Analysis: Norway, Russia reap rewards from Europe's flexible gas market

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Norway and Russia are big winners from Europe's gas price rally as they benefit from volatility after the European Union forced their gas producers years ago to shift away from steady, long-term contracts, according to sources, analysts and data.

, which together account for 60% of Europe's needs, moved away from long-term contracts that had linked prices closely to oil.

Rivals, such as Algeria and Qatar, rarely trade spot gas, while U.S. gas producers that are active in spot markets have struggled to boost gas output after storm damage, hitting global traders, such as Vitol and Trafigura, which rely on countries like the United States to secure volumes to trade. Equinor may be better placed than Gazprom. The state-run firm, which sells most of Norway's gas, is estimated to be selling more than half to spot customers with 70% based on day-ahead pricing, the most volatile, up from 25% a few years ago.

Some European politicians have called for an investigation of Gazprom, Russia's state-backed monopoly exporter of pipeline gas, accusing it of holding back extra supplies. It adds fuel to a debate about whether a new pipeline supplying Russian gas to Germany, Nord Stream 2, should get the greenlight or be blocked for making Europe even more reliant on Russia.

"It used to be quite normal to have a gas price half of oil. Now natural gas is double oil and that means you have to think differently," said Helge Haugane, Equinor's senior vice president for gas and power. Gazprom, which saw first half 2021 profits jump by 22 times after last year's slump, has struggled to find extra volumes after a blast at a Siberian plant, despite appeals from customers for more supply.

 

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