• 50 mins Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 2 hours $1.6 Billion Canadian-US Hydropower Project Approved
  • 4 hours Venezuela Officially In Default
  • 6 hours Iran Prepares To Export LNG To Boost Trade Relations
  • 8 hours Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 14 hours Saudi Oil Minister: Markets Will Not Rebalance By March
  • 19 hours Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 23 hours Rosneft Announces Completion Of World’s Longest Well
  • 1 day Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 1 day Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 1 day Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 1 day Santos Admits It Rejected $7.2B Takeover Bid
  • 2 days U.S. Senate Panel Votes To Open Alaskan Refuge To Drilling
  • 2 days Africa’s Richest Woman Fired From Sonangol
  • 2 days Oil And Gas M&A Deal Appetite Highest Since 2013
  • 2 days Russian Hackers Target British Energy Industry
  • 2 days Venezuela Signs $3.15B Debt Restructuring Deal With Russia
  • 2 days DOJ: Protestors Interfering With Pipeline Construction Will Be Prosecuted
  • 2 days Lower Oil Prices Benefit European Refiners
  • 2 days World’s Biggest Private Equity Firm Raises $1 Billion To Invest In Oil
  • 3 days Oil Prices Tank After API Reports Strong Build In Crude Inventories
  • 3 days Iraq Oil Revenue Not Enough For Sustainable Development
  • 3 days Sudan In Talks With Foreign Oil Firms To Boost Crude Production
  • 3 days Shell: Four Oil Platforms Shut In Gulf Of Mexico After Fire
  • 3 days OPEC To Recruit New Members To Fight Market Imbalance
  • 3 days Green Groups Want Norway’s Arctic Oil Drilling Licenses Canceled
  • 4 days Venezuelan Oil Output Drops To Lowest In 28 Years
  • 4 days Shale Production Rises By 80,000 BPD In Latest EIA Forecasts
  • 4 days GE Considers Selling Baker Hughes Assets
  • 4 days Eni To Address Barents Sea Regulatory Breaches By Dec 11
  • 4 days Saudi Aramco To Invest $300 Billion In Upstream Projects
  • 4 days Aramco To List Shares In Hong Kong ‘For Sure’
  • 4 days BP CEO Sees Venezuela As Oil’s Wildcard
  • 4 days Iran Denies Involvement In Bahrain Oil Pipeline Blast
  • 7 days The Oil Rig Drilling 10 Miles Under The Sea
  • 7 days Baghdad Agrees To Ship Kirkuk Oil To Iran
  • 7 days Another Group Joins Niger Delta Avengers’ Ceasefire Boycott
  • 7 days Italy Looks To Phase Out Coal-Fired Electricity By 2025
  • 7 days Kenya Set To Give Local Communities Greater Share Of Oil Revenues
  • 7 days Rosneft, China To Deepen Strategic Cooperation
Alt Text

A Very Bullish Case For Commodities

Goldman Sachs has put forward…

Alt Text

The Surprise Winners Of The Oil Price Rally

The recent rally in oil…

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


Leave a comment

Leave a comment




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