European Utility Companies Leverage on Increased Global Gas Availability to Renegotiate Oil Linked Gas Contracts with Russia

European Utility Companies Leverage on Increased Global Gas Availability to Renegotiate Oil Linked Gas Contracts with Russia

Summary

Natural gas consumption in Europe increased from 53.8 bcf per day in 2000 to 55.5 bcf per day in 2009. The increase in natural gas consumption is driven by its growing importance in the primary energy mix in several European countries. Despite a surplus gas supply situation globally and thereby low spot gas prices, European gas and power utilities continue to import high priced gas under oil linked, take or pay contracts with Russia and Norway. This has affected the profitability of European utility companies during 2009-2010 and in the first quarter of 2011. It has led several gas utility companies to enter into negotiations with Russian and Norwegian suppliers in order to shift from costlier oil linked long term contracts to more flexible gas contracts reflecting gas to gas competition. With an increase in gas supplies globally and decoupling of oil and gas prices in recent past companies are seeking greater indexation to spot gas prices in their gas supply contracts.

Scope

• The viewpoint provides analysis of the recent trend of contract renegotiations between European utilities and Russian and Norwegian gas suppliers
• The research throws light on the decline in US gas demand and its impact on gas availability for Europe
• It highlights the possible changes that might be incorporated into the renegotiated gas supply contracts between European utility companies and Russia or Norway.

Reasons to buy

• Develop business strategy based on the understanding of the recent trends in gas sourcing in Europe
• Understaand the global gas supply dynamics in the wake of rapid developments of gas shales in the US
• Keep abreast of the developments that are reshaping the long-term oil-linked gas supply contracts from key gas suppliers in Europe - Russia and Norway.