BNS The Lithuanian Energy Ministry is initiating new arbitration proceedings against Russia’s gas company Gazprom, one of the largest shareholders of Lietuvos Dujos (Lithuanian Gas), in an effort to obtain lower gas prices.
The Lithuanian Energy Ministry is initiating new arbitration proceedings against Russia’s gas company Gazprom, one of the largest shareholders of Lietuvos Dujos (Lithuanian Gas), in an effort to obtain lower gas prices.
Lietuvos Dujos said in a stock exchange release on Thursday that its shareholders would be asked to vote on the Energy Ministry’s proposal at their extraordinary general meeting scheduled for 30 January 2014.
The ministry proposes that Lietuvos Dujos initiates new arbitration proceedings in order to reduce the price of gas supplied under the December 16, 1999 gas supply agreement, including all subsequent amendments and supplements, it said.
If the shareholders give the go-ahead, the CEO of Lietuvos Dujos will be obligated to take all the necessary steps to initiate the arbitration proceedings.
“The general manager of the company is also authorised to conduct negotiations with Gazprom with the aim to improve the conditions of supply of gas to the company. The arbitration proceedings shall be suspended in case of reaching a favourable commercial agreement with Gazprom which would be approved by the board of directors of the company,” according to the draft resolution of the shareholders’ meeting.
As a result of the government’s steps and decisions made in the past year, the price of gas is around 10 per cent lower starting 1 January 2014, but it is still much higher than those in surrounding markets, an Energy Ministry official told BNS.
“Unfortunately, this is just 10 per cent. Despite all our efforts, the gas price remains much higher compared to the prices paid by our neighbours and other market prices. We are overpaying for gas every day. This is harmful for our consumers and our economy, as well as for Lietuvos Dujos, which loses customers over such prices, and gas consumption is on the decline,” Daiva Rimasauskaitė, an adviser to the energy minister, told BNS.
“The ministry’s proposal does not mean that dialogue is ruled out,” Rimasauskaitė said.
“The door remains open. These arbitration proceedings can be stopped as soon as the price is reduced to the fair level,” she said.
There is no doubt that Gazprom, which owns 37.06 per cent of shares in Lietuvos Dujos, will vote against the proposal. Therefore, the ministry can only expect support from Germany’s E.ON Ruhrgas International, which holds a 38.9 per cent stake.
Lietuvos Dujos and Gazprom on 16 December 1999 signed their first long-term gas supply agreement, for the years 2000 through 2005. The agreement set a fixed price of 76 US dollars per 1,000 cubic meters for the first half of 2000 and a formula for calculating prices for the next 18 months based on global prices for heavy fuel oil. Later, prices had to be renegotiated.
Lithuania last November paid 1,187 litas (EUR 344), or around 468 US dollars under the current litas-dollar exchange rate, per 1,000 cubic meters of Russian natural gas.
Under Lietuvos Dujos’ privatization deal and a 2004 share purchase agreement, Gazprom committed itself to supplying gas to Lithuania at fair prices and based on a price formula set in the then-effective gas supply agreement between Lietuvos Dujos and the Russian supplier.
Lithuania in October 2012 filed a 5-billion-litas arbitration claim in Stockholm against Gazprom. The Russian company initiated arbitration proceedings against Lithuania under the UNCITRAL arbitration rules over the country’s alleged commitments.
The European Commission is about to complete its investigation into possible anti-competitive market practices by the Russian gas giant.
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