Gazprom Set to Cut Natural Gas Prices to Europe Again

Gazprom has announced that once again it will cut its gas prices for European buyers this year.

Due to competition from other natural gas suppliers, and cash-strapped energy companies around Europe unable to pay the old high prices listed in the long-term supply contracts, Gazprom has already had to drop its prices, and even return some money to customers that paid retroactive payments. In 2012 it is estimated they handed back $3.22 billion, but this year the cuts will be far smaller, only $800-$900 million according to Alexander Medvedev, head of Gazprom’s exports division.

After reducing prices last year Gazprom managed to regain some of the export sales and market share that it briefly lost to Statoil of Norway (who still offer cheaper constracts).

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Medvedev is hopeful that the second round of price cuts will encourage some energy companies to sign new supply deals. Deals which he suggests may include Eni of Italy, and GDF Suez SA of France.

The average gas price that Gazprom will offer European customers in long-term contracts will be reduced to around $370-$380 per 1,000 cubic metres, down from last year’s average of $402 per 1,000 cubic metres. This equates to around $13.6 per million British thermal units (mmBtu), still way above the benchmark average of $9 per mmBtu.

By. Joao Peixe of Oilprice.com