Page 13 - EurOil Week 45 2022

EurOil POLICY EurOil

Aker BP says price floors needed

for new long-term supply deals

NORWAY THE chair of Norwegian hydrocarbon producer introduction of a cap on the price of gas entering
Aker BP has said that European natural gas buy- the bloc. But despite countless meetings between
The EU is pressuring ers must pay a price floor if they want to secure ministers, member states have not been able to
suppliers to lower their long-term supply contracts that avoid soaring agree on what form the price cap would take.
prices. prices seen this year. Norway is now Europe’s biggest gas producer
Norwegian producers sell much of their gas following cuts in Russian supply, and therefore
either directly on the spot markets or under con- the outcome of negotiations with Oslo will also
tracts linked to hub rates, which has resulted in be critical for the plan to work.
them booking record earnings this year on the Eriksen previously warned that a price cap
back of the energy supply crunch. However, EU would mean reduced supply and higher demand,
authorities and customers are pushing for new as it would disincentive suppliers to provide
deals that provide them lower price guarantees more volumes and could encourage users to con-
over a longer period. sume more. This is a sentiment shared by some
Aker BP wants to see a “price floor” intro- member states including Germany.
duced as a condition for entering into these new Meanwhile, Russia has threatened to cut off
long-term contracts that would also limit the gas supply completely if a cap is imposed on its
price upside, Oeyvind Eriksen, the company’s output.
board chair, told Reuters. Striking long-term commercial contracts
“The buyers want a price ceiling, but not a would need EU government support, Eriksen
floor. Selling the upside without any downside said, as no private counterparty is currently pre-
protection is not an attractive instrument,” he pared to agree to long-term prices for gas.
said. “As producers, we are interested in as long Norway’s Equinor, which accounts for 70%
contracts as possible, as long as we get a fair value of Norway’s gas supply, has warned that buyers
with a robust return over time.” in Europe must be ready to pay for high prices
The EU has been discussing for months the for years to come to avoid shortages in supply. ™

Week 45 14•November•2022 www. NEWSBASE .com P13