Lithuania opens formal gas price talks with Russia

By bne IntelliNews May 6, 2013

bne -

Lithuania formally requested Russian export monopoly Gazprom to lower the price it pays for gas on May 3, as the recently appointed government mulls the future of projects designed to offer Vilnius greater leverage on the cost of Russian gas.

Lithuanian Energy Minister Jaroslav Neverovic made the request at a meeting with Gazprom's Deputy Chairman Alexander Medvedev in Vilnius, the energy ministry said in a statement. "Obviously the process won't be simple or fast," Neverovic said, according to Bloomberg, adding that the price Gazprom currently charges Lithuanian gas consumers "doesn't reflect the real situation in the gas market." The meeting marked the start of formal negotiations, in which Lithuania is consulting with the European Commission, the ministry added.

The Lithuanian government has offered conflicting signals on its approach to the issue since it took power in December from a predecessor which had pushed aggressively to reduce the country's 100% reliance on Russian gas. That saw it plan to launch a project to develop a LNG platform by next year, and hand a shale gas exploration licence to US giant Chevron. Taking its cue from an investigation launched by the EU's anti-trust watchdog, it also filed an arbitration suit demanding LTL5bn (€1.45bn) from Gazprom for what it says are years of overcharging.

However, some officials from the new government have suggested that the aggressive stance from the previous government is to blame for the 20% extra Vilnius says it pays compared with neighbouring Latvia and Estonia. Minister of Economy Birute Vesaite directly suggested that the plan to unbundle Lithuania's gas pipelines from national gas supplier Lietuvos Dujos - a crucial step in the LNG plan given Gazprom's 37% stake - could be scrapped in return for a price discount.

That move, pushed under the EU's Third Energy Package, would also see Gazprom lose influence over the pipelines that deliver gas to Russian enclave Kaliningrad. Lithuanian Prime Minister Algirdas Butkevicius said that at an April meeting, Russian Prime Minister Dmitry Medvedev had expressed concern over future transit terms for the territory.

He added that those transit terms will be negotiated together with gas prices, and insisted that, contrary to previous suggestions from his ministers, Lithuania will not delay the unbundling process. He also insisted that Vilnius does not want to sign a long-term supply contract with Gazprom.

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