(Bloomberg) — The European Union plans to take its first steps into the global natural gas market as a buyers’ club next month as it seeks to drive down energy prices.
(Bloomberg) — The European Union plans to take its first steps into the global natural gas market as a buyers’ club next month as it seeks to drive down energy prices.
Initial estimates put joint demand from the bloc’s 27 nations and three neighboring countries at 24 billion cubic meters over the next three years, according to European Commission Vice President Maros Sefcovic. After the tender is launched in April, the EU expects the first contracts with suppliers from the US to the Middle East and Africa to be signed around June.
Joint gas purchases are a new tool that the bloc deployed to limit a jump in energy costs triggered by a cut in Russian supply in the wake of Moscow’s invasion of Ukraine. Even though gas and power prices are currently only a fraction of their records hit in August, they’re nevertheless boosting consumer inflation and weighing on local companies’ competitiveness against rivals in the US and China.
“We clearly need to turn the economic tide in Europe,” Sefcovic said in an interview. “I believe we’re creating a new system that will increase competition and bring in new suppliers and push energy prices down. Since we started this exercise, there’s enormous interest from international suppliers.”
The bloc pushed through a swath of emergency regulations last year to ensure that the unprecedented price spikes don’t happen again, including making gas demand pooling mandatory for 15% of reserve refilling. That would amount to around 13.5 billion metric tons, still a fraction of the 338 billion cubic meters that the EU imported in 2021.
Sefcovic said he has seen interest in joint purchases from industrial gas consumers in sectors including steel, aluminum, ceramics, glass and automotive production.
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The EU will open registration on the energy platform for companies interested in buying gas on March 15 and a couple days later it will launch a call for the so-called central buyers and agents. The first will aggregate demand, seek the best possible offer from suppliers and conclude contracts with final consumers. Agents will help broker deals between suppliers and final consumers and will also offer ancillary services, such as transport.
“In April, we plan to open window of the platform where companies present formally how much gas they will want to buy through the first tender,” Sefcovic said. “What is a major advantage is that we’re kind of opening the big market to small and medium-size companies, which would otherwise not be able to buy part of LNG cargo or get in touch with an energy major.”
On the supply side, more than 50 companies from around the globe are interested in engaging with Europe via the energy platform, according to Sefcovic. Following the first tender, the EU will organize more joint purchases on a regular basis to ensure the bloc has enough gas. While Europe’s storage is still around 61% full, largely thanks to a mild winter, the focus is already shifting to replenishing the reserves ahead of the next heating season.
“I’m very much against any complacency or feeling that the tough times of last year are over because we don’t know what this year has in store for us,” Sefcovic said. “What is increasingly important is that we have to deal with prices. We can’t power our economy at such a huge price differential compared with the US or China.”
(Updates with Sefcovic’s comments from the seventh paragraph.)
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