EU looks to enforce mandatory co-operation on gas purchases

Brussels wants to force member states to nominate energy companies to join a region-wide platform for joint gas purchases, as part of measures aimed at lowering energy prices across the 27-member bloc.

The European Commission first unveiled its platform for joint purchases of gas this spring as part of a package aimed at weaning the continent off Russian fossil fuels. Despite the surge in gas prices since the invasion of Ukraine in late February, it so far remains unused and counts companies from just five countries as members.

Commission officials now want member states to agree to emergency legislation that would require EU companies to use the platform for a portion of their purchases.

The EU imported 345bn cubic metres of gas in 2021, including 45 per cent by pipeline from Russia on long-term contracts. Russia has reduced flows drastically, leaving companies to bid for gas on the spot market at far higher prices.

Commission officials believe marshalling the bloc’s collective bargaining power would permit capitals, many of which are offering subsidies to businesses and households to cushion higher energy costs, to get a better deal on gas prices, according to people familiar with the discussions.

However, some of the region’s major energy companies are sceptical that having a single European buyer will lower costs, arguing that the price of gas is set on international markets.

The EU is considering mandating joint purchasing using the same emergency treaty article that underpinned proposals last month for windfall taxes on energy companies. Doing so would allow the rules to be introduced quickly, pushing it through on a majority vote by member states without the need for the European parliament to agree on the legislation.

Commission president Ursula von der Leyen is under pressure to produce ideas on energy purchasing and price capping ahead of an EU summit on October 20 and 21. Last week she said member states were bidding prices up by competing with each other and wrote to EU leaders to suggest ways of capping costs.

The joint-purchasing mandate is still being discussed within the commission and may change before proposals are unveiled on addressing the energy crisis on October 18. Brussels will need to win wide support from member states if the idea is to become law — something which is not guaranteed.

However, two EU diplomats said they believed there was enough support for mandatory joint purchasing for it to reach legislation. Germany, which opposes price caps on gas, has indicated support for joint purchasing after doing individual deals with countries such as Qatar.

Companies would use the platform to pool demand from each country and negotiate with suppliers to buy gas to fill storage facilities. Commercial customers will buy the gas out of storage and platform members could get subsidies to cover the cost of storage.

The platform is not expected to help lower prices until 2023. “It is a question of refilling storage for next spring so we do not have a shortage next winter. This is about security of supply,” said an EU official.

Any decree on joint purchasing would have to be limited to the crisis situation. Each country would have to designate a company to take part.

“It is high time for us to actually get it going,” said a senior EU official. “We already have a lot of positive feedback from some of our gas suppliers. They also see the need to have a single market in the EU.”

The push comes as the EU seeks to bolster supplies of gas under long-term contracts from key partners including Norway and the US. 

Kadri Simson, the region’s energy commissioner, this week visited Algeria in search of fresh gas supplies.

Energy ministers are likely to further discuss ways of curbing energy costs during an informal meeting on Wednesday in Prague.

A commission spokesman said: “The president was clear that [joint purchasing] is one of the avenues we are pursuing with a focus on using it for storage refilling for [the following] winter.”

Additional reporting by Barney Jopson in Madrid
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