The Russian gas in Europe can essentially fall in price

It seems that the European gas market ceases to be «klondike» for exporters of natural gas, and first of all, pipeline. As the “Kommersant” informs, “Gazprom” is going to reconsider price parameters of the contract on delivery of gas to Bulgaria, here again, instead of oil binding, indexation on the basis of the West European hubs can be used. By estimations of analysts, as a result, the price of the Russian gas for Bulgaria can decrease by more than 50 %, to $140 per a thousand cubic metres.

According to the data of the Kommersant, “Gazprom” anyway should reconsider the formula of the price because of obligations to European Commission within the limits of settlement of antimonopoly investigation. Besides, Bulgaria since autumn can receive gas from Azerbaijan, and also CNG from the world market.

According to the experts familiar with the situation, in current conditions when the prices for hubs in Europe have fallen almost to $100 per a thousand cubic metres, indexation change, really, will lead to reduction of price for Bulgaria. Possibly, it is an issue of the Netherlands TTF (Central European gas hub), the most liquid in Europe.

Contract revision occurs at the initiative of Bulgaria. Thus, in 2018 “Gazprom”, within the limits of settlement of antimonopoly claims of the European Commission, incurred additional obligations concerning five isolated markets – the countries of the Baltic Sea, Poland and Bulgaria.

The European Commission considers that “Gazprom” abused a leading position, having imposed on these consumers contracts with oil indexation. Now these countries can demand from the Russian monopoly of revision of the prices if they essentially differ from quotations of gas hubs in Western Europe.

In the message “Bulgargaz” it is noted that since March under the operating contract the price for gas from RF will make up about $265 per a thousand cubic metres. For comparison: an average price of export of “Gazprom” to Europe in 2019 – $203 per a thousand cubic metres.

According to the European Commission, in first three quarters of 2019 the cost of Russian gas imported to Bulgaria was on the average twice above, than the price for gas hubs in the Netherlands and Germany.

As experts mark, in case of binding change on hub price in the contract of “Gazprom” and “Bulgargaz” will develop of the quotation on TTF plus transport to Bulgaria. Then,  at the  current price TTF the cost of the Russian gas for Bulgaria will make up about 140 US dollars per a thousand cubic metres.

Apparently, aspiration of suppliers of gas by all means to sell gas on the most solvent – the European market, starts to play against suppliers: gas cost falls. Now in Europe it becomes more favourable to buy gas at the spot market, than to receive it through the pipeline under a long-term contract.

So, it is cheaper that as it was earlier. And in it, not only an economic crisis matters, but also offers from suppliers of gas who repeatedly exceed the demand. As analysts consider, all these “trends” can seriously affect the not only the map of European, but also world gas supply.