Creating a common natural gas market in the Eurasian Economic Union will bring down prices and improve the energy security of the participating nations

27 june 2017

The Analytical Center has hosted a round-table titled Common Natural Gas Market in the Eurasian Economic Union: Assessing the Economic Effects, during which the experts shared their research in this area. "The issue of establishing common markets is drawing a lot of attention," said the Deputy Head of the Department for Energy of the Eurasian Economic Commission Mikhail Pleshkin." We have to approve two programs for creating common markets, one for natural gas and one for oil and petroleum products. There are many commonalities between them."

Thus, when it comes to natural gas, it is vital that we ensure equal access to the transport infrastructure and promote the trading of natural gas on commodity exchanges, Mikhail Pleshkin believes. Promoting the trading on commodity exchanges should eventually do away with state controlled prices for industrial consumers and eventually equalize prices in various regions and bring down bureaucratic barriers. "This will improve the energy security of the nations participating in the Eurasian Economic Union," the expert summed up. According to him, the effects expected from the common natural gas market include improved reliability of the natural gas supply, reduced wholesale prices, increased demand for natural gas in some regions as well as accelerated development in industries that use natural gas as a natural resource (chemical processing of natural gas.)

"Since the Eurasian Economic Union is first and foremost about the economy, it needs to have economic benefits it can offer its members," said the Head of Studies in the Fuel and Energy Sector Department of the Analytical Center Alexander Kurdin. "We are working on that right now and we have already got some ideas and estimates for the creation of a common market."

A model developed using the methodology of the Analytical Center was presented by the deputy head of the Department for the Fuel and Energy Sector Alexander Amiragyan. According to the expert, the free flowing of natural gas means that the contract system of natural gas deliveries will have to be revised; the infrastructure caps on the transport of natural gas will have to be lifted and so on. Mr. Amiragyan made special note of the fact that there are still issues that need more work, such as the mechanism for deciding which suppliers and consumers can be allowed to participate in the market, the issue of cross-subsidies and some others.

"It is not so much figures that we are discussing here as various approaches and we are in agreement with the Analytical Center on this one," said the Deputy Head for Energy of the Institute for Energy and Finance Alexander Belogoryev. "The problem is in how we set our goals, the model that has been presented does not envision maximizing the economic effect of the common natural gas market, rather the goal is to improve the efficiency of the economy as a whole and make sure that the interests of all the participating countries are taken into account. This means a lot of uncertainty, for example in the prices on the commodity exchanges." Mr. Belogoryev estimates that over the long term the natural gas prices may fall by 40-45% rather than by the 20% than the Analytical Center prognosticates.

During the round-table the experts noted that it was necessary to develop mechanisms to protect the borders of the common Eurasian Economic Union market against expansion by non-participating nations, making a number of proposals that take into account the features of the domestic and global markets.