Azernews.Az

An increase in spot indexation of gas contracts is being observed in Europe, Energy Centre Skolkovo Senior Analyst Maria Belova said.

"Most European consumers continue to receive gas under long term contracts, however, the structure of the price formula is being changed within the contracts," she told Trend news agency on Monday. "The price indexation on spot for at least part of the contract volumes is becoming more widespread."

She added that BP Vice-President on Shah Deniz Alistair Cook's recent statement about the consortium's readiness to move to a spot indexation of contracts is a modern marketing course designed to increase buyers' interest.

Cook added that the consortium on the Shah Deniz development is ready to sell gas to some customers within the second stage of the project on the spot prices.

"We are completely open to any proposals," he said. "We do not exclude 100 per cent binding to spot prices for some buyers."

The Russian expert Belova said that the suppliers' desire and intention to sell gas with 100 per cent binding to spot prices is focused on the growing European trend. This is related to the European consumers' reconsideration of an opinion on the economic feasibility of the traditional pricing market with binding to the prices on oil products.

The process of transiting to spot prices was accelerated by the economic crisis and excess gas, she said. Moreover, as a result of the high level of uncertainty in terms of demand, all market participants need more flexibility than that indicated in the traditional contracts.

She added that in the case of selling gas from the second stage of development of the Shah Deniz field, the matter rests in an attempt of new gas to win a market. It has not recently demonstrated positive dynamics in terms of the demand for gas.

The analyst said that such issues as the route for transporting gas from Turkey to Europe, and a point of the spot trade (index) to be bounded must be specified.

The contract to develop the offshore Shah Deniz field was signed on June 4, 1996. Participants to the agreement are: BP (operator) - 25.5 per cent, Statoil - 25.5 per cent, NICO - 10 per cent, Total - 10 per cent, LukAgip - 10 per cent, TPAO - nine per cent and SOCAR-10 per cent.

Gas reserves of Shah Deniz field are estimated at 1.2 trillion cubic meters. It is predicted that in the second stage of field development, gas production can be brought to 24 billion cubic meters a year.

Gas, which will be produced during the second phase of the field development, is considered as the main source for the Southern Gas Corridor projects and in particular, Nabucco West and TAP (Trans Adriatic Pipeline). Azerbaijan plans to export 10 billion cubic metres of gas per year to Europe within the second phase.