VILNIUS - The Lithuanian Cabinet endorsed on Jan. 7 a draft agreement on the sale of a 34 percent stake in Lietuvos Dujos, the natural gas distribution company, to Russia's Gazprom, the only natural-gas supplier to Lithuania.
After a year-and-a-half of negotiations that often broke down, Gazprom has agreed to pay 100 million litas (28.9 million euros) for the 34 percent stake in the gas company.
"This agreement is crucial to Lithuania because natural gas supply is one of the most sensitive issues in meeting the country's energy needs," Prime Minister Algirdas Brazauskas said after the Cabinet meeting.
Lithuania "has only one source [of natural gas]. I do not see an alternative source of natural gas supplies in the near future," he added.
Gazprom and Lietuvos Dujos will continue talks over a long-term agreement - until 2015 - for natural-gas supplies. The parties expect to complete the talks after signing the privatization deal.
Brazauskas said the terms and conditions of the natural-gas supply agreement were favorable to Lithuania. He said the agreement would provide long-term supply guarantees while retaining the current price-setting principles, which link the natural-gas price to fuel oil prices on the Rotterdam market.
The prime minister also emphasized that Gazprom would commit itself to supplying 90 percent of Lithuania's natural-gas needs and that Lietuvos Dujos' market share would rise from approximately 28 percent to 70 percent.
"Lietuvos Dujos operates successfully and has a large profit. I believe that the company has a good future," he said.
Lietuvos Dujos posted a net profit of 68.97 million litas for the first nine months of 2003, a 66.7 percent rise year-on-year.
The government will retain a 24.36 percent stake in Lietuvos Dujos after the deal with Gazprom is finalized. Germany's Ruhrgas owns 35.49 percent of Lietuvos Dujos, while the remaining 7.64 percent are in the hands of small investors.