Statoil breaks oil-linked gas pricing – from the Financial Times (UK)

The Financial Times reports that Statoil, Europe’s second largest gas supplier, has broken the link to oil prices in a majority of its northern European contracts, moving much faster than expected on an issue seen as key to the continent’s industrial competitiveness.

Statoil, the Norwegian state energy company, said that its German contracts and nearly all its UK, Dutch and Belgian contracts now reference prices at regional gas hubs, which the EU has been promoting as it seeks a more open gas market.

Traditionally, European companies have tended to sign long-term supply contracts linked to the price of oil, whereas US companies have been able to buy gas for immediate delivery in a widely traded market, giving them more flexibility.

The news will be welcomed by policy makers in Brussels and large gas buyers who have been fighting for an end to oil indexation for several years. Gas buyers argue that oil-indexed prices charged by Statoil and its Russian counterpart Gazprom often differ from the regulated prices at which they sell gas to consumers.

It is worth noting that Eni, the Italian energy company, has taken Statoil to arbitration this year. According to people familiar with the dispute, since the contract was last renegotiated several years ago, Eni has been buying gas at oil-linked prices of about $15 to $16 per million British thermal units (mBtu), before selling much of it to third parties at European hub prices, which are about $10 per mBtu.


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