Gazprom values its gas at $70/1,000 cubic m above spot price due to flexibility
The average price of the gas that Gazprom exported to countries outside the CIS in 2014 was $341 per 1,000 cubic meters, down from $385 in 2013, the Russian gas giant said in a presentation for investors in Hong Kong.
The spot price for gas at the most liquid hub in Europe, TTF in the Netherlands, was $287.
Gazprom deputy CEO Alexander Medvedev said at the presentation that gas consumption in Europe is becoming increasingly volatile. The seasonal difference in consumption is now 150 million-200 million cubic meters per day. Only Gazprom can provide such flexibility thanks to its production and logistics capabilities, he said.
Flexibility should also be factored into the contract price, Medvedev said, adding that it should cost as much as storage in underground storage facilities for the injection-withdrawal season - about $70 per 1,000 cubic meters or $2 per mbtu.
Gazprom sells its gas under long-term contracts with a link to the oil price. However, a spot component has been included in them recently. But Medvedev said that in the course of the latest revision of the contract with Austria's Econgas this company's director said that it would be better not to change anything in the contracts because if spot prices had not been factored in the price would be lower.
"According to current market conditions, Gazprom Export's gas shipments to Europe in 2015-2017 are estimated at 155 billion-160 billion cubic meters depending on the weather," Gazprom said in the presentation.
However, in January the company's exports tumbled 31% to 11.1 bcm, according to Interfax estimates. Gazprom's exports fell to 147.2 bcm in 2014.
Gazprom estimates that it had a 30.6% share - "almost 31%," Medvedev said - of the European gas market in 2014, compared to 30% in 2013.