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IEA in favour of spot gas over pricing linked to oil

Hydrocarbon Engineering,

The International Energy Agency (IEA) has came out in favour of the spot gas market on Wednesday over contracts that link gas to oil prices, citing Turkey as a successful renegotiation.

Gazprom secured a long term deal to export gas to private companies in Turkey in November, breaking a previous impasse in gas trade following its price dispute with state gas company Botas.

Many European utilities and other gas buyers receive most of Russia’s piped gas supplies under long term contracts that link gas prices to the price of oil. In comparison with spot gas and electricity prices, oil prices have been high making Russian gas expensive. Utilities have been pushing Gazprom to renegotiate prices and link more of its gas to the spot market.

IEA Executive Director, Maria van der Hoeven, has emphasised the importance of a well functioning spot market, describing transit countries such as Turkey as representing a huge opportunity. Turkey was very good at renegotiating the price of gas.

Turkey imports natural gas mainly from Russia, Iran, Azerbaijan, to satisfy approximately 45% of its heat and power needs. Establishing a spot gas price market is among Turkey’s medium term plans, particularly after its planned Energy Exchange becomes operational in September and it launches trading in electricity futures and derivatives.

Adapted from press release by Emma McAleavey.

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