IEA Comes Out In Favour Of Spot Gas Over Pricing Linked To Oil

July 17, 2013

The International Energy Agency (IEA) came out in favour of the spot gas market on Wednesday over contracts that link gas to oil prices, citing Turkey as an example of a successful renegotiation, Reuters reports.

Russian gas export monopoly Gazprom clinched a long-term deal last November to export gas to private companies in Turkey, breaking a previous impasse in gas trade following its price dispute with state gas company Botas.

"Turkey was quite good at renegotiating the price," IEA Executive Director Maria van der Hoeven told reporters. The IEA advises 28 industrialised countries on energy policy.

Many European utilities and other gas buyers receive most of Russia's piped gas supplies under long-term contracts that link gas prices to the price of oil.

Oil prices have been high compared with spot gas and electricity prices, making the Russian gas expensive. Utilities have been trying to push Gazprom to renegotiate prices and link more of its gas to the spot market.

"What we see is a majority of the gas prices are based on oil indexes, and the question is if that's the right way to go," van der Hoeven said.

"It is important to have a well-functioning spot market, and that's where we see a huge opportunity as Turkey is ... a transit country," she added.

Copyright, Reuters, 2013.