In Europe, the era of cheap gas: Gazprom reduces gas price for Bulgaria by 40%
Bulgaria has agreed on a 40% price cut for its imports of Russian natural gas, Prime Minister Boyko Borissov said Tuesday. It means that Gazprom has agreed to link the new price to the prices of continental West European gas hubs and refused from the oil indexation in the contract, Reuters informs. In this regard, earlier experts predicted a drop in price of Russian gas for Bulgaria by more than 50% - up to $140 per 1,000 cubic metres.
Bulgaria imports 2.9 billion cubic metres of gas per year from Russia under a long-term contract valid through 2022.
In his speech at a press conference, Borisov also stressed that diversification and competition really reduce gas prices. In October, Bulgaria will receive up to 1 billion cubic metres gas supplies per year from Azerbaijan through the Trans Adriatic Pipeline (TAP) gas pipeline and the Gas Interconnector Greece-Bulgaria (ICGB). In addition, Bulgaria will gain access to the global liquefied natural gas (LNG) market through Greece and expects to import fuel from the United States, Qatar and Egypt.
Bulgarian Energy Minister Temenuzhka Petkova noted the important role of the European Commission in the negotiation with Gazprom. “Thanks to the intervention of the European Commission, we can today rejoice at this excellent result,” the minister said.
In 2018, Gazprom, as part of the settlement of antitrust rules of the European Commission, assumed additional obligations for its customers in Estonia, Latvia, Lithuania, Poland, and Bulgaria. The European Commission concerned that Gazprom was abusing its dominant position by imposing oil indexation contracts on these consumers. Now these countries may demand a revision of prices from the Russian monopoly if they differ significantly from the prices of gas hubs in West Europe.
It seems that the era of cheap gas is starting in the European Union. Even the level of local European gas production is falling, the supply on the EU gas market exceeds demand, mainly because of the abundance of LNG. As a result, the gas price at European gas hubs is significantly lower than the price of Gazprom. It seems high gas prices that have always attracted exporters for supply to the European market, are in the past. At the end of 2020, Azerbaijani would starts gas supplies to Southern Europe through the Southern Gas Corridor. According to the laws of the market, in order to receive a certain part of it, it will be necessary to offer gas conditions that are more favorable than competitors are do. Of course, at the beginning, the volume of gas delivery from Azerbaijan will be not too much, but it will be enough to cramp gas exporters at the EU market. In addition, of course, the factor of coronavirus should be taken into account. Almost all experts, in this regard, speak about slowdown in the already low pace of global economic development, which would also affect the global energy market.
