The Transition to Hub-Based Pricing in Continental Europe – A Response to Sergei Komlev of Gazprom Export
This energy comment is a response to a paper by Sergei Komlev, from the Contract Structuring and Pricing Directorate of Gazprom Export, which challenged the conclusions of previous OIES research on European gas pricing and suggested that we had “refused to engage constructively with those who offer opposing viewpoints.” In this comment, Jonathan Stern and Howard Rogers set out the differences between their research and that of Sergei Komlev and respond to his criticisms.
They conclude that contractual linkage of European natural gas prices to oil no longer has any market reality, and is only held in place by existing long-term contracts. By contrast they suggest that Komlev is refusing to recognize that the era of oil-linked gas pricing is drawing to a close in Europe (and is subject to increasingly serious challenge in Asia) and also refuses to accept that such changes represent a secular trend which will not be reversed. This is far from an academic argument: the extent to which Gazprom is willing to change its views on pricing will have a significant impact on Russian gas supplies to Europe, and hence on the future of the entire European gas market.