Russian Gazpom to dispute gas price with largest European buyer
Gazprom Export intends litigate in Stockholm with the German company Uniper, its largest Europen gas client. Gazprom’s trading division notified Uniper that an arbitration procedure would be initiated, with the demand to revise the gas price according to the contract starting on February 1, 2018. “Approaching arbitration to resolve a contract dispute is a standard practice, envisaged by such contracts,” reads Gazprom’s statement, as quoted by RBC news agency.
The official Gazprom Export representative did not disclose how much the monopoly intended to raise the price, or how much Uniper or Gazprom’s average wholesale purchaser in Germany pays for gas. On Investor Day in New York on February 8, Gazprom Deputy CEO Alexander Medvedev said that Gazprom’s average exporting price in 2017 was $196.7 per thousand cubic meters, and predicted this figure could grow to $220 in 2018. He said that in January, gas was shipped to Europe at an average of $224 per thousand cubic meters, and predicted that the price may drop in February.
RBC news agency reports, quoting a source in Gazprom, that the primary reason for revising the terms of the contract is a change in market conditions. The company wants to increase the gas price for Uniper “so that the importer does not have unreasonably high margins compared to the market prices on spot platforms, such as the TTF, NGG and Gaspul”, the RBC corresponded noted. At the end of trading on February 14, the gas price pat the TTF hub was the equivalent of $240.5 per thousand cubic meters, $239.7 at NCG and $234.3 at Gaspool, according to the calculations of Alexei Belogoryev, deputy head of the Energy and Finance Institute.
Uniper accounts for half of Germany’s Russian gas imports. Germany was Gazprom’s biggest client in Europe. In 2017, Germany purchased 53.4 billion cubic meters of gas, according to a Gazprom report.
Gazprom also litigated with Uniper between 2014 and 2016. At that stage, the company E·On Global Commodities SE (renamed Uniper on January 1, 2016) filed a lawsuit against Gazprom at the Stockholm Arbitration Institute, demanding a revision of the gas shipment price for the previous period (from October 30, 2013). Since 2012, Gazprom and E·On have had an additional contractual agreement which enables the Germans to buy gas at a discount. However, in 2014 Gazprom refused to give a discount, citing the change in market conditions. The litigation concluded in the spring of 2016, when the partners agreed to correct the gas price in the coming years. At the end of the dispute, E·On paid Gazprom an additional €800 million, Interfax reported. The period concerned in the judicial agreements has now ended, and the two companies are once again at odds.
Analysts believe that the dispute between Gazprom and Uniper is due to the fact that the previously made amicable settlement expired on December 31, 2017. He assumes that Gazprom only wants to maintain the validity of the price formulas it used in 2017. “Uniper would evidently like a greater pegging to the spot gas price,” the expert believes. In his opinion, unlike the dispute with Naftogaz Ukraine, this dispute will not lead to a massive revision of the gas price with other clients.