Lithuania’s natural gas prices to drop 20 percent July 1

Lithuania’s natural gas prices to drop 20 percent July 1

Natural gas prices will drop 20 or more by July thanks to agreements between Lietuvos Dujos and Russian gas supplier, Gazprom, Prime Minister Algirdas Butkevicius said Tuesday on LRT Radio.


“Calculations are currently being made because Lietuvos Dujos and Gazprom have signed a new agreement [effective] until Jan. 1, 2016.  The agreement provides a new formula, which requires certain calculations take into account changes to the [US] dollar exchange rate,” said Butkevicius.


“We hope that we’ll have the final figures by [May] 20 to 25 and will then submit them to the price commission, which will analyze those proposals and make its decision by June 1. The price would take effect on July 1. I can say that the price will fall at least by 20 percent,” he said.


Later, Butkevicius cautioned, “I haven’t seen final estimates yet. I can’t say with confidence today. Let’s wait for another two to three weeks.”.


The National Control Commission for Prices and Energy will also consider liquefied natural gas (LNG) terminal infrastructure costs and other price factors.


Unofficial Sources skeptical about new gas prices


Unofficial sources told BNS that Lietuvos Dujos and Gazprom’s “improved” pricing formula, remains basically unchanged, except for a new coefficient.


Sources were further skeptical about major price drops for consumers, adding that the commission might lower prices by less than 20 percent to minimize price fluctuations.


Gazprom’s lower gas price will be in effect until the end of 2015, when its long-term supply contract with Lietuvos Dujos expires.


The business daily Verslo Zinios has reported that Gazprom proposes to link the price of Russian gas sold to Lithuania to the price of Russian-origin gas sold to Germany, the German Eastern border price, or the BAFA (German Federal Office of Economics and Export Control) index based on the average gas import and transportation prices.


According to unofficial sources, the proposed price of gas for 2013 through 2015 of the existing Gazprom contract is $370 per 1,000 cubic meters, 24 percent, or around $118 lower than the price of $488 in March.


The sources say that a “take-or-pay” clause will remain in the contract and that the volume of gas purchased annually will be around 1 billion cubic meters.


New prices and arbitration with Gazprom


Russian business newspaper Kommersant reported Monday that Lithuania might withdraw its lawsuit against Gazprom in exchange for cheaper natural gas.  The Lithuanian government has said repeatedly that the suit is not up for negotiation and will not be withdrawn.


Butkevicius said Lithuania’s arbitration claim, worth over 4 billion litas (EUR 1.16 b), filed in Stockholm against Gazprom is not among the issues negotiated with the Russian gas giant, adding that he has no information as to when the arbitration court will hold a hearing or make its ruling.


“Speaking about the arbitration, I can reassure everybody that there are no changes. This issue is not being discussed at the moment. A law firm that was hired during the time of the Conservatives  that has signed an agreement with a British law firm in charge of this issue. I think this issue should be discussed in the autumn. Today we don’t even have information as to when the Stockholm arbitration court will hear this issue,” he said on LRT Radio.


Lithuania is represented in its disputes against Gazprom at the Stockholm and UN arbitration courts by the law firms Lawin and Tark Grunte Sutkiene, and US based Shearman & Sterling.


Unofficial sources have told BNS that the claim now amounts to around 4.5 billion litas and that a ruling is unlikely until autumn 2015.


Lithuania sued Gazprom in 2012 for 5 billion litas for gas overcharges between 2004 and 2012.






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