Gerhard Konig, speaking in an interview in Gazprom Export's newsletter sent out Tuesday, said gas would remain tied to oil.
"The linkage between oil and gas prices will remain as important for the energy markets in the future as it is today," he said.
The comments come after debate in the industry about whether spot gas prices, set by gas-to-gas competition, could become the main form of pricing. Long-term sales contracts could be indexed to the spot gas market, rather than to oil, as was the custom in the past.
Spot gas prices were up to 50% lower than oil-indexed prices in 2009, although more recently they have only been around 25% lower.
Konig said buyers aren't just interested in the price of gas, but in long-term relationships and stable supplies.
"Considering the needs of power plant operators as well as the needs of the industry in general, one thing should be kept in mind: companies are not only interested in a good price, but also in a secure supply of gas," he said. But he admitted that spot markets were of growing importance.
"We also use the spot markets in Northwest Europe to optimize our sales and procurement portfolio," he said.
Wingas is a joint venture of Germany's Wintershall and Russia's Gazprom. The Russian producer is a key supporter of oil-indexed contracts.
Spot gas prices dropped under oil-indexed levels due to the effects of the recession, which saw physical gas demand drop in Europe, and new arrivals of LNG from countries like Qatar into the European market.
Konig said that even the LNG sellers did not want to see low prices. "The producers of LNG are probably not interested in the current price levels on the spot markets," he said. "Otherwise, they would not be able to justify their big investments in LNG terminals."
And he warned that a continued low spot price "only delays further investments in the LNG infrastructure."
He cautioned that, "with the decrease of production in Europe, and the growing demand in Asia, prices are bound to consolidate. Bargain hunting would leave Europe's long-term energy needs behind at this point."
One of Germany's other main gas companies has indicated that the oil/gas link may not remain as important as it is now.
Klaus Schaefer, head of Germany's E.ON Ruhrgas, this summer called for long-term sales contracts to be adjusted to current market conditions, and said it is time to look at index mechanisms. Schaefer said that spot markets are increasingly important as price references.
China ChemNet will hold China SNG/CBM (International) Summit on 10-12 Nov, 2010 in Changji City of Xinjiang Province. This summit is the high-end international summit under the guidance of authorities and experts, conference topics include five major aspects of policy interpretation, industry research, business promotion, business meetings and Sino-foreign cooperation, is not only the new type coal chemical industry conference, but also the best opportunity to energy giant polymerization, government and enterprises investment, investors looking for the project. Sincerely welcome you to attend the summit. Details: http://news.chemnet.com/list/zt/meeting/2010energy/index.html
