* Price expected at $370 per 1,000 cm, down from over $400
* Would equate to a spot market price of 26 euros/MWh
* Would be competitive with German spot market
* Exports expected to rise to 152 bcm next year
(Adds analyst comment, background in para 4, 5, 6)
By Vladimir Soldatkin and Henning Gloystein
MOSCOW/LONDON, Dec 18 Russia's Gazprom
, pressured by customers and competitors to reduce its
gas charges, is likely to cut long-term contract prices to
Europe next year to levels comparable to the spot market, a
source at the company said.
The price of the natural gas Russia's gas export monopoly
sells to Europe on long-term contracts could fall to around $370
per 1,000 cubic metres in 2013 from over $400 this year.
"This (price) is a base-case scenario. The forecast is
subject to change during the course of the year," the source
said on Tuesday.
It would equate to a spot market price of around 26 euros
($34.22) per megawatt-hour (MWh), below current German spot gas
prices of over 27 euros a MWh and still slightly below price
levels for delivery next summer.
Gazprom, Europe's biggest supplier of gas, has come under
increasing pressure from rival suppliers such as Norway's
Statoil, which unlike Russia adapted its pricing policies early
on to reflect customer demands for cheaper gas.
A near 10-percent drop in Russian gas exports to Europe over
the January-November period, versus the prior year, underscores
the extent to which Gazprom is losing its main export market,
Thierry Bros, analyst at French bank Societe Generale said.
The company is keen to defend its dominant position because
it depends on European revenues, which account for around 80
percent of its income.
"The minimum European price for Gazprom (with zero margin)
could be $160 per 1,000 cubic metres...this shows that Gazprom
has room to reduce its price further," Bros said.
The source said gas exports to Europe are expected to
increase to 152 billion cubic metres (bcm) next year from just
over 140 bcm in 2012, which came in below forecasts due to
In 2011 the price was $390 per 1,000 cubic metres, and
Gazprom said earlier this year that its average price for 2012
was likely to be $405 to $415 by the end of the year.
At almost 30 euros per MWh, this year's price is higher than
even the most expensive winter contracts in Germany's spot
market, where levels currently do not exceed 29 euros a MWh.
PRESSURE TO REDUCE PRICES
Europe's gas demand has declined because of its economic
slump, energy efficiency drives and competing fuels in its main
Because of these developments, Gazprom has been under
pressure from customers and competitors to cut its prices.
Statoil, Gazprom's biggest rival to supply Europe
with gas, said earlier in December that it expected the majority
of its supplies to be sold under spot market pricing models in
Prices in long-term contracts to supply gas via pipeline
have historically been pegged to oil prices, because both fuels
used to be produced by the same exporters and were often used in
the same industries. Oil has remained expensive despite the
European utilities that rely on imports of piped gas have
been selling the gas on to customers at retail prices that are
linked to the freely traded and lower priced spot market.
As a result of this profit squeeze, many utilities have
sought to renegotiate their contracts with suppliers such as
Statoil and Gazprom, seeking a higher share of spot-market
indexation in their supply deals.
Adding to the price pressure, the European Commission opened
an investigation in September into allegations that Gazprom was
abusing its dominant position in Central and Eastern European
($1 = 0.7598 euros)
(Additional reporting by Oleg Vukmanovic, editing by Jane Baird
and David Cowell)