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UPDATE 2-E.ON CEO says adjusted gas contracts with Statoil
March 14, 2012 / 12:47 PM / 6 years ago

UPDATE 2-E.ON CEO says adjusted gas contracts with Statoil

* E.ON makes headway with refining crippling long-term deals

* Influence of oil-indexation seen waning

* Progress with Statoil may be precursor for Gazprom talks (Adds CFO on oil indexation, analyst comment, details)

By Vera Eckert

DUESSELDORF, Germany - March 14 - E.ON said on Wednesday it had renegotiated gas purchasing contracts with Norway’s Statoil, to a level bound to reduce its loss position, while talks over a gas contract dispute with Russia’s Gazprom continued.

“We have managed to agree with one of our biggest suppliers, Norway’s Statoil, to develop further our long-term partnership for Norwegian gas in a way that adjusts the conditions to the current German and European market situation,” CEO Johannes Teyssen said during the company’s annual press conference.

“We are satisfied with the agreement reached,” said a spokesman for Statoil, which is responsible for 25 percent of E.ON’s gas supply, adding that he could not comment on the specifics of contracts.

E.ON posted losses of 700 million euros ($918 million) in gas trading last year due to a margin squeeze, which arises when producers charge high pipeline gas prices while consumers in Europe reference prices to cheaper spot gas resulting from a worldwide supply glut.

With some more favourable terms already negotiated last year for 40 percent of E.ON’s gas procurement portfolio, the development in Norway leaves just over 30 percent of total contracts up for negotiations, E.ON executives said. Those include contracts with Russia’s Gazprom.

The executives remained tight-lipped on details of the price discounts due to competition. A deal won recently by Italy’s ENI for pipeline gas from Gazprom was estimated to have won the company $700 million

E.ON remains in arbitration proceedings with Gazprom over a gas contract dispute, but discussions continued separately, said E.ON board member Joergen Kildahl in a question and answer session.

The historically evolved oil-price indexation of gas in Europe would remain a market feature, even if its influence would diminish, he also said.

“We will sell of course oil-price-indexed (gas) products to customers who want them,” he said. “But it will change, it will not be a default option any more. Gas-to-gas competition and liquidity at the (spot trading) hubs is increasing.”

A research note from JP Morgan said, “We think the deal (with Statoil) increases the likelihood for a compromise with Gazprom, so that the guided turn-around in the gas segment 2013 has become more credible (albeit risks remain).” ($1 = 0.7628 euros) (Reporting by Chris Steitz, Vera Eckert, Victoria Klesty; Editing by Helen Massy-Beresford)

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