EU Joint Gas Purchase Platform Kicks Off

The EU Energy Platform to buy gas jointly is now active.

The platform launched its first call for companies interested in buying gas together through a service called AggregateEU.

It is a true milestone for this EU initiative.

1. The joint-purchasing mechanism

Council Regulation (EU) 2022/2576 of December 19, 2022 (the “Solidarity Regulation”) brings together European gas buyers to obtain better prices and to benefit final consumers. The Solidarity Regulation is an emergency measure based on Article 122 TFEU, with a limited duration of one year, expiring in December 2023. In the Council’s view, better coordination of gas purchases, reliable price benchmarks and gas exchanges across borders enhance solidarity among gas users (for further details, see Cleary Blog).

Joint gas purchasing follows two steps:

1. EU demand aggregation: a service provider collects the companies’ requests for gas. Member States must ensure that at least one-sixth of their national storage filling requirements is submitted to it (see here on EU minimum filling storage obligation).  
2. Joint purchase: once gas suppliers are chosen, buyers can negotiate and conclude purchasing contracts with them.

An EU mechanism – called AggregateEU – carries out the two steps at the European level. AggregateEU matches gas buyers and sellers and is managed by Prisma European Capacity Platform GmbH (“Prisma”), a service provider hired by the Commission, in charge of connecting the demand with the most attractive offers.

2.  The first call for buyers

On April 25, 2023, Prisma launched the first call for gas buyers.

Participants had to:

• register with Prisma and subscribe to AggregateEU by April 20, 2023; and
• specify (i) type (i.e., LNG or National Balancing Point) and (ii) date of delivery.

Demands for gas could be placed until May 2. In the first round, the requested demand amounted to 11.6 bcm.  

Any company established in the EU or in the Contracting Parties of the Energy Community (Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Georgia, Moldova, Montenegro, Serbia and Ukraine) can participate as a buyer.

Also, suppliers may come from outside the EU (except those sanctioned by the EU, mostly Russian gas suppliers). They must register on the Prisma platform. Subsidiaries of the same group cannot be both sellers and buyers in the same tender on AggregateEU.

“With AggregateEU, we have created a new marketplace in Europe, which will increase our energy security ahead of the next winter and help fill our gas storages. This is also an opportunity for international gas suppliers to expand their customers’ base. This is a win-win exercise”, said Vice-President Maroš Šefčovič.[1]

New tenders will take place every two months until the end of 2023. Registration for AggregateEU is currently open. So far, more than 110 companies (including buyers and sellers) have registered to participate in AggregateEU.

3. The first tender for joint gas purchases

On May 10, 2023, the Commission invited international suppliers to respond to the first tendering round for 11.6 bcm of joint gas purchases, to cover gas deliveries from June 2023 to May 2024.

By leveraging its collective economic weight, the EU managed to attract bids from a total of 25 supplying companies, equivalent to more than 13.4 bcm of gas. However, only 10.9 bcm (8.7 bcm of gas via pipeline, and 2.2 bcm of LNG) have been matched with customers by Prisma, as not all of the offers found buyers due to either the terms of the proposed contracts or pricing concerns.

From May 16, 2023, EU companies have been able to negotiate the terms of the supply contracts directly with the suppliers, without any involvement of the Commission.

The second round has started on June 26, 2023, with submissions of demand for gas to be delivered between August 2023 and March 2025. Suppliers will be able to submit their bids from July 7–10, 2023.

The success of the first round encouraged the Commission to improve the upcoming round and the mechanism as a whole. For the second round, the bids could cover the entire gas year, in order to attract further potential users, such as energy-intensive industries, which buy gas over longer periods of time. In addition, similar models for “other strategic commodities”, such as hydrogen and critical raw materials, could be developed by the Commission.[2]

4. Joint purchase

Participants can enter into contracts with the selected supplier. Negotiations take place outside of AggregateEU.

Single purchase

Big buyers can negotiate contracts with suppliers on their own. They should:

• request at least (i) 300 GW/h in LNG tenders; and (ii) 5 GW/h in National Balancing Point / Virtual Trading Point tenders;
• be well-equipped to transport gas and perform negotiations; and
• be creditworthy.

Cooperation

Other companies may cooperate following two models:

• “Agents/Shipper-on-Behalf” – under this model, buyers entrust another company (likely, a mid-streamer) to act on their behalf in providing certain services, like reserving a slot on an LNG terminal, transporting from a ship to the point of consumption, storing or balancing services. The signing of the contract will occur between every individual buyer and the gas supplier; or
• “Central Buyers” – under this model, buyers could ask other companies (likely larger gas companies) to negotiate and sign the contract with the gas suppliers.

A list of companies which have agreed to offer such services to Prisma is available on this website. 

Competition risks

Buyers, sellers and agents must comply with competition law. The Commission has offered to provide informal guidance to interested companies on a case-by-case basis. It has also set out some general principles:

• commercially sensitive information should be (i) exchanged only bilaterally between the Agents/Shipper-on-behalf or Central Buyer and their individual customers, and (ii) limited to what is necessary to negotiate and carry out the gas purchase agreements;
• if the Agent/Shipper-on-Behalf or Central Buyer operate in the same market as their customer, firewalls must limit access to commercially sensitive information only to staff dedicated to this function; and
• Central Buyers should not derive rents from gas procured through AggregateEU. They are allowed to earn rent from ancillary services.

[1]           Remarks by Vice-President Maroš Šefčovič (EU commissioner in charge of the EU Energy Platform) on the results of the first joint EU gas purchasing tender, on May 10, 2023 (available here).

[2]           Remarks by Vice-President Maroš Š