European Gas Price Could Top $500 By End 2008 – Gazprom

MOSCOW. July 8 (Interfax) – Gazprom (RTS: GAZP) forecasts that the price of gas in Europe could average at more than $500 per thousand cubic meters by the end of 2008, Alexei Miller, the Russian gas monopoly’s chief executive, said at a meeting with Russian Prime Minister Vladimir Putin.

“As regards gas prices, the situation for end consumers is unfolding fairly dramatically. By our forecasts, the average European price could reach more than $500 per thousand cubic meters by the end of 2008,” Miller said.

Miller said that Gazprom supplied the EU with “just over 168 billion cubic meters of gas and the CIS and Baltic States with just over 100 bcm” last year.

“The volumes of gas supplies are growing by the year, but these are now growing more slowly than domestic market consumption. The domestic market is now becoming a true competitor for our external markets,” Miller said.

This is due partly to the government’s decision to achieve price parity with exports in the domestic market, Miller said. “As regards the volumes, which are significant, these are rising to a greater extent here in Russia. Therefore we’re saying that the domestic market is becoming a very serious rival to the external market,” he said.

Russia’s strong economic growth has boosted domestic gas consumption more than 25 billion cubic meters (bcm) in the last three years, Miller said.

“The country has never known such an increase in consumption. This is of course a fine illustration of how very rapidly the economy is growing,” Miller said.

“This is a lot of gas, as much as Gazprom exports to a country like, say, Italy, each year,” he said.

Gazprom has said it is revising its annual production target up from 561 bcm to 563 bcm, in order, Miller said, to meet growing demand for gas in Russia.

Vladimir Putin, for his part, said that the transition to price parity with exports would be smooth for households.

“When we decided last year to achieve parity [between domestic prices and exports], we agreed with the company that we’d give households special treatment and make the transition far smoother for them,” Putin said.

The year by which this parity will be achieved is not even definite, he said. “At least we’ll be regulating this for the time being,” he said.

Gazprom’s Miller said there was nearly a fivefold difference between domestic and export prices for gas, but that the gap would be reduced gradually.

“As for households, they’ll bet getting gas at regulated prices after 2011. Gazprom works on the basis that the government will regulate gas prices for households, guided by the rate of inflation,” Miller said.

(c) 2008 Daily News Bulletin; Moscow – English. Provided by ProQuest Information and Learning. All rights Reserved.