Russias Gazprom says its exports to Europe to rise 13 pct in 2010, defends long-term deals

MOSCOW - Depressed natural gas consumption in Europe will rise next year and the surplus of gas will disappear in 2011, boosting prices, Gazprom deputy chief executive Alexander Medvedev said Tuesday.
The world's largest natural gas producer plans to ship 160.8 billion cubic meters of gas worth US$50.3 billion in revenue to Europe next year, Medvedev said at a televised gas conference. That volume is 13 per cent higher than what Gazprom expects to sell this year.
Russia exported a total of 174 billion cubic meters of gas in 2008, according to the Russian Federal Statistics Service. Gazprom is Russia's gas exporting monopolist.
It has been hit hard by the economic downturn as global demand for energy slumped. Medvedev said Gazprom expects demand in Europe to drop by some 5 to 7 per cent this year in "a record-steep decline for the whole history of the gas industry."
In January-August, consumption in Europe dropped 7.5 per cent to 30.4 billoin cubic meters, Medvedev said, quoting data from the International Energy Agency and Eurostat. He insisted, however, that the figures are still better than in 2007 and that demand will pick up significantly in 2011.
"We can expect a temporary surplus of gas to disappear as early as in 2011," Medvedev said. "In this case, prices under spot contracts and oil-based contracts will become equal."
Medvedev also reacted to recent reports that Gazprom is losing its market share as its long-term contracts provide little flexibility for clients.
"We have a good Russian saying: don't lay your own fault at somebody else's door," he said. "Russian gas has always been competitive and will remain such."
Medvedev argued that a drop in gas consumption does not give the company enough "grounds to bring substantial changes to the principles of long-term contracts.
"The downturn, although unprecedented, is only temporary," he said.
Gas prices in Gazprom's long-term contracts are based on global oil prices and normally lag behind them for a few months.
Under their take-or-pay contract with Gazprom, European customers must buy a fixed minimum amount of gas no matter how much of it they actually need - or pay fines.
Gazprom insisted last month that its European customers must honour commitments to pay in full for contracted volumes regardless of the amount used, claiming they owe it $2.5 billion under those rules.
Russia's Prime Minister Vladimir Putin has said, however, that Gazprom wouldn't use take-or-pay provisions to fine Ukraine. Some observers interpreted it as a gesture of support for Ukrainian Prime Minister Yulia Tymoshenko, who is running for president in January's vote.