The Spanish company “Naturgy” Gas Natural Fenosa announced that it had reached an agreement with an unnamed LNG supplier to review the prices of two contracts that bind them starting from the beginning of its implementation this year, and this is considered a price war declaration on Sonatrach, which is affected by reduced demand, lower gas prices, and the opening of the way to suppliers from the Middle East and North America.
A statement by the Spanish National Securities Market Authority on its website seen by “Echorouk” stated that “Naturgy” has reached an agreement with one of the main LNG suppliers in the long term without disclosing it, to review the commercial terms of the various gas contracts.
According to the statement, the review includes a review of the formulas, conditions and methods of supplying gas in favor of Naturgy, which have been in place since 2020, allowing Naturgy to improve the mix of its supply portfolio while reducing its risk profile.
The review included a clause stipulating the commitment of the Spanish company to purchasing gas at a price lower than the annual contracted amount (ACQ) applied as of 2020, and to update the pricing formula for the gas supplied to it.
The statement also pointed out that “Naturgy” is committed to making the gas supply contracts closer to the current market situation, while improving its commercial competitiveness and risk management, explaining that the company has two long-term contracts for the supply of LNG, and with this agreement the new expiration dates will be on September 2021 and September 2023.
According to the statement, the company confirmed that it will continue negotiations with the rest of the suppliers and expect new agreements before the end of the year.
The former CEO of Sonatrach, Nazim Zouiouèche, told to this effect “Echorouk” that there is a real war going on over gas prices in Spain, especially since the price of one million British thermal units has become only $ 2, which is a very low price, explaining that reviewing these contracts suggests that it is assumed that they are with a product from the USA.
Nazim Zouiouèche explained that, unfortunately, there is a price war in the Spanish market, because there are competitors who want to put their gas production in this market, and therefore this will be tantamount to a declared war for the quotas.
Regarding Sonatrach’s handling of this file, in light of the Spanish party’s announcement of the existence of negotiations with the Algerian company to review gas contracts, especially prices, Nazim Zouiouèche said that the matter will be very difficult, and if it is necessary, one must step back to be able to jump forward later.
Zouiouèche prefers to be patient and calm and not devour the national reserves of gas under these circumstances, because gas prices will inevitably rise after the receding of the Corona virus pandemic, especially since gas will remain important for other years, and it will ensure the transition from polluting energy to renewable energies.
Our interlocutor added, “We must be careful and preserve the current contracts, and if it is necessary for Sonatrach, the contracts must be reviewed and taken a step back to be able to leap forward in the future”.
He also said, “Nevertheless, we must from now quickly go to renewable energies to produce electricity, save quantities of gas, and wait for its prices to rise to market it”.
For his part, Noureddine Charouati, the former president and general manager of Sonatrach, said in a telephone statement to “Echorouk”, that in these circumstances there is a decline in demand, and gas production in the United States has resumed again, and therefore producers found themselves with large quantities of gas, and they want to market it at any price.
It was therefore offered to the Spanish market, because their profit margin was in condensate and not in liquefied gas.
According to Charouati, “Algeria’s current contracts with Spain are proceeding normally, and history confirms that Sonatrach won the bet of the dispute with the Spanish company 10 years ago, explaining that these companies are moving according to the decisions of the boards of directors to exert pressure to try to win concessions from the other party”, as he put it.