Medvedev Gives No Ground on Long Term Contracts

The Deputy Chairman of Gazprom has reiterated the Russian gas monopoly’s rejection of any adjustment of its long-term gas contracts with European customers.

Speaking in Salzburg, Alexander Medvedev effectively pointed to poor decision making, saying that customers entered into contracts based upon assumptions that they made on gas demand.

E. ON Ruhrgas, Poland’s PGNiG and Italy's Eni SpA are amongst European gas importing firms asking for contractual changes to renegotiate the prices of their contracts with gas producers to take into account lower spot prices.

Medvedev questioned the relevance of low prices exhibited in the spot markets in view of their lack of liquidity.

Gas distributors face substantial risks in coming years from unfavorable long-term gas supply contracts indexed to crude oil prices that are much higher than prices on the spot market.

RWE AG has initiated arbitration procedures for most of its natural gas supply deals with producers, as negotiations to adjust commercial terms have failed.

Medvedev did have some good news for European consumers, saying that it appears that the price increase for Russian gas will be lower than predicted a month ago.

"If the current picture remains is, in our contracts, the price in the fourth quarter are close to 400 USD per 1,000 cubic meters," said Medvedev. In late April, Gazprom CEO Alexei Miller commented that he expected prices to rise to 500 USD.