About 80 companies have signed up to the EU’s platform for joint natural gas purchases that launched on Tuesday, as senior officials warned the bloc should not accept high prices as a “new normal” for consumers.
The platform was agreed after Russia’s invasion of Ukraine and weaponisation of gas supplies, but has struggled to come to life amid pushback from some capitals and companies wary of handing over too much purchasing power to Brussels.
Among the 76 buyers and sellers that have already signed up and five that have pledged to do so soon, there were several energy-intensive industries including steel, fertiliser, ceramics and glass, European Commission vice-president Maroš Šefčovič told the Financial Times.
“There are big energy consumers, there are big traders and most of the European majors in different roles.” He added that especially small and medium-sized firms from landlocked countries that depended on large suppliers could benefit from the scheme.
“Clearly, there is interest from the companies,” Šefčovič said.
The registered companies will place their orders on the platform, with tenders beginning in early May to match them with suppliers. Matched companies will then negotiate the contracts without the involvement of the commission. Bigger energy companies can act as buyers on behalf of smaller companies or offer services such as shipment.
Axpo Italia, a subsidiary of Swiss-based energy company Axpo and one of the companies acting on behalf of smaller groups, said in order to encourage smaller companies to participate in the platform, it was “vital” for them to see the benefits of participating.
“If clear incentives would be provided — such as more competitive prices — we would expect considerable interest across the market,” said Federico Celani, gas trading desk manager at the company.
The first contracts are expected to be signed from the second half of May and the first deliveries could be made in two months, according to the commission.
Rounds of aggregating demand and tendering will be repeated every two months until the end of the year. In total, the platform should cover about 13.5bn cubic metres of gas, or about 3.5 per cent of total EU consumption in 2022.
Companies from non-EU countries that are part of the bloc’s energy community, such as Albania and Ukraine, can also participate. Russian companies are excluded.
Last summer, with Europe scrambling for gas to fill its storage capacity ahead of winter, the price of the TTF European gas benchmark surged, putting huge strains on companies and utilities. In late August, the price hit a record high of €343 per megawatt hour.
While the TTF price has now lowered to about €40 per megawatt hour, partly as a result of demand reduction and filling of European gas storage, it is still almost three times higher than the pre-pandemic 2019 average price of €14.6.
“We are now in a better situation than before. But, still, we should be very vigilant,” Šefčovič warned. “We should also not settle for the prices we have right now as a new normal.”
Šefčovič said he was confident that the platform would meet its demand aggregation target of 13.5bn cubic metres this year.
But some in the industry have questioned the rationale of this new EU tool.
“Europe already has the benefit of a liquid and transparent market,” said Chris Wright, head of European gas and LNG research at Vitol. “It remains to be seen how much more added value the joint purchasing programme will bring.”