BP has been making some interesting points about the outlook for the natural gas market, most recently in a very thoughtful article in Foreign Affairs (requires subscription) by Christof Rühl, the company’s chief economist. It is a theme that BP is likely to highlight in its strategy presentation to investors on Tuesday.
It looks pretty clear that the key trends in the gas market – strong US production of “unconventional” gas, and the shift from long-term contracts to spot market sales – are bad news for Gazprom.Alexander Medvedev, the head of Gazprom’s international business, told the FT last week that the the basis of the company’s business in long-term oil-linked contracts remained unchanged, in spite of a shift to spot market pricing for between 10 and 15 per cent of the volumes sold to European customers.
What has perhaps been less widely appreciated is that, for all the enthusiasm of BP CEO Tony Hayward, the changing nature of the global gas market could also be bad news for BP and other international oil companies. Read more