The end of long-term contracts? Gas price and market dynamics in Central and Eastern Europe

Wachsmuth, Jakob; Breitschopf, Barbara; Pakalkaité, Vija

doi:10.1109/eem.2017.7981953

Cited by 3 publications

(3 citation statements)

References 8 publications

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“…However, one cannot lose sight of the direct relationship between oil and gas prices (despite lower importance of oil-indexed long-term contracts that decreased gas prices for CEE, [13]) and the fact that when they reach a certain level there is a significant change in their share in the European energy consumption basket, which has both positive and negative impacts. Nevertheless, there has been changing, challenging the established trading principles of Russian gas in EU recently [14].…”

Section: Resultsmentioning

confidence: 99%

EU fossil fuel imports and changes after Ukrainian crisis

Baláž

Zábojník

Hričovský³

2020

SHS Web Conf.

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Russian-Ukrainian relations brought several challenges for the European energy security due to transportation corridors crossing the territory. Gas crisis in several CEE countries in early 2009 revealed brittle energy supplies stability of the net importers. The conflict in east Ukraine has brought new challenges for gas and oil shipments crossing the transport routes of Ukraine. Authors analyse transport corridors, presence of Nord Stream I and Nord Stream II projects as possible determinants of the importance of Ukrainian transport corridor and clarify exported volumes of fossil fuels from Russia to EU using the pipelines. The main objective of the article is to determine to what extent new transport routes for gas and oil by passing Ukraine will determine Slovak economy in the field of energy security as well as fiscal revenues. At the broader level, authors analyse potential effects for the whole EU in the field of energy security, transport costs but also CO2 footprint when using alternatives to pipelines. Article synthetises alternatives to Russian energy shipments, predominantly to CEE, and possible costs stemming from Ukrainian political changes. An added value of the article lies in analysis of the difference between commercial benefits of Russian supplies besides import dependence, regional effects and general energy policy goals fulfilment.

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Section: Resultsmentioning

confidence: 99%

EU fossil fuel imports and changes after Ukrainian crisis

Baláž

Zábojník

Hričovský³

2020

SHS Web Conf.

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“…Based on the empirical model, Wachsmuth et al (2017) analyzed the development of natural gas prices and discussed the changes of import contracts in Central and Eastern Europe (CEE). It was found that a decreased share of oil-indexed long-term contracts had significantly cut down the gas prices in Central Europe.…”

Section: Frontiers In Earth Sciencementioning

confidence: 99%

Value of long-term LNG contracts: A theoretical and empirical study

Xia

Wu²,

Liu³

et al. 2023

Front. Earth Sci.

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With the rapid development of short-term and spot trade of liquefied natural gas (LNG), the natural gas market is gradually evolving from regionalization to globalization. At the same time, the existence and rationality of long-term LNG contracts have become increasingly controversial. To explore the value of long-term LNG contracts in the process of natural gas market globalization, this article constructs a two-stage game model and applies China’s LNG trade data in 2018 to the model. The study shows that, compared with complete import of short-term LNG, even if the long-term LNG contracts do not have price advantages, importing an appropriate amount of long-term LNG may help to increase the total LNG imports, reduce the price of LNG, and thus improve import benefits. Besides, a moderate amount of long-term LNG contracts is conducive to the establishment of a stable and flexible natural gas supply system and the security of natural gas imports. Therefore, natural gas importers should not underestimate or even ignore the value of long-term LNG contracts while actively participating in short-term and spot trade of natural gas.

