Gazprom, E.ON Threats Won't Stop Lithuania Market Opening, Government Says

Lithuania won’t allow threats of legal action by OAO Gazprom and E.ON AG, owners of the country’s natural-gas utility, to thwart efforts to open the market to competition, Energy Minister Arvydas Sekmokas said today.

“The tone of the E.ON and Gazprom letters is in the spirit of an ultimatum addressed to the highest heads of the state,” Sekmokas said at a news conference in the capital, Vilnius. “Threats about arbitration” in the case “can be perceived as pressure of large companies on a small country,” he said.

Lithuania decided May 19 to split the gas sales and transmission divisions of AB Lietuvos Dujos, majority-owned by Moscow-based Gazprom and E.ON of Dusseldorf, Germany. The initiative is part of the European Union’s drive to force dominant energy companies to give competitors access to transmission networks, the government said.

By ensuring that competitors can use the transmission pipelines, the government hopes to attract investors for a liquefied natural gas terminal on the Baltic Sea. Klaipedos Nafta AB, Lithuania’s state-controlled oil-products terminal, would build the LNG project.

Gazprom and E.ON, which own a combined 76 percent of Lietuvos Dujos, said June 11 the government failed to inform major shareholders before deciding to separate sales and transmission activities. So-called unbundling would reduce efficiency and increase costs at consumers’ expense, the two companies said.

Prime Minister Andrius Kubilius said today that Gazprom and E.ON’s reaction to the unbundling plan is “no surprise” because the initiative “would help consumers free themselves from a monopoly supplier.”

“I cannot imagine a successful construction of a liquefied natural gas terminal without the implementation” of gas unbundling, Kubilius said.

To contact the reporter on this story: Milda Seputyte in Vilnius at mseputyte@bloomberg.net

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