Eni may seek up to $10 billion from Statoil in gas dispute

Thu Nov 28, 2013 1:25pm EST
 
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ROME (Reuters) - Italian oil and gas group Eni (ENI.MI: Quote) said it may demand as much as $10 billion from Norway's Statoil (STL.OL: Quote) in arbitration in one of the biggest cases ever over expensive long-term gas contracts.

Eni started arbitration proceedings against Statoil in August. Chief Executive Paolo Scaroni said on Thursday that a recent Norwegian media report that it was demanding $10 billion was "probably true".

The dispute stems from a 1997 supply agreement that ties natural gas prices to refined oil products, a common practice in the past that has proven expensive as European spot gas prices have fallen relative to oil prices.

"That $10 billion is probably the value of the discount over the entire 20-year contract period. It's a huge sum of money," said a source familiar with long-term gas contract arbitrations.

Statoil declined to comment.

Europe's biggest gas suppliers Gazprom (GAZP.MM: Quote) and Statoil have seen a backlash in recent years from cash-strapped European buyers, locked into long-term supply contracts, to cut prices and move away from oil price-linked contracts.

Statoil has already renegotiated over half of its contracts, and analysts estimate that about half of its gas is now traded on a spot basis, a benefit to customers while oil prices are relatively high and European gas demand is weak.

After first resisting offering discounts, Gazprom followed suit in order to reclaim lost market share from Statoil. It agreed to return 102.7 billion roubles ($3.1 billion) last year in back payments.

Such payments will be much smaller this year, the firm said, after it started to recover some market share lost to Statoil.   Continued...

 
A general view of Statoil's office is seen in Stavanger in this January 18, 2013 file photo provided by NTB Scanpix. REUTERS/Kent Skibstad/NTB Scanpix