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UPDATE 1-Lithuanian utility to seek arbitration against Gazprom
January 30, 2014 / 2:26 PM / 4 years ago

UPDATE 1-Lithuanian utility to seek arbitration against Gazprom

(Adds quotes, background, details from paragraph 4)

VILNIUS, Jan 30 (Reuters) - Shareholders of Lithuanian utility Lietuvos Dujos voted on Thursday to seek arbitration over a gas price dispute with sole supplier Gazprom , as it aims to pull down some of the highest prices in Europe.

The move was initiated by the Lithuanian government, which holds 17.7 percent of Lietuvos Dujos, and backed by its biggest shareholder, Germany’s E.ON, with 38.9 percent, which shifted its alliance to the government.

Gazprom, which has 37.1 percent, voted against.

“An extraordinary shareholders meeting ... has decided to initiate arbitration against natural gas supplier Gazprom in order to lower the too high price of gas,” Lietuvos Dujos said in a statement.

The gas utility, the main retail supplier in the nation of 3 million people, said it had failed so far to negotiate more favourable prices from Gazprom, the world’s top gas producer and the supplier of a quarter of Europe’s gas needs.

Gas prices to Lithuania were among the highest in the European Union last year, data from the European Commission showed, and exceeded those of its Baltic neighbours.

The Commission has been investigating Gazprom since September 2012 on suspected anti-competitive behaviour, including overcharging customers and blocking rival suppliers.

“Gazprom’s supplies to Lietuvos Dujos at much higher prices than to Latvia, Estonia, and higher than for Germany,” the energy ministry said in a statement.

“This is harmful to our consumers, our economy, and it also harms Lietuvos Dujos, which loses its customers and faces shrinking gas consumption,” it added.

The Lithuanian government had already filed another case against Gazprom before the international arbitration court in Stockholm, seeking compensation of 5 billion Lithuanian litas ($2 billion) for past pricing.

With the new arbitration initiative, the government is trying to speed up talks with Gazprom to finally get a discount, said Ramunas Vilpisauskas, the head of the Vilnius Institute of International Relations and Political Science.

“It has been more than a year since the government promised voters cheaper gas, but it hasn’t delivered yet,” he added.

Gazprom has said the utility agreed to pay prices based on a formula that is linked to oil prices. It said it would not change its pricing practices in Eastern Europe despite regulatory pressure.

The current sale agreement between Lietuvos Dujos and Gazprom covers supplies until the end of 2015.

The Russian company said last September it could reduce prices significantly if Lithuania signed a “comprehensive agreement”, which would also include its holding in the utility and transit fees.

Lithuanian officials also have said Gazprom wants Vilnius to withdraw its existing claim from the Stockholm court.

Lithuania plans to erect an liquefied natural gas (LNG) terminal at end of 2014, and its top power utility Lietuvos Energija expects to start importing LNG in 2015. ($1 = 2.5305 Lithuanian litas) (Reporting by Andrius Sytas; Writing by Nerijus Adomaitis; editing by Jane Baird)

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