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Gazprom cuts purchases from private gas firms

Private Russian natural gas producers took a hit Monday after state-controlled giant Gazprom said it would cut domestic market purchases it makes from them to compensate for supply shortfalls.

Analysts said the decision could eliminate between a quarter and more than half of monthly gas sales by independent firms such as Novatek and Lukoil.

Gazprom's stock rose slightly on the news while that of Novatek was off by three percent near the end of trading after posting intraday losses of around five percent.

A spokesman for the energy giant said that Gazprom's decision would remain in effect until further notice owing to "currently unstable gas demand on the domestic market."

He added that Gazprom's subsidiaries would continue trading with private companies and that Gazprom intended to fulfill its obligations to move the independent's gas to European clients along its network.

"Our decision to resume the practice of buying gas from independents will depend on market conditions," Gazprom number two Alexander Medvedev was quoted as saying by Interfax.

Analysts expressed surprise at the move because it seemed to contradict the "take-or-pay" principle Gazprom itself dictates to European clients that fail to make the agreed volume of purchases per year.

That arrangement -- now being investigated by the European Commission -- requires other countries and their utility companies to pay for the gas they do not actually take from Gazprom following dips in demand.

"This is simply nonsense," Nomos Bank analyst Denis Borisov told the Vedomosti business daily of the surprise announcement.

Russian anti-trust officials said they were studying whether to investigate Gazprom for abuse of its position of power on the local market.

"If there is an appeal, we will take a look," a Federal Anti-Monopoly Service spokesman told Vedomosti.

Analysts said gas demand in Russia was still below levels seen prior to the 2008-2009 financial crisis.

Gazprom's production is also down by more than five percent on an annualised basis despite forecasts of an improvement over the 2011 figure.

zak/wai

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