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Gazprom agrees to pay 54% more for Turkmenistan's gas

Energy Trade

OAO Gazprom CEO Alexei Miller agreed to pay 54% more for natural gas from Turkmenistan. Gazprom, Russia's gas export monopoly, will pay $100 per 1,000 cubic meters of gas until the end of 2009, up from $65, the company said in an e-mailed statement yesterday. Miller signed the agreement with Turkmenistan President Saparmurat Niyazov in the Turkmen capital Ashgabat. The price of Turkmen gas is crucial for an agreement Gazprom reached with Ukraine after a pricing dispute in January. NAK Naftogaz Ukrainy, the Ukrainian state energy company, has been paying a compromise price of $95 per 1,000 cubic meters for a mix of cheap Turkmen gas and more expensive Russian gas. Gazprom, which controls import pipelines to Ukraine, has said any price increase would depend on whether Turkmen gas gets more expensive. Ukrainian Fuel and Energy Minister Yuriy Boiko told reporters in Kiev yesterday the price of $95 would be good through the end of the year, Interfax reported. Ukraine's new pro-Russian prime minister, Viktor Yanukovych, secured that assurance after visiting President Vladimir Putin in August, Boiko said, according to Interfax.

Even though Gazprom is the world's largest gas producer, it relies on cheaper fuel from Turkmenistan to supply customers such as Ukraine. It sells its own gas to Europe at a premium. In June, Turkmenistan threatened to shut off deliveries to Gazprom after Miller and Niyazov failed to agree on the price of more supplies this year. Turkmenistan has already exported 30 billion cubic meters of gas to Gazprom this year. It agreed yesterday to sell 12 billion more cubic meters at the new price of $100 per 1,000 cubic meters. From 2007 through 2009, Gazprom said, it will buy up to 50 billion cubic meters a year at that price. The two sides will meet before July 1, 2009, to discuss a new price for further deliveries, according to the statement. Turkmenistan plans to start shipping gas to China through a new pipeline starting that same year. Gazprom and Turkmenistan signed a 25-year agreement on gas deliveries in 2003. Turkmenistan produced 58.8 billion cubic meters of gas last year, according to the BP Statistical Review. (Bloomberg)

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