The Lithuanian Energy Ministry said on 30 January that shareholders of the Baltic state’s gas utility Lietuvos Dujos voted to initiate arbitration against Russian gas monopoly Gazprom in order to lower too high gas prices.
“Gazprom supplied gas price for AB Lietuvos Dujos is significantly higher than in Latvia’s, Estonia’s or Germany’s markets. This is harmful for our customers, for our economy and also for the company AB Lietuvos Dujos, which is actually losing customers and gas consumption is being significantly reduced because of such prices,” the energy ministry said.
The decision to initiate arbitration was proposed by Lithuanian government, which holds 17.7% of Lietuvos Dujos. Germany’s E.ON owns 38.9% and Gazprom, the only gas supplier to Lithuania, has 37.1%.
The Lithuanian company announced earlier in January through the Vilnius Stock Exchange Information Network that its shareholders would consider on 30 January the Lithuanian Energy Ministry’s proposal to initiate arbitration proceedings against Gazprom. “The arbitration proceedings will be ceased if the company reaches an amicable contract with Gazprom, which will be approved by the board of directors,” the statement read.
Greece is also seeking lower gas prices from Gazprom but so far has avoided arbitration given that it is a lengthy procedure. The Russian company and Greece’s Public Gas Corporation (DEPA) are currently holding discussions on the cost of natural gas.
“So far, Gazprom appears to have compromised on prices only with those buyers that have real alternatives to Russian gas,” Julian Lee, senior energy analyst at London’s Centre for Global Energy Studies (CGES), told New Europe on 31 January. “Both Greece and Lithuania have the prospect of future alternatives, either in the form of piped gas from Azerbaijan, or as LNG (liquefied natural gas), but the competition may not yet be strong enough for Gazprom to make concessions easily,” he added.
Lee noted that the fact that expected LNG exports to the United States have not materialised because of the surge in its domestic production of shale gas have already put pressure on Gazprom. The start of US LNG exports in the next couple of years can only increase that pressure, he added.
In Brussels, Greece’s Prime Minister Antonis Samaras brought up the issue of the high cost of natural gas in a bilateral meeting with Russian President Vladimir Putin. The Greek government is thought to have ordered DEPA officials to reject any price of more than $400 per 1,000 cubic metres.
Samaras argued that Greece could not afford to keep paying natural gas prices that are about 30% above the European average. “My country is currently coming out of a six-year recession and low energy prices from Russia are crucial to our recovery,” he said.
Gazprom last year pulled out of a bid at the last minute for DEPA. One of the reasons, officials said at the time, was the European Commission’s “objections” to the sale that would give Gazprom a strong hold in the Mediterranean state’s energy market.
The Commission launched an antitrust probe against Gazprom in September 2012. The Russian gas giant said two weeks ago it would defend itself against accusations it had abused its dominant market position.