contract with the poles ” allows you to sell the appearance of cool business to American banks, which still have a lot of cheap dollars to invest in the project. But the quantitative tightening (QT) program launched by the fed is gradually closing the window of opportunity. In fact, if a large and long-term customer is not found within the next year, even those 78 million tons of LNG capacities that are already under construction in the US and will be completed by the end of 2019 will be clearly excessive.

And everyone is happy. And the American and the Polish side with a satisfied smile, and the mysterious phrases of the report on achieving strategic success. Venture Global shows that now in the United States for a number of reasons formed a significant surplus of shale gas, a fair share of which is simply burned, and up to half of the volume sold at large discounts from the market, reaching just those 30%.

What is being done is due to the shortage of gas transportation capacity for the delivery of gas to the plants – remains behind the scenes. The poles believe that the plants in Louisiana will be built in four years, and the sea of cheap gas in the US will remain, thereby ensuring the “realism” of the final price by 20-30% below the current Gazprom, that is somewhere at the level of 135-145 dollars per thousand cubic meters. And there are no practical risks, because the agreement of intent has no force of the contract.

Scam, you say? No, it’s just business. For all its conditionality, Poland already now has the opportunity to claim any bonuses from the United States for such a clear public support for American global plans. And it helps to increase the volume of exports. And in reducing the negative foreign trade balance. And the expansion of Gazprom in Europe strongly reflects. And allied loyalty demonstrates. Than not the candidate for a medal! However, better money. Or a military base, the placement of which the poles have been tearfully begging the Pentagon and the White house for many years.

All of it promises quite a tangible money in exchange for virtually nothing. And for reputation can be not worry. Over the past five years, the poles have made about a dozen such victorious relations. One more, one less. Who cares! And by 2022, as the famous Khoja Nasreddin used to say, either the donkey will die, or the padishah. But now the sensation rose noble, and Poland in it pretends to be a triumphant.

Of course, in Moscow, these clownish passes see and laugh quietly into his mustache. How would say the late Viktor Stepanovich, “there were no more such slides, chatby us to push.” That’s true

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