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Oxford Institute Defends Independence After Gazprom Criticism

Feb. 12 (Bloomberg) -- The Oxford Institute for Energy Studies defended the independence of its research and refuted claims by Sergei Komlev, OAO Gazprom’s head of pricing, that its work lacks balance.

OIES is an academic researcher and doesn’t carry out consultancy work, co-founder Jonathan Stern and Howard Rogers, head of natural-gas research, said today in an e-mailed report. It has taken into consideration arguments in support of tying the price of gas to oil as supported by Gazprom, they said.

OIES research on the transition to hub-based natural gas pricing in Europe was “not convincing” and the institute’s failure to engage with credible arguments in support of oil indexation in long-term supply contracts constituted “head-in-the-sand behavior,” Komlev said in a paper last month.

Suppliers to Europe including Gazprom, Russia’s natural gas export monopoly, and Statoil ASA of Norway have increased the amount of spot pricing in long-term contracts linked to oil, which meet most of Europe’s demand. Gazprom took a 78.5 billion-ruble ($2.5 billion) charge in the first quarter of 2012 on retroactive gas-price adjustments after talks with European Union customers, according to financial statements published Sept. 6.

“We vigorously object to Komlev’s reference to us as ‘consultants,’” OIES said in the report. “We have no commercial position to protect and no clients whose views we need to take into account. Not only do we believe we engaged constructively with arguments in support of indexation, but that in his paper he acknowledged that we did so.”

Komlev has repeatedly defended oil-linked long-term gas contracts on the grounds that with so few companies supplying Europe it would be easy to manipulate prices if the market was completely liberalized as in the U.S. Suppliers need to be compensated for the flexibility they offer buyers, he said in the January paper.

“A shift to such a pricing system would be detrimental to many of the existing long-term contracts that are a cornerstone of energy security for import-dependent Europe,” he said.

To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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