Several companies have already put in bids, an EU official said in the morning, just two hours after the platform was launched. The first deliveries are now expected to be carried out in late June or beginning of July.
ADVERTISEMENTThe European Union's platform to buy gas jointly in a bid to lower prices and ensure a steady supply in the coming months went online on Tuesday.
Several companies have already put in bids, an EU official said in the morning, just two hours after the platform, known as AggregateEU, was launched. The first deliveries are now expected to be carried out in late June, or beginning of July.
The voluntary scheme was agreed upon by member states in mid-December as part of a raft of emergency measures to combat the energy crisis sparked, in part, by Russia's invasion of Ukraine and subsequent decision to cut gas deliveries to the EU in retaliation against wide-ranging sanctions.
The platform aims to leverage the bloc's purchasing power with international suppliers by allowing energy companies in participating countries to submit their demand expectations for liquified natural gas (LNG) and pipeline gas for the coming year with tendering rounds held on a monthly basis to match that demand.
EU countries are required to pool at least 15% of their respective storage obligations. This equates to about 13.5 billion cubic metres (bcm) for the year which will have to be bought via the platform.
This is to avoid a repeat of spring and summer 2022 when member states scrambled to secure enough gas to ensure they could continue to power households and businesses during winter. This mad dash for gas, triggered by Russia's decision to slash pipeline deliveries to the EU, pushed prices to levels never seen before with a record high of €321 per megawatt-hour reached in August.
Prices are now hovering at around €40 per megawatt-hour, last observed in January 2022.
So far, 76 companies on both the buying and selling sides have registered with the service. Buyers can be across the 27 EU member states as well as countries in the Energy Community which also includes Ukraine, Moldova, Georgia, and Western Balkan states, while the only criterion for sellers is that they must not be owned or controlled in part by a Russian entity.
Buying companies can decide whether they want to receive LNG and which terminals in north-western or southern Europe they want it offloaded from, or pipeline gas which can be delivered to 26 points across the bloc.
Buying companies have five days to put in their bids for the first tender rounds. Demand will then be pooled by the service provider, Prisma, which will put the tender out. Sellers are expected to put in their tenders on 9 May with negotiations to follow. Contracting is forecast around 17 May with deliveries a little over a month later. This process is to be repeated on a monthly basis.
Two different cooperation models have been set up to facilitate the pooling of demand and lower prices.
The first one is through a so-called Central Buyer (possibly a large company) that would agree to purchase gas on behalf of other companies based on a bilateral contract. This is to ensure that small companies that require lower volumes or do not have the necessary creditworthiness can tap into the service and potentially benefit from lower prices.
The other model is through an Agent on Behalf that can provide complementary services, such as transportation, to companies that have already negotiated directly with a supplier to buy a certain volume of gas.
An official from the European Commission, which finances the platform but will not take part in the negotiations, said they expect interest in the services to grow "exponentially" over the coming months as some companies will be waiting to see how the first few tendering rounds go before taking part.
They stressed, however, that it "is difficult to forecast how much gas will appear throughout these tenders."
The 27 member states have a combined gas storage capacity of around 100 bcm. Under a new regulation taken in reaction to Russia's war in Ukraine and the subsequent energy crisis, they must ensure their gas storage capacities are filled at 90% by 1 November 2023, to weather the colder months comfortably.
The bloc exited the winter with storage 56% full, well above the five-year average of 34%.
