(Bloomberg) -- Poland and Bulgaria gave a bullish response Wednesday to the halt in gas flows from Russia. But security of supply can only be assured if other European countries avoid a similar cutoff.
Poland insisted it had enough gas in storage for more than 1 1/2 months and consumers won’t feel the hit, while Bulgaria said it had secured supply for “at least a month.” Yet both will need imports from elsewhere in the region, and Russia has suggested other “unfriendly” states may also face a cut in flows.
“The key question for the European gas market and the Polish gas balance is whether Russian gas will continue to reach western Europe,” Poland’s MBank said in a note. If not, “we cannot rule out the emergence of an undersupply as large as 3 billion cubic meters annually.”
Gas contracts held by Poland and Bulgaria with export giant Gazprom PJSC (OTC:OGZPY) expire at the end of 2022, making those countries less vulnerable to pressure from Moscow than other European importers such as Germany. But for now Russia supplies about half of Poland’s gas and almost all Bulgaria’s demand.
Poland has repeatedly said it does not intend to renew its deal and has been preparing other sources for years. They include an expansion of its liquefied natural gas terminal, with future shipments already booked from the U.S. and Qatar. It has also invested in a new pipeline from Norway, set to start flows in October, helping utility PGNiG SA make use of gas fields bought last year.
Until then, Poland may need flows from Germany -- itself reliant on Russia for more than half its gas -- and neighboring nations.
Bulgaria also said last month it may not extend its contract with Gazprom (MCX:GAZP). Energy Minister Alexander Nikolov said Wednesday the country had secured supplies from alternative sources and won’t yet need to ration gas. Yet it has a scant buffer, with storage sites just 17% full compared with Poland’s at 76%. It will need to boost storage in summer to prepare for higher winter demand.
Bulgaria started receiving Azeri gas in 2021 via a new pipeline. Shipments from the Caspian Sea producer may further increase this year with the opening of a spur from Greece, a country that can also supply LNG. Bulgarian Prime Minister Kiril Petkov said Wednesday he’s “confident” the new link will start on time.
Russia’s move may mean Poland loses 7 billion cubic meters for the remainder of the year and Bulgaria 2-3 billion, according to German utility Uniper SE (OTC:UNPRF). The focus now turns to other European Union nations as President Vladimir Putin continues to demand gas payments in rubles, with settlement for monthly supplies due in the coming weeks.
©2022 Bloomberg L.P.