Russian state-controlled natural-gas giant OAO Gazprom (OGZPY, GAZP.RS) is standing firm on how it prices exports for "the foreseeable future," says deputy chief executive Alexander Medvedev.
Russian state-controlled natural-gas giant OAO Gazprom (OGZPY, GAZP.RS)
is standing firm on how it prices exports for "the foreseeable
future," says deputy chief executive Alexander Medvedev.
The world's largest natural-gas producer is a major supplier to
Europe
. However,
the company has lost ground to competitors abroad that are willing to adopt
more flexible pricing and charge less.
Still, "We are not planning to make any additional changes," Mr.
Medvedev said.
European competitors such as
Norway
's
Statoil ASA (STO, STL.OS) are chipping away at Gazprom's market share by
offering European clients more flexible contracts and prices not linked to oil,
analysts said.
Gazprom, which links its price to oil, saw its gas sales to the European Union
fall 9.1% last year from 2011, while Statoil delivered record gas volumes to
the region, growing its sales by around 10% in 2012, after the Norwegian
company linked many of its contracts to a natural gas benchmark. Natural gas
prices at European hubs have been weaker than oil prices.
But Mr. Medvedev said Statoil's gains came at a cost. The company grabbed
market share at the expense of revenue, he said.
"We are not hunting [sales] volumes, we are hunting for cash," he
added.
Earlier this week, Russian President Vladimir Putin signaled he is willing to
end Gazprom's monopoly on
Russia
's
natural gas exports by allowing rival companies to ship liquefied natural gas
abroad. The move is being considered because
Russia
,
despite having the world's largest gas reserves, continues to lag behind other
exporters in tapping the high-value LNG export market.
Gazprom believes the Kremlin's efforts to liberalize
Russia
's gas
exports could be a "positive development," so long as new Russian
exporters don't flood the market with cheap LNG, Mr. Medvedev said.
"It's not just a question to give the right" to export, he said,
"but also to give certain responsibilities" for not driving prices
down to unprofitable levels for all.
"That's why President Putin asked [the industry] to analyze the concept
and prepare suggestions. And obviously Gazprom's suggestions will be taken into
account," Mr. Medvedev said.
The deputy chief executive also denied Gazprom was pressured by Russian
officials to discount natural-gas exports for
Bulgaria
to
win the Bulgarian government's approval of the South Stream gas pipeline
project. The project will take gas directly to southwestern
Europe
,
bypassing traditional transit hubs in
Ukraine
and
Belarus
,
which charge fees for transferring gas.
The Kremlin had "no influence of the South Stream process on our
commercial discussions," Mr. Medvedev said.
Instead, Gazprom and
Bulgaria
agreed on lower prices because of declining gas demand in
Europe
, slow
European economic growth and the influx of cheap coal from the
U.S.
as an
alterative heating source.
Mr. Medvedev added it was a coincidence that both deals--the revising of
Bulgaria
's
prices and the South Stream agreement--were signed on the same day.
"It wasn't planned to happened on one day," he said, adding the
signing of the South Stream agreement was delayed by the death of Patriarch
Maxim, the head of
Bulgaria
's
Orthodox Church, on Nov. 6 last year. Mr. Medvedev said that when the pricing
accord was reached, both parties saw they could sign both deals on one day,
Nov. 15, and "economize on the transport costs."
But while some Gazprom customers like
Bulgaria
and
Poland
saw
the prices reduced via negotiations last year, other Gazprom customers, like
the
Ukraine
, were
not so fortunate.
Gazprom served
Ukraine
with
a $7 billion bill for gas in 2012.
Ukraine
officials have balked at paying, calling the charge unreasonable.
But Mr. Mevedev said, "A contract is a contract. This bill is issued in
accordance with contractual terms."
He added that Gazprom is in "positive discussions" with
Ukraine
,
though no deal has been reached.
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