Gazprom denied plans to start a price war in Europe

Gazprom has no need to open a price war, said the Deputy Chairman of the management Board Alexander Medvedev, commenting on media reports that Gazprom may bring down prices on the European gas market up to the level at which to supply Europe with liquefied natural gas (LNG) from the U.S. will be unprofitable.

“In long term contracts there is no discount prices have set a new price level according to the formula in accordance with the market situation. Another volume of our exports is indirectly linked to the pricing at gas hubs in certain corridors. For these prices, any discounts we have not imposed and will not impose”, — Medvedev said at the investor day in London.

The Deputy Chairman of “Gazprom” noted that companies do not see any reason to supply LNG to Europe, while its exports to Asia can bring producers greater profits. “We are calm but attentive,” — said Medvedev, noting that if necessary, Gazprom will be able to use the reserves and to reduce their costs of production and transportation of gas.

Earlier the Financial Times reported on the preparation of “Gazprom” to the price war in Europe. According to the newspaper, Gazprom can use the strategy used by Saudi Arabia in the oil market and lower gas prices in Europe to inappropriate for competitors from American LNG projects. According to analysts, this will allow Gazprom to defend its market share in the region, bringing a significant amount of revenue.

Assessment analyst of the Paris Bank Société Générale Thierry Bros, to displace American LNG to the European market, Gazprom will have to sacrifice a revenue of $1.3 billion, which represents less than 1 percent of their annual sales.

Analysts, however, believe that Gazprom will be difficult to keep gas prices low for a long time. As a medium-term strategy of the company, in their opinion, can use methods of the price war to prevent the emergence of new LNG projects.

Earlier Medvedev said that in 2015, Gazprom increased its share on the European gas market up to the maximum for the last ten years at 31%.

According to a Gazprom presentation to investors, the company estimates that in 2015 gas consumption in Europe has increased, while the production decreased by 2%. From the same foreign suppliers to the greatest extent increased supplies with “Gazprom” (by 8.2% to of 158.6 billion cubic meters). Due to this, its share rose from 30.2% to approximately 31%.