September 23, 2008

Russia to Raise Gas Prices for Armenia By 40% in 2009

YEREVAN. Sept 23 (Interfax) - Russia will raise gas prices for Armenia 40% to $154 per 1,000 cubic meters on April 1, 2009 from the current $110, Armrosgazprom CEO Karen Karapetian said during a meeting with Armenian President Serzh Sargsian on Tuesday.

Gas prices will then rise to $200 per 1,000 cubic meters on April 1, 2010, he said. The growth in gas prices for Armenia is on par with the increase on the Russian energy market. Starting in 2011, Armenia is to start paying European prices for gas.

Karapetian said the upcoming hike in gas prices would not lead to a reduction in gas consumption.

Sargsian said the negotiations with Gazprom (RTS: GAZP) are based on a gradual increase in gas prices, which allows the population and business to plan in advance. The president said that "the price hike will have a negligible impact on the population but create great opportunities for heightened competition among businesses."

He also called on Armrosgazprom to actively continue the process of bringing gas to the whole country.

In September 2008, Gazprom signed a contract on gas supplies to Armenia in 2009-2010. Gazprom delivered 2.05 billion cubic meters (bcm) of natural gas to Armenia in 2007.

Karapetian also told journalists that Russian gas supplies to Armenia in 2009 would amount to a minimum of 2.5 bcm compared to the expected level of 2.4 bcm at the end of 2008.

These are modest forecasts though, he said, since actual growth will be much higher. Initially, the contract with Gazprom called for gas supplies of 2.1 bcm in 2008.

The Armenian gas market will continue to grow despite the gradual increase in gas prices, he said. "I am confident that the rise in gas prices will not become a hindrance for the country's economy," he said, adding that Gazprom is the biggest shareholder in Armrosgazprom and is therefore also interested in the development of the Armenian gas market.

OJSC Armrosgazprom has a monopoly on gas supplies to Armenia. Russia's Gazprom owns a 72.16% stake in the company, the Armenian government owns 22.78% and Itera owns 5.06%.

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