By Shane McGinley
The hearing was part of a deal for the Qatari firm’s 25-year deal to supply gas to Italy
An arbitration court in Qatar has ruled against Rasgas, the country’s largest producer of Qatari LNG after Qatar Petroleum, in a decision which saw Italian energy group Edison awarded a €450m (US$578.07m) discount on the price of supplies Rasgas was to supply the Milan-based firm as part of a 25-year contract.
“The Court of Arbitration of the ICC – International Chamber of Commerce – has notified to Edison the award related to the dispute between Edison and Rasgas for the revision of the price of LNG (liquid natural gas) supplied under the long term contract from Qatar,” Edison said in a statement.
“The Court decision has accepted the merits of Edison’s positions. The overall impact on 2012 accounts of Edison is estimated in 450 million euros on EBITDA. The arbitration with Rasgas started in March 2011 within the renegotiation process of Edison’s long term procurement gas contracts,” it added.
Edison, which last year successfully challenged Russian gas export monopoly Gazprom to reduce the cost of long-term gas supplies, currently also has pending arbitration hearing its gas contracts in Libyan and Algeria.
"It's a breakthrough win as it paves the way for other European companies in the same situation to renegotiate gas prices with Qatar," a source close to the arbitration process told Reuters.
"The price review success has the potential to reduce the final gas sale to businesses and households in Italy and also Europe as other companies might follow the same path in renegotiating the contracts with their suppliers," the source added.
At issue is a decades-old system of indexing gas supplies to oil prices that has hurt European utilities because they are forced to sell the gas at a loss, losing billions of euros in the process.
Qatar, which liquefies its gas for export on tankers, adopted the same model set by Europe's two biggest pipeline exporters Russia and Norway by linking gas supplies to oil prices.
The backlash against oil-linked contracts has gained ground in recent years as waning demand for gas and economic recession across Europe forces utilities to defend dwindling profit margins.
The decision, which favours Edison, reflects new realities in Europe's third-biggest gas market as ongoing structural reforms have made oil-linked pricing of gas in Italy increasingly unsustainable, the source said.
Edison's supply deal with Rasgas guarantees 6.4bn cbm of supply annually over 25 years to Italy's offshore regasification terminal in Rovigo.
Rasgas also supplies Spain's Endesa, Belgium's Distrigas and the trading wing of France's EDF.
* With Reuters