WILL RUSSIAN NATURAL GAS LONG-TERM CONTRACT PRICES REMAIN OIL PRICE DETERMINED AFTER THE END OF OIL-INDEXATION

摘要

Until the end of the 2000s natural gas trading in continental Europe had been built on long-term gas sales and purchase contracts (LTC) between major outside gas suppliers and European buyers. The dominant pricing scheme of LTCs was oil price indexation. In the last couple of years however the structure and pricing of LTCs have changed through re-negotiations and recontracting. We expect mid-term (3-10 years) gas commodity contracts to remain part of the EU’s gas wholesale trading structure up to at least the mid 2030’s. We argue that LTC pricing will remain location and contract dependent and adjust to the closest competitive threat for the seller (liquid hub for more interconnected regions; LNG or competing pipeline for more isolated regions).This transition in LTC pricing is strongly related to increasing supply competition. The objective of the paper is to identify the most important determinants of Russian LTC pricing strategy under the current market conditions. We investigate to what extent Gazprom long term contract prices are determined by strategic considerations, its market position and to what extent oil price can be expected to remain a significant LTC price determinant.