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Gazprom Hints at Flexibility In Gas Prices for Europeans

Gazprom hinted Wednesday that it could adjust its long-term deals with European customers to avoid imposing fines for reduced gas purchases.

The comments came as industry analysts say Gazprom is presenting a tough line with its customers in Europe under which they must buy a minimum amount of gas or pay fines.

European firms, for their part, say they would stick to current terms and practices despite complications, while some observers note that Gazprom is in danger of losing its share in Europe’s market, which it supplies with more than a quarter of imported gas.

“Long-term contracts will stay in place, but they might be changed,” Sergei Komlev, head of contract structuring and price formation at Gazprom Export, Gazprom’s exporting arm, told a conference organized by the Association of European Business.

His chief, Alexander Medvedev, said earlier this week that some companies are facing take-or-pay problems but he still expected Gazprom’s European customers to fully take volumes of contracted gas. The discussions were fuelled by a report suggesting that European customers owe Gazprom $2.5 billion under take-or-pay provisions.

Representatives of European companies on Wednesday tried to downplay the issue, saying they will fulfill the contractual obligations.

“All obligations should be met. … Long-term contracts are the backbone of the business,” said Uwe Fip, senior vice president at E.On Ruhrgas.

“Long-term contracts play a pivotal role and they will remain attractive,” Xavier Perret, general delegate in Russia from GDF Suez added.

Former Deputy Energy Minister Vladimir Milov said in comments published in Vedomosti that Gazprom suffered big losses in the European market due to its inflexible pricing policy and inability to defend its interests.

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