EU builds demand hub against gas price jumps
Sopuruchi Onwuka, with agency reports
Countries in the European Union are building a strong demand hub that would not only expand the gas market with multiplicity of smaller companies but also form a stronger bargain platform for securing best price deals in a volatile market worsened by trade sanctions against Russia’s invasion of Ukraine.
Vice President of the EU Commission, Maros Sefcovic, stated that economic continent has harnessed some 77 percent registered gas demand by pipeline, and additional 23 percent of demand by liquefied deliveries.
The Oracle Today reports that is a major player in liquefied natural gas (LNG) supplies to Europe. The country currently works on feasibility export pipelines across the Sahel region to North Africa, and across the Mediterranean Sea to Europe. The pipeline concept would ultimately position Nigeria as strong energy supply factor to the European market.
The Oracle Today gathered from various market sources that the new market platform which has already hosted over 100 companies as buyers and traders is coordinated by the European Economic Commission which is said to be working to tame high prices suffered by the economic bloc in the heat of supply crises associated with souring relations with Russia.
It would be noted that Russia has remained the traditional source of cheap pipeline gas to Europe; but the belligerent producer deployment gas supply as economic weapon to suppress regional support for Ukraine which it invaded in February 2022 at the chagrin of the civilized world.
Europe had imposed trade sanctions outside energy products, and Russia had choked gas supply to Europe; culminating in gas pipeline sabotage that left Europe with immediate option of the costly export market.
And to moderate import prices, Europe has to muster significant demand volume that exporters cannot ignore, a development that led to creation of European Union’s scheme for joint purchases where over 100 companies would now put their orders in one big basket.
After weathering supplies and cost through the last winter and the first without robust Russian gas, the EU countries are working to fill gas storage to 90% by November, analysts said, adding that the joint buying scheme aims to generate 13.5 billion cubic metres of gas demand, or 15% of the volume required to build storage to 90 percent by November.
Total EU annual demand is around 360 bcm which is currently at 60% of storage capacity, according to Gas Infrastructure Europe data.
To plug the supply gap and still keep pull on prices low, more than 60 companies have signed on to the European Union’s joint purchase scheme and hope for the first deals to be signed within months.
An agency report stated that the joint gas buying scheme would help to fill gas storage ahead of winter, tame high energy prices and contain fears of energy shortages in Europe after Russia slashed gas deliveries.
Sefcovic confirmed that some 65 European companies registered demand to jointly buy gas in the scheme’s first demand-collecting round. And 101 firms have now registered interest in the platform either as buyers or sellers.
He said the scheme aims to improve gas market access for smaller companies and maintain a pull on energy prices for Europe’s energy-intensive industries like fertiliser and steel producers.
“The prices as we have seen them last year, and I would say even prices until now – we cannot accept them as a new normal,” he declared in a report published by Reuters.
Czech energy firm CEZ, Spain’s Cepsa and Poland’s PKN Orlen are among the companies that plan to take part in the joint buying scheme, spokespeople for the firms said.
Around 19 of the 101 companies registering interest have also signed up as intermediaries to represent multiple smaller firms that want to pool their demand.
EU officials have said some large energy firms had expressed reluctance to take part, questioning what incentive they had to join as they can already negotiate their own gas deals at competitive prices.
Sefcovic declined to confirm the outright volume of gas being sought through the scheme, which cannot purchase Russian gas.
“We are reaching out to all international suppliers with the exception of Russia,” he said.
As a next step, the EU platform will collect offers from suppliers, and match buyers with suppliers by 17 May.
Matched companies will then negotiate gas contracts. The EU will not be involved in those commercial talks.
Brussels wants the first deals to be signed in June or July, and plans to repeat the tendering process every two months. So far, the demand requests cover deliveries from June to May 2024.
