HomeMediaLatest NewsThe deadlines are out: why the EU does not want to buy gas under "long" contracts

The deadlines are out: why the EU does not want to buy gas under "long" contracts

20 January 2023

Salikhov Marcel R. President, Principal Director on Economic Studies, Head of the Economic Department

Marcel Salikhov, President of the Institute for Energy and Finance, commented to the Izvestia newspaper on the practice of concluding long-term contracts for the LNG supply to the European gas market.

— Long—term LNG contracts were concluded — this is standard practice, including for European companies, - Marcel Salikhov explains. — Many European companies have long—term contracts with Qatar (Qatargas) for the supply of LNG - in particular, Edison (Italy), Centrica (Great Britain), PGNiG (Poland) have such contracts. There are also contracts with producers in the USA, Nigeria and Russia (Yamal LNG). For example, NOVATEK has an existing contract with the Spanish Natury Energy Group for 2.5 million tons annually. Deliveries under it began in 2018, the contract term is 20 years. According to our estimates, the total volume of existing long-term contracts concluded by European companies is about 37 million tons annually.

However, he added, in the current conditions, European companies were afraid to conclude new long-term contracts.

— This was due to two main reasons. Firstly, the European energy policy is aimed at the development of renewable energy sources and discourages the use of fossil fuels. It is risky for companies to enter into contracts for 20-30 years if the official authorities approve forecasts of a green future. Secondly, the companies also feared that the political situation might change and Russian gas would return to the European market. Then LNG will have less competitiveness compared to pipeline supplies from Russia," the expert noted.


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