Price negotiations between Russian gas company Gazprom and Finland's Gasum, ongoing since early 2014, have been concluded, Gasum said Friday.
On the same day, Gasum said in a separate press release the Finnish government had agreed to buy Gazprom's 25% stake in the company, making it fully state-owned.
"By this deal, the Finnish government is demonstrating its strong commitment to the development of the Finnish gas market", Gasum CEO Johanna Lamminen said in the press release.
The new price, in use from January 1 2016, is described as "competitive with European gas prices," which a Gasum spokeswoman confirmed to Platts referred to pipeline gas on major European markets.
Gasum said its import price from Russia had already fallen 30% during 2015 due to the bearish oil market. However, in the negotiations Gazprom agreed to a further cut and to lower the degree of oil-indexation, a factor which "improves the predictability of future prices," the Finnish company said.
The spokeswoman said, however, that even with Friday's agreement, competitiveness against coal in power generation remained Gasum's primary challenge in the Finnish market, where gas demand has been on a downward trend in recent years due to plunging coal prices.
In 2014, Finland consumed 2.8 Bcm of gas, down from 5 Bcm in 2005, according to IEA data.
Finland is currently dependent on Russia for its entire gas supply, with Gasum as the sole wholesaler of gas and owner and operator of national gas grid, including the two 4.1 Bcm/year Russian import pipelines.
Gasum has been exempted from EU rules requiring the separation of sales and transmission of gas because of its total dependence on Russia for gas imports.
However, in October the Finnish government announced it was pursuing a 2.6 Bcm/year pipeline project to Estonia with EU funding, with the aim of ending the market's isolation.
The pipeline, dubbed Balticconnector, is included in the EU's 2015 list of PCIs -- Projects of Common Interest -- but a final investment decision is not expected until the first half of 2016.
