Russia's Gazprom has reached an agreement with Poland's PGNiG to adjust the price of Russian gas supplied to the European country, in a move that allows the partners to terminate the procedure over the price issue at the Arbitration Court in Stockholm, the two companies said Tuesday.
The two companies have signed an amendment to the contract to adjust price terms of Russian gas supplies via the Yamal-Europe gas pipeline, Gazprom said in a statement.
"The agreed price takes into account current market prices of gas and oil products," Gazprom said.
At the same time, it does not call into question the key principles of natural gas trading such as long-term contracts or the "take-or-pay" principle as well as linking the gas price to oil product prices, Gazprom said.
"The spot price component taking into consideration price environment on Poland's market would not be directly included into the contact," it said.
The new terms and conditions of the Yamal contract "reflect changes that have occurred on the European gas market in recent years," PGNiG said in its statement. "As a result, the negotiated pricing formula will also reflect current market prices of gas," it said.
The gas price adjustment agreement was signed by PGNiG chief executive Grazyna Piotrowska-Oliwa and Gazprom deputy CEO Alexander Medvedev.
"The agreement demonstrates that Gazprom and PGNiG are capable of finding, through business negotiations, a win-win solution that satisfies the interests of both parties," Piotrowska-Oliwa was quoted as saying in PGNiG's statement. "It is a clear sign that competitiveness of PGNiG's long-term gas contracts relative to European markets is being recovered."
In turn, Medvedev said that the two companies "worked out a mutually acceptable mechanism to adjust the Russian gas price that allows the contracts to flexibly accommodate specific changes occurring on the Polish and European gas markets."
Like most European gas companies, Poland's state-controlled natural gas company PGNiG buys supplies from Gazprom under a long-term contract with prices indexed to oil. While European gas prices have remained relatively flat over the last two years, oil prices have soared causing huge losses on oil-linked contracts for gas importers.
In February PGNiG filed a suit against Gazprom at the Arbitration Court in Stockholm in an effort to index more than half of its contracted volumes to spot prices.
In September, Poland's Treasury Minister Mikolaj Budzanowski said Poland was paying too high a price for Russian gas at over $500/1,000 cubic meters, compared with an average price on the Western European market of around $360/1,000 cu m, which was "absolutely unacceptable."
PGNiG reported a wider-than-expected net loss of Zloty 314 million ($96.9 million) in the second quarter, blaming the high cost of gas imports. This compares with the Zloty 19.7 million net loss the company recorded a year earlier. Gazprom exported a total of 10.25 Bcm of gas to Poland in 2011, up 3.2% from 9.93 Bcm in 2010.
Gazprom's existing contracts on supplies of Russian gas to Poland and gas transit via Poland are valid till 2022 and 2019 respectively, according to Gazprom.
Earlier this year, Gazprom renegotiated long-term supply contracts with a number of its European clients, including German's E.ON, France's GDF Suez, Germany's Wintershall, Slovakia's SPP, Italy's Sinergie Italian and Eni, Turkey's Botas and Austria's Econgas.
The gas giant paid European customers $2.4 billion in price adjustments in the first quarter and expects to refund a further $1.28 billion in retroactive natural gas price adjustments till the end of this year.
