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Oil-indexed gas supply contracts protect against gas price volatility: GECF

Highlights

Algeria, Russia, others favor oil-indexed contracts

Such contracts ensure 'stable' investment in gas projects

GECF urges 'balanced' approach to energy transition

Long-term, oil-indexed gas supply contracts provide buyers with protection against gas price volatility, the Gas Exporting Countries Forum said Sept. 29, as prices continued to hit new record highs.

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The GECF said members continued to back the "fundamental" role of long-term contracts and gas pricing based on oil and oil product indexation.

The GECF -- whose members include gas heavyweights Russia, Qatar and Iran -- came into being in 2001 and holds around 71% of the world's proven gas reserves. It has 11 full members and seven observer country members.

Oil-indexed contracts, it said, are one way to protect against gas crises.

"From the perspective of gas suppliers, the 18-member coalition -- together representing the largest share of proven reserves, production, and trade of gas in the world -- maintains adherence to the spirit of 2019 Malabo Declaration," the GECF said.

"The declaration unreservedly supports the fundamental role of long-term gas contracts as well as the gas pricing based on oil/oil products indexation, to ensure stable investments in the development of natural gas resources," it said.

That principle, it said, provided a "solid base" for gas buyers and provides protection against price volatility.

"For example, Qatar's long-term contracts represented around 60% of its natural gas exports," the GECF said.

"Algeria, Russia, and other GECF member countries have also favored and will continue to rely on long-term contracts with pricing indexed to oil. That is certainly one way to ensure unabated supply of gas to all parts of the world and avoid a future gas crisis."

Energy transition

The GECF also said the record high prices in Europe were hampering the post-COVID-19 recovery, adding there was also now "increased public scrutiny" of the EU's climate policy and green energy transition plans.

"These recent developments, which sadly affect the entire strata of society still reeling from the devastation caused by COVID-19, validate the long-held position of the GECF on a balanced approach to managing the energy transition," it said.

The GECF said it supported "realistic" pathways in the energy transition, and called for an "inclusive and uninterrupted access" to modern energy sources, while also highlighting energy security as a foremost global agenda item.