Baltic States – CIS, Energy, Gas, Lithuania, Russia

Haupas, a company that supplies Russian gas to Druskininkai, a spa town in southern Lithuania, says that the new price formula, offered for three months, keeps the price of gas from falling as fast as the price of oil.

Meanwhile, Lietuvos Duju Tiekimas (Lithuanian Gas Supply), another gas importer, would not comment on pricing changes, saying that talks with Gazprom are still ongoing.

"Under the price formula, (...) if oil product prices fall below a certain level, the price of gas stops falling as sharply as oil prices are falling," Haupas Deputy Director Donatas Motiejunas told BNS.

Motiejunas said that based on the new formula, the import price for Gazprom gas would reach 19 euros per megawatt-hour (MWh) in January, up from 16.5 euros in December.

It appears that the Russian supplier applies the same pricing to all European customers as it does not to want to have problems, given the European Commission's probe into its business practices, he said.

According to Motiejunas, under the new formula, the price of gas begins to decline at a slower rate at around 200 US dollars per 1,000 cubic meters. Another condition is that the price cannot be lower than that on Germany's gas exchange.

"It is tied to GASPOOL. There is a formula. You calculate your price based on it and your result has to be lower than that on the exchange," he said.

According to Haupas deputy director, the new formula has been offered for the first three months of this year and it can then be extended. The three-month period was chosen because Gazprom says that it plans to hold auctions for Lithuania, Latvia and Estonia.

Lietuvos Duju Tiekimas CEO Mantas Mikalajunas said that he would not comment on any pricing changes while talks with Gazprom were underway, adding that the company continued to purchase gas from the Russian group based on its old contract, which expired in late 2015 and under which the company did not buy around 300 million cubic meters of gas.

"We still have amounts from the past period. It is too early to speak about any model that will be applied in the coming months or in the more distant future," he told BNS.

It is normal practice to change the pricing given falling oil prices, Mikalajunas said.

According to him, one formula can be applied to long-term contacts and another to short-term contracts. The possibility of Gazprom holding auctions is not being ruled out either.

Unofficial sources say that Gazprom's new gas price can be similar to the price at which Norway's Statoil supplies liquefied natural gas to Lithuania.

Gazprom last December planned to hold gas auctions for the Baltic countries, but postponed these auctions, possibly until the spring. Russia's media reported in December that Gazprom had extended for three months its expiring gas supply contracts with Baltic customers.

Other Lithuanian companies that purchase gas directly from Gazprom include Kauno Termofikacijos Elektrine (Kaunas Combined Heat and Power Plant, or KTE), Dujotekana and the fertilizer manufacturer Achema.

Lietuvos Duju Tiekimas in May 2014 obtained a 20 percent price discount from Gazprom for gas supplies between 2013 and 2015. Therefore, the gas utility lowered the price of gas for all of its commercial and household consumers for the period between mid-2014 and late 2016, or up to mid-2017.