European natural gas buyers that renegotiated supply contracts with Russia’s OAO Gazprom in the past 14 months got a price rebate of as much as 20 percent, the International Center for Natural Gas Information said.
Long-term contracts reviewed in the period account for about 60 billion cubic meters (2.1 trillion cubic feet) a year of gas, Cedigaz, as the Paris-based center is known, said today in a statement. That’s about a third of Gazprom’s deals in Cedigaz’s database of 185 long-term pipeline-gas supply contracts signed from 1965 to 2014. Buyers got discounts of 10 to 20 percent and a reduction of take-or-pay obligations, the center said.
“The active trend of price and volumes renegotiations has been continuing with an equal strength in the past 14 months,” Cedigaz said. Agreements on new terms highlight “an ongoing push towards more linkage to market prices,” it said.
European natural gas buyers are pushing to renegotiate long-term supply contracts after the premium of oil-linked fuel to that on hubs rose to the most since 2009. Gas for next month on Germany’s biggest hub costs 34 percent less than under long-term agreements linked to oil, the biggest gap since March 2009, according to Bloomberg’s gas contract calculator using the Bafa proxy for 2014. Long-term supply deals are usually based on the price of oil and oil products instead of gas trades on European hubs.
GDF Suez SA, France’s largest gas company, plans to agree new supply terms with OAO Gazprom next year, Vice Chairman Jean-Francois Cirelli said in a June 3 interview. Eni SpA, Gazprom’s largest client, renegotiated a contract last month, a move Stanford C. Bernstein said would boost operating profit at its gas and power unit by 560 million euros ($760 million).
Buyers from EON SE to RWE AG have won price revisions with suppliers through talks or arbitrations after they posted losses selling gas into domestic markets and the cost price for the fuel used in heating diverged from oil. Italy’s Eni also renegotiated a contract with Norway’s Statoil ASA (STL) this year.
Milan-based Edison SpA expected its arbitrations with Gazprom and Eni to be completed “in a few months,” Pierre Vergerio, chief operating officer of the Italian gas arm of Electricite de France SA, said May 22.
“Gazprom was not the sole provider to face tough renegotiations of its long-term contracts,” Cedigaz said. “All major European suppliers were either brought to the negotiating table or subjected to arbitration.”
New long-term contracts accounting for 11.4 billion cubic meters a year were added to the database in the 14-month period, according to the statement. Those include nine for supplies from the BP Plc-led Shah Deniz project in Azerbaijan with European buyers. Cedigaz’s database includes 126 contracts in force for supplies of 449 billion cubic meters a year.
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