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Price Differential Undermines Investment, says Gazprom The difference between spot fuel prices and long-term contracts threatens investment in new gas production and distribution, warned Gazprom in April.
Last year spot prices for gas were low thanks to increased U.S. supply, which saw cargoes of LNG diverted to other markets. Those low prices prompted customers bound by long-term contracts to demand lower prices.
Bloomberg reported that the Moscow-based company’s Deputy Chief Executive Officer Alexander Medvedev called the price gap a “destabilizing factor.” He said it could continue over the next two to three years as demand catches up to supply again.
Gazprom recently delayed two new projects: the Arctic Bovanenkovo field will not begin output until 2012, and production at the Shtokman field has been delayed by three years. A proposed LNG facility slated for Shtokman will not be built unless gas prices reach $7.50 to $8 per MBtu, said a project principal in February.
Just as U.S. shale gas development has had a profound impact on international prices for LNG, unconventional development elsewhere poses a significant obstacle to Gazprom’s goals of controlling global market share. In the context of the global recession, the company has thus far made some changes to its long-term contracts by giving weight to spot-market prices, but has thus far refused to drop the fuel’s price link to oil. |
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