UPDATE 2-Polish gas imports down 16 pct on Ukraine row

Poland's imports of Russian gas have dropped overall by only 16 percent despite a total halt in supplies via Ukraine triggered by the row between Moscow and Kiev over pricing, Polish gas monopoly PGNiG said on Wednesday.
PGNiG said it had offset much of the shortfall by increasing gas deliveries from a second pipeline crossing Belarus and also by tapping more extensively into Poland's domestic gas reserves.

The company also took steps to limit deliveries to its largest industrial clients to help shield private households and vital public services from disruption.

'At the moment (total) gas imports from the East are being carried out at 84 percent. In order to balance deliveries to clients, usage of gas from storage was increased,' PGNiG said in a statement.

PGNiG does not provide exact volumes of imported gas through each route, but the Ukrainian link is estimated at 14-15 billion cubic meters a day. Imports via Belarus have been increased by at least 5 billion cubic meters daily.

Poland uses about 13 billion cubic metres of gas annually, of which about one third comes from domestic gas sources
The Belarus pipeline and domestic reserves puts Poland, the largest ex-communist state in the European Union, in a stronger position than some of its neighbours.
'Compared to other countries in the region our situation is moderately safe thanks to the alternative import route,' DI BRE analyst Kamil Kliszcz told Reuters.

As temperatures have dropped well below zero in recent days, Poland's daily gas usage rose to about 55 million cubic metres daily from 45 million cubic metres before the cold spell, PGNiG spokeswoman Joanna Zakrzewska said.

INDUSTRY HIT

On Wednesday large gas consumers including chemical makers and refiners started to receive information on an impending cut in gas supplies after the government approved measures aimed at economising on consumption.

Poland's largest fertiliser company Pulawy, which analysts see as most vulnerable to the disruption in gas supplies, has already reported PGNiG will cut the volume of supplied gas by between 12.5 and 16.7 percent as of Wednesday.

'If the reduction in imports persists, Pulawy would be the most vulnerable because it did not reduce its production levels earlier, unlike other chemical firms,' Kliszcz said.

The reduced supply to Pulawy might last until the end of January.

Poland's top oil refiner PKN Orlen will see its gas supplies cut by as much as 28 percent starting later on Wednesday and lasting until the end of January.

The cut in supplies will have a small impact on the company's profits because it will be forced to use heating oil instead of gas to keep its production running, PKN's spokesman Dawid Piekarz said.

Earlier the refiner declared that despite the gas disruption it will keep the refining level unchanged.

Other Polish chemical makers Police and Tarnow were forced to cut their production levels in late 2008 due to sharply reduced demand for fertilizers and falling prices which makes them more immune to the gas crisis.
Source: By Patryk Wasilewski and Pawel Bernat, forbes.com