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Russian Electronic Gas Platform Makes Gas Trade Rise
December 26, 2006 12:24

The Russian electronic platform has conducted the second gas trading recently. As it turned out, bulk consumers are ready to purchase gas at $70 per 1 thousand cubic meters, which exceeds the controlled price 50%.

Electronic gas trade was guaranteed success from the very outset. For instance, new Russian promising brand REBCO is likely to become popular at the New-York Raw Materials Exchange, but there are still no sellers. At the same time Russian Gas Exchange is staffed with sellers and consumers. Gazprom along with independent manufacturers have long been maturing the idea of developing the free sector of gas market. Some time ago this idea took shape in the experiment following the “5+5” pattern, according to which Gazprom and the group of independent manufacturers will sell 5bn cubic meters of gas each during the period of 2006-2007. Many market participants believe that the actual cost of gas must be essentially higher than controlled prices, and electronic trade could demonstrate the true value of raw materials.

It has turned to come true. The first trading session held on November 22 witnessed that consumers were ready to pay 30% over the controlled price for gas – the weighted average price made up about $50 per thousand cubic meters. At the second trading session (December 15) gas was sold at an average of $70 per thousand cubic meters. The figures appeared to be far above prognosis made by Russia’s Industry and Energy Ministry, which had predicted 15-20% of growth.

It’s quite clear that electronic trading came in very handy for gas suppliers. The question is how good it is for consumers.

 These days Gazprom delivers gas for industrial customers and citizens at the controlled price, but there are those, who can afford to pay double for gas. They are such bulk consumers as electrical energy, metallurgy and construction enterprises along with regional companies dealing with gas sales. One of the heaviest consumers is RAO UES of Russia: the gas share in the fuel balance of the company makes up 70%. Surely, power energy companies have backup fuel in store – black mineral oil, but it is even more expensive. A ton of black mineral oil costs over 200 dollars whereas the max price of a thousand cubic meters of gas offered at the electronic platform December 15 reached the point of 94 dollars. Moreover, gas is considered to be a more workable type of fuel, and energy producers are willing to pay through the nose.

The electronic platform has seen only two trading sessions so far, but starting February they will be held every 10 days. Analysts are waiting for new sellers and consumers to come to the market: the first trading session was visited by 10 consumers and their number increased to 40 at the second one. The stock-jobbing told on the trade volume, which grew almost fourfold – from 119 million cubic meters to 400 million. Gazprom’s share at the second trading session amounted to 235mn cubic meters; the share of independent companies, such as Rosneft, LUKoil, NOVATEK and some others - 165mn cubic meters.

 Analysts from Deutsche UFG called the electronic gas platform launch to be “of singular importance to settle a clear free market price on gas.” All participants of the gas market realize that the fair gas price, for heavy consumers at least, must be higher. The government has claimed the intention to level controlled prices up to European by 2010-2011, which is $125-150 per thousand cubic meters (though figures exclude transportation expenses).


Olga Pletneva

Tags: Russian oil     

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