Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Latvia Agrees to Pay Gazprom About 50% More for Its Gas

RIGA -- Latvia's gas company said Friday that it had struck a gas supply deal with Gazprom for 2008 through 2010, which could lead to a rise in prices of up to 50 percent, depending on heavy fuel oil price changes.

Latvijas Gaze, 47 percent owned by E.On Ruhrgas and 34 percent by Gazprom, did not give an exact figure for how much it would pay in a statement released Friday.

Gazprom has been trying to move all its former Soviet customers to West European prices, which were about $260 per 1,000 cubic meters and which Gazprom has said will be about $350 in 2008.

Latvia, like its Baltic neighbors, is completely dependent on Russia for gas, though the whole region accounts for only a small part of Gazprom's exports at 4.9 billion cubic meters in 2006, compared with a major customer like Ukraine at 59 bcm.

Latvijas Gaze said the rise in prices it expected to pay for gas was because of the rise in the price of fuel oil, up from about $240 per ton in January to $506 now.

It said it expected supplies of gas in its underground storage unit, which were bought at lower prices earlier this year, would last until April.

From April, the price rise would depend on the average price of the previous six months of fuel oil.

If this were from $400 to $500 per ton, then the rise in the price of the gas it buys would be between 20 and 50 percent from the December 2007 price.

If the average price of heavy fuel oil falls to $350, then the price rise would be about 7 percent, it added.

It said it would make a loss of between 5 million Latvian lats ($10.43 million) and 30 million Latvian lats ($62.60 million) in 2008, if oil prices rise further and if tariffs for domestic customers are not increased.