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Gazprom Rejects Switch to Spot on ‘Predatory’ Gas Pricing Threat

OAO Gazprom, Russia’s gas export monopoly, rejected a move to tie European prices to the spot market and cut the existing link to oil and refined prices, saying it could expose producers to “predatory pricing.”

Spot prices, which European customers have asked the Russian gas export monopoly to factor into long-term contract prices, should play a “subordinate, balancing role,” said Sergei Komlev, head of pricing and contract formation at Gazprom’s export division.

Gazprom supports “the existing dual hybrid pricing model,” Komlev said today at a conference in Moscow. Switching to 100 percent spot indexation or de-linking oil and gas prices “is unacceptable to gas producers because it will create opportunities for predatory pricing.”

European customers have sought lower gas prices while facing oversupply in Europe and a gap between spot and long-term prices. Gazprom supplied 7 percent of total gas supplies to Europe at prices linked to spot rates last year after revising contracts with customers, including EON AG’s Ruhrgas unit, Eni SpA and GDF Suez SA, according to a November bond prospectus.

Gazprom is also holding pricing talks with European importers and has entered arbitration with at least four companies during the past year, according to the prospectus.

Gas importers in Europe buy about two-thirds of their fuel under long-term contracts. Gazprom indexes its prices to oil with a lag of as long as nine months.

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