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Gazprom JV WINGAS sees future for spot gas indexation

07 Feb 2012 14:54:54 | esgm

Germany's WINGAS, a joint venture of BASF subsidiary Wintershall and Russia's Gazprom, believes that the future of natural gas long-term supply contracts lies in a combination of oil-indexed and spot market-based pricing elements, chairman Gerhard König told ICIS Heren at German energy conference E-world in Essen on Tuesday.

"As one of a few European suppliers, we will stick with long-term contracts, but with competitive ones. And that will probably mean that they will be based on both [the oil as well as the gas spot markets]," König said. "But I do not believe that oil-indexation will cease to exist and that there will be a 100%-spot indexation," the WINGAS chairman added.

Last summer, WINGAS-customer Bayerngas said that it finalised a long-term supply contract with the company, with a price formula linking some volumes to gas spot prices (see ESGM 27 June 2011).

WINGAS, which has a 20% market share based on gas sales in Germany, still supplies its customer base primarily with gas delivered under long-term supply agreements with varying pricing formulas and contract periods. Around half of WINGAS's contract portfolio is made up of Russian supply.

König pointed out that it is becoming increasingly difficult to enter into long-term supply contracts with producers from the North Sea. "There are many gas producers there who do not want to enter into long-term agreements right now. They would rather wait and see where the prices are headed," he said.

König also emphasised that WINGAS is in constant negotiations with all of its gas suppliers to revise the prices of their long-term supply contracts.

Only last month, natural gas major Gazprom made unspecified price adjustments to its long-term supply volumes with five European companies, including WINGAS (see ESGM 17 January 2012).

WINGAS owns about 2,000km of pipelines in Germany and Europe's largest underground gas storage facility, Rehden, with a capacity of more than 4 billion cubic metres. At present, Gazprom holds 50 % less one share in the joint venture. JR

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