Gazprom demands pipe ‘discounts’

Gas giant Gazprom is apparently demanding big discounts from Russian pipeline suppliers for its major projects, especially Nord Stream 2 to Germany.
In a move likely to disrupt the pipe and metals sectors, the state-controlled major is seeking around 20-per-cent discounts as it tries to get a grip on pipeline investment spending that is set to peak in the next two years.
Gazprom is building the TurkStream pipeline to Turkey through the Black Sea and Power of Siberia to supply China, and is preparing for the Nord Stream 2 link to Germany.
Nord Stream 2 recently took a major step forward when Germany granted its first permit for the project.
Gazprom’s average annual investments to 2035 are projected to reach 1 trillion roubles (US$17.3 billion), peaking before 2020.
It is a major client to the pipeline manufacturers with a near monopoly on Russian gas. “You can’t say no to Gazprom,” a supplier reportedly said.
Gazprom’s next major purchase will be pipes for the Russian domestic link to Nord Stream 2, with newcomer, ZTZ, reportedly offering lower prices.
ZTZ said it was offering prices up to 30-per-cent lower than its competitors. “Our colleagues need to justify their artificially high prices to their client,” a spokesman said.
The firm was buying steel “at a more optimal price”, it claimed.
Nord Stream 2 received its first construction permit from Germany last month.
The Stralsund Mining Authority issued the permit for the construction and operation in German territorial waters and the landfall area in Lubmin, north–eastern Germany.
Gazprom is rumoured to be demanding discounts on large diameter pipes (LDP), a market which is currently oversupplied.
“We looked at the market and decided that we were paying above the market price. We wanted to discuss this with the pipe makers,” a Gazprom source told Readers.
LDP with a diameter above 5.3 metres make up over 90 per cent of Gazprom’s pipe purchases. In the first half of last year, Gazprom largely bought pipes from four Russian firms: steel manufacturers OMK and Severstal and specialist pipe makers ChelPipe and TMK.
Severstal, which supplied a quarter of Gazprom’s LDP in the first half of 2017, makes pipes from its factory in St Petersburg.
“We held talks and agreed the main parameters of our cooperation. We have contractual obligations, which meant production at our Izhora plant did not stop,” a Severstal spokeswoman said.