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Lithuania Starts Talks With Gazprom Seeking Price Reduction

Lithuania asked OAO Gazprom (OGZD) to reduce natural-gas prices as the Baltic nation works to reduce its dependence on the Russian supplier.

Energy Minister Jaroslav Neverovic made the request at a meeting today with Gazprom Deputy Chairman Alexander Medvedev in Vilnius, the Lithuanian capital, the Energy Ministry said in an e-mailed statement. The meeting was the start of formal negotiations, in which which Lithuania is consulting with the European Commission in Brussels, the ministry said.

“Obviously the process won’t be simple or fast,” Neverovic said in the statement. He said the price Gazprom currently charges Lithuanian gas consumers “doesn’t reflect the real situation in the gas market.”

Seeking to diversify its gas options and get leverage in talks with Gazprom, Lithuania is building a floating liquefied natural-gas terminal on the Baltic Sea, scheduled to start work in late 2014. The country is also considering giving U.S.-based Chevron Corp. (CVX) a license to explore for shale gas and seeks to build a gas pipeline link with neighboring Poland.

Lithuanian gas utility Lietuvos Dujos AB, which is 37 percent-owned by Gazprom, plans to spin off its transmission activity to a new company on July 31 to meet European Union rules intended to boost competition. Gazprom will be forced to sell its stake in the new company, losing influence over the pipelines that deliver gas to Russia’s Kaliningrad enclave.

At a meeting last month in St. Petersburg, Russian Prime Minister Dmitry Medvedev expressed concern about the future of terms for the transit of Russian gas to Kaliningrad, Lithuania Prime Minister Algirdas Butkevicius said after the meeting.

Talking Points

Butkevicius, speaking on LRT television on April 7, said transit terms would be negotiated together with gas prices. He said Lithuania wouldn’t consider any delay in the implementation of EU rules on separating gas sales and transmission, nor did it want to sign a long-term supply contract with Gazprom.

In October, Lithuania’s previous government filed a lawsuit against Gazprom in a Stockholm arbitration court for 5 billion litai ($1.9 billion), the amount the country says it was overcharged for supplies since 2004. That followed the EU’s announcement in September, and partly at Lithuania’s request, of an antitrust probe regarding the Russian company’s pricing for gas sales in central and eastern Europe.

To contact the reporter on this story: Bryan Bradley in Vilnius at bbradley13@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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