Gazprom Reduces Gas Prices To Some European Customers

January 19, 2012
In a rare concession to European utilities that have long pressed for pricing relief, Russian state gas producer OAO Gazprom (GAZP.RS) said Tuesday it had agree to lower the price to several European importers by an undisclosed amount due to changing market conditions.

The move comes as an inflow of liquefied natural gas to Europe and increased production of shale gas in the U.S. have pushed Gazprom's long-term contract prices above spot market prices, prompting importers to ask for contractual changes. The shift also comes amid recent declines in natural gas demand in Europe in the wake of the mild winter, a condition that has prompted some utilities to cut retail prices recently.

Gazprom--a supplier of about a quarter of Europe's gas needs--said price reductions were given to France's GDF Suez SA (GSZ.FR), Germany's Wingas, Italy's Sinergie Italiane, Slovakia's Slovensky Plynarensky Priemysel AS, or SPP, and Austria's Econgas Group, Gazprom said. Gazprom continues to face arbitration proceedings with some other utilities that have pressed for relief.

"Gazprom has reached and formalized agreements with a number of major European buyers, which involves certain adjustments to the price of Russian gas," said Gazprom's Deputy Chief Executive Alexander Medevdev.

"(The changes) take into account developments in the gas market in Europe and the situation with the economy and the energy sector of certain European states," he said.

The five companies import around 35 billion cubic meters of Russian gas a year, or close to a quarter of Gazprom's European exports.

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