Norway and Russia are big winners from Europe’s gas price rally as they benefit from volatility after the EU forced their gas producers years ago to shift away from steady, long-term contracts, according to sources, analysts and data, Report informs referring to Reuters.
Benchmark European gas prices have soared 300% so far this year, with demand rocketing as economies recover from COVID-19 lockdowns and supply struggling to keep pace due to repairs and sliding gas investment amid a drive towards renewable power.
The price surge comes two decades after the EU liberalized its gas market, prompting a shift to more short-term, flexible contracts based on prices for gas traded on exchanges or hubs.
Russia’s Gazprom and Norway’s Equinor together account for 60% of Europe’s needs, moved away from long-term contracts that had linked prices closely to oil.
“We have never been as exposed to spot prices for gas as we are right now,” Equinor economist Eirik Waerness told investors this month, referring to the firm’s 2019 move to sell more gas in short-term markets. “The rapid increase in gas prices did happen at the best historical time possible for Equinor,” he added.
Equinor may be better placed than Gazprom. The state-run firm, which sells most of Norway’s gas, is estimated to be selling more than half to spot customers with 70% based on day-ahead pricing, the most volatile, up from 25% a few years ago.