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. Last Updated: 07/27/2016

Transaero, Gazprom Neft Sign Supply Deal

Gazprom Neft signed an accord to supply jet fuel to Transaero, the country's third-biggest airline, to help bring down record prices by removing middlemen and deflect government charges of price fixing.

The oil arm of Gazprom will supply fuel at a fixed price to be adjusted quarterly, Transaero chief executive Olga Pleshakova said Wednesday after a signing ceremony in St. Petersburg.

Prices for jet fuel rose 70 percent in Russia from November to June, prompting the Federal Anti-Monopoly Service to open price-fixing probes last week against five Russian oil producers, including Gazprom Neft.

The other companies named in the investigation are the country's four largest oil producers, Rosneft, LUKoil, TNK-BP and Surgutneftegaz. Gazprom Neft is the country's fifth-largest oil producer.

Alexander Dyukov, the president of Gazprom Neft, blamed intermediaries in the sales of the fuel for the sudden price rise.

"There is surely no price fixing. Not one of the five companies' executives was going to agree on it. We gave no such instructions to our staff," Dyukov told reporters.

Dyukov said direct, long-term contracts with air carriers would be the remedy for unjustified growth in jet-fuel prices.

Russians are crying foul over soaring ticket prices in the middle of the summer holidays, while airlines blame oil firms and fuel distributors for price fixing of jet kerosene, which they say accounts for one-third of their total costs.

Putin said earlier this month that the anti-monopoly service should "wake up" and prove its ability to regulate the market after domestic jet-fuel prices rose 42 percent since the start of the year, compared with a 25 to 33 percent increase for other refined products.

The agency has in the past launched similar cases but has failed to impose any big fines or take steps to stop market abuse.

Gazprom Neft, the country's second-largest refiner of jet fuel, supplies 20 percent of Transaero's oil-product needs, Dyukov said.

The company tripled its production of the fuel in the first six months of 2008 compared with the same period last year, he said.

Gazprom Neft fell 2.3 percent in MICEX trading Wednesday.

Dyukov also said Gazprom Neft would settle for a stake of less than 49 percent in Kazakh oil producer MangistauMunaiGas if it were able to book the company's reserves.

"We are interested in the assets but aren't prepared to buy them at any old price," Dyukov said. He declined to say how much the company would be willing to pay or the smallest stake it would consider.

Naftna Industrija Srbije's value has declined since Gazprom offered to pay 400 million euros ($630 million) for a 51 percent stake in Serbia's national oil company, Dyukov said.

Profit margins for oil producers have decreased since the agreement was made in January, he said. The liberalization of Serbia's oil-product market will put the oil company at a disadvantage because its refined products don't comply with European standards, Dyukov said.

Bloomberg, Reuters