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    PGNiG books smaller profit in 2021


PGNiG saw upstream output climb thanks to newly-acquired Norwegian assets, but saw procurement costs rise at its midstream trading and storage unit.

by: Callum Cyrus

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PGNiG books smaller profit in 2021

PGNiG Group on March 24 said it had achieved a 20% year-on-year earnings increase in 2021, reporting 15.6bn zloty ($3.6bn) for the year before interest, taxes, depreciation and amortisation (EBITDA). 

However its net profit fell by 18% year-on-year to around 6bn zloty from 7.3bn zloty in 2020. Icy weather across Europe last winter pushed gas prices to multi-year highs as market supplies tightened. This led a "robust" E&P performance at PGNiG's upstream unit, which posted year-on-year revenue growth of more than 240% and accounted for around 87% of PGNiG's overall EBITDA.

A key contributor was the rising price of gas-fired electricity. The arithmetic average price of gas on the day-ahead market of the Polish Power Exchange was five times higher year-on-year at 225 zloty/MWh, PGNiG said, while crude oil prices also rose 65% on the year to 273 zloty/barrel.

Group volumes of both gas and oil rose due in part to PGNiG's increased activity on the Norwegian Continental Shelf, after it purchased 21 licence areas for $615mn from INEOS E&P Norge last March. Gas output rose from 4.5bn m3 in 2020 to 5.4bn m3 last year, while oil production grew to 1.37mn tons from 1.32mn tons.

PGNiG said the INEOS deal was "highly profitable" and that Norway remained its upstream growth "priority" to diversify imported gas and reduce Russia's influence.  The licences hold around 117mn barrels of oil equivalent, and should bring PGNiG's Norwegian output up by around 55%.

But PGNiG is an integrated gas business and the tight market caused imbalances at its midstream trading and storage unit. The cost of procuring gas rose faster than PGNiG's midstream and storage revenues, with purchases rising by 234% year-on-year in the final quarter to 21.9bn zloty, from 6.6bn zloty in Q4 2020. That erased more than 1.7bn zloty from PGNiG's final EBITDA result, compared with a positive 9.6bn zloty contribution in 2021, even though midstream revenues in the fourth quarter alone climbed 238% to 32.5bn zloty.

Gas volumes sold to non-PGNiG customers rising by 9% year-on-year to 34.5bn m3, on the back of higher sales volumes from household and corporate customers, meant the company bought 9% (16.1bn m3) more gas imports to supplement internal production.

LNG accounted for more than 24% of PGNiG's imports, but 61% was still piped from markets across Poland's eastern border.

"The PGNiG Group's results for 2021 demonstrate that even amid a hydrocarbon price turmoil and pan-European gas crisis, PGNiG is able not only to maintain stable operations, but also to improve its performance and consistently pursue its strategy, which creates the group's value and enhances security of gas supplies," said Pawel Majweski, president of PGNiG's management board.