PRESS: Gazprom to tie European contracts to spot gas prices

MOSCOW, Apr 14 (PRIME) -- Russian gas giant Gazprom will switch to using spot gas prices in Europe as a guidance in its long-term European contracts, where the price is currently tied to the cost of the basket of oil products, Kommersant business daily reported Thursday.

Gazprom recently agreed to settle gas price disputes with Germany’s E.On and France’s Engie. Market sources told Kommersant that E.On will pay 800 million euro retroactive payments to Gazprom as part of settling mutual price claims on the gas supply contract.

The payment will cover the period of 2013–2015 and is connected with the fact that spot gas prices, at which E.On received a right to buy part of gas volumes from Gazprom in 2012, were from time to time higher than prices calculated in contracts tied to the basket of oil products.

The gas price in all long-term contracts on the European market has been always tied to the cost of the basket of oil products. But as a result of the 2009 crisis, the demand for gas in Europe has fallen and stopped corresponding to volumes set aside in contracts. At the same time, volumes of spot gas trading have significantly increased. As a result, Gazprom’s European clients, who were forced to buy gas under contracts tied with the cost of the basket of oil products and sell them at a lower spot price, were suffering losses and demanding discounts and a switch to the spot price from Gazprom, Kommersant said.

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