• 3 minutes Could Venezuela become a net oil importer?
  • 7 minutes Reuters: OPEC Ministers Agree In Principle On 1 Million Barrels Per Day Nominal Output Increase
  • 12 minutes Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
  • 19 hours Could Venezuela become a net oil importer?
  • 40 mins Reuters: OPEC Ministers Agree In Principle On 1 Million Barrels Per Day Nominal Output Increase
  • 34 mins Oil prices going Up? NO!
  • 23 hours Tesla Closing a Dozen Solar Facilities in Nine States
  • 19 hours Gazprom Exports to EU Hit Record
  • 21 hours EU Leaders Set To Prolong Russia Sanctions Again
  • 19 hours Could oil demand collapse rapidly? Yup, sure could.
  • 19 hours Oil Buyers Club
  • 1 day Saudi Arabia plans to physically cut off Qatar by moat, nuclear waste and military base
  • 23 hours Why is permian oil "locked in" when refineries abound?
  • 12 hours Oil prices going down
  • 22 hours EVs Could Help Coal Demand
  • 17 hours Saudi Arabia turns to solar
  • 10 hours Russia's Energy Minister says Oil Prices Balanced at $75, so Wants to Increase OPEC + Russia Oil by 1.5 mbpd
  • 1 day China’s Plastic Waste Ban Will Leave 111 Million Tons of Trash With Nowhere To Go
  • 6 hours Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
Alt Text

China’s Oil Demand Could Take A Big Hit

In the last three years…

Alt Text

The Oil Giant That Saw Its Cash Reserves Plunge 90%

India’s top oil exporter has…

Alt Text

Energy Efficiency Adds Value To Home Prices

A new study has suggested…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trending Discussions

Europe’s Case Against Gazprom Will Damage Russian Influence

Europe’s Case Against Gazprom Will Damage Russian Influence

As Russian President Vladimir Putin tries to maintain its grip over Eastern Europe with its vast web of natural gas pipelines, one small European country gained a bit of leverage over Russia. Lithuania announced on May 8 that it has successfully pressured Russian gas giant Gazprom into lowering its price for natural gas through 2015, according to Reuters.

Lithuania is not the first country that comes to mind when thinking of who may be able to stand up to Russia. But the deal came as Lithuania made some aggressive moves to seek global suppliers of liquefied natural gas (LNG). The small Baltic nation was in talks with Norway and Qatar and was trying to sign a deal as quickly as possible.

To be sure, it is not as if Lithuania has achieved energy independence from Russia. In fact, it relies on Russia for 92 percent of its imported natural gas supplies. But Lietuvos Dujos – the Lithuanian utility that accounts for 40 percent of the domestic market – forced Gazprom to slash its price of gas. Although the details of the agreement were not disclosed, Lithuanian Prime Minister Algirdas Butkevicius previously said that he expected Gazprom to agree to a 20 percent price reduction.

Related Article: Gazprom Takeover Leaves Southern Kyrgyzstan Without Gas For Three Weeks

“Lietuvos Dujos has entered into an agreement with Gazprom that involves a significant reduction in the price of natural gas,” the company said in a statement.

By seeking alternative supplies of energy, Lithuania forced Russia into price concessions for fear of losing market share. In the coming months and years, as Europe continues to diversify its sources of energy, it will enhance its leverage of Russia in a similar manner.

But perhaps more important than Lithuania seeking LNG suitors is the ongoing case on behalf of the European Commission against Gazprom for price manipulation and antitrust violations. Europe has argued that Gazprom manipulates prices for political gain and the European Commission is set to release the results of a two-year investigation this month, which is expected to demonstrate substantial evidence that Gazprom is breaking European laws. After that report is released, the EC could take action relatively quickly.

“I think we are going to see, first of all, a spectacular lump of bad publicity for Gazprom, because the complaints will list all of the bad things that Gazprom has been doing, then we will have fines, which may be very substantial, and there will also be the opportunity for the companies that have been overcharged for gas to launch lawsuits against Gazprom over the extortionary prices that they have been charging,” Edward Lucas, the editor of The Economist, told Radio Free Europe in an interview.

The European Commission could seek fines against Gazprom and/or a change in pricing structure. Gazprom has long linked its prices to the price of crude oil, and has signed up countries to long-term contracts, which are often expensive.

Related Article: Russia Claims Ukraine’s Black Sea Oil And Gas Bounty

But as the spot market in Europe has grown as a result of a flood of Qatari LNG – which was once destined for the U.S. until shale gas came about – Russian gas is no longer the only game in town. Purchases of natural gas on the spot market have shot up from just 15 percent in 2008 to 44 percent in 2012. This has Gazprom’s gas contracts looking more and more expensive and even extortionary, as Mr. Lucas points out. Eastern European countries often pay 1 ½ times more for natural gas than does Western Europe.

That has Gazprom scrambling to preempt any actions by the European Commission. By granting price cuts, it hopes to disarm the complaints by many EU member countries. It has maintained near-monopoly control over Europe’s energy for years, but its influence could be on the wane. The discount it just gave to Lithuania is a sign that cracks in Russia’s grip over Europe are beginning to show.

By Nick Cunningham of Oilprice.com




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News