Serbia signs new gas supply contract with Gazprom

Serbia has signed a "very favourable" three-year gas supply contract with Russian state-controlled Gazprom, Serbian president Aleksander Vucic said.

The contract is for 2.2bn m³/yr and is 100pc oil-indexed, replacing a six-month extension to its contract for 2bn m³/yr at a price of $270/'000m³, which expires on 31 May.

Serbia is still seeking an additional 800mn m³/yr of Russian gas on top of this, for a price yet to be determined. Vucic has already sent a letter to Gazprom to discuss additional quantities, the president said.

If Serbia cannot strike a deal for all the quantities it requires, it will look to secure gas ahead of the winter when it is relatively cheaper to fill storage, Vucic said. Serbia recently reached an agreement with Hungary to store 500mn m³ of gas in its storage facilities.

Before the talks, Vucic said he feared the formula would include 70pc indexation to the TTF, and the most optimistic scenario he envisioned was 80pc oil-indexation, with 20pc linkage to the TTF. The 100pc oil-linked formula means that Serbia will pay "by far the best price" in Europe, "10-12 times less than the others in Europe will pay", the president said. If Serbia "realises everything from the agreement with Putin, we will have a safe winter in terms of gas supply", he said. Prices are expected to be in a range of $310-$408/'000 m³, depending on the price of oil, Vucic added.

Putin and Vucic also discussed further construction of gas storage facilities in Serbia, although no additional details have emerged. According to a January 2019 agreement, Gazprom and Srbijagas planned to increase the capacity of the country's only storage facility, Banatski Dvor, to 750mn m³ from 450mn m³.

By Brendan A'Hearn