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21Oct21

Gas under long-term contracts 4 times cheaper for EU than spot contracts — Putin

Gas supplied by Gazprom to Europe under long-term contracts costs the EU countries four times less than gas purchased on the spot market, Russian President Vladimir Putin said at a meeting of the Valdai International Club.

"Those European companies that receive gas from Gazprom under long-term contracts receive it four times cheaper [than those who buy gas on the spot market]. It is not about a percentage figure but it is four times [cheaper]. And Gazprom does not make any super-profits," the President noted.

"We are not crying about this, because we are interested in long-term contracts, in long-term mutual obligations. In this case we provide an opportunity to invest in production and provide the required volumes for our consumers. It is stable and reliable," he added.

Putin recalled that the latest policy the EU countries pursued in the sphere of gas market regulation implied abandoning long-term contracts in favor of spot contracts, which are supposedly a more market-based instrument. However, in 2021, it turned out that it was more profitable to supply gas to Asia and Latin America, rather than to Europe, which was one of the reasons for the current crisis, the Russian leader noted.

The crisis in the European gas industry escalated this autumn, after spot gas prices began to skyrocket, exceeding $1,000 per 1,000 cubic meters and almost reached $2,000 per 1,000 cubic meters amid low occupancy of gas storage facilities.

According to observers, the crisis was caused by a number of factors. One of them was the explosive growth in gas demand from Asia, which caused a surge in prices on the Asian market, as well as an outflow of supplies from the European routes. The situation was aggravated by the fact that the share of wind generation in Europe decreased.

However, the main reason for the high volatility in the gas market was the low capacity rate of gas storage facilities. As of mid-October, European underground gas storage facilities were filled by 71% of the volume of gas that was taken from them last season.

[Source: Tass, Sochi, 21Oct21]
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