Gazprom and pipe companies agree on discounts for Power of Siberia

Gazprom is ready to grant advance payments to the Pipe Companies for the first time, but in exchange for this it requires some discounts. These are the special conditions for the main Russian-Chinese project, the Power of Siberia pipeline costing around 1.5 trillion rubles. The pipe manufacturers themselves find the agreement beneficial, but analysts fear a decline in the sales margins for the project to zero.

Yesterday, Gazprom and the Russian pipe companies - Dmitry Pumpyanskiy’s TMK, Anatoly Sedykh’ OMK, Andrei Komarov’s ChTPZ and the Izhora pipe plant (a part of Severstal of Alexei Mordashov) - signed an agreement on special pricing conditions in the supply of large diameter pipes for the main gas pipeline Power of Siberia. "We will consider the possibility of granting advances, and they - discounts," - the head of Gazprom Alexei Miller said.

"Right now, payment is conducted upon shipment, the new conditions which will come into force from October 1st," - the Association of Pipe Producers says. According to sources of the Kommersant in the industry, the advance may reach 40%, it will be given one month prior to delivery, and the discount can be up to 10% of the base price of a pipe, calculated by the formula (is in force from 2012). "Today, Gazprom’s tenders for LDP are as follows: a base price is determined by the formula for each type of pipe, then the producers decide how much they are willing to give up," - one of the Kommersant’s sources in the industry explains. The companies usually grant a discount in the amount of 2-3%. Officially pipe manufacturers and Gazprom don’t comment on the agreement.

The Power of Siberia gas pipeline with capacity of 61 billion cubic meters of gas per year is constructed for the supply to China. The length of the pipeline is about 4 thousand km, the route construction will require about 2.6 million tons of pipes. The investments will amount to about 1.5 trillion rubles.

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