Experts study models of gas pricing in Russia

18 march 2015

Experts of the Analytical Center prepared a new Energy Bulletin "Pricing in gas markets".

In the Bulletin experts consider ways of gas pricing in Russia. "Selecting the pricing model in Russia is a critical issue for the  "Gazprom" and other companies in terms of profitability of domestic sales and export incentives. The size of the country and differences of gas consumers (families, power generation, chemical industry, metallurgy) complicate the choice. There is no solution that would consider all the interests, including the competitiveness of energy-intensive industrial exports", experts write.

At present, the rate of growth of gas prices on the wholesale market for the 2014-2017 period were reduced to less than 5.10% per year, experts consider. According to them, this is a sign that there is a temporary or final rejection of the logic of equal profitability prices as an indicator of unregulated natural gas price in Russia. Experts believe that current pricing rules, that have to be installed in 2018, remain uncertain, there are questions about the feasibility of introducing the principle of equal yield (especially given the current exchange rate), as well as about the choice of a particular model of gas pricing in wholesale markets.

The Bulletin also addresses issues of gas pricing in the European region. Experts believe that a single gas market in Europe, in spite of all efforts, has not been formed yet, and the focus on the spot pricing is mainly a characteristic of the north-western region, which has a necessary infrastructure and price points. According to experts, economic conditions, which are favorable in terms of the change-over to market principles of gas pricing, also change. Firstly, energy demand restores in the European region with the resumption of economic growth. Secondly, Europe began to give away competition to Asia for short-term LNG supply, which was reflected in a significant reduction in the volume of corresponding imports. Third, international oil prices since mid-2014 experienced a strong fall. "While European experts argue with the Russian about the inevitability of change-over to a market model for gas  pricing, a political will can once again become the driver of this change-over in Europe", experts say.

The other issues of the Bulletin: encouraging the development of renewable energy in isolated and remote power systems of Russia, and Turkish transit.