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“…Developments in the EU gas market proved that gas-on-gas pricing prevails, and oil indexation is phasing out in contracts, despite the strong opposition of Gazprom and its reluctance to change. The change in contract pricing of the Russian contracts was to a large extent enforced by arbitration court decisions (Mitrova, et al, 2015;Neumann, et al, 2015;von Hirschhausen, et al, 2020;Wachsmuth, et al, 2017).…”

Section: European Commission As a Watchdog On Fair Competitionmentioning

confidence: 99%

Natural gas pipeline politics in and around the European Union Modelling – based assessment of Russian and European strategies

Takácsné Tóth

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In the last 20 years, the growing reliance of the EU on gas imports increased the vulnerability of the energy system to supply shocks. Natural gas is difficult to substitute in the short term due to the high share of gas in space heating and electricity generation in most of the EU Member States. Russia has been supplying gas to the EU since the 1970s and reached a 35% market share by 2020. There has always been some cautiousness with ’red gas’ during the Sovjet era, but trust in Russian gas supplies was first time seriously questioned by Western European policymakers in January 2009. At that time transit via Ukraine was halted for two weeks because of a dispute over gas transit between Russia and Ukraine. Since that time the EU and Russia developed parallel strategies to mitigate this transit risk. This dissertation focuses on the power politics surrounding the natural gas pipeline projects planned and implemented between 2009-2020 with a special focus on the Nord Stream 2 pipeline, which became a symbolic project of power politics. The dissertation applies an interdisciplinary approach and uses geopolitical, legal and economic arguments to explain the pipeline strategies and their implementation. In the analytical chapters, the main analytical tool is gas market modelling to compare different pipeline and policy options from the European welfare and the Russian profit point of view. The dissertation aims to answer the following questions: Question 1.: How would Russian Gazprom use the Ukrainian infrastructure under different combinations of availability of the new routes, if it were a profit-maximizing actor? Question 2.: How successful was the EU’s pipeline strategy in infrastructure planning, in selecting and implementing the right projects of common interests between 2013-2020 to improve the resilience of the EU gas markets to supply shocks and growing market power of upstream supplies? Question 3.: How did the European and the Russian pipeline strategies influence each other under a worsening geopolitical EURussia relationship between 2009-2020? The timeframe of the dissertation is 2009-2020, which is the era when the security of supply-related legislation forming was dominating the EU legislative agenda in the natural gas sector. The geographical coverage of the analysis is the territory of the European Union plus the Energy Community Contracting Parties, Russia, and Turkey The novelty of the dissertation is the advanced use of gas market modelling on geopolitical scenarios to inform policymakers of the cost and the socio-economic benefits of certain policy decisions. The dissertation was based on three modelling chapters connected by the analytical framework of Russian and European natural gas pipeline investment developments between 2009-2020. The scenarios applied reflected the latest state of play at the time of the respective analysis. The analytical framework and the methodology applied proved to be useful tools to address high-level questions on pipeline politics. The changing environment was reflected in changing input data and scenario definition and the analytical approach can be applied to new questions in the future, like the full substitution of Russian gas supplies to Europe. - The dissertation contributes to previous academic research done in the field of regulation of natural monopolies especially in the field of energy networks by assessing with market modelling tools the use of different pipeline routes and marketing strategies of Russia. (Chapter Error! Reference source not found.) - Modelling applied in the dissertation contributes to the understanding of how changing parameters of the long-term contracts (annual contract quantity, flexibility, and especially change in delivery point and capacity bookings along the route) impact wholesale gas prices of the European countries and the welfare of the citizens. The dissertation adds to the modelling literature the Russian perspective, by applying profit maximization to the Russian sales strategy when selling spot volumes to the European market complementary to long-term contract deliveries. (Chapter 5) - The dissertation also contributes to the development of a methodological sound modelling-based cost-benefit analysis of infrastructure investment applied to the European gas PCI projects. (Chapters Error! Reference source not found. and Error! Reference source not found.) Thereby the competitive nature of the European and the Russian pipeline strategy is captured which is new in the literature.

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The end of long-term contracts? Gas price and market dynamics in Central and Eastern Europe

Cited by 3 publications

References 8 publications

EU fossil fuel imports and changes after Ukrainian crisis

EU fossil fuel imports and changes after Ukrainian crisis

Value of long-term LNG contracts: A theoretical and empirical study

Natural gas pipeline politics in and around the European Union Modelling – based assessment of Russian and European strategies

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