The European natural gas market is still recovering from the aftermath of what many refer to as the “perfect storm” — the liberalisation of natural gas shifting markets from monopolies to market-based pricing, the aftershocks of the 2008 financial crisis, and the discovery and production of shale gas in the U.S. The result has been a significant reduction of demand for natural gas and a substantial increase in supply, creating highly price-competitive markets. Such an environment has given rise to many disputes between producers and midstream distributors. FTI Consulting Energy professionals have deep expertise in the European natural gas sector and are well versed in international arbitration about the pricing of gas. We act as economic experts, providing analysis of how markets are changing and how the pricing of natural gas should change to reflect changes in those markets.
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The emergence of European hubs and market-based gas prices has enabled gas producers, suppliers and traders to transact business with each other. There has been increasing convergence of prices at these hubs. By trading natural gas like a commodity, market participants can buy and sell standardised contracts, futures, and contracts for natural gas delivery next month or next year. Such an environment has given rise to inevitable disputes. FTI Consulting Energy professionals have deep expertise in the natural gas sector and are well versed in international arbitration about the pricing of gas. We act as economic experts, providing analysis of how markets are changing and how the pricing of natural gas should change to reflect changes in those markets.
There are various elements to pricing that natural gas companies need to know — one is understanding competitive pricing strategies. This provides the pivot point for companies to establish their own pricing strategies. For example, if the objective is to acquire new customers and you are less worried about profit, your strategy might be to undercut the market. On the other hand, if you have a larger market share, and your objective is to optimise profits, your strategy might be to keep your prices high, recognising that you may lose some customers. FTI Consulting Energy professionals develop the pricing metrics that help clients determine pricing to cover their cost base and still provide a return that meets corporate goals and shareholder expectations. Such pricing clarity also helps determine the cost to sustain existing customers and the cost to acquire new ones.