* Price cuts will be less than 7-10 per cent
* Average Russian gas price for Europe to decline to
* Back payments to Europe seen up to $900 million this year
(Combines stories, adds detail, analyst quotes)
By Vladimir Soldatkin and Denis Pinchuk
MOSCOW, June 4 Gazprom will cut
pipeline gas prices for European buyers this year in response to
competition, its top export official said on Tuesday.
Gazprom, Russia's largest company by market capitalisation,
generates around 55 percent of its gas revenues in Europe where
it supplies around a quarter of gas needs. Its revenues from gas
sales to Europe declined 3 percent last year to $55.9 billion.
The company has already had to give in to pressure to
cash-strapped European buyers locked into long-term supply
contracts, cutting prices and returning some money in
"retroactive payments." This year's reductions will be smaller,
"The price correction will be even less than in the previous
round of talks, when it stood at 7-10 percent," Alexander
Medvedev, the head of Gazprom's export arm, told a briefing.
Total rebates to European companies stood at 102.7 billion
roubles ($3.22 billion) in 2012.
Following the first adjustments last year, Gazprom's export
volumes to Europe have recovered slightly, clawing back some
market share it had lost to Norwegian rival Statoil,
which supplies most of its gas under spot market deals which are
currently cheaper than Russia's contracts.
Medvedev said the repayments are expected to total less than
$800-$900 million this year, although this amount excludes
possible payments to Germany's utility RWE, which has
been involved in an arbitration case with Gazprom.
Medvedev also said Gazprom would continue to cut prices this
year in new deals where its sale prices are pegged to declining
oil prices, though at a slower pace than has been the case.
He said new deals could include Italy's Eni and
France's GDF Suez SA.
Medvedev expects the average gas price for Europe in
Gazprom's long-term contracts will decline to $370-$380 per
1,000 cubic metres from $402 last year, confirming previous
The proposed price drop to Europe would translate into a
fall from $14.8 per million British thermal units (mmBtu) to
around $13.7 per mmBtu.
While this is still higher than the average price of $9 per
mmBtu paid at Europe's benchmark gas hub, Britain's National
Balancing Point (NBP), it is competitive with winter spot prices
and below those paid for Asian liquefied natural gas (LNG)
In a move to strengthen its European hold, Gazprom wants
full access to Germany's Opal pipeline, an extension to the
Nord Stream link built by Russia to bypass transit countries
such as Ukraine.
Some analysts reckon Gazprom's 2013 forecast for gas prices
is too low, meaning it may be factoring in a possible pay-out to
"Medvedev is trying to say that ... there is still a risk
from the RWE process, which he didn't include into his
estimates," said Alexei Kokin, an analyst with Uralsib brokerage
in Moscow, forecasting average sales prices at $400 this year.
He said Gazprom may hit its target to raise its exports to
Europe to 152 billion cubic metres (bcm) from 139 bcm last year.
Gazprom increased its exports to Europe by 7 percent in
January-May to 66.6 bcm, while the average price in the first
quarter stood at $399.42 per 1,000 cubic metres.
(Additional reporting by Alexei Anishchuk in Yekaterinburg and
Henning Gloystein in London; editing by Douglas Busvine and