Lithuania’s President says Gazprom’s pledges to reduce gas price come too late

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Lithuanian President Dalia Grybauskaitė | DELFI, Photo by T. Vinickas

Lithuanian President Dalia Grybauskaitė | DELFI, Photo by T. Vinickas

Lithuania’s President Dalia Grybauskaitė believes that promises by Russia’s Gazprom to reduce the price of natural gas for Lithuania have come too late since the price will decline once Lithuania wins its case in Stockholm arbitration.

“I think Gazprom had to reduce the price for us long time ago and the previous government filed a five billion litas (EUR 1.45 b) with the international arbitration court for good reason. Gazprom knows perfectly well that it will lose this case since it has already lost a couple of such cases in Europe. Therefore, it rushed here as if to offer lower prices,” she said in an interview to the Lithuanian Radio.

“We will get cheaper gas at any rate since we are building a liquefied natural gas terminal, which will be put in operation in a year’s time, since we will win the case in arbitration, since the European Commission is getting ready to impose an anti-trust fine against Gazprom in October. Therefore, I really think that Gazprom had to do that much, much earlier,” Grybauskaitė added.

She stated that Lithuania did not need a new long-term gas supply contract with Gazprom, either.

“No, without any doubt. Since it would burden and interfere with the operations of our [LNG] terminal. Since the relations and supply, which Gazprom used to offer, traditionally meant binding the state with set volumes and making it pay fines if it bought less. I think it really is very disadvantageous,” Grybauskaitė said.

The existing long-term contract between Gazprom and Lietuvos Dujos was signed in 2004 and will expire at the beginning of 2015. At the end of each year, the companies sign an addendum to the contract to set specific gas purchase volumes and prices for the next one-year period.

It is said that the gas price formula has been revised five times since 2005, eventually tying it to oil product prices in the world’s markets.

Gazprom and the Lithuanian government signed an agreement on the acquisition and sale of a 34 per cent in Lietuvos Dujos in January 2004. The 100-million-litas (EUR 29 million) deal was finalized in March of that year.

At that time, Gazprom pledged to supply gas at fair prices. However, the price of gas, which then reached 84 US dollars per 1,000 cubic meters at most, soared to 520 US dollars in 2012 due to formula revisions and a surge in the prices of crude oil.

Last October, Lithuania initiated a claim against Gazprom at Stockholm arbitration institute. That disputed concerned a five billion litas excess payment for Russian natural gas supplied to Lithuania at allegedly unfair prices during the past eight years.

Lithuania has already won two cases against Gazprom in arbitration institutions. One case concerned the price of heat generated by Kauno Termofikacijos Elektrine (Kaunas Combined Heat and Power Plant), which was then controlled by Gazprom, and another dealt with the probe into the activities of Lietuvos Dujos.

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One thought on “Lithuania’s President says Gazprom’s pledges to reduce gas price come too late

  1. Pingback: Grybauskaitė: Promisiunile Gazpromului de a reduce prețul gazelor au venit prea târziu | LiMiT

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