How and why Eni and Gazprom tug

How and why Eni and Gazprom tug

What happens between Eni and Gazprom? Gazprom has started an arbitration procedure with Eni for disagreements on the interpretation of provisions relating to contracts for the supply of natural gas.

Sparks between the Russian giant Gazprom and Eni, its main partner in the Italian market. There are problems between the two companies regarding the interpretation of the provisions of the natural gas supply contracts.

The two sides are currently considering the candidacy of the president of the arbitral tribunal, who will consider the dispute. Let's go step by step.


According to what emerges from a note from Gazprom Export, the Russian energy giant has started an arbitration procedure with the Italian company Eni to resolve some "differences" regarding the interpretation of the provisions of the natural gas supply contracts.


The dispute, although the news has jumped to the news only in the past few hours, dates back to January 2020, before the health emergency from Coronavirus. "On January 10, 2020 Gazprom Export sent Eni SpA a notice on the initiation of arbitration proceedings due to disagreements between the parties, regarding the interpretation of the provisions of the natural gas supply contracts. On 11 February 2020, a response to the notification was received from the representatives of Eni SpA ", explains the Russian company in a note.


What is the problem underlying the controversy between the two energy giants? Hard to know: contracts, in fact, are top secret. According to what was reconstructed by the Sole 24 Ore , the disputes arise from a supply contract signed in 2014. In the renegotiation of the contract "Eni had made it known that it had achieved greater alignment with the market prices of gas (rather than a full indexation to oil , as before) and greater flexibility of take-or-pay clauses, "writes the Sun.

"Moscow had at the time adopted a new, very complex formula for calculating the price of gas supplies to Eni: a" smart solution ", the Secretary General of Cedigaz Geoffroy Hureau had defined it at the time, which would have allowed to "offer Eni market-related prices, while allowing Gazprom to maintain its commitment to indexing oil". It is precisely from this complexity that "divergences of interpretation" could have arisen, now that the market presents serious difficulties for gas producers ", adds the financial newspaper. In recent months, in fact, the price of gas has continued to depreciate (even falling below 2 euros per Megawatt hour).


Without a doubt, the market is changing. And Gazprom and Eni have to deal with this: the Russian giant, in fact, for some time, has suffered a slowdown in sales and, with the advance of the American LNG, has had to deal with a decrease in prices on the Old World.

The numbers also speak clearly: in the first quarter of 2020, Gazprom delivered 4.069 billion cubic meters of gas to Italy, compared to 4.97 billion cubic meters delivered in the first quarter of 2019.


The two companies are now evaluating who will shed light and resolve the dispute. It could mediate the Arbitration Court of Stockholm or the International Chamber of Commerce of Paris.


For the first time, therefore, Gazprom and Eni will find themselves before a judge. The two companies have always resolved the old controversies with negotiations.

Eni, it must be said, is a historic partner of the Russian company and is the main partner of the energy group in the Italian market: three long-term contracts have been signed between the two companies for the supply of natural gas in Italy and, in the 2017, Eni and Gazprom decided to strengthen their collaboration with a Memorandum in which they committed to work on a southern corridor for the supply of Russian gas in Italy.

This is a machine translation from Italian language of a post published on Start Magazine at the URL on Wed, 17 Jun 2020 09:44:03 +0000.