Russian gas giant OAO Gazprom (GAZP.RS) doesn't rule out the possibility of altering its long-term export contracts, but will retain the take-or-pay principle, the company said Wednesday.
"Changes could be made to the long-term contracts," said Sergey Komlev, head of price formation at Gazprom Export. "But all the main principles, including take-or-pay, will remain in place," he added.
Take-or-pay is a contract stipulation whereby the buyer agrees to pay for a minimum amount of product over a specified time, whether or not the seller delivers that amount.
Gas prices under Gazprom's long-term contracts, which are pinned to those of oil with a six to nine month lag, have far exceeded spot market prices this year.
Moreover, the economic slowdown has depressed demand for natural gas in Europe, and Gazprom's European costumers, such as Germany's E.On Ruhrgas AG, France's GDF Suez (GSZ.FR) and Italy's ENI SpA (E) have bought less Russian gas this year than specified in their take-or-pay contracts.
"Long-term contracts have (over time) adopted to the market reality, and there is no reason to think that the new realities that we are facing now will not be incorporated into the structure of the long-term contracts," Komlev said, without elaborating.
Take-or-pay contracts used to be common gas industry practice when liquid spot markets didn't exist and producers needed long-term deals with stable prices to underpin investments in new gas fields.