Gas-on-gas pricing soars in Europe amid Russian gas cuts: OIES expert
Gas-on-gas pricing has likely expanded to cover 80% of European gas supply as a result of the replacement of lost Russian deliveries with LNG, Mike Fulwood, senior research fellow at the Oxford Institute for Energy Studies, said on October 5.
"In 2021, before the surge in LNG coming in, then in Europe as a whole about two thirds was actually gas-on-gas or market pricing, while one third was oil indexation," Fulwood said during an event to mark the release of the International Gas Union's Global Wholesale Gas Price Survey 2022 report, at the Energy Intelligence forum in London. "With the 60% increase or 50bn3 more LNG coming to the European market that is pretty much all hub priced; probably now 80% of the European market is gas-on-gas competition."
While the EU has filled its gas storage facilities to 90% of capacity ahead of this winter, Fulwood warned that the bloc would struggle to refill the facilities over next summer.
"The most storage we can expect next summer is probably 45-50% [...] unless Europeans seriously do something about cutting demand, next winter there could be problems," he said.
He added a new wave of global LNG supply was due to arrive in 2026-27.
"Our estimates are that by 2028, compared to last year, there is 50% more LNG export capacity on the market," he said. "To some extent we think that even with zero Russian gas coming to the European market we can well rebalance the market."