Discounts in the cold

We live in a small world, still dependent on unexpected changes in the environment. This well -known thought is very often forgotten, which sometimes leads to serious consequences. One of these consequences that we all feel in our own skin is a sharp cooling on the European continent caused by the breakthrough of the Arctic anticyclone. Both December and almost all of January were warm enough, and suddenly such a nuisance. The air temperature drops to almost minus 30 degrees, and this is in those areas where the centuries did not know about such indicators of weather, they did not know how to know.

Naturally, immediately the question of heating arose on the agenda, that is, about heating. And here the situation becomes almost anecdotal, despite the harsh winter surroundings. Due to the fact that the first two winter months were warm, the demand for fuel (primarily for natural gas) fell sharply, and after demand-market prices. The drop in demand and market prices entailed the strong pressure of fuel consumers to the main gas suppliers (first of all, to the Russian Gazprom) - so that they also reduce prices, or, more precisely, provide discounts from existing contract prices.

Despite Gazprom’s reluctance to provide such discounts, he still had to make concessions to some consumers, firstly, in order to maintain good relations for the future and, secondly, understanding that discounts are provided for a while, not forever.

However, these agreements did not have time to enter into force, the breathing of the Arctic air sharply lowered the temperature throughout Europe and from excess fuel the gas immediately turned into a scarce. And all those countries that have recently complained about an excess of gas suddenly began to blame Gazprom of disrupting supplies.

This, in fact, is the anecdotal of the situation. If Gazprom’s employees, responsible for export, dragged on the negotiations for another couple of weeks, then no one would have stuttered about any discounts. But the work has been done, and now Gazprom has some time to subsidize European consumers of Russian gas.

In order for the situation with prices in the gas market of Europe more understandable, we will give a small certificate about the pricing model that Gazprom uses in gas supply to Europe. From the description of this model it will be clear why Gazprom cannot lower prices, but can only give a discount from the price.

According to the current order, which has existed almost since the beginning of the 80s, Gazprom has concluded the so-called gas in Europe with the main consumers of gas in Europe Long contracts for the supply of natural gas. The term of the contract is at least 20 years. Such a long period is caused by purely investment circumstances - exploration, deposits arrangement, the construction of a gas pipeline and gas storage system requires very large simultaneous capital investments, the payback of which will be stretched for a very long time. And only the twenty -year term of the contract allows you to count on the full payback of projects and on receiving sufficient profit.

At the same time, the gas buyer assumes quite stringent obligations, which are called “Take or Pay” (“Take or Pay”), which is translated into normal Russian means that the consumer is obliged to choose the entire amount of gas recorded in the contract - or, in any case, fully pay it. Moreover, regardless of the financial condition, the current economic situation and the needs of the country that it represents, in previously contracted gas volumes. That is, if you have signed a contract at one time, if you please fulfill its conditions, even if in a few years they become disadvantageous.

The long term of the contract forms the specific terms of pricing. Since it is almost impossible to foresee how the demand and gas demand during the future twenty years will change, a special formula was designed by which its contract price would be determined. The full name of this formula sounds a little scary: "A sliding nine -month average oil price." Again, translating into a simple Russian language, we can say that the price of gas is the price of oil, taking into account its seasonal fluctuations. That is, the price of gas is reviewed every month, taking into account how the price of oil has changed the previous 9 months.

Since the price formula is recorded in a twenty -year contract, and is its integral part, the gas supplier (and the consumer is also) do not have the right to cancel or revise it. Therefore, Gazprom cannot “reduce” or “increase” the price, since the price itself is determined by the formula, and the formula is recorded in a long -signed contract. The only thing in this case can make Gazprom is to provide a discount from the price that is displayed according to the contract formula. The discount, of course, is provided only temporarily, and the formula itself does not change.

Gas consumers have become hostages of this pricing formula, which, incidentally, at one time proposed. But then the prices for oil and gas could not diverge very strongly, because the gas market as such simply did not exist. Therefore, it was quite natural when determining the price of gas to focus on the price of other hydrocarbons, the market of which, on the contrary, was very developed.

Now it is necessary to illuminate the question of the size of the discounts. The fact is that the gas market of Europe consists of three parts. The first part is the supply of gas according to long -term contracts, the prices of which are determined by previously agreed formulas (under such conditions in Europe, not only Russian gas is sold, but any gas that is brought to the consumer in pipelines: British, Norwegian, Dutch and Algerian).

The second part is the so -called Liquefied gas, which enters the European market from countries that are far from it (Qatar, Iran and Trinidad and Tobago), and therefore are not able to supply it through pipelines. This gas is liquefied in places of production, and sent for export in special tankers. The price of gas, unlike the pipeline, is determined not by the formulas, but by the free game of market forces, which more flexibly take into account the fluctuations of demand, and therefore, recently serves as a guideline to establish short -term prices of the gas market.

And the third part is the same gas that enters pipelines and which cannot be sold to end consumers in full due to, for example, a very warm winter; Or, for example, due to a fall in demand due to the economic crisis. Since gas inspeers are required to pay it in full, but end consumers are not required to do this at all, European gas companies may form significant reserves of unused gas. While the capacities of the gas storages are enough, they relate to this fact calmly. But as soon as the capacities become close to filling, a light panic begins - where to put unused gas excesses?

In order not to disrupt the agreements prescribed in long-term contracts, the gas-inspection companies begin to sell excess volumes to everyone, and at lower prices than those at which they buy it themselves. That is, European gas companies begin to sell part of the gas at a loss, and this, of course, strongly strains them.

Unused excesses of pipeline gas, together with liquefied gas, form a powerful market segment, at which prices are determined not by formulas in twenty -year contracts, but by the momentary situation in the gas market. Accordingly, the size of the discounts that gas companies want to get from Gazprom is determined by the prices of the short -term (spot) gas market.

At the same time, I repeat, this is not about changing the price formula, but only about temporary discounts, which should reduce the amount of losses of guaranteed consumers of Russian gas. True, the size of these discounts is large enough - now the price of contract gas is $ 475 per 1000 kb. m, and the price of a spot market is $ 285 per design bureaus. m. Raping in prices is $ 190 per 1000 kb. m, and if Gazprom really starts to provide discounts in these sizes, then, according to experts, it will lose from $ 2 billion per year (according to already concluded discount agreements) to $ 8 billion. - If it provides them to everyone.

Of course, now we can’t talk about some discounts. Surely in the very near future the increase in prices in the spot market and companies that previously traded at a loss will be recorded will again begin to make a profit. The objective basis for reducing prices will evaporate as quickly as gas reserves in gas storages.