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Wed 27 Nov 2013 01:50 PM

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Poland to probe Qatar deal for LNG imports

Supreme Audit Office says it will look into 2009 agreement amid concerns over high costs

Poland to probe Qatar deal for LNG imports

Poland's Supreme Audit Office said on Wednesday it would look into the country's deal to import liquefied natural gas (LNG) from Qatari state-run exporter Qatargas, whose supplies will be more expensive than existing sources of gas.

Under an agreement signed in 2009, Poland's gas monopoly PGNiG will buy 1 million tonnes of LNG annually from Qatargas for 20 years at a price closely correlated to crude oil.

Poland, which hopes to reduce its reliance on Russian gas, will receive the gas at its new LNG terminal on the Baltic Sea, starting in 2015, after facing delays.

But based on current prices, the Qatari imports would cost at least a third more than what Russia charges for deliveries to Europe.

"We examine all these kinds of contracts, which are key to the Polish economy. We will also undoubtedly examine the contract with Qatar on the liquefied gas supplies," Audit Office spokesman Pawel Biedziak said.

"We are analysing when to do that and what should be the scope of the examination."

The deal with Qatar calls on Poland to pay a rate of 16 percent or above of crude oil prices, plus a fixed component of around 50 US cents per million British thermal units (mmBtu), trade sources familiar with the agreement said.

At current oil prices of $111 per barrel, that works out to a delivered price of $18.25/mmBtu, making it one of the world's most expensive long-term LNG contracts ever signed.

The Audit Office earlier this year criticised Poland's negotiations with Russia's Gazprom in 2006-2009, arguing Poland overpaid for gas imports from its eastern neighbour.

The office is Poland's top independent state audit body designed to safeguard public spending. It is subordinate to the lower chamber of Parliament.

Sources told Reuters earlier this year that PGNiG had set up a committee to look into renegotiating its Qatari deal. PGNiG was not immediately available to comment.