MOSCOW, July 9 (RIA Novosti) – Russian gas monopoly Gazprom will amend its contract with German utility RWE, following a legal ruling that adjusted Gazprom’s gas price formula, Gazprom Deputy CEO Alexander Medvedev said Tuesday.
“We’ll do this within a month. We are interested in doing this quicker because amendments [to the contract] will be made before final documents are signed,” Medvedev said.
The price adjustment follows an arbitration ruling in Vienna against Gazprom that could pave the way for ending the decades-long practice of linking gas prices in long-term deals to oil prices.
Under the arbitration ruling, Gazprom will have to make retroactive payments to RWE calculated from May 2010 to the date of alteration of the contract. RWE earlier said Gazprom would pay back about 1 billion euros ($1.3 billion) to the German utility.
Bloomberg earlier cited RWE’s Chief Financial Officer Bernhard Guenther as saying: “We have a solution which partly replaces oil indexation by gas indexation.”
Gazprom Export, the Russian company's export arm, previously said the ruling introduced “quite limited spot indexation” and that the Russian gas monopoly considered the ruling “objective, weighted and taking into account the principles of long-term contracts.”
Gas supply contracts have been a major problem for European utilities in the last few years as falling gas demand in Europe has forced them to sell gas to consumers at lower prices than those they had agreed to pay under long-term deals with suppliers.