18 May 2016 - 16:33
  • News ID: 261150
GAS-ON-GAS COMPETITION GAINS IN 2015

TEHRAN, May 18 (Shana) -- Gas-on-gas competition determined the price of more gas consumed in the world last year than any other method, such as oil price escalation (OPE) or some form of regulation.

Gas-on-gas (GOG) accounted for 45%, with OPE at 19% and regulated prices at 31%, according to the International Gas Union's survey, carried out by Nexant.

In Europe, the northwest has the biggest share of GOG at 92%, and this could rise, following contract renegotiations in Germany and France; also the arrival of LNG from the US, while not large this year, will quicken the process with more short-term contracts. By contrast in 2005, OPE accounted for 72% of the volume and GOG for 27% in northwest Europe.

In the Baltics and Scandinavia GOG was low at 15%. Parts of the Mediterranean were also low in terms of GOG, such as Spain and Turkey, but others such as Italy were high, bringing the average up to 32%. There is almost no GOG in southeast Europe.

Since the survey began in 2005, Europe has been a region seeing some of the biggest change in price formation. While not formally rejecting OPE, Gazprom is using a hybrid model whereby hub prices set the range within which the OPE may move: the existence of oil-indexed gas may set the floor or ceiling on spot markets, making the two anyway closely linked.

Surprisingly the former Soviet Union saw a rise in GOG as independents compete with Gazprom for customers within the Russian Federation, although as Gazprom's sales price is regulated and the independents sell at a discount to that, it is not quite the same kind of GOG as elsewhere. Since late 2014 some of the gas reaching the Baltic states has been LNG imported into Lithuania.

Ukraine however has been buying less and less Russian gas and more and more gas on tenders with western European countries, so there the percentage of GOG is rising; so far this year it says it has bought no Russian gas. Since April last year it has imported 7.7bn m³ from Europe and 4bn m³ from Russia, it said May 16.

By William Powell, Editor in Chief of Natural Gas Europe
News ID 261150

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