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Russia's Gazprom 'always' fulfills contractual obligations in full: Miller

Highlights

As European MEPs call for probe into Gazprom behavior

Allege potential violation of EU market rules

Russia urges early approval of Nord Stream 2 pipeline

The head of Russian gas giant Gazprom has defended the company's sales strategy, saying it "always" meets the requirements of its contracts with buyers.

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In a speech late Sept. 17, Gazprom CEO Alexei Miller said Gazprom was a reliable supplier "no mater how the cold winter, no matter how harsh the conditions."

"We always fulfill our contractual obligations in full," Miller said.

Miller was speaking as it emerged that a group of European MEPs had sent a letter to the European Commission, urging Brussels to launch a probe into Russia's recent market behavior in Europe.

European gas prices are currently at record highs, with lower-than-expected Russian gas supplies seen as part of the reason for the price spikes.

The benchmark TTF day-ahead contract breached Eur70/MWh last week, according to S&P Global Platts price assessments. The price was last assessed on Sept. 17 at Eur65.45/MWh.

"We call on the European Commission to urgently open an investigation into possible deliberate market manipulation by Gazprom and potential violation of EU competition rules," the 43 MEPs said in the letter, seen by Platts, dated Sept. 16.

The MEPs -- from a range of parties and countries -- said the high prices had been triggered partly by Gazprom's "refusal" to book additional capacity for gas supplies via Belarus and Ukraine.

Gazprom is under no contractual obligation to book additional gas transit capacity to Europe, however, and has repeatedly said it is fulfilling all its contractual obligations.

The European Commission -- which has been critical of Russia's gas market behavior in the past -- was part of talks that resulted in Gazprom booking just 40 Bcm/year of transit via Ukraine in 2021-24.

Gazprom therefore has no obligation to book more short-term capacity via Ukraine if it doesn't want to.

Nord Stream 2

The MEPs also said that the company may have been holding back gas to pressure German and EU authorities to approve the now-complete Nord Stream 2 pipeline from Russia to Germany.

On Sept. 15, the Kremlin's official spokesman Dmitry Peskov said the timely launch of commercial operations on Nord Stream 2 would help balance European gas prices.

"Undoubtedly, the early commissioning of Nord Stream 2 will significantly balance prices for natural gas in Europe, including on the spot market," Peskov said.

The timing of the start of commercial flows through Nord Stream 2 has become a key factor influencing European gas markets given the tight supply picture amid low stocks and competition from Asia for LNG.

Gazprom -- the owner of the Nord Stream 2 operating company -- said last month it could supply 5.6 Bcm of gas via the pipeline in 2021, a rare piece of bearish news in the European gas sector.

However, the German regulator has only just deemed the application from Nord Stream 2 AG for approval as an independent transmission system operator to be complete, giving it up to four months to produce a draft decision.

That means a first decision might not be published before January 2022.

Europe-Asia link

Miller, meanwhile, said the European market was very much linked with the Asian market.

Part of the reason for the high gas prices has been the growing global competition for LNG as the economy recovers from the pandemic.

Miller said the Asian market was proving more attractive for LNG suppliers than the European market. "The Asian premium remains," he said. "The flows of LNG go to the Asian market and the absolute numbers of supplies to Asian consumers are higher than to European ones."

The JKM spot Asian LNG price was assessed by Platts Sept. 17 at $25.08/MMBtu, a healthy premium over the TTF month-ahead price of $22.67/MMBtu.

Miller said Chinese gas demand in particular was increasing quickly. "In the first half of the year, the volume of gas consumption in China increased by 15.5%," he said.

"This means that forecast estimates of consumption in China in 2021 will amount to 360 Bcm," he said.

Gazprom is expected to supply around 10 Bcm of gas to China via the Power of Siberia pipeline in 2021.