IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Prepress Content: The following article is a preprint of a scientific paper that has completed the peer-review process and been accepted for publication within The Energy Journal.

While the International Association for Energy Economics (IAEE) makes every effort to ensure the veracity of the material and the accuracy of the data therein, IAEE is not responsible for the citing of this content until the article is actually printed in a final version of The Energy Journal. For example, preprinted articles are often moved from issue to issue affecting page numbers, and actual volume and issue numbers. Care should be given when citing Energy Journal preprint articles.

Market Power and Long-term Gas Contracts: The Case of Gazprom in Central and Eastern European Gas Markets

Abstract:
We explore a major European competition decision, the 2012-18 Gazprom case, using a global gas market simulation model. We find that access to LNG markets alone is insufficient to counterbalance Gazprom's strategic behaviour; central and eastern Europe (CEE) needs to be well interconnected with bidirectional flow capability. 'Swap deals' created by the decision facilitate CEE market integration, while limiting Gazprom's potential market power. Such deals may increase the diversity of contracted gas and number of market players, but do not improve physical supply diversity. In the next five years, swap deals could marginally impact negatively the utilization of strategic assets in CEE, but since Gazprom's commitments expire by mid-2026, utilization of these strategic assets may fall considerably, especially if Gazprom withholds supplies. As an unintended consequence, CEE markets may disintegrate from the rest of Europe. Avoiding such outcomes will require further gas market reforms, particularly, market design for gas transportation.

Download Executive Summary Purchase ( $25 ) Supplemental Information 

Keywords: Gazprom, European Commission, Market Power, Natural Gas, Security of Supply, Competition, Long-term contracts, Swap deals

DOI: 10.5547/01956574.44.1.cchy

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 44, Number 1 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

© 2022 International Association for Energy Economics | Privacy Policy | Return Policy