* Gas trading EBITDA losses amount to 700 million euros
* E.ON talking to suppliers, says will turn corner in 2013
* To streamline gas activities in Dusseldorf
DUESSELDORF, Germany, March 14 (Reuters) - Germany's E.ON on Wednesday posted losses of 700 million euros ($917.64 million) in gas trading last year due to a margin squeeze, and said it was in talks with its suppliers to make its loss-making purchasing contracts competitive.
E.ON reported the gas trading loss as part of a 30 percent 9.3 billion euros group losses in earnings before interest, tax, depreciation and amortisation (EBITDA) in 2011.
As Germany's gas market leader, its activities are an indicator of the health of central European gas markets.
In 2011, it said the worst case scenario for the gas trading unit was a one billion euros loss.
At the heart of its gas profits squeeze, begun in 2009, are high global oil prices to which gas is index-linked and weak spot gas prices in central Europe.
New and cheaply extracted gas volumes over the last few years have massively altered the global market, resulting in oversupply and putting pressure on European gas suppliers tied into expensive pipeline contracts with Norway, Russia and other origins.
Negotiations with suppliers such as Russia's Gazprom which is responsible for 27 percent of gas supply and with Norway's Statoil over discounts were progressing, E.ON executives said ahead of the company's annual news conference.
"We've made further progress in adjusting them (gas procurements contracts) to reflect new market realities. In 2011, we negotiated more favourable terms for about 40 percent of our long-term contracted gas offtake," chief executive Johannes Teyssen said in a letter to shareholders.
"We continue to expect that we can bring all our long-term gas supply contracts to a competitive level by 2013."
E.ON in its annual report did not supply totals for the gas trading result for 2011. It said in an outlook section for gas that the 2012 result should be similar to that of 2011.
Its global gas unit's EBITDA was 22 percent down at 1.53 billion euros in 2011, but within this, the gas trading loss was mitigated by profitable gas upstream activities.
This was due to cross-indexation with record oil, where E.ON produces from gas fields such as those operated jointly with Gazprom in Siberia.
E.ON's Ruhrgas unit, its former intra-German gas company, is Gazprom's biggest European customer.
Sector peer RWE last week also warned investors to expect 2012 losses on gas trading to significantly exceed last year's 800 million euro hit, due to the margin squeezes.
E.ON said as a result of the gas dilemma, it would continue to reorganise its gas business.
Teyssen said: "the separation of our gas-supply, gas-storage, and LNG (liquefied natural gas) business from our trading business no longer offers any advantages.
"We're going to combine these businesses, which will enable us to better realise synergy potential."
E.ON last year cut management positions and started planning for a merger of the E.ON Ruhrgas (Global Gas) and E.ON Energy Trading (Global Unit Trading) units in Dusseldorf. ($1 = 0.7628 euros) (Reporting by Vera Eckert; editing by James Jukwey)