IEA Supports Transition from Oil Indexation to Spot Markets

The International Energy Agency (IEA) expressed support for flexible gas markets based on spot prices rather than on oil indexation, reported Reuters on Wednesday. 

“Turkey was quite good at renegotiating the price,” said IEA Executive Director Maria van der Hoeven, referring to the agreement clinched by Russia’s Gazprom and Turkish companies.

Van der Hoeven also questioned the feasibility and legitimacy of contracts that link gas to oil prices.

“What we see is a majority of the gas prices are based on oil indexes, and the question is if that’s the right way to go,” van der Hoeven said, suggesting that it is pivotal to have well-functioning spot markets.

Turkey is energy poor. The country imports the vast majority of its oil, gas and hard coal supplies to meet domestic demand. Turkey imports 58% of its gas from Russia, 19% from Iran, 9% from Algeria, 9% from Azerbaijan and 3% from Nigeria.