EU Opens Gas Buyers’ Club to Blunt Price Volatility Seen in Energy Crisis

(Bloomberg) -- The European Union took its first steps in creating a pool of natural gas buyers and pairing them with sellers to avoid the kinds of price spikes that roiled energy markets last year.

A new platform for joint gas purchases, known as AggregateEU, officially opened on Tuesday morning. It allows companies to start submitting their gas-demand projections for the next 12 months from June. 

After the data are aggregated and analyzed — and potential sellers submit their offers — both sides can see best matches and complete deals on their own or via special agents. That’s expected after May 17.

The EU has been trying to reduce competition among gas buyers, especially those who lack experience in negotiating, after supply cuts from Russia led to extreme price volatility, pushing some companies to seek government bailouts. While the energy crisis has eased substantially since gas futures peaked in August, there are still supply risks in the fallout over Russia’s war in Ukraine.

AggregateEU aims to use the bloc’s collective market power to gain better prices from international suppliers, and it will be particularly valuable to smaller entities or those in landlocked countries, the European Commission said in a statement. Russian gas or companies controlled by the government in Moscow are excluded from tendering.

It remains to be seen if major buyers — from Germany’s Uniper SE to France’s Engie SA — will actively use the mechanism and how big the collective buying might be. Following the first tender, the EU plans to organize more joint purchases every two months, mandating that governments pool demand for 15% of their storage-filling obligations. That target equates to roughly 13 billion cubic meters this year, or about 3% of the EU’s total demand for the fuel.

The commission wouldn’t comment on its expectations from the first tender. But 76 companies have registered so far, a senior official told journalists Tuesday.

Uniper is “looking into ways to play a role” in AggregateEU, the company said by email. Engie also said it’s assessing the opportunity and implementing the necessary steps.

Finding Deals

“The more participants we have, the higher the chances of finding attractive gas deals,” EU Commission Vice-President Maros Sefcovic said last week. “This is the moment to make full use” of the new tool. 

After the tender is completed, the EU expects the first contracts with suppliers — from the US to the Middle East and Africa — to be signed around June. Some non-EU countries have also been invited to participate, including Ukraine.

There is a fair amount of skepticism about how the platform will work, however. 

“If the larger buyers can negotiate a better price directly with the sellers, why would they use the AggregateEU mechanism?” said Kim Talus, director of the Tulane Center for Energy Law. That is, unless the member state — and possibly majority owner — requires the national buyer to use the system, he added.

The obligation to aggregate demand applies to EU member states, but it’s not binding for companies. All contracts will also be negotiated and signed outside the Prisma European Capacity Platform GmbH, which handles the process. 

While relatively small buyers can use the tool, they’re unlikely to cover the majority of deals, according to Katja Yafimava, senior research fellow at the Oxford Institute for Energy Studies. “The platform’s raison d’etre is mostly political,” she said. 

(Updates with Uniper, Engie comments in eighth paragraph.)

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