Gazprom Export CEO: gas market needs stability, not volatility

The ideal pricing model for continental Europe is a hybrid oil-based pricing model with spot components, providing violation safe pricing formula, Elena Burmistrova, CEO of Gazprom Export said on Tuesday.

Speaking at the Flame Conference currently being held in Amsterdam, Burmistrova said that recent calls for more hub-based indexation could bring more volatility to the market.

“Security of supply is not only about delivering gas to the market but also about financial stability and predictability of the market, due to the large infrastructure investments that require a stable market,” she said.

There are no reliable pricing signals from hubs that would protect the market from volatility, as well protect the consumers, suppliers, and investors.

Burmistrova added that financial players strive in a volatile market, however, gas producers and clients need predictability and stability raising the question whether a price link driven by financial speculation is needed, and if the market is interested in high volatility.

“Gas is a long-term business by nature,” she said, as it needs investments that can be paid back over decades, meaning it needs long-term contracts and demand guarantee, otherwise the development costs would be a lot higher.

The gas industry is also a part of constant technological development, part of which is reflected in rising use of natural gas in road transport as well as LNG for inland and marine bunkering.

New emission standards introduced provide a big opportunity for LNG suppliers and users of LNG as fuel for marine transport.

“The LNG bunkering facility in the port of Rostock is in the final stages of development and new LNG plants in Russia will be all equipped with LNG bunkering and fueling facilities,” Burmistrova said.

According to Gazprom forecasts, LNG use for marine bunkering and road transportation will add up to 45 bcm to European demand by 2025 with additional 35 bcm for traditional power generation.

The CEO added that Gazprom is also developing the Baltic LNG project as it seeks the opportunity to reach remote European markets, Middle East, Latin America and South Asia.

LNG World News Staff