Friday, 28 August 2015  -  13 Dhul-Qada 1436 H
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IEA favors spot gas pricing



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

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 industrialized 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.

Turkey imports natural gas mainly from Russia, Iran, and Azerbaijan to fuel around 45 percent of its heat and power needs, according to the IEA.

Establishing a spot gas market is among Turkey's medium-term plans, particularly after its planned Energy Exchange becomes operational in September and it launches trading in electricity futures and derivatives.

Turkey is set of overtake Britain within a decade as Europe's third-biggest electricity consumer at its market grows, and it has been working to diversify its energy mix.

Plans call for pipelines to start carrying Azeri gas through Turkey towards the end of this decade. Turkey would take 6 billion cubic meters (bcm) for its own market and send another 10 bcm on to Italy via Albania and Greece.

The government also has clinched deals with Russia's Rosatom and a Japanese-French consortium to build nuclear power plants.

The price of oil fluctuated Wednesday as investors assessed the latest report on US oil and gasoline supplies and statements from the chairman of the Federal Reserve on US monetary policy.

U.S benchmark crude for August delivery was up 11 cents at $106.11 in morning trading on the New York Mercantile Exchange. The price has moved between $105.60 and $106.35 since trading opened in New York.

In London, Brent crude was up 43 cents to $108.57 a barrel on the ICE Futures exchange. — Agencies

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