The EU has said the bloc will push ahead with plans to jointly buy hydrogen and critical raw materials after its first attempt at aggregated gas purchases was oversubscribed.
Several leading energy players took part in the first round of joint gas purchases, which matched 10.9bn cubic metres of demand — more than 80 per cent of the EU’s year-end target of 13.5 bcm — from gas buyers with potential suppliers.
Participants included French utility Engie, Norway’s state-owned Equinor and Swiss-based Axpo, the companies told the Financial Times. TotalEnergies also took part, said a person familiar with the matter. Some groups acted as buyers and sellers in different EU regions.
Brussels’ pursuit of joint purchases for gas reflects the EU’s need to secure supplies for critical products and stabilise prices. Gas prices soared as Moscow cut pipeline exports following its full-scale invasion of Ukraine early last year, putting huge strains on companies, utilities and consumers.
Ukraine’s state-owned energy company Naftogaz — Ukraine is part of the Energy Community of non-EU states allowed to participate in the scheme — joined in the round as a buyer, it said. Others, such as Italy’s Eni, said they planned to take part in the next round of tenders.
Maroš Šefčovič, the European commissioner in charge of the gas platform, described the outcome as “a remarkable success” even though the amount of gas tendered is so far only a fraction of the EU’s total use. In 2022 EU gas usage was 360 bcm, according to the International Energy Agency, and before Moscow’s invasion of Ukraine just over 40 per cent, or about 155 bcm, of that demand came from Russia.
“We have been very impressed by the aggregate demand even for the first round, and especially that we ended up with oversupply of the gas offered,” Šefčovič said. Overall, 18.7 bcm was offered by suppliers but not all of it found buyers due to either the terms of the proposed contract or pricing concerns. He said 110 energy buyers had subscribed to the scheme.
The aim of the gas platform is to co-ordinate demand in the hope that contracting bigger volumes will push down prices, as the bloc did for vaccines during the Covid-19 pandemic. It was conceived as part of the EU’s push to diversify away from Russian imports, with other measures, including the development of infrastructure to receive liquefied natural gas and deals with leading exporters such as the US and Azerbaijan.
Contracts have yet to be signed and the commission will not be party to the prices negotiated, although it required offers for pipeline gas to track TTF prices, Europe’s main gas trading benchmark. TTF prices have plunged since they reached record highs of about €340 per megawatt hour last August, with month-ahead gas contracts trading at about €30/MWh — close to prewar levels.
For gas traders, the platform “may increase the efficiency of finding customers and selling volumes in larger tranches”, said Peter Thompson, head of global gas market advisory at consultancy Baringa.
It “may offer some potential for buyers to get discounts as sellers will see more of a benefit of selling large volumes in single tranches” but with demand outpacing supplies globally, “why would sellers sell at discounted prices here versus elsewhere?” he added.
Šefčovič noted that if prices were not competitive, buyers could “walk away” in pursuit of better deals.
Efforts to jointly procure gas are more common in Asia. Japan’s Jera and South Korea’s Kogas signed a memorandum of understanding in April looking at the potential joint procurement of LNG. The MoU followed the companies’ similar agreement with China’s Cnooc in 2017.
The possibility of joint purchases to boost the bloc’s stockpiles of minerals critical to green technologies such as wind and solar power and battery production was proposed by Brussels in March “in order to achieve better conditions with . . . suppliers or to prevent shortages”.
Šefčovič said the gas scheme would act as a “blueprint” for a “new market” for critical materials as well as hydrogen that will help decarbonise energy-intensive industries. Several Middle Eastern companies had expressed interest in supplying hydrogen, he added.
Brussels will run four more rounds of joint gas purchases this year.
