BACKGROUND

In contrast to oil prices, achieved gas prices in a market are not easily accessible. Even though gas is partly sold in the spot markets in UK and the Netherlands, a large portion of gas continues to be sold via long-term contracts between upstream companies and European gas companies (like E.ON and GDF Suez). There are numerous kinds of contracts with different mechanisms to set a specific price. Knowledge on this can be used to understand the current situation and to provide an outlook on gas price development.

APPROACH

Understanding historic and current price mechanisms requires in-depth knowledge about the gas value chain. Firstly, collection and analysis of reported and realized prices of producer sources, government statistics (like the German Border Price) and research papers is undertaken. In particular, Rystad Energy has established regression formulas based on this research to describe a price for gas sold under long-term gas contracts. Secondly, to gain an outlook on gas price development, a market view on gas in the region can be established. This includes looking at indigenous production in the region and piped gas in Norway, Russia, and North Africa.

RESULT

Comparisons can be made between spot gas prices, contracted gas prices, and oil prices. This can be seen in context of, for instance, a financial crisis involving demand destruction and impact on different prices. We can see various prices have moved parallel in some periods and differed in other periods.

Gas Price Development: German Border Price on High Level from 2006, NBP Increasing since January 2010