Gazprom defends actions in Europe
Gazprom is neither interested in record high or record low gas prices, and instead desires a stable and predictable market, the head of the Russian supplier's export arm Elena Burmistrova said on November 3, hitting back against criticism that the company is exacerbating the European energy crisis by withholding supply.
"We are not interested in record low or record high gas prices. The latter leads to degradation of demand, which contradicts our interests as a producer and supplier," Burmistrova said at the Flame conference in Amsterdam. "We want to see a balanced and predictable market, where together with our customers we can successfully grow our business."
Burmistrova noted that long-term contracts provided predictability and a safeguard against price volatility. Gazprom favours long-term, oil-indexed contracts, as they provide stability to underpin its investments in gas supply. But over the last decade its European customers have been pushing for more hub-based pricing and spot trades.
The International Energy Agency (IEA) estimates that this price liberalisation saved the EU some $70bn in gas import bills between 2010 and 2020, during which time hub prices were generally lower than those under Gazprom's oil-indexed contracts. But these reforms also cost the bloc $30bn in bills this year alone, as a global energy crunch has driven hub prices to record heights.
"To understand the advantages of long-term contracts over spot contracts, one should ask the major players in the European market," Burmistrova said. "They will confirm that oil-pegged contracts are more profitable than spot contracts, and that gas supplied by Gazprom under long-term contracts is many times cheaper than that supplied under short-term contracts."
Gazprom assumes that global demand and supply of gas will continue to grow, and therefore the company has no interest in selling "as much gas as possible in the shortest possible time," she said.
Burmistrova complained about "inaccurate reports and speculations" about Gazprom's actions in Europe, in particular regarding its alleged role in exacerbating the energy crisis. The European Commission itself has criticised Gazprom for not sending more gas, and some EU lawmakers are pushing for an investigation into anti-competitive practices at the company.
LNG supplies to Europe have sharply decreased this year, while the continent's indigenous supply has also fallen, Burmistrova said. "Against this background, it is strange to hear accusations that Gazprom's actions have led to an increase in gas prices in Europe."
The December gas delivery contract at the Dutch TTF hub is up 1.9% so far today at €78($90.1)/MWh.