In many EU countries, the price of natural gas is linked to that of oil. The oil-gas price link has a historic basis. Following the discovery of large natural gas reserves in the Netherlands at the end of the 1960s, it became necessary to calculate the economic value of the gas. It was therefore decided to base the gas price on the price of the alternative fuels used by companies and households before the discovery of the gas reserves. Fuel oil for industry and domestic fuel oil for households were thus taken as the reference fuels. This pricing method was chosen because it was thought to reflect the value of natural gas as a fuel in the market most accurately. The system was adopted by many EU countries and is now used across almost the whole of the continent. Most sales contracts drawn up by EU and non-EU suppliers are still based on the oil-gas price link.
Below is an overview of the different types of contract used by GasTerra. Contracts based on the spot market indexation are a new addition. Since 1 June, GasTerra has been selling low-calorific gas for 2008 on the TTF (Title Transfer Facility) at a TTF spot market indexation, in addition to high-calorific gas. This is in response to the current market trend whereby, besides the conventional oil link, which is still widely used internationally, and some mixed oil and coal variants, a price also arises at trading places which is the result of gas-to-gas competition in the liberalised market.
On 1 July 2004, the Dutch gas market was fully liberalised. As a result, each market player – energy distribution companies and consumers alike – is free to buy natural gas from any supplier. This regularly gives rise to questions about how fuel prices are calculated. On the one hand, the free market has led to shifts and changes. Yet at the same time, some laws and procedures remain (provisionally) unchanged.
This brochure provides answers to the most frequently asked questions about the current gas market and the how gas prices are calculated.
