The EU Looks To Make Joint Natural Gas Purchases Permanent

• Following the successful launch of its joint natural gas purchasing initiative earlier this year, the EU is looking to make the scheme permanent.
• The scheme was initially a reaction to last year’s energy crisis caused by Russia’s invasion of Ukraine.
• In May, the EU had more than 110 companies subscribed to the joint gas purchase mechanism and more firms have subscribed since then.

The European Commission is proposing making the temporary joint EU gas purchases a permanent scheme after its successful launch earlier this year, Reuters reported on Tuesday, quoting EU officials and a document it has seen.

The EU proposed the joint gas purchases amid last year’s energy crisis following the slump in Russian pipeline gas deliveries after the Russian invasion of Ukraine. The joint initiative, set to expire in December 2023, is aimed at securing gas supply for the EU members.

The European Commission is now looking to make it a permanent scheme as part of an overhaul of the gas market rules in the EU, according to Reuters’ sources.

In May 2023, the EU announced the successful outcome of the first-ever international tender for joint purchasing of EU gas supplies. During this tender, the EU managed to attract bids from 25 supplying companies equivalent to more than 13.4 billion cubic meters of gas (bcm) – surpassing the 11.6 bcm of joint demand that EU companies submitted through the recently established AggregateEU mechanism.

“EU companies will now be able to negotiate the terms of the supply contracts directly with the supplying companies, with no involvement of the Commission,” the EU said.

Under the platform and joint purchase mechanism, the demand volumes submitted to the platform will subsequently be aggregated and ultimately matched with sellers’ bids through a tender. Each tendering round – every two months – lasts approximately two weeks. Both the type of delivery, liquefied natural gas (LNG) or national balancing point, and the date, should be indicated by a company when placing its gas demand.

As of May 2023, the EU had more than 110 companies subscribed to the so-called AggregateEU joint gas purchase mechanism and more firms have subscribed since then.

Under the new EC proposal seen by Reuters, companies will have a permanent option to participate voluntarily in joint gas purchases. In case of a gas supply crisis, however, the joint purchases would become mandatory to prevent EU member states from competing for the same supply.

By Tsvetana Paraskova for Oilprice.com

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