You're reading: Gazprom stands firm on China, Ukraine gas prices

SOCHI, Russia, June 6 (Reuters) - Russian gas monopoly Gazprom said it would not accept lower profits on deliveries to China than those on sales to Europe, nor consider revising the price for neighbouring Ukraine.

Gazprom CEO Alexei Miller told reporters on Monday the company would not consider revising the gas price for Ukraine in 2011 despite its neighbour’s calls for renegotiations.

"We are not going to invent any kind of new (pricing) formula for anyone or link it to (the price) of any other type of fuel," Miller told journalists in Russia’s Black Sea resort town of Sochi.

Russia is in the final stage of negotiations to supply China with 68 billion cubic metres (bcm) of gas per year over 30 years, but the parties have yet to agree on price.

Gazprom spokesman Sergei Kupriyanov said the price of gas deliveries to China should allow the company to earn no less than it would by delivering the same gas to Europe.

"Until we get the price that suits us, the time frame (for an agreement) is not critical," he said.

"We sell gas from the same fields to Europe, and the price should be no worse."

Under the deal, Gazprom would send 30 bcm a year via pipeline through the ‘Altai’ route, pumping gas from its existing fields in western Siberia across a narrow stretch of common border located between Kazakhstan and Mongolia.

A further 38 bcm per year would go by another pipeline down Russia’s Pacific seaboard and into northeast China.

When the deal goes through, it will mark the end of Gazprom’s dependence on the European market, which Gazprom expects to supply with 150 bcm of gas this year. Miller said European customers would be paying $500 per 1,000 cubic metres in the fourth quarter of this year, 42 percent more than the $352 it forecast in February.

Gazprom, under fire in its core market last year from weak spot prices and rising imports of super-cooled liquefied natural gas, has shown resurgent confidence since Japan’s Fukushima nuclear disaster.

Pressure from European clients to increase the spot element in its long-term contracts has receded as contract prices have become competitive again and demand for gas is expected to rise as nuclear plants are taken off line.

UKRAINE GAS TALKS

Ukraine, through which 80 percent of Russian gas flows to Europe, has been trying for months to renegotiate the price of its imports of Russian gas and also wants to raise the price for the transit of gas to the EU as it comes under threat from the new Nord Stream pipeline.

Ukrainian Prime Minister Mykola Azarov said earlier on Monday, "If the price of gas has risen, that should be reflected in transit fees."

Gazprom’s Miller said last month the company would redirect around 20 bcm of gas currently transited through Ukraine to Nord Stream, which would carry gas under the Baltic Sea to Germany. It is slated to start operation this fall.

Last year 95.4 billion cubic metres of Russian gas crossed Ukraine into Europe, and at current rates analysts estimate that Ukraine stands to lose $700 million if Russia cuts 20 bcm.

Price disputes between Moscow and Kiev have in the past led to disruption of gas supplies in winter through pipelines across Ukraine to consumers in the European Union. Azarov is due to meet his Russia counterpart, Vladimir Putin, in Moscow for gas talks on Tuesday.