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Europe to remain Gazprom’s key revenue source despite China deal — S&P

June 09, 2014, 17:40 UTC+3 MOSCOW
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MOSCOW, June 09. /ITAR-TASS/. The European market will remain a major source of revenue for Russian gas giant Gazprom even after supplies to China start, Standard & Poor’s rating agency said on Monday as cited by PRIME news agency.

According to a contract with CNPC, Gazprom will supply 38 billion cubic meters of gas annually, while in 2013 supplies to the EU amounted to 174.3 billion cubic meters and domestic supplies 243.3 billion cubic meters.

The price of gas supplied to China is not disclosed, but according to public information it is comparable with the European price. However, operating expenses of developing new gas fields in Eastern Siberia, from where gas flows to China, can be higher than operating expenses of existing fields, which supply Europe, the analysts said.

But the Chinese contract will make Gazprom’s long-term negotiating position with its European customers, who have recently demanded a lower price, firmer.

The contract can also cut China’s future liquefied natural gas needs, which is good for EU LNG buyers. But the analysts consider this consequence as a long-term one, that is why all the concerned parties will have enough time to manage risks.

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