Today Geneva hosted the Industry Forum of the Gas Centre of the United Nations Economic Commission for Europe (UNECE) focused on the long-term supply contracts in the gas sector. The Forum was arranged at the initiative of Stanislav Tsygankov, Head of the Gazprom International Business Department and Chairman of the UNECE Gas Centre Executive Board.

Taking part in the event were in excess of 50 representatives from leading European oil and gas companies. The Gazprom delegation was led by Sergey Balashov, Deputy Head of the Company’s International Business Department.

The key speech was delivered by Sergey Komlev, Head of the Contract Structuring and Price Formation Directorate of Gazprom export. He emphasized that long-term contracts were an irreplaceable tool of balancing the interests of the gas purchaser and the seller. They have demonstrated their efficiency in the past and will retain significance in the future. It will be necessary, though, to slightly adjust the contracts to the rapidly changing market situation. At the same time, the basic principles, such as the “take-or-pay” obligation and risks sharing, will remain unchanged.

Meanwhile, it was noted that the rejected pegging to oil prices in long-term contracts didn’t meet the interests of both gas producers and consumers as the gas pricing based on the formula pegged to the third commodity (crude oil basket) protected consumers from any manipulatory attempts of major market players. This position was generally supported by all the speakers.

Background:

The UNECE Gas Centre was launched in January 1994 by the UNECE Working Party on Gas within the ECE Program “Promotion and Development of a Market-Based Gas Industry in Economies in Transition”. Gazprom is a co-founder of the Centre comprising more than 20 leading European energy companies including GDF SUEZ, ENI, OMV Gas, Gasunie, National Grid, Botas, Sonatrach and others.