Stand. European states are preparing to jointly purchase gas, as was the case recently for the vaccine. But will they also be so successful? If the benefits are even greater than for the vaccine, the implementation issues seem much more serious.
The idea of joint purchasing from the various natural gas suppliers, in particular the Russian state monopoly to Gazprom export, is not new. It was already defended in 2014, after the annexation of Crimea. It resurfaced in October 2021 in the face of rising gas prices. Faced with the invasion of Ukraine, the Council of the European Union (EU) has officially adopted it. The Commission now needs to work hard to define the organizational arrangements and specify its ambition.
The expected benefit is the same as yesterday: getting a lower price in negotiations with producers. It is accessible via “construction”. It basically involves forming a cartel of buyers who are confronted with a small number of suppliers, each of which has a monopoly on the size of their resources and the size of their infrastructure.
Strong bargaining power
For the gas transported by pipe, the Algerian company sonatrach or the Norwegian company Equinor would no longer discuss with several interlocutors in competition, but with only one. In this new configuration, the European Union would have strong bargaining power over the price. For example, it accounts for three quarters of global pipeline gas purchases and more than half of Gazprom’s gas trade.
The position of Europe is less favorable for gas transported by ship: it represents only 16% of the purchased world volumes. But at certain times of the year, especially in the summer when the warehouses are full, this share can be significantly higher.
In conjunction with that, and still by construction, group buying makes it possible to avoid a generalized continental rat race, where each government would be accompanied by its gas industrialists who would visit the producing countries to sign supply contracts. Because gas capacity is limited in the short term and running almost at full capacity, one gets what the other doesn’t. In the medium term, their expansion possibilities are not zero, but they are not unlimited either.
But in reality, these benefits will depend on the group buying scheme chosen. It has already been agreed that joining the Joint Organization will be voluntary. If Germany and its companies plan to continue their recently started bilateral negotiations with Qatar and sign an agreement, they will not be prevented from doing so.
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