RUSSIA’S GAZPROM SET TO DECREASE PRICE OF GAS FOR ARMENIA

ARKA
Oct 20, 2009

YEREVAN, October 20, /ARKA/. Armenia’s natural gas company said
Russia’s Gazprom is set to decrease the price it charges for gas
supplied to Armenia. Karen Karapetian, the chief executive director
of the Russian-Armenian joint venture ArmRosGazProm (ARG) said today
the price for Armenia will be $180 as of April 2010, down from the
originally planned $200.

The price of Russian gas for Armenia rose from $110 to $154 per
one thousand cubic meters in April and was expected to rise to
$200. The new price for Armenia, VAT not included, will be $169.5,
Karen Karapetian said.

Reports in some Russian newspapers claimed that Russia will reduce the
price in return for being granted the right to build a new reactor
for Armenian nuclear power plant. However, Karen Karapetian brushed
aside these reports saying construction of a new reactor has nothing
to do with gas price.

Gazprom is the main supplier of gas to Armenian households and
provides about one-third of Armenia’s electricity. According to
Karen Karapetian, "intensive negotiations are still under way with
the Russian side over the new price," but he added that ARG will
build its next year strategy based on $180 price. According to him,
this is the best price that Gazprom can offer Armenia and ‘demanding
all the time that Russia displays a special treatment of its ally in
the region is not expedient and ‘boring.’

"We need to shift gradually to building our relations on economic
categories,’ he said, adding that 12 years is quite a long time
period for Armenia to get prepared for shifting to market relations
in dealing with Russian counterparts.

Despite this, he said, even under market conditions Armenia will have
a privileged price next year.

Armenia plans to build a new nuclear power plant to replace the
aging Metsamor plant. The new plant is supposed to operate at twice
the capacity of the older, Soviet-constructed facility, which is 30
kilometers west of the capital, Yerevan. Metsamor currently generates
some 40 percent of Armenia’s electricity.

The Armenian government has yet to attract funding for the project
that was estimated by a U.S.-funded feasibility study to cost as much
as $5 billion. In a recent interview with Russian newspaper Kommersant
Armenian foreign minister Edward Nalbandian said his government hopes
that Russia will help it build a new nuclear power reactor.

In a bid to attract investors in 2006 the Armenian parliament passed
a law allowing foreign companies to participate in construction and
running of nuclear power plants in Armenia.

ARG is the sole gas supplier to Armenia. Russian Gazprom owns 80%
in it, the rest is held by the Armenian government.