* Statoil sells 50 pct of all gas on spot prices
* Wintershall deal valued at around $17.4 billion
* Gazprom has to react or risk losing market share -analyst
By Nerijus Adomaitis
OSLO, Nov 20 Norway's Statoil signed a
10-year gas supply deal with Germany's Wintershall, based on
spot gas prices that challenged Russian gas export monopoly
Gazprom, which insists on oil-linked prices despite
European Union opposition.
Statoil agreed on Tuesday to supply Wintershall, the natural
gas unit of chemicals firm BASF, with 45 billion
cubic metres (bcm) of gas worth $17.4 billion at current prices,
in a deal aimed at creating a flexible gas market in
"This is the first contract of such magnitude and length in
continental Europe," Statoil Executive Vice President Eldar
Saetre told Reuters.
Government-controlled Statoil, Europe's second biggest gas
supplier after Gazprom, is now selling about half of its gas
under spot terms, including more than 40 percent of its European
gas, Saetre said.
By contrast Gazprom, which faces an anti-trust probe from
the European Union, on Tuesday stood firmly by the established
system of clinching long-term deals linked to the price of oil
and insisting that customers pay penalties if they do not take
the gas as agreed.
"We will defend our system of long-term contracts with all
our energy," the Russian state-controlled company's export chief
Alexander Medvedev told a gas conference also stressing its
commitment to the European market.
"We have a portfolio of long-term take-or-pay contracts
totalling 4 trillion cubic metres of gas," he said.
This approach has angered European power and gas suppliers
who have to sell the gas on to customers at retail prices linked
to the freely traded spot market, which can be lower than the
price paid to Gazprom.
Russia provides around 35 percent of the EU's gas demand,
according to data from the European Commission, and Europe
accounts for 80 percent of Russian gas exports.
This share could shrink in future, if Gazprom does not
follow Statoil's move to increase price flexibility in
contracts, analysts said.
"This is a serious challenge for Gazprom... If one major
supplier goes to spot indexation, the other suppliers have to
follow or risk losing market share," said Bjorn Brochmann, head
of gas market analysis at Oslo-based Thomson Reuters Point
Russian gas exports to Western Europe already fell by 15
percent during the last gas year, which ended on Sept. 30, while
Norwegian supplies rose by 7 percent, Brochmann added.
"That could already indicate that Norway is pushing harder."
French Bank Societe Generale said in a research note this
week that European gas pricing was on the brink of a step
"In Europe, the rationale for oil indexation disappeared
many years ago, so hub pricing makes more sense today," the bank
The European Commission launched the investigation earlier
this year, focusing on suspicions Gazprom was hindering the free
flow of gas across the EU's 27 countries, preventing supply
diversification and imposing unfair prices on its customers.
Meanwhile, Gazprom also faced a potential domestic challenge
to its export monopoly as Russia's energy ministry said it could
make an exception for an independent liquefied natural gas
project that could help break Russia's dependence on Europe's
declining market for its pipeline gas. [ID:nL5E8MK3D4}
Statoil said the Wintershall deal, which represents about 6
percent of German consumption, reflects a shift toward a more
flexible market, similar to that in the United Kingdom, where
all Norwegian gas is sold according to spot prices.
"We are moving to that direction, we are in the transition
(to the spot market), but I can't say how quickly it will take
to get there," Statoil's Saetre said.
"Already, if you want to sell gas in Europe on shorter term,
1-2 year, contracts, you basically have no other option but to
use spot price," he added.
Analysts at Societe Generale said oil-indexation was already
down to 55 percent of total volumes of gas sales in Europe, and
that spot indexation would be the dominant form of pricing by
Germany's two biggest utilities E.ON and RWE
renegotiated their long-term gas purchasing contracts
with Statoil this year to adjust the terms to the market
conditions, but it remains unclear how much of gas they buy is
Last year, Statoil signed a 10-year extension to an existing
natural gas sale contract with British utility Centrica
linked to the UK s p ot price.