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Gazprom to lower gas prices for Europe

Staff writer |
Russian energy giant Gazprom will cut pipeline gas prices for Europe this year in response to competition, its export chief said.

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Gazprom generates about 55 percent of its gas revenues in Europe where it supplies approximately 25 percent of gas needs. Its revenues from gas sales to Europe declined 3 percent last year to $55.9 billion.

"The price correction will be even less than in the previous round of talks, when it stood at 7 to 10 percent," said Alexander Medvedev, the head of Gazprom's export arm. Total rebates to European companies stood at 102.7 billion rubles ($3.22 billion) in 2012.

Following the first adjustments last year, Gazprom's export volumes to Europe have recovered slightly, clawing back some market share it had lost to Norwegian rival Statoil, which supplies most of its gas under spot market deals that are currently cheaper than Russia's contracts.

Mr. Medvedev said the repayments were expected to total less than $800-$900 million this year. He expects the average gas price for Europe in Gazprom's long-term contracts will decline to $370-$380 per 1,000 cubic meters from $402 last year. The proposed price drop to Europe would translate into a fall from $14.8 per million British thermal units (mmBtu) to about $13.7 per mmBtu.

While this is still higher than the average price of $9 per mmBtu paid at Europe's benchmark gas hub, Britain's National Balancing Point (NBP), it is competitive with winter spot prices and below those paid for Asian liquefied natural gas (LNG) cargo.

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