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    Statoil Re-indexes Engie Contracts

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Summary

France’s Engie that it reached an agreement this week with Statoil on the renegotiation of their long-term gas supply contracts.

by: Mark Smedley

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Natural Gas & LNG News, Europe, Market News, News By Country, France, Norway

Statoil Re-indexes Engie Contracts

France’s Engie said December 2 that it reached an agreement with Statoil on the renegotiation of their long-term gas supply contracts on November 30.

Engie said the agreement “consists of a modernisation of historical contracts to adapt them to a profound evolution of European natural gas markets” and “thus contract prices have become fully market reflective and are now indexed on the French PEG hub.”

Statoil was a pioneer in adapting UK long-term contracts to spot ‘NBP’ hub pricing there, and has progressively adopted such market pricing over the past 15 years in Belgium and Germany, but it has been slower to switch from oil-indexation for its southern European and French customers.

Engie said that in 2016 its gas supply contracts with Statoil totaled 7.5bn m³/yr, representing about a fifth of its portfolio of long-term gas contracts that can supply France.

Edouard Neviaski, head of Engie’s Global Energy Management Business Unit (Photo credit: Engie)

“Engie and Statoil have demonstrated the possibility to find a commercial solution to modernize historical long-term contracts and to adapt them to today’s market environment. This renegotiation proves the quality of the relationship between our two companies,” said Edouard Neviaski, head of Engie’s Global Energy Management Business Unit, adding: “With this agreement, Engie has de-risked its long-term supply contracts by adjusting their pricing to market conditions.” 

In April 2016, Engie and Gazprom Export also agreed to change pricing of their long-term gas supply contracts from oil to gas indexation. The French utility said it is “in continuous discussion with all its suppliers to maintain a coherent value-creative contractual framework for all stakeholders.”

Engie said that 30 years after the signature of the Troll contract, which enabled the development of Norway’s giant Troll gas field, “this agreement illustrates the fruitful long-lasting partnership and the quality of the commercial relationship which has always prevailed between Engie and Statoil.”

 

Mark Smedley