Norway v Russia: Impact of price renegotiations of long-term contracts on gas supply to Europe

It is estimated that the price concession that Gazprom granted to its European importers during 2012 reduced the average price of Russian gas to the level of Norwegian gas. After renegotiations, Norwegian long-term contracts have higher share of spot-indexation than the Russian contracts. As current forward curve indicates continued high spot gas prices, we may see Russian gas to be more attractive for Europe this summer and next winter. However, without further price revision in its long-term contracts Russian gas might again lose its attractiveness relatively to Norwegian gas next year, based on current forward prices of oil and gas. These ideas and implications are discussed.