Platts: Gazprom, oil-link vs spot gas prices, and storage

Europe’s competition commissioner Margrethe Vestager is taking on some tough battles. Last week she accused US technology giant Google of abusing its dominant position in the internet search market. This week she has laid charges against Russian gas producer Gazprom over its sales practices in eastern Europe.

The EC Commission carried out dawn raids on a number of gas companies in September 2011 and opened an investigation a year later, in September 2012. On Wednesday, April 22, it filed a formal statement of objections against Gazprom over its gas sales to eastern Europe.

One of the central objections is that Gazprom acted anti-competitively by linking the price of gas to that of oil.

In fact this was standard throughout the European gas industry since its birth in the 1960s and 1970s, with suppliers including Norway, the Netherlands, Algeria and Libya all linking their prices to the oil markets. When gas production began there was no gas price on which to base the long-term contracts needed to secure infrastructure investments, and oil seemed a sensible alternative as a competitor fuel. MORE