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Gazprom will supply 15 per cent of gas to Europe with a discount

Date: March 5^th 2010 Author: Anastasia Filatova, Moscow Category: Articles
Topic: Natural gas

During the next three years Russian gas monopoly OAO Gazprom will supply up to 15 per cent of gas to Europe under a spot market price, reports Lenta.ru. At present, the prices on the spot market are 25 per cent lower than the prices set in Gazprom’s contracts.

This discount will be available for the largest clients of Gazprom in Europe – German Ruhrgas, Italian Eni and French GDF Suez.

PHOTO: www.nord-stream.com

“Every three years we have the right to look at prices, and what we have done today is just for a three-year period including 2010. We are sure that in three years the situation will be back on track. There is no danger in the mid- to long-term,” Deputy Chairman of Gazprom’s Management Committee Alexander Medvedev said, as quoted by the Financial Times.

Earlier, Gazprom refused to supply gas to Europe under the spot market prices and insisted on the invariability of the long-term contracts in which the price for Russian gas is oil-linked with a time lag of six to nine months.

In 2009, the European importers of gas were unable to purchase the whole contracted volume of gas due to economic recession. Gazprom’s clients have started to doubt the expediency of oil-linked prices of gas, having increased their purchases on the spot market which offered the best prices. As a result, Gazprom’s sales in Europe declined sharply.

According to Gazprom, the January spot market prices were lower than those in the long-term contracts by 117 dollars per a thousand cubic meters. Thus, according to forecasts by Gazprom, exchange quotations will grow to a price level of the long-term contracts only in 2011. Business daily Vedomosti reports that in 2010 alone, the concern will receive 1.6 billion US dollars less.

According to the Federal Customs Service, the actual volumes of Russian natural gas exported in 2009 decreased by 23.9 per cent to 120.5 billion cubic meters. Extraction of Gazprom last year has sunk to a record-breaking low figure in its entire history, totalling 462.2 billion cubic meters which is 16 per cent below the 2008 level.

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