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Natural Gas: Prices

Volume 474: debated on Wednesday 2 April 2008

To ask the Secretary of State for Foreign and Commonwealth Affairs what assessment his Department has made of the likely political effects of the decision announced on 11 March 2008 by KazMunaiGas, Uzbekneftgaz and Turkmengaz to raise prices for natural gas; what discussions (a) he, (b) members of his Department and (c) UK representatives have had with the governments of (i) Kazakhstan, (ii) Turkmenistan and (iii) Uzbekistan on the matter; and if he will make a statement. (197034)

It was announced on 11 March, following a meeting between the Chief Executive Officer of Russia’s Gazprom and the heads of the Kazakh, Turkmen and Uzbek state gas companies, that Gazprom would pay European market rates for the Central Asian gas that it imports, beginning from 2009. However, the announcement is a framework agreement and the exact pricing formula has yet to be determined. It is expected that the actual price paid for the gas will be based on a net-back formula related to the cost of the gas, less transport costs.

There has been significant press speculation on the agreement and the underlying reasons behind it, in particular on the likelihood that Gazprom will seek to pass on the increased price to Ukraine and the impact that this may have on the price Ukraine pays for its gas. However, until the exact commercial parameters of the agreement are clear, it would be premature to draw conclusions about its likely political effects.

We have not had any formal discussions with the Governments of Kazakhstan, Turkmenistan and Uzbekistan on this issue since 11 March. However, we remain in regular contact, both bilaterally and through the EU, with all three governments on energy related issues.