Bloomberg News

Gazprom Supplied 7% of Europe’s Gas at Spot Rates in Last Year

November 17, 2011

Nov. 17 (Bloomberg) -- OAO Gazprom supplied 7 percent of total gas supplies to Europe at prices linked to spot rates last year after revising contracts with some customers, the Russian gas exporter said in a bond prospectus obtained by Bloomberg.

Gazprom conducted negotiations last year with customers including EON AG’s Ruhrgas unit, Eni SpA, GDF Suez SA. They sought to revise prices under contracts because of oversupply in Europe and a gap between spot and long-term prices, according to a preliminary bond prospectus dated Nov. 11, a copy of which Bloomberg News obtained.

Gas importers in Europe, who buy about two-thirds of their fuel under long-term contracts, have pressured Gazprom to change its pricing formulas after spot rates fell. The Russian gas producer, which indexes its prices to oil with a lag of as long as nine months, agreed to give weight to gas prices at European hubs in talks with some clients last year.

“While we are including trading floor quotations in some of our contracts, we generally consider this pricing mechanism to be unsuitable for determining prices under our long-term contracts due to its volatility and lack of predictability,” Gazprom said in the prospectus.

Over the past year, E.ON Ruhrgas, RWE’s Transgas unit, Erdgas Import Salzburg GmbH and Poland’s PGNiG started arbitration against Gazprom, demanding a review of long-term contract prices, according to the prospectus. The company is continuing talks with a number of importers, including EON, RWE and Eni, the prospectus said

Sergei Kupriyanov, a spokesman for Gazprom, declined to comment on information in the prospectus.

Gazprom shipped about 139 billion cubic meters of gas to Europe last year and expects export volumes to increase to at least 151 billion cubic meters this year, Sergei Chelpanov, deputy head of the state-run company’s export unit, said Nov. 9.

Gazprom News: GAZP RM <Equity> CN <GO>

--Editors: Will Kennedy, Reed Landberg

To contact the reporters on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net; Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net; Gavin Serkin at gserkin@bloomberg.net


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