Oil price rose on Tuesday…
Signs of oversupply continue in…
The model has worked fine for many years, however oil prices are now at constantly high levels and the European utilities are starting to complain and pressure their suppliers to drop the link with oil and create more flexible pricing models based on spot gas markets, such as the British National Balancing Point.
Statoil first took the initiative and linked their gas prices to the spot market, rather than the oil market, meaning that they now sell more than half of their natural gas exports under contracts linked to spot prices; this share is expected to increase even further in the future. As a result of this early move, Statoil were able to steal a lot of market share off their larger competitor, Gazprom.
Related article: A Carbon Tax may Curb the Rise in Natural Gas Flaring
The Oxford Institute for Energy Studies explained that, “if Gazprom is determined to preserve oil-indexation then it will lose market share.”
In 2012, despite the fact that the European gas market shrank overall, Statoil exported record volumes to the continent, causing Russian gas exports to Europe to fall by around 10 percent.
Gazprom has made its move to try and counter Statoil’s aggressive expansion strategy by making billions of dollars of price concessions. However, it is still determined to link its gas prices to the oil markets; only time will tell if this is enough to secure its market share.
By. James Burgess of Oilprice.com
James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…