06 January 2014, News Wires – Eni has lost between €2 billion and €3 billion ($2.7 billion and $4 billion) under a gas supply contract with Norway’s Statoil whereby it is required to pay a premium of around 50% over market prices, according to chief executive Paulo Scaroni.
The Italian energy giant recently launched an arbitration claim against Statoil for $10 billion in compensation after failing to gain gas price concessions from its Norwegian counterpart in talks to renegotiate terms of the long-term supply deal.
While Eni has succeeded in securing revised deals from Russia’s Gazprom and Sonatrach of Algeria, Statoil has apparently refused to budge over its contract with the Italian customer, despite reportedly offering concessions to North European gas buyers.
Speaking to Norwegian business daily DN, Scaroni claimed Statoil was the company’s “worst supplier” and said he was unable to comprehend the “rigid” stance of the Norwegian state-owned giant given the pair are partners on numerous oil and gas fields.
The Eni boss believes Statoil and other suppliers should have a long-term interest in sinking contracted gas prices to safeguard their future gas market in recession-hit Europe, where slow demand combined with cheaper shale gas supplies from the US have sunk spot prices.
Eni signed a long-term gas supply contract with Statoil back in 1997 with a gas price largely linked to that of oil.
However, since then spot gas prices in the open market have fallen in northern Europe, fuelled by market liberalisation, leaving Eni being forced to pay a relatively higher price under its fixed contract – dubbed by Scaroni as “an obligation to lose money”.
Although Statoil is believed to have offered Eni the same price as that for French and German gas buyers, the Italian company faces reported additional costs of around €200 million a year in the form of payments for transit through French pipelines that have further hiked prices for consumers in Italy.
Defending its contract policy, Statoil chief executive Helge Lund was earlier reported as saying the company had been quick to adjust its gas supply deals to new market realities – including decoupling of the oil linkage – and claimed the company was a “long-term, rational and flexible actor” interested in a gas price that would secure its future market.