Price of Russian gas to Europe seen falling by up to 35% in 2015

[MOSCOW] The price of Russian gas for most of the European Union and Turkey could fall by up to 35 per cent this year, tracking oil prices lower, Russia's Vedomosti newspaper reported on Friday, citing forecasts by the country's Economy Ministry.

The newspaper said the average price of gas supplied by Russian state-owned company Gazprom could be around US$222 per 1,000 cubic metres for countries the company labels part of its "far abroad".

Gazprom defines "far abroad" countries as the European Union minus former Soviet republics Lithuania, Latvia and Estonia, but including Turkey.

Sales to Europe account for more than half of the revenues of Gazprom, which generates around 8 per cent of Russian gross domestic product.

The prices of gas in Gazprom's long-term contracts are pegged to those of oil with a six- to nine-month lag. Global oil prices fell almost 60 per cent between June and January, mainly on a supply glut.

On Friday, the price of Brent crude oil rose above US$60 per barrel for the first time this year. Last June oil was trading at a peak of more than US$115 per barrel.

Sergey Kupriyanov, a spokesman for Gazprom, said it was too early to predict the final Russian gas price for Europe, which covers a quarter of its gas needs with supplies from Gazprom. "One could tell that with certainty at the end of the year,"he said. A spokeswoman for the Economy Ministry declined immediate comment.

Vedomosti cited an unnamed official at the ministry as saying that its forecasts could be altered during planned reviews in April and September.

REUTERS