Gazprom Agrees to Link Price of Gas Sold to Engie to Gas Market,Not Oil Market

By Into Landauro

PARIS--French power utility Engie SA (ENGI.FR) said one of its main gas suppliers, Russia's Gazprom, has agreed to link the price of gas sold to Engie to the international gas price instead of the oil price.

The company said it agreed with Gazprom to tie the price of long-term gas contracts to gas market conditions in a bid to reduce the volatility of the price it pays for its natural gas, as gas prices are less volatile than oil prices.

A spokesman for the company said the price of gas bought from Gazprom will be tied to the international price of gas, instead of the international price of oil. He declined to say whether the agreement will make Engie's gas supply cheaper or more expensive at first.

In the past, Engie, formerly known as GDF Suez, has said it wanted to tie its gas contracts to the gas market and not to the oil market.

Engie declined to specify how much gas it has agreed to buy from Gazprom though it said gas supply contracts with Gazprom will represent around 22% of all Engie's long-term gas supply in Europe in 2016.

The deal with Gazprom is part of a Engie's strategy to reduce its exposure to the fluctuations of energy spot prices that have made part of its business of selling energy unprofitable over the past few years as a result of adverse market conditions in Western Europe.

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(END) Dow Jones Newswires

April 12, 2016 07:25 ET (11:25 GMT)

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