08 November 2013, News Wires – Italian energy giant Eni has launched an arbitration case against Statoil in which it is demanding a reported Nkr60 billion ($10 billion) in compensation for alleged overpricing of gas supplies by the Norwegian state-owned company.
Eni is claiming that Statoil has charged prices for its gas supplies to the Italian market that are much higher than the overall market level over a prolonged period, according to a report in Norwegian business daily DN.
The apparent reason for the price discrepancy is the gas price has been linked to that of oil based on a 1997 agreement but development of the gas spot price since than has been weaker than that for oil.
Gas prices in Europe have dropped sharply in Europe as demand has slumped due to the economic recession, resulting in gas-fired power stations being idled.
The Italian company is reported to have succeeded in renegotiating the price of its gas supply contracts with Russia’s Gazprom and Sonatrach of Algeria, but Statoil has so far refused to make any such concession.
While Eni chief executive Paulo Scaroni had revealed back in August the company would start arbitration against Statoil to claw back alleged gas overpayments, the level of compensation it is demanding has only now come to light.
A Statoil spokesman told the publication he would not comment on individual cases but said an arbitration was merely a review by a neutral party of events in the light of market conditions.
The company has though so far failed to formally disclose details of the arbitration to the market, according to the report.
Scaroni wrote in a recent Financial Times opinion article that he believes gas prices in Europe should be cut to a similar level to those of the US, which are only about 25% of the European price, given production costs for Norwegian fields are lower than for shale.
“If our suppliers continue to try to achieve the highest possible price for their gas, they will squeeze European industry and damage their natural gas market,” he wrote.