Gazprom to Benefit from Take-Or-Pay
OAO Gazprom expects to double the volume of natural gas that European consumers will be forced to pay for this year under previously agreed contract terms, Deputy Chief Executive Officer Alexander Medvedev said.
Gazprom, Russia’s gas export monopoly, received payment for 5 billion cubic meters of gas under so-called take-or-pay provision in its long-term supply contracts last year, Medvedev said at a conference broadcast on Russian state television.
“This year, most likely, virtual exports will double compared with last year,” he said today.
Gazprom, which sells gas to Europe under multiyear contracts with prices linked to those for oil products, exported 140 billion cubic meters of gas to Europe last year and expects to ship a similar amount this year.
Gas demand in Europe shrank last year following the global economic crisis, while supplies of liquefied natural gas increased amid rising production from shale formations in the U.S., leading to oversupply and drop in spot prices.
Customers such as E.ON Ruhrgas AG, Eni SpA and GDF Suez SA have secured flexible supply terms from Gazprom for the period through 2012, Medvedev said earlier this month. The fundamentals, such as long-term contracts and the take-or-pay principle, haven’t changed, Medvedev said today.
Gazprom agreed to introduce lower spot prices in its long- term contracts as well as postponing supplies of 15 billion cubic meters of gas between 2010 and 2012, Gazprom said in a prospectus to Eurobonds obtained by Bloomberg.
The Moscow-based producer expects to reinstate the original terms in the contracts after demand for gas in Europe recovers, the document said. Medvedev reiterated today Gazprom plans to reach the pre-crisis level of export supplies in 2012.
“Not only have we pulled through a hard test that exporters including our company have encountered lately, but also didn’t alter long-term strategic principles and goals while demonstrating adequate contract flexibility,” he said today.
Source: Bloomberg