Russian Gazprom to maintain oil-indexed pricing for gas supplies to China

Moscow (Platts)--19 Jun 2013 729 am EDT/1129 GMT

Russia's Gazprom has no plans to link the price of gas to be supplied to China under a long term contract to US spot gas prices, the company said in a statement Wednesday, citing Gazprom CEO Alexei Miller.

"[Price of] gas supplied to China will not be linked to prices at the [North] American spot market," Miller was quoted as saying following his Tuesday meeting with president of China's CNPC, Zhou Jiping.

Currently, Gazprom's long-term gas deliveries are oil-indexed. This has led a number of its European clients to complain about the pricing levels.

As a result in 2012, Gazprom agreed to renegotiate prices for several European gas buyers and further re-negotiations are expected this year as well.

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At their Tuesday meeting, Miller and Jiping discussed the long-term gas supply agreement which is planned to be signed by the end of this year, Gazprom's statement said.

Last week, speaking about the progress of the talks with CNPC, head of Gazprom Export, Alexander Medvedev, said the two parties agreed on all key points of the contract except the basic gas supply price that will be used in the pricing formula.

Asked whether the partners would reach an agreement on the price this month, as Gazprom executives projected earlier, Medvedev said: "If the upcoming [round] of the talks is successful, the signing will take place."

Gazprom is prepared to provide China with discounted gas provided China pays in advance for the gas, Medvedev added, providing no further details.

In March, Gazprom and CNPC signed a memorandum on understanding to start pipeline gas supplies to China in 2018, at a rate of 38 billion cubic meters/year. The agreement includes a possible increase in volumes to as much as 60 Bcm/year.

The deliveries, over 30 years, will be made via the so-called eastern route from East Siberia.

Gazprom had previously expected in mid-2011 to sign a final contract to supply 30 Bcm/year of pipeline gas over 30 years from West Siberia to western China but that project was repeatedly delayed as the parties failed to agree on price.

--Dina Khrennikova,
--Edited by Haripriya Banerjee,

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