Monday 8 December 2014

Gazprom, Spinning

As oil prices tank ($67 today!), heads must be spinning at our old friend Gazprom, where they still insist on indexing their prices to that of oil.  But they still aren't quite there with the spin management yet.  Here's an amusing presentation for energy & geo-politics buffs, entitled Gazprom for European Market: Reliable Supply in a Changing Environment.

Naturally enough in a presentation on Europe the first slide is about new sales of gas to China, with the claim that these 'are not going to compete with LNG import on Chinese market'.  Well of course not.  A major new source of supply isn't going to have any effect on the international wholesale market, and certainly not on prices.  No Sir.

And so it goes on, a Kremlinologist's delight.  'Major suppliers to Europe have similar contracts' (a subtle one, this, attacking the new federast notion that Europe should buy its gas centrally - and they are right, Europe shouldn't).   'The price of Russian gas are fully competitive and are subject renegotiate' (sic) - well yes, but oil indexation + 'subject renegotiate' is a ludicrously inefficient way of doing things.  'European customers are perfectly protected by long-term oil-indexed contracts against any form on monopoly abuse of power' - an attack on the ongoing EC investigation into Gazrom's behaviour, plus a slide making cryptic, tangled (and wrong-headed) critique of pricing via gas indexation.  Tell that to Eastern European buyers.

And the rather sinister 'After midstream business is dead, nobody is taking responsibility for supplies structuring'.  Midstream dead !  This is a bit harsh - whoever do they mean ?  Would that be, errr, Eon and RWE ?



CityUnslicker said...

as you note, they sell via indexation everywhere that has a choice. West Europe, they seem to have a bit more power due to the supply needs!

Anonymous said...

Russia, will have a bloody good belly laugh at Europe's expense more especially if this winter is a particularly cold one and it won't be pretty, mark my words: crude prices will spike.

Further, Europe cannot bait the Russia bear too much, Russian banks hold €billions, if it withdrew its [Russian] funds - the EU banking system would go tits up.

Putin knows this, he is patient and Russia has a history of waiting out the Europeans, ask Von Paulus and before him, the Corsican corporal.

MyEarlyName said...

Wouldnt it be a monumental slap in the face if Russia began to ask for part payment in Gold for their energy?

What would that do to the yanks?

Perhaps this is why the crafty Ruskies have been buying so much of the stuff of late?

Stranger things have happened

Nick Drew said...

anon, MEN: two entertaining early entries for our turn-of-the-year predictions compo

(BTW, cold winter unlikely to make crude spike - gas, maybe: but it is very, very soft right now, all storage is full and a lot of new LNG capacity will be coming onstream in 2015 looking for revenues against those sunk costs

... unless someone plays the semtex option, see earlier post)