Germany’s E.ON might shut Ruhrgas as it takes Gazprom to court

Germany’s E.ON has decided to take its natural gas supplier Gazprom to an international arbitration court in order to adjust the pricing formula in the long-term supply contracts between the two companies, both parties confirmed to ICIS Heren on Monday.

The news came on the day the German media reported that E.ON might shut its gas subsidiary Ruhrgas.

Back in June, news leaked that E.ON and Russia’s Gazprom had failed to reach an agreement in negotiations concerning the price of gas enshrined in their long-term oil-linked supply agreement (see ESGM 4 July 2011), after E.ON had asked to link prices for all volumes to spot gas prices.

Like other European suppliers E.ON has been facing difficulties meeting its minimum offtake obligations under the oil-indexed, take-or-pay contracts because of the slump in spot gas prices and demand.

The price negotiations are gaining additional importance for E.ON against the background of an increasingly difficult market position. German magazine Der Spiegel reported on Monday that E.ON might shut its Essen-based natural gas subsidiary Ruhrgas as well as two other business units in order to put the troubled company back on its feet.

E.ON confirmed to ICIS Heren that it is currently reviewing its strategy, but stressed that no final decisions have been taken on the matter yet. A spokesperson said that an announcement on planned restructuring measures is expected on 10 August, when E.ON will publish its business results for the first half of 2011.

E.ON has already said that this year’s results are likely to be hit as a result of Germany’s nuclear fuel tax taking effect, as well as lower power prices and high gas procurement prices (see ESGM 9 March 2011). JR/JA