Gazprom poised to raise gas prices for Lithuania

  • 2005-08-10
  • Staff and wire reports
VILNIUS - A top Gazprom official has told Prime Minister Algirdas Brazauskas that the Russian gas monopoly may raise the wholesale price of natural gas unless the government reviews the retail price on the Lithuanian market.

Alexander Ryazanov, Gazprom deputy chairman, told Brazauskas that the retail gas price is unfavorable for Lietuvos Dujos (Lithuanian Gas), the local gas company which Gazprom partly owns.

Ryazanov refused to specify the size of the possible price hike, which would occur if the government disregarded the requirements of Gazprom.

In June the State Control Commission for Prices and Energy reduced the price of gas for large industrial users by 6 percent on average, starting July 1. As a result, Lithuanian Gas might lose some 25 million litas (7.2 million euros) in a year, Ryazanov said.

"We do not claim that we should have super profits; however, the approach toward the regulation of prices should be fair. We will be forced to raise the price of gas to Lithuania so as to cover our losses," he said.

Lithuanian Gas shareholders have promised to set out their position and relevant proposals to the Cabinet leader in writing.

Nemira Pumprickaite, Brazauskas' spokeswoman, said, "The prime minister cannot make the decisions alone. However, he promised that the government would consider those proposals."

Russia has been hinting in recent months that it wants the Baltic countries to eventually pay world prices for gas. This would entail a threefold increase in the current price over a period of several years. Lithuanian officials realize the price leveling is inevitable and have been psychologically preparing the population for the adjustment.

To be sure, Ryazanov said that Gazprom would retain gas transportation and distribution tariffs unchanged for a two-year period if its requirements are met. Those tariffs comprised some 20 percent of the total gas price for large-scale users and some 80 percent for smaller-scale consumers.

Gazprom also proposed to add entities that consume up to 1 million cubic meters of gas per year to the group of users not regulated by the commission. The company would set out several additional requirements in its proposals, including technicalities regarding settlements.

Germany's E.ON Ruhrgas International controls 38.9 percent in Lithuanian Gas. Gazprom holds 37.1 percent, while the state still controls 17.7 percent in the transportation and distribution company. Lithuanian Gas posted earnings of 36.1 million litas (10.46 million euros) for the first half of 2005, a decline of 16.6 percent year-on-year.