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23

Gazprom's prices on long term contracts to change after 3 years

Gazprom on Friday detailed the concessions it was giving to its four largest customers, saying its long-term contracts would take into account the much-lower spot price for gas for only three years.

 

Gazprom on Friday detailed the concessions it was giving to its four largest customers, saying its long-term contracts would take into account the much-lower spot price for gas for only three years. The company said earlier last week that it renegotiated contracts with Germany's E.On, France's GDF Suez, Italy's Eni and Turkey's Botas as spot-traded gas remains about 25 percent cheaper than Gazprom's deliveries, which customers are contractually bound to buy. Between 10 percent and 15 percent of sales will be linked to spot prices through 2012, Gazprom deputy chief Alexander Medvedev said in an interview. The rest will continue to be linked to oil prices.

 

"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,” he said, The Financial Times reported. “We are sure that in three years the situation will be back on track.” Gazprom has been widely criticized for being inflexible in its pricing, a policy that was believed to be one of the reasons it yielded some of its market share to competitors from Norway and Qatar. The crisis-hit demand, coupled with a surge in the production of cheap shale gas in the United States, led to an oversupply on the company's traditional market in Europe and Turkey.

 

Gazprom earlier said the take-or-pay condition for the contracts — a key point that allows it to plan its investment for years ahead — remained in place after the talks with customers. Given Gazprom's record of sales last year, the company may lose $1.6 billion in revenues on exports this year alone if spot prices remain at the January level, Vedomosti reported, citing its own calculations.

 

Source : The Moscow Times