Our task is to switch to market-based gas pricing mechanisms

1 march 2017

The Analytical Center held a roundtable discussion entitled "Draft Program for Establishment of a Common Gas Market in EEU: Gas Pricing Issues", during which experts discussed the objectives and limitations of the program as well as the changes to be introduced in the normative legal framework of the member states for setting market-based gas prices.

Alexander Kurdin, an expert of the Analytical Center, told us about the main provisions relating to pricing and tariff formation. "Our task is to switch to market-based gas pricing mechanisms, with no regulation of prices within the common market", the analyst said. "Tariffs for transportation will be set by authorized bodies for the participants of the common gas market on a non-discriminatory basis compared to the others". The program also includes a section on the formation of exchange-based and non-exchange based price indicators, the expert added. "To generate the price indicators for the common gas market, the member states will identify responsible organizations which will be exchange trade operators. And if other forms of over-the-counter gas trading develop, other organizers will be appointed," the expert said.

Kurdin believes that one of the challenges of the industry concerns preserving its pricing mechanism as provided for in intergovernmental treaties. To solve the problem, the expert suggested terminating all the bilateral intergovernmental agreements about the sale of gas at the common markets starting from the establishment of the markets. According to the expert, it is also important to implement a transition to the common principles of gas pricing at the national wholesale markets.

The participants of the discussion paid special attention to the issues of the establishment of antimonopoly control over pricing in respect of transactions in the common market of gas. Some experts supported the idea of establishment of special rules for the control of monopolistically high or low prices on common gas markets of the EEU, while others believe that the pricing of such transactions should not be subject to antimonopoly control.

The round table discussion was attended by representatives of the Eurasian Economic Commission, federal authorities, companies, expert organizations and academic community of EAU member states.

The roundtable discussion was held within the framework of the preparation of the draft program for the establishment of a common gas market in EEU.