Article from: OGEL 1 (2011), in Editorial
After the four specials we published in 2010 we kick of 2011 with a regular issue covering a variety of topics that are at the heart of the contemporary energy discussions around the world. One central theme of this issue is that of natural gas pricing in the EU natural gas trade. Articles from some of the leading experts in this area, Professor Jonathan Stern and Dr. Andrey Konoplyanik provide for a comprehensive overview of the currently discussed issues. Unlike the US, where gas to gas competition determines the natural gas prices, the EU natural gas prices are based on the market value principle, which means the cost of alternative non-gas fuels. In practise this translates into indexation to heavy fuel oil and light fuel oil or crude oil or a combination of these. While most EU companies were in favour of this type of pricing scheme, the situation has radically changed since 2007. The current culmination of the discussions on the correct pricing mechanism is the August 2010 when the new Chairman of the Board of Management of E.ON Ruhrgas AG indicated that E.ON has moved against the continuing oil price linkage and that the current long-term contracts with this linkage need to be adjusted. This, to quote Professor Jonathan Stern, is nothing short of proposing a "revolution in the industry". Litigation between external producers and their EU customers has also started.
As can be seen in these papers, there are several factors that have led to changing behaviour in the EU natural gas industry. These include the rapid and fundamental changes in world LNG markets that have resulted from a decrease in demand and the closure of US markets, linked to the emergence of unconventional gas, both of which have acted as catalysts for change through providing for increasing liquidity in the EU natural gas hubs. However, there is also an important regulatory dimension to this change. This paradigm shift in energy governance change - from state to market, from plan to contract, and from monopoly to competition - has significantly changed the way in which EU natural gas markets are regulated and this has had a profound impact on the risk position of the contractual parties. I very much recommend the papers by the two leading experts in this area.
Other "hot topics" include nuclear and climate change. Here we explore issues such as the licensing of new nuclear projects, nuclear waste under EU law and nuclear related disputes. With increasing activities in this area, including new projects and competition over new markets in China and India, policy changes favoring nuclear in many EU countries and increasing discussion in countries traditionally opposed to nuclear, like Australia, and emerging EU level activities in this area make the papers interesting and topical reading. Climate change topics cover a variety of questions ranging from climate change litigation to energy savings and green buildings. Emerging energy savings schemes in producing countries like Russia, with low levels of energy efficiency, means that these countries are joining the EU in its fight against climate change. While international cooperation in this area still faces significant obstacles, progress has been made, as will be seen in these papers. Very much related to this topic, green electricity generation is examined in both Brazil and Texas.
In 2011 we will continue to publish OGEL special issues, see www.ogel.org/callforpapers.asp for an overview. Topics will include: "Resource Development and Indigenous People" (nearly ready, you can still send your last minute contributions) and "Comparative Energy Law" as well as other subjects. Keep an eye on the OGEL website and OGELFORUM for the call for papers.