Gazprom ‘Doing Its Best’ to Meet EU Demand as Cold Snap Bites

OAO Gazprom (GAZP), Russia’s natural-gas export monopoly said it’s “doing its best” to meet soaring demand from the European Union caused by freezing weather as some EU states report declining supplies.

Supplies have been reduced to Poland, Slovakia, Austria, Hungary, Bulgaria, Romania, Greece and Italy, European Commission spokeswoman Marlene Holzner told reporters in Brussels today. She cited a drop of 30 percent to Austria, 24 percent to Italy and 8 percent to Poland.

Gazprom is “doing its best” to meet rising demand, and all its systems are operating despite the cold, Sergei Komlev, head of pricing at the company’s export pricing division, said in Moscow. Komlev said Gazprom is fulfilling its contracts and European customers are demanding more. “Their appetite has increased too much.”

A cold snap sweeping across Europe has increased demand for the fuel used for heating and pushed gas prices in the U.K. to the highest level in more than three years. The death toll in eastern Europe rose to about 250, with temperatures as low as minus 50 degrees Celsius (minus 58 degrees Fahrenheit) in parts of Kazakhstan.

“The contracts that Russia has apparently allow for a certain flexibility in case they also need the gas, and that’s the situation that Russia’s facing at the moment,” Holzner said. Gazprom hasn’t said it’s reducing exports because of increased domestic demand in statements on the issue.

“They are asking for more than we are obliged to supply,” Komlev said. “There is a difference between wishful thinking and agreed contractual volumes.”

Price Disputes

Gazprom said yesterday that Ukraine was taking more fuel than contracted. NAK Naftogaz Ukrainy, Ukraine’s state-run energy company, said imports and transit are in compliance with existing contracts.

The EU relies on Gazprom for about a quarter of its gas, with as much as 80 percent of Russian shipments crossing Ukraine. Disputes between the two countries over gas prices and transport costs have disrupted winter supplies to Europe twice since 2006. Tension escalated this year as Ukraine, Gazprom’s biggest gas customer by contracted volumes, sought to renegotiate its agreements with Russia.

Natural-gas storage facilities across the EU are full and the situation doesn’t qualify as a “state of emergency” because the affected countries have been able to use natural gas from elsewhere, Holzner said.

‘Well Equipped’

EON AG said it’s receiving about one-third less gas from OAO Gazprom today. EON said it’s “well equipped” to cope with the supply reduction and that German gas storage facilities are “high” for this time of year.

Polskie Gornictwo Naftowe i Gazownictwo SA (PGN), Poland’s dominant gas company, said deliveries from Russia returned to the requested level today after they were reduced yesterday. The company is getting as much gas as it has asked for. Deliveries from Gazprom were cut by about 7 percent yesterday, PGNiG said in a statement.

Gas for the next working day climbed as much as 9.6 percent as the pipeline between Britain and Belgium was exporting fuel at 10 million cubic meters a day, according to a website run by Interconnector (U.K.) Ltd. Temperatures in London may drop as low as minus 6 degrees Celsius tomorrow, 9 degrees below the 30- year average, CustomWeather Inc. data on Bloomberg show.

To contact the reporters on this story: Andrew Clapham in Brussels at aclapham@bloomberg.net; Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editors responsible for this story: Jerrold Colten at jcolten@bloomberg.net; { at wkennedy3@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.