December 18, 2013 / 10:21 AM / 4 years ago

UPDATE 1-Eni gets major price cut in GasTerra contract deal

* GasTerra contract change includes new indexation mechanism

* Positive impact on 2013 results

* Eni in arbitration with Statoil over Norway contracts (Recasts lead, adds source, detail, background)

By Stephen Jewkes

MILAN, Dec 18 (Reuters) - Eni has clinched a deal with GasTerra over long-term Dutch gas supply contracts that will give the Italian oil and gas group a major price cut and boost its results.

Eni said it had obtained a significant price reduction as well as a change in the price indexation mechanism which will include a link to cheaper spot gas prices.

The renegotiation of long-term contracts with suppliers is widespread in Europe’s gas industry as low spot prices on the wholesale market, depressed by flagging economies, make many existing agreements unprofitable.

Eni’s bottom line in the past few years has been hit by its gas business as sales in Europe falter due to the economic crisis and long-term gas prices stay above spot rates.

“This agreement marks an important milestone in Eni’s effort to align all long-term gas supply contracts to the new market conditions,” Eni said.

The renegotiation of contracts with GasTerra will have a positive impact on 2013 results. A source familiar with the matter said the impact would be in the order of “several hundreds of millions of euros.”

Eni declined to comment on the exact amount.

Earlier this year, Eni renegotiated its contracts with Gazprom to secure a price cut and also with Algeria’s Sonatrach, enabling it to import less gas.

In August, it started arbitration proceedings against Norway’s Statoil. Eni CEO Paolo Scaroni, who has previously described the Statoil gas supplies as the most expensive in its portfolio, said in November reports Eni might demand as much as $10 billion from the Norwegian company were “probably true.”

Reporting by Stephen Jewkes. Editing by Jane Merriman

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