Tuesday, September 18, 2012

Impact European antitrust case against Gazprom on Russian gas market

Impact European antitrust case against Gazprom on Russian gas market : The European Commission's antitrust case against Gazprom will force the Russian company to divest shares in gas infrastructure and shift towards shorter term supply contracts, precedent from European energy companies suggests.

The case adds to structural shifts in the European gas market to erode the pricing power of Gazprom, which is more than 50 per cent owned by the Russian state.

That pressure can only strengthen the hand of China, as Russia tries to diversify its markets away from Europe and ship gas to the world's fastest growing energy consumer, in negotiations that have stalled on price.

The EU investigation centres on excessive market power including long-term contracts that have locked gas customers for up to 30 years into more expensive oil-indexed prices in Poland, the Czech Republic, Slovakia, Hungary, Bulgaria, Estonia, Latvia and Lithuania.

East European countries have benefited least from imports of liquefied natural gas (LNG) into west European ports and the associated rise in cheaper spot pricing in north and west European market hubs.

UK hub prices were 68 per cent of a theoretical price calculated using a traditional oil-indexed formula, the EU's quarterly gas market review reported earlier this year.

Rising energy dependence is driving the EU's efforts to diversify supplies and liberalise prices, through its competitive markets drive and the shift towards renewable energy.

The EU imported 62.4 per cent of its natural gas consumption in 2011, up from 60.3 per cent in 2007, according to the EU's"Statistical Pocketbook 2012".

EU domestic production of natural gas continued its long term decline in 2011, at below 1,788 terrawatt hours (TWh), about 30 per cent below production levels in 2003, the quarterly review reported. -- REUTERS

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