European Gas Market Restructuring: Interests of Importing Countries and Gas Exporting Companies

In: Mirovaja ėkonomika i meždunarodnye otnošenija: MĖMO, Band 67, Heft 8, S. 48-59

Abstract

The article focuses on the process of restructuring the natural gas market in Europe. It is shown that the transformation of the European gas market is taking place under the decisive influence of the political decision of the European Commission and the governments of the EU largest gas consuming countries, first, to reduce gas consumption as much as possible in the shortest time; second, to replace Russian gas with imports from alternative sources. As both tasks have the highest priority, the EU countries act within the framework of political, not market logic, regardless of significant economic costs. To hedge against very high gas prices EU introduced since 15 February 2023 the market correction mechanism, capping the price of gas from the above. It is also expected the mandatory filling of gas storage facilities to at least 90% of their capacity before the winter season since 2023 would pressure gas prices downwards. Natural gas exporting companies operate within a system of market coordinates and are ready to participate in the process of transforming the European natural gas market only to the extent that does not contradict their economic interests. The politicization of gas cooperation between the EU and the US at the interstate level cannot change the market behavior of companies. Given the uncertainty regarding the perspective demand for gas in Europe, gas exporting companies are interested in concluding long-term contracts for the export-import of gas on a "take or pay" basis. Europe's unwillingness to massively engage into the long-term import-export contracts for LNG and readiness to bear additional costs in the form of elevated gas prices will allow companies in the short-term period to make high profits on the spot market